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): January 8, 1997
ACTION PERFORMANCE COMPANIES, INC.
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(Exact name of registrant as specified in its charter)
ARIZONA 0-21630 86-0704792
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(State or other (Commission File No.) (IRS Employer ID No.)
jurisdiction of incorporation)
2401 West First Street, Tempe, Arizona 85281
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (602) 894-0100
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ACTION PERFORMANCE COMPANIES, INC.
CURRENT REPORT ON
FORM 8-K
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Acquisition of Motorsport Traditions
On January 8, 1997, Action Performance Companies, Inc. (the "Company"),
through MTL Acquisition, Inc. ("MTL Acquisition"), a wholly owned subsidiary,
acquired the business and substantially all of the assets and assumed specified
liabilities of Motorsport Traditions Limited Partnership, a North Carolina
limited partnership ("MTL"). Also on January 8, 1997, the Company acquired all
of the outstanding capital stock of Creative Marketing and Promotions, Inc., a
North Carolina corporation ("CMP" and, together with MTL, "Motorsport
Traditions") from Kenneth R. Barbee and 1995 Nascar Winston Cup Champion driver
Jeff Gordon. The effective date of the acquisition of Motorsport Traditions is
January 1, 1997. Motorsport Traditions markets and distributes licensed
motorsports products, including apparel and other souvenir items, through a
network of wholesale distributors, trackside events, and fan clubs. The Company
intends to continue to operate the business of Motorsport Traditions in
conjunction with the business of Sports Image, Inc., which the Company acquired
in November 1996.
The purchase price paid by the Company for the assets of MTL consisted
of (i) cash in the amount of $5,400,000; (ii) a promissory note issued by MTL
Acquisition in the principal amount of $1,600,000 (the "Purchase Price Note");
and (iii) 57,143 shares of the Company's Common Stock (the "MTL Shares"). The
Purchase Price Note bears interest at 4% per annum, matures on December 31,
1998, and has been guaranteed by the Company. The Company acquired all of the
outstanding capital stock of CMP from Messrs. Barbee and Gordon in exchange for
an aggregate of 285,714 shares of the Company's Common Stock (the "CMP Shares").
In connection with the issuance of the MTL Shares, the Company entered
into a registration agreement with MTL and the general and limited partners of
MTL. In connection with the issuance of the CMP Shares, the Company entered into
a registration agreement with Messrs. Barbee and Gordon. These agreements
require the Company to file a registration statement covering the MTL Shares and
CMP Shares no later than January 31, 1997, and to use its best efforts to cause
the registration statement to become effective as soon as practicable and to
remain effective until December 31, 1999. In addition, the registration
agreements grant the holders of the MTL Shares and the CMP Shares "piggyback"
registration rights.
Financing Transactions
In connection with the acquisition of Motorsport Traditions and the
Company's November 1996 acquisition of Sports Image, on January 2, 1997, the
Company entered into a $16.0 million credit facility with First Union National
Bank of North Carolina (the "Credit Facility"). The Credit Facility consists of
a revolving line of credit for up to $10.0 million through September 30, 1997,
and up to $6.0 million from September 30, 1997 to March 31, 1998 (the "Line of
Credit") and a $6.0 million letter of credit/bankers' acceptances facility (the
"Letter of Credit/BA Facility"). The Line of Credit bears interest, at the
Company's option, at a rate equal to either (i) the greater of (a) the bank's
publicly announced prime rate or (b) a weighted average Federal Funds rate plus
0.5%, or (ii) LIBOR plus 1.9%. The Line of Credit is guaranteed by Sports Image
and Motorsport Traditions. The Company utilized $4.0 million of the Line of
Credit to provide part of the cash portion of the purchase price for Motorsport
Traditions and an additional $4.0 million of the Line of Credit to repay a
portion of the $24.0 million
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promissory note issued in connection with the acquisition of Sports Image. The
Letter of Credit/BA Facility is available for issuances of letters of credit and
eligible bankers' acceptances in an aggregate amount up to $6.0 million to
enable the Company to finance purchases of products from its overseas vendors.
The Credit Facility will mature on March 31, 1998. The Credit Facility contains
certain provisions that, among other things, will require the Company to comply
with certain financial ratios and net worth requirements and will limit the
ability of the Company and its subsidiaries to incur additional indebtedness or
to sell assets or engage in certain mergers or consolidations.
On January 2, 1997, the Company issued an aggregate of $20.0 million
principal amount of senior notes (the "Senior Notes") to three insurance
companies. The Senior Notes bear interest at the rate of 8.05% per annum,
provide for semi-annual payments of accrued interest, and will mature on January
2, 1999. The Company may not prepay the Senior Notes prior to maturity, but will
be required to offer to redeem the Senior Notes in the event of a "Change of
Control" of the Company, as defined in the Senior Notes. The Senior Notes
contain certain provisions that, among other things, will require the Company to
comply with certain financial ratios and net worth requirements and will limit
the ability of the Company and its subsidiares to incur additional indebtedness
or to sell assets or engage in certain mergers on consolidations. The Senior
Notes are guaranteed by Sports Image and Motorsport Traditions. The Company
utilized the proceeds from the Senior Notes to repay the remainder of the
promissory note issued in connection with the acquisition of Sports Image.
License and Endorsement Agreements
In connection with the acquisition of Motorsport Traditions, the
Company acquired the exclusive rights to manufacture and market various apparel
and souvenir products bearing the name, likeness, and signature of Jeff Gordon
and the likeness of his race car, pursuant to a license agreement with an
affiliate of Mr. Gordon (the "Apparel and Souvenir License"). The Apparel and
Souvenir License expires on December 31, 2000, subject to renewal by agreement
between the parties. The Apparel and Souvenir License requires the Company to
pay the licensor royalties based on a percentage of the wholesale price of
licensed products sold by the Company, with minimum royalty payments each year
during the term of the agreement.
Also in connection with the acquisition of Motorsport Traditions, the
Company entered into a license agreement (the "Die-Cast License") with an
affiliate of Jeff Gordon, pursuant to which the Company has the exclusive right
to manufacture and market die-cast replicas of Mr. Gordon's race car and related
vehicles. The Die-Cast License excludes the right to manufacture and market
certain die-cast collectibles currently licensed by a third party until that
license expires in September 1997. The Die-Cast License expires on December 31,
2000. The Die-Cast License requires the Company the pay the licensor royalties
based on a percentage of the wholesale price of licensed products sold by the
Company, with minimum royalty payments each year during the term of the
agreement.
In connection with the Die-Cast License, the Company entered into a
personal service and endorsement agreement with Jeff Gordon and an affiliate of
Mr. Gordon (the "Endorsement Agreement"). The Endorsement Agreement expires on
December 31, 2000. During the term of the Endorsement Agreement, the Company
will have the right to use Mr. Gordon's name, likeness, signature, and
endorsement in connection with the advertisement, promotion, and sale of the
die-cast collectibles to be produced under the Die-Cast License. The Endorsement
Agreement requires Mr. Gordon to make two personal appearances and to
participate in photo shoots and the production of one television commercial and
two radio commercial production sessions per year during the term of the
Endorsement Agreement, to the extent that the Company requests him to do so.
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Employment and Consulting Agreements
In connection with the acquisition of Motorsport Traditions, the
Company entered into a two-year employment agreement (the "Employment
Agreement") with Kenneth R. Barbee, who served in various executive capacities
with Motorsport Traditions prior to the acquisition. Pursuant to the terms of
the Employment Agreement, Mr. Barbee will serve as a Vice President of the
Company's wholly owned subsidiary, Sports Image, at a salary of $120,000 per
year. In addition, Mr. Barbee will be eligible to receive an annual bonus of up
to $24,000, as determined by the Company's Board of Directors based upon factors
that it deems relevant, including Mr. Barbee's performance. The Company also
granted to Mr. Barbee six-year options to acquire 15,000 shares of the Company's
Common Stock at an exercise price of $17.50 per share. Of the options granted,
options to acquire 7,500 shares were vested at the date of grant and options to
acquire the remaining 7,500 shares will vest on the first anniversary of the
date of grant.
Also in connection with the acquisition of Motorsport Traditions, the
Company entered into a four-year consulting agreement (the "Consulting
Agreement") with John Bickford pursuant to which Mr. Bickford will provide
consulting services with respect to representing the Company in the motorsports
community, creating new marketing and promotional campaigns, and advising the
Company with respect to the motorsports industry. The Company will pay Mr.
Bickford an annual fee of $100,000 for services provided in connection with the
Consulting Agreement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Businesses Acquired.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to determine whether it is required to provide
the financial statements required by this Item 7(a). In the event that the
Company determines that it is required to provide the financial statements
required by this Item 7(a), such financial statements shall be filed by
amendment to this Form 8-K no later than March 24, 1997, in accordance with Item
7(a)(4) of Form 8-K.
(b) Pro Forma Financial Information.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to determine whether it is required to provide
the pro forma financial information required by this Item 7(b). In the event
that the Company determines that it is required to provide the financial
statements required by this Item 7(b), such financial statements shall be filed
by amendment to this Form 8-K no later than March 24, 1997, in accordance with
Item 7(b) of Form 8-K.
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(c) Exhibits.
Exhibit No. Description of Exhibit
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10.39 Asset Purchase Agreement dated as of January 1, 1997,
among Action Performance Companies, Inc., MTL
Acquisition, Inc., Motorsport Traditions Limited
Partnership, Midland Leasing, Inc., and Motorsports By
Mail, Inc.
10.40 Exchange Agreement dated as of January 1, 1997, among
Action Performance Companies, Inc., Kenneth R. Barbee,
and Jeffery M. Gordon
10.41 Promissory Note dated January 1, 1997, in the principal
amount of $1,600,000 issued by MTL Acquisition, Inc., as
Maker, to Motorsport Traditions Limited Partnership, as
Payee, together with Guarantee of Action Performance
Companies, Inc.
10.42 Note Purchase Agreement dated as of January 2, 1997,
among Action Performance Companies, Inc., Jefferson-Pilot
Life Insurance Company, Alexander Hamilton Life Insurance
Company of America, and First Alexander Hamilton Life
Insurance Company, together with form of Note, form of
Subsidiary Guaranty, and form of Subsidiary Joinder
10.43 Credit Agreement dated as of January 2, 1997, among
Action Performance Companies, Inc., Sports Image, Inc.,
MTL Acquisition, Inc., and First Union National Bank of
North Carolina
10.44 Registration Agreement dated as of January 1, 1997, among
Action Performance Companies, Inc., Motorsport Traditions
Limited Partnership, Midland Leasing, Inc., and
Motorsports By Mail, Inc.
10.45 Registration Agreement dated as of January 1, 1997, among
Action Performance Companies, Inc., Kenneth R. Barbee,
and Jeffery M. Gordon
10.46 Employment Agreement dated as of January 1, 1997, between
Action Performance Companies, Inc. and Kenneth R. Barbee
10.47 Consulting Agreement dated as of January 1, 1997, between
Action Performance Companies, Inc. and John Bickford
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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.
January 23, 1997 ACTION PERFORMANCE COMPANIES, INC.
By: /s/ Christopher S. Besing
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Christopher S. Besing
Vice President, Chief Financial
Officer, and Treasurer
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ASSET PURCHASE AGREEMENT
DATED AS OF JANUARY 1, 1997
AMONG
ACTION PERFORMANCE COMPANIES, INC.,
MTL ACQUISITION, INC.,
MOTORSPORT TRADITIONS LIMITED PARTNERSHIP,
MIDLAND LEASING, INC., AND
MOTORSPORTS BY MAIL, INC.
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TABLE OF CONTENTS
Page
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SECTION 1
TRANSFER OF ASSETS............................ 1
1.1 Purchase and Sale of Assets....................................... 1
1.2 Assumption of Liabilities......................................... 1
SECTION 2
PURCHASE PRICE.............................. 2
2.1 Purchase Price.................................................... 2
2.2 Allocation of Purchase Price...................................... 2
SECTION 3
REPRESENTATIONS AND WARRANTIES...................... 2
3.1 Representations and Warranties of Seller.......................... 2
(a) Organization, Good Standing, and Qualification............. 2
(b) Authority.................................................. 2
(c) Subsidiaries............................................... 3
(d) Financial Statements....................................... 3
(e) Books and Records.......................................... 3
(f) No Material Change......................................... 3
(g) Actions in the Ordinary Course of Business................. 3
(h) Title to Properties........................................ 3
(i) Litigation................................................. 4
(j) Rights and Licenses........................................ 4
(k) No Violation............................................... 4
(l) Taxes...................................................... 4
(m) Accounts Receivable........................................ 4
(n) Contracts.................................................. 4
(o) Compliance with Law and Other Regulations.................. 5
(p) Insurance.................................................. 5
(q) Certificate of Limited Partnership and Books............... 5
(r) Employees.................................................. 5
(s) No Payments to Officers, Partners or Others................ 5
(t) Intent and Access.......................................... 5
(u) Accuracy of Statements..................................... 6
3.2 Further Representations and Warranties of Designated MTL Partners. 6
(a) Ownership of Partnership Interests in Seller............... 6
(b) Rights to Acquire Partnership Interests in Seller.......... 6
(c) Power to Execute Agreement................................. 6
(d) Agreement Not in Breach of Other Instruments............... 6
3.3 Representations and Warranties of Buyer........................... 6
(a) Due Incorporation, Good Standing, and Qualification........ 6
(b) Corporate Authority........................................ 7
(c) Capital Stock.............................................. 7
(d) Options, Warrants, and Rights.............................. 7
(e) Subsidiaries............................................... 7
(f) Financial Statements....................................... 7
(g) No Material Change......................................... 8
(h) Title to Assets and Properties............................. 8
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(i) Litigation................................................. 8
(j) Rights and Licenses........................................ 8
(k) No Violation............................................... 8
(l) Taxes...................................................... 8
(m) Accounts Receivable........................................ 9
(n) Contracts.................................................. 9
(o) Compliance with Law and Other Regulations.................. 9
(p) Insurance.................................................. 9
(q) Articles, Bylaws, and Minute Books......................... 9
(r) Employees.................................................. 9
(s) SEC Reports................................................ 9
(t) Accuracy of Statements..................................... 10
(u) Status of Buyer's Common Stock Being Issued................ 10
3.4 Survival of Representations and Warranties........................ 10
SECTION 4
COVENANTS OF SELLER........................... 10
4.1 Covenants of Seller............................................... 10
(a) Satisfaction of Obligations................................ 10
(b) Filing of Tax Returns and Forms............................ 10
(c) Change of Name............................................. 10
4.2 Further Assurances................................................ 10
SECTION 5
GENERAL................................. 11
5.1 Costs and Indemnity Against Finders............................... 11
5.2 Controlling Law................................................... 11
5.3 Notices........................................................... 11
5.4 Binding Nature of Agreement; No Assignment........................ 11
5.5 Entire Agreement.................................................. 11
5.6 Paragraph Headings................................................ 12
5.7 Counterparts...................................................... 12
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ASSET PURCHASE AGREEMENT
AGREEMENT dated as of January 1, 1997, among ACTION PERFORMANCE
COMPANIES, INC., an Arizona corporation ("Buyer"); MTL ACQUISITION, INC., an
Arizona corporation ("Designated Subsidiary"); MOTORSPORT TRADITIONS LIMITED
PARTNERSHIP, a North Carolina limited partnership ("Seller"); and MIDLAND
LEASING, INC., a North Carolina corporation, and MOTORSPORTS BY MAIL, INC., a
North Carolina corporation (collectively, the "Designated MTL Partners" and with
all partners of Seller the "MTL Partners").
Buyer desires to acquire, and Seller desires to transfer, substantially
all of the assets, properties, rights, and goodwill of Seller upon the terms and
conditions set forth in this Agreement.
To facilitate the transactions contemplated hereby, Buyer has formed
Designated Subsidiary, which is a wholly owned subsidiary of Buyer and has not
conducted any business activities prior to the date of this Agreement (the
"Closing Date"). The Designated MTL Partners own substantially all the
partnership interests of Seller.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth herein, the parties agree as follows:
SECTION 1
TRANSFER OF ASSETS
1.1 Purchase and Sale of Assets. Based upon and subject to the
representations, warranties, covenants, agreements, and other terms and
conditions set forth in this Agreement, Seller hereby sells, conveys, transfers,
assigns, and delivers, and Designated Subsidiary hereby purchases, acquires, and
accepts, as provided herein, all of the assets, properties, rights, and goodwill
of Seller of every kind and description, wherever located, including, without
limitation, (a) all assets and properties, tangible or intangible, real,
personal or mixed, (b) notes and accounts receivables, (c) computer equipment,
(d) office and warehouse equipment, (e) vehicles, (f) reserves, (g) prepayments,
(h) inventories, (i) deposits, (j) bank accounts, (k) cash and securities, (l)
claims and rights under contracts, agreements, leases, and commitments of Seller
of whatever nature, including, but not limited to, those agreements listed on
Schedule 1.1(b) hereto, (m) the name "Motorsport Tradition," (n) all computer
programs, data bases, records, systems, and processes and all know how,
information, and trade secrets relating thereto, and (o) all books and records
of Seller relating to Seller's business. The assets, properties, rights, and
goodwill conveyed, transferred, assigned, and delivered by Seller are sometimes
herein called the "Transferred Assets" and shall include, without limitation,
all of the assets and properties shown on or reflected in the Balance Sheet of
Seller as at November 30, 1996 (the "Base Balance Sheet") and all assets and
properties acquired by Seller after the date of the Base Balance Sheet and to
the Closing Date. There is, however, excluded from the assets and properties
sold and purchased pursuant to this Agreement, (i) those assets listed on
Schedule 1.1(b) hereto; (ii) any assets and properties disposed of by Seller
since November 30, 1996 in the ordinary course of business, (iii) Seller's
limited partnership franchises, limited partnership record books containing the
minutes of meetings of general and limited partners, and such other records as
have to do exclusively with Seller's organization or capitalization, and (iv)
Seller's tax and employee records.
1.2 Assumption of Liabilities. Designated Subsidiary hereby assumes,
and Buyer shall cause Designated Subsidiary to pay or discharge when due, all
debts, obligations, and liabilities of Seller reflected and accrued on the Base
Balance Sheet or incurred and accrued after the date of the Base Balance Sheet
in the ordinary course of business and all other debts, obligations, and
liabilities of Seller specifically listed in the Seller's Disclosure Schedule
described in Section 3.1; provided, however, that Designated Subsidiary does not
assume, and Buyer shall have no obligation to cause Designated Subsidiary to pay
or discharge when due, any debts, obligations, or liabilities of Seller (a) that
are listed on Schedule 1.2 hereto, (b) that are in existence on the date of the
Base Balance Sheet and do not appear thereon or in the Seller's Disclosure
Schedule, (c) that arise under agreements and commitments that have not been
assigned to Designated Subsidiary pursuant to this Agreement, (d) the existence
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of which would conflict with or constitute a breach of any representation,
warranty, covenant, or agreement made by Seller in this Agreement, except to the
extent disclosed in the Seller's Disclosure Schedule, (e) that arise in
connection with lawsuits, which are not reflected in the Base Balance Sheet or
as described in Seller's Disclosure Schedule, brought against Seller based on
any circumstances that occurred on or prior to the Closing Date, (f) that arise
by reason of or for any default, breach, or penalty of or by Seller under any
agreement or commitment, which are not reflected in the Base Balance Sheet or as
described in the Seller's Disclosure Schedule, (g) that relate to any federal,
state, or local income, sales, personal property, transfer, or other taxes, if
any, which may be imposed on Seller or the MTL Partners in connection with the
transactions contemplated by this Agreement or the liquidation and dissolution
of Seller, or (h) that arise in connection with negotiating the terms of this
Agreement, effecting the transactions contemplated by this Agreement, and
liquidating or dissolving Seller, including the fees and expenses of Seller's
legal counsel, accountants, and other consultants and advisers.
SECTION 2
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Transferred Assets
acquired pursuant to Section 1.1, in addition to the assumption of liabilities
pursuant to Section 1.2, is an amount equal to $8,000,000 consisting of (a) cash
in the amount of $5,400,000; plus (b) a promissory note of Buyer or Designated
Subsidiary ("Buyer's Promissory Note") in the principal amount of $1,600,000
plus (c) 57,143 shares of Common Stock of Buyer ("Buyer's Common Stock") valued
at $17.50 per share.
2.2 Allocation of Purchase Price. Buyer and Seller agree that the total
purchase price (including liabilities assumed) for the assets and properties
purchased pursuant to this Agreement shall be allocated to those assets and
properties as set forth in Exhibit A as prepared by Buyer and approved by Seller
(such approval not to be unreasonably withheld), which shall be attached to this
Agreement within 60 days after the date hereof. Buyer and Seller agree that the
allocation set forth in Exhibit A shall be made in accordance with the
requirements of Section 1060 of the Internal Revenue Code of 1986, as amended
and any applicable Treasury Regulations promulgated thereunder. Buyer and
Seller, each at its own expense, also agree to file appropriate forms with the
Internal Revenue Service setting forth the information required to be furnished
to the Internal Revenue Service by Section 1060 and the applicable Treasury
Regulations thereunder.
SECTION 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller and Designated MTL
Partners. Except as otherwise set forth in the Seller Disclosure Schedule
heretofore delivered by Seller to and acknowledged as received by Buyer, Seller
and the Designated MTL Partners jointly and severally represent and warrant to
Buyer and Designated Subsidiary as follows:
(a) Organization, Good Standing, and Qualification. Seller
is a limited partnership duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its organization with all requisite power
and authority to own, operate, and lease its assets and properties and to carry
on its business as now being conducted. Seller is not subject to any material
disability by reason of the failure to be duly qualified for the transaction of
business or to be in good standing under the laws of any jurisdiction. Seller
has heretofore delivered to Buyer a list setting forth, as of the date of this
Agreement, each jurisdiction in which Seller conducts its business on any basis
and each jurisdiction in which Seller is qualified to do business.
(b) Authority. Seller has the requisite power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. The MTL Partners have duly authorized the execution, delivery, and
performance of this Agreement. No other proceedings on the part of Seller are
necessary to authorize the execution and delivery by Seller of this Agreement or
the consummation by Seller of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by, and constitutes a legal,
valid, and binding agreement of, Seller and the MTL Partners, enforceable
against Seller and the MTL Partners in accordance with
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its terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' rights, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought.
(c) Subsidiaries. Seller has no subsidiaries. Seller does
not own, directly or indirectly, any capital stock or other equity securities of
any corporation or have any direct or indirect equity or ownership interest in
any corporation, partnership, or other business.
(d) Financial Statements. The Balance Sheet of Seller as of
November 30, 1995 and the Statements of Income and Retained Earnings and Cash
Flows of Seller for the year ended November 30, 1995, and all related schedules
and notes to the foregoing, have been audited by Greer & Walker L.L.P.,
certified public accountants, and the Balance Sheet of Seller as of November 30,
1996 and the Statements of Income and Retained Earnings and Cash Flows of Seller
for the 12 months ended November 30, 1996 have been prepared by Seller without
audit. All of the foregoing financial statements have been prepared in
accordance with generally accepted accounting principles, which were applied on
a consistent basis, are correct and complete, and present fairly, in all
material respects, the consolidated financial position, results of operations,
and changes in financial position of Seller as of their respective dates and for
the periods indicated. Seller does not have any material liabilities or
obligations of a type that would be included in a balance sheet prepared in
accordance with generally accepted accounting principles, whether related to tax
or non-tax matters, accrued or contingent, due or not yet due, liquidated or
unliquidated, or otherwise, except as and to the extent disclosed or reflected
in the Base Balance Sheet or Seller's Disclosure Schedule or incurred since the
date of the Base Balance Sheet in the ordinary course of business.
(e) Books and Records. The books of account and other
corporate records of Seller are complete and accurate, have been maintained in
accordance with good business practices, and the matters contained therein are
appropriately reflected in Seller's financial statements.
(f) No Material Change. Since November 30, 1996, there has
not been and there is not threatened (i) any material adverse change in the
business, assets, properties, financial condition, or operating results of
Seller, (ii) any loss or damage (whether or not covered by insurance) to any of
the assets or properties of Seller, which materially affects or impairs its
ability to conduct its business, or (iii) any mortgage or pledge of any assets
or properties of Seller, or any indebtedness incurred by Seller other than
indebtedness, not material in the aggregate, incurred in the ordinary course of
business.
(g) Actions in the Ordinary Course of Business. Since
November 30, 1996, Seller has not (i) taken any action outside of the ordinary
and usual course of business other than in consultation with Buyer; (ii)
borrowed any money or become contingently liable for any obligation or liability
of another; (iii) failed to pay all of its debts and obligations as they became
due; (iv) incurred any debt, liability or obligation of any nature to any party
except for obligations arising from the purchase of goods or the rendition of
services in the ordinary course of business, none of which aggregate more than
$100,000 with respect to the same supplier or customer; (v) knowingly waived any
right of substantial value; (vi) failed to use its best efforts to preserve its
business organization intact, to keep available the services of its employees,
or to preserve its relationships with its customers, suppliers, and others with
which it deals other than in consultation with Buyer; or (vii) increased or
committed to increase the salary, fee or compensation of any officer, employee,
independent contractor, agent, firm or person performing services for it.
(h) Title to Properties. Seller has good and marketable
title to all of its real and personal assets and properties, including all
assets and properties reflected in the Base Balance Sheet or acquired subsequent
to November 30, 1996, except assets or properties disposed of subsequent to that
date in the ordinary course of business. Such assets and properties are subject
to no mortgage, indenture, pledge, lien, claim, encumbrance, charge, security
interest, or title retention or other security arrangement, except for liens for
the payment of federal, state, and other taxes, the payment of which is neither
delinquent nor subject to penalties, and except for other liens and encumbrances
incidental to the conduct of the business of Seller or the ownership of its
assets or properties,
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which were not incurred in connection with the borrowing of money or the
obtaining of advances and which do not in the aggregate materially detract from
the value of the assets or properties of Seller or materially impair the use
thereof in the operation of its business, except in each case as disclosed in
the Base Balance Sheet. All leases pursuant to which Seller leases any
substantial amount of real or personal property are valid and effective in
accordance with their respective terms.
(i) Litigation. There are no actions, suits, proceedings, or
other litigation pending or, to the knowledge of Seller, threatened against
Seller, at law or in equity, or before or by any federal, state, municipal, or
other governmental department, commission, board, bureau, agency, or
instrumentality that, if determined adversely to Seller, would individually or
in the aggregate have a material adverse effect on the business, assets,
properties, operating results, prospects, or condition, financial or otherwise,
of Seller.
(j) Rights and Licenses. Seller has provided Buyer with a
list of all of its trademarks, trademark rights, trade names, trade name rights,
and licenses.
(k) No Violation. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
violate or result in a breach by Seller of, or constitute a default under, or
conflict with, or cause any acceleration of any obligation with respect to, (i)
any provision or restriction of any partnership agreement, loan agreement,
indenture, or mortgage of Seller, or (ii) any provision or restriction of any
lien, lease agreement, contract, instrument, order, judgment, award, decree,
ordinance, or regulation or any other restriction of any kind or character to
which any assets or properties of Seller is subject or by which Seller is bound.
(l) Taxes. Seller has duly filed in correct form all Tax
Returns (as defined below) relating to the activities of Seller required or due
to be filed (with regard to applicable extensions) on or prior to the Closing
Date. All such Tax Returns are accurate and complete in all material respects,
and Seller has paid or made provision for the payment of all Taxes (as defined
below) that have been incurred or are due or claimed to be due from it by
federal, state, or local taxing authorities for all periods ending on or before
the Closing Date, other than Taxes or other charges that are not delinquent or
are being contested in good faith and have not been finally determined and have
been disclosed to Buyer. The amounts set up as reserves for Taxes on the books
of Seller are sufficient in the aggregate for the payment of all unpaid Taxes
(including any interest or penalties thereon), whether or not disputed, accrued,
or applicable. No claims for taxes or assessments are being asserted or
threatened against Seller. Seller has furnished to Buyer copies of all Tax
Returns filed by or for it since its inception. For purposes of this Agreement,
the term "Taxes" shall mean all taxes, charges, fees, levies, or other
assessments, including, without limitation, income, gross receipts, excise,
property, sales, transfer, license, payroll, and franchise taxes, imposed by the
United States, or any state, local or foreign government or subdivision or
agency thereof and any interest, penalties or additions attributable thereto,
and the term "Tax Return" shall mean any report, return, or other information
required to be supplied to any taxing authority or required by any taxing
authority to be supplied to any other person.
(m) Accounts Receivable. The accounts receivable of Seller
have been acquired in the ordinary course of business and, to the knowledge of
Seller, are valid and enforceable, and are fully collectible, subject to no
known defenses, set-offs, or counterclaims, except to the extent of the reserve
reflected in the books of Seller or Seller's Disclosure Schedule or in such
other amount not greater than $500,000 unless subject to setoff as a result of
actions by Buyer.
(n) Contracts. Seller is not a party to (i) any plan or
contract providing for bonuses, pensions, options, stock purchases, deferred
compensation, retirement payments, or profit sharing, (ii) any collective
bargaining or other contract or agreement with any labor union, (iii) any lease,
installment purchase agreement, or other contract with respect to any real or
personal property used or proposed to be used in its operations, excepting, in
each case, items included within aggregate amounts disclosed or reflected in the
Base Balance Sheet, (iv) any employment agreement or other similar arrangement
not terminable by it upon 30 days or less notice without penalty to it, (v) any
contract or agreement for the purchase of any commodity, material, fixed asset,
or equipment in excess of $100,000, (vi) any contract or agreement creating an
obligation of $100,000 or
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more, (vii) any contract or agreement that by its terms does not terminate or is
not terminable by it upon 30 days or less notice without penalty to it, (viii)
any loan agreement, indenture, promissory note, conditional sales agreement, or
other similar type of arrangement, (ix) any material license agreement, or (x)
any contract that may result in a material loss or obligation to it. All
material contracts, agreements, and other arrangements to which Seller is a
party are valid and enforceable in accordance with their terms; Seller and, to
Seller's knowledge, all other parties to each of the foregoing have performed in
all material respects all obligations required to be performed to date; and
neither Seller nor, to Seller's knowledge, any such other party is in default or
in arrears under the terms of any of the foregoing.
(o) Compliance with Law and Other Regulations. Seller is not
subject to or has been threatened with any material fine, penalty, liability, or
disability as the result of its failure to comply with any requirement of
federal, state, local, or foreign law or regulation or any requirement of any
governmental body or agency having jurisdiction over it, the conduct of its
business, the use of its assets and properties, or any premises occupied by it.
(p) Insurance. Seller maintains in full force and effect
insurance coverage on its assets, properties, premises, operations, and
personnel in such amounts as Seller deems appropriate, all as set forth on
Seller's Disclosure Schedule.
(q) Certificate of Limited Partnership and Books. Seller has
heretofore delivered to Buyer true and complete copies of the Certificate of
Limited Partnership of Seller as currently in effect. The books of Seller
contain complete and accurate records of all meetings and other partnership
actions held or taken by the general partners and limited partners of Seller
since its organization.
(r) Employees. Seller has never maintained or contributed to
any "employee benefit plan," as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including, without limitation, any stock option plan, stock purchase plan,
deferred compensation plan, or other similar employee benefit plan. Seller never
contributed to any "multi-employer pension plan," as such term is defined in
Section 3(37)(A) of ERISA.
(s) No Payments to Officers, Partners or Others. Except to
the extent that the following will have no material adverse effect on the
purchase by Buyer or Designated Subsidiary of the assets and properties of
Seller to be purchased pursuant to Section 1.1 hereof or the assumption by
Designated Subsidiary of the obligations of Seller to be assumed by Designated
Subsidiary pursuant to Section 1.2 hereof, since November 30, 1996, there has
not been any purchase or redemption of any partnership interests of Seller or
any transfer, distribution or payment by Seller, directly or indirectly, of any
money or other assets or properties to any officer, partner, or any of their
affiliates or other person other than the payment of compensation for services
actually rendered at rates not in excess of the rates prevailing on the Base
Balance Sheet or payments in the ordinary course of business or for goods or
services in other than arm's length transactions.
(t) Intent and Access. Seller is acquiring the shares of
Buyer's Common Stock and Buyer's Promissory Note without a view to the public
distribution or resale in violation of any applicable federal or state
securities laws. Seller and the MTL Partners acknowledge that Buyer's Common
Stock and Buyer's Promissory Note are not registered under the Securities Act of
1933, as amended or any state securities laws and cannot be sold publicly
without registration thereunder or an exemption from such registration. Seller
and the MTL Partners understand that certificates for such shares and such note
will contain a legend with respect to the restrictions on transfer under federal
and applicable state securities laws as well as the fact that the shares and
note are "restricted securities" under such federal and state laws. Seller and
the MTL Partners have been furnished with such information, both financial and
non-financial, with respect to the operations, business, capital structure, and
financial position of Buyer and its subsidiaries as they believe necessary and
have been given the opportunity to ask questions of and receive answers from
Buyer and its subsidiaries and their officers concerning Buyer and its
subsidiaries. Without limiting the foregoing, Seller and the MTL Partners
specifically acknowledge the receipt of Buyer's Form 10-KSB Report for the
fiscal year ended September 30, 1996, Buyer's Proxy Statement dated January 29,
1996,
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Buyer's 1995 Annual Report to Shareholders, Buyer's Prospectus dated May 29,
1996, Buyer's Current Report on Form 8-K dated June 20, 1996, and Buyer's
Current Report on Form 8-K dated November 7, 1996. Notwithstanding the
foregoing, Seller understands that Buyer will promptly undertake to register the
Buyer's Common Stock.
(u) Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate, or other information furnished by Seller to Buyer
in connection with this Agreement or any of the transactions contemplated hereby
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein, in light of
circumstances in which they are made, not misleading.
3.2 Further Representations and Warranties of Designated MTL Partners.
Each Designated MTL Partner makes the following further representations and
warranties as to such Designated MTL Partner:
(a) Ownership of Partnership Interests in Seller. Such MTL
Partner owns the partnership interests in Seller as set forth in the Seller
Disclosure Schedule beside such MTL Partner's name.
(b) Rights to Acquire Partnership Interests in Seller. Such
MTL Partner does not have any outstanding options or other rights to purchase or
subscribe for or contracts or commitments to sell, or any interests,
instruments, evidences of indebtedness or other securities convertible in any
manner into, any partnership interests in Seller.
(c) Power to Execute Agreement. Such MTL Partner has full
power and authority to execute, deliver, and perform this Agreement, and this
Agreement is the legal and binding obligation of such MTL Partner, enforceable
against such MTL Partner in accordance with its items, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, or other similar laws now or hereafter in effect relating to
creditors' rights, and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefore may be
brought.
(d) Agreement Not in Breach of Other Instruments. The
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby, and the fulfillment of the terms hereof, will not result in
the breach of any term or provision of, or constitute a default under, or
conflict with, or cause the acceleration of any obligation under, any agreement
or other instrument of any description to which such MTL Partner is a party or
by which such MTL Partner is bound, or any judgment, decree, order or award of
any court, governmental body or arbitrator, or any law, rule or regulation
applicable to such MTL Partner.
(e) Reliance Upon MTL Partner's Advisors. Such MTL Partner
acknowledges that such person has been encouraged to rely upon the advice of
his, her, or its legal counsel and accountants or other financial advisers with
respect to the financial, tax, and other considerations relating to the
transactions contemplated by this Agreement. Such MTL Partner represents and
warrants that such person has reviewed with his, her or its own tax advisors the
federal, state, local, and foreign tax consequences of the transactions
contemplated by this Agreement. Such MTL Partner is relying solely on such
advisors and not on any statements or representations of Buyer or any of its
officers, directors, employees, or agents and understands that such MTL Partner
(and not Buyer) shall be responsible for his, her, or its own tax liability, if
any, that may arise as a result of the transactions contemplated by this
Agreement.
3.3 Representations and Warranties of Buyer. Except as otherwise set
forth in the Buyer Disclosure Schedule heretofore delivered by Buyer to Seller,
and except as disclosed in any document heretofore filed by Buyer with the
Securities and Exchange Commission ("SEC"), Buyer represents and warrants to
Seller as follows:
(a) Due Incorporation, Good Standing, and Qualification.
Buyer and each of its subsidiaries are corporations duly organized, validly
existing, and in good standing under the laws of their
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jurisdictions of incorporation with all requisite corporate power and authority
to own, operate, and lease their assets and properties and to carry on their
business as now being conducted. Neither Buyer nor any of its subsidiaries is
subject to any material disability by reason of the failure to be duly qualified
as a foreign corporation for the transaction of business or to be in good
standing under the laws of any jurisdiction. As used in this Agreement with
reference to Buyer, the term "subsidiaries" shall include all direct or indirect
subsidiaries of Buyer, including Designated Subsidiary.
(b) Corporate Authority. Buyer and Designated Subsidiary
have the corporate power and authority to enter into this Agreement and carry
out the transactions contemplated hereby. The Boards of Directors of Buyer and
Designated Subsidiary have duly authorized the execution, delivery, and
performance of this Agreement. No other corporate proceedings on the part of
Buyer or Designated Subsidiary, including a meeting of Buyer's shareholders, are
necessary to authorize the execution and delivery by Buyer of this Agreement or
the consummation by Buyer or Designated Subsidiary of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by, and
constitutes a legal, valid, and binding agreement of, Buyer and Designated
Subsidiary, enforceable against them in accordance with its terms, except that
(i) such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, or other similar laws now or hereafter in effect relating to
creditors' rights, and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefore may be
brought.
(c) Capital Stock. As of the date hereof, Buyer has
authorized capital stock consisting of 25,000,000 shares of Common Stock, $.01
par value, of which 13,094,962 shares are issued and outstanding, and 5,000,000
shares of Preferred Stock, no par value, of which no shares are issued and
outstanding. As of such date, 1,166,303 shares of Buyer Common Stock were
reserved for issuance upon the exercise of outstanding stock options and
warrants. All of the issued and outstanding shares of capital stock of Buyer and
each of its subsidiaries have been validly authorized and issued and are fully
paid and nonassessable.
(d) Options, Warrants, and Rights. Neither Buyer nor any of
its subsidiaries has outstanding any options, warrants, or other rights to
purchase, or securities or other obligations convertible into or exchangeable
for, or contracts, commitments, agreements, arrangements or understandings to
issue, any shares of their capital stock or other securities, other than those
referred to in Section 3.3(c).
(e) Subsidiaries. The outstanding shares of capital stock of
the subsidiaries of Buyer owned by Buyer or any of its subsidiaries are owned
free and clear of all claims, liens, charges, and encumbrances. Buyer does not
own, directly or indirectly, any capital stock or other equity securities of any
other corporation or have any direct or indirect equity or ownership interest in
any other corporation or other business.
(f) Financial Statements. The Consolidated Balance Sheets of
Buyer and its subsidiaries as of September 30, 1995 and September 30, 1996 and
the Consolidated Statements of Operations, the Consolidated Statements of
Shareholders' Equity, and the Consolidated Statements of Cash Flows of Buyer and
its subsidiaries for the three years ended September 30, 1996, and all related
schedules and notes to the foregoing, have been reported on by Arthur Andersen
LLP, independent public accountants. All of the foregoing financial statements
have been prepared in accordance with generally accepted accounting principles,
which were applied on a consistent basis (except as described therein), are
correct and complete, and present fairly, in all material respects, the
financial position, results of operations, and changes of financial position of
Buyer and its subsidiaries as of their respective dates and for the periods
indicated. Neither Buyer nor any of its subsidiaries has any material
liabilities or obligations of a type that would be included in a balance sheet
prepared in accordance with generally accepted accounting principles, whether
related to tax or non-tax matters, accrued or contingent, due or not yet due,
liquidated or unliquidated or otherwise, except as and to the extent disclosed
or reflected in the Consolidated Balance Sheet of Buyer and its subsidiaries as
of September 30, 1996, or incurred since September 30, 1996, in the ordinary
course of business or as contemplated by this Agreement.
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(g) No Material Change. Since September 30, 1996, there has
not been and there is not threatened (i) any material adverse change in the
business, assets, properties, financial condition, or operating results of Buyer
or its subsidiaries taken as a whole, (ii) any loss or damage (whether or not
covered by insurance) to any of the assets or properties of Buyer or its
subsidiaries, which materially affects or impairs their ability to conduct their
business, or (iii) any mortgage or pledge of any material amount of the assets
or properties of Buyer or any of its subsidiaries, or any indebtedness incurred
by Buyer or any of its subsidiaries, other than indebtedness, not material in
the aggregate, incurred in the ordinary course of business.
(h) Title to Assets and Properties. Buyer and its
subsidiaries have good and marketable title to all of their respective real and
personal assets and properties, including all assets and properties reflected in
the Consolidated Balance Sheet of Buyer and its subsidiaries as of September 30,
1996, or acquired subsequent to September 30, 1996, except assets or properties
disposed of subsequent to that date in the ordinary course of business. Such
assets and properties are subject to no mortgage, indenture, pledge, lien,
claim, encumbrance, charge, security interest, or title retention or other
security arrangement, except for liens for the payment of federal, state, and
other taxes, the payment of which is neither delinquent nor subject to
penalties, and except for other liens and encumbrances incidental to the conduct
of the business of Buyer and its subsidiaries or the ownership of their assets
or properties, which were not incurred in connection with the borrowing of money
or the obtaining of advances, and which do not in the aggregate materially
detract from the value of the assets or properties of Buyer and its subsidiaries
taken as a whole or materially impair the use thereof in the operation of their
respective businesses, except in each case as disclosed in the Consolidated
Balance Sheet as of September 30, 1996. All leases pursuant to which Buyer or
any of its subsidiaries lease any substantial amount of real or personal
property are valid and effective in accordance with their respective terms.
Buyer and each of its subsidiaries own or have the right to use all assets and
properties necessary to conduct their business as currently conducted.
(i) Litigation. There are no actions, suits, proceedings, or
other litigation pending or, to the knowledge of Buyer, threatened against Buyer
or any of its subsidiaries, at law or in equity, or before or by any federal,
state, municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality that, if determined adversely to Buyer or its
subsidiaries, would individually or in the aggregate have a material adverse
effect on the business, assets, properties, operating results, prospects, or
condition, financial or otherwise, of Buyer and its subsidiaries taken as a
whole.
(j) Rights and Licenses. Neither Buyer nor any of its
subsidiaries is subject to any material disability or liability by reason of its
failure to possess any trademark, trademark right, trade name, trade name right,
or license.
(k) No Violation. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
violate or result in a breach by Buyer or any of its subsidiaries of, or
constitute a default under, or conflict with, or cause any acceleration of any
obligation with respect to, (i) any provision or restriction of any charter,
bylaw, loan, indenture, or mortgage of Buyer or any of its subsidiaries, or (ii)
any provision or restriction of any lien, lease agreement, contract, instrument,
order, judgment, award, decree, ordinance, or regulation or any other
restriction of any kind or character to which any assets or properties of Buyer
or any of its subsidiaries is subject or by which Buyer or any of its
subsidiaries is bound.
(l) Taxes. Buyer has duly filed in correct form all Tax
Returns relating to the activities of Buyer and its subsidiaries required or due
to be filed (with regard to applicable extensions) on or prior to the Closing
Date. All such Tax Returns are accurate and complete in all material respects,
and Buyer has paid or made provision for the payment of all Taxes that have been
incurred or are due or claimed to be due from it by federal, state, or local
taxing authorities for all periods ending on or before the Closing Date, other
than Taxes or other charges that are not delinquent or are being contested in
good faith and have not been finally determined and have been disclosed to
Seller. The amounts set up as reserves for Taxes on the books of Buyer and its
subsidiaries are sufficient in the aggregate for the payment of all unpaid Taxes
(including any interest or penalties thereon), whether or not disputed, accrued,
or applicable. No claims for taxes or assessments are being asserted or
threatened against Buyer or any of its subsidiaries.
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(m) Accounts Receivable. The accounts receivable of Buyer
and its subsidiaries have been acquired in the ordinary course of business, are
valid and enforceable, and are fully collectible, subject to no known defenses,
set-offs, or counterclaims, except to the extent of the reserve reflected in the
books of Buyer and its subsidiaries or in such other amount that is not material
in the aggregate.
(n) Contracts. Neither Buyer nor any of its subsidiaries is
a party to (i) any plan or contract providing for bonuses, pensions, options,
stock purchases, deferred compensation, retirement payments, or profit sharing,
(ii) any collective bargaining or other contract or agreement with any labor
union, (iii) any lease, installment purchase agreement, or other contract with
respect to any real or personal property used or proposed to be used in its
operations excepting, in each case, items included within aggregate amounts
disclosed or reflected in the Consolidated Balance Sheet of Buyer and its
subsidiaries as of September 30, 1996, (iv) any employment agreement or other
similar arrangement not terminable by it upon 30 days or less notice without
penalty to it, (v) any contract or agreement for the purchase of any commodity,
material, fixed asset, or equipment in excess of $100,000, (vi) any contract or
agreement creating an obligation of $100,000 or more, (vii) any contract or
agreement that by its terms does not terminate or is not terminable by it upon
30 days or less notice without penalty to it, (viii) any loan agreement,
indenture, promissory note, conditional sales agreement, or other similar type
of arrangement, (ix) any material license agreement, or (x) any contract that
may result in a material loss or obligation to it. All material contracts,
agreements, and other arrangements to which Buyer or any of its subsidiaries is
a party are valid and enforceable in accordance with their terms; Buyer, its
subsidiaries, and all other parties to each of the foregoing have performed all
obligations required to be performed to date; neither Buyer, nor any of its
subsidiaries, nor any such other party is in default or in arrears under the
terms of any of the foregoing; and no condition exists or event has occurred
that, with the giving of notice or lapse of time or both, would constitute a
default under any of them.
(o) Compliance with Law and Other Regulations. Neither Buyer
nor any of its subsidiaries is subject to or has been threatened with any
material fine, penalty, liability, or disability as the result of its failure to
comply with any requirement of federal, state, local, or foreign law or
regulation or any requirement of any governmental body or agency having
jurisdiction over it, the conduct of its business, the use of its assets and
properties, or any premises occupied by it.
(p) Insurance. Buyer and each of its subsidiaries maintains
in full force and effect insurance coverage on their assets, properties,
premises, operations, and personnel in such amounts as Buyer deems appropriate.
(q) Articles, Bylaws, and Minute Books. Buyer has heretofore
delivered to Seller true and complete copies of the Articles of Incorporation
and Bylaws of Buyer and Designated Subsidiary as currently in effect. The minute
books of Buyer and Designated Subsidiary contain complete and accurate records
of all meetings and other corporate actions held or taken by the Boards of
Directors (or committees of the Boards of Directors) and shareholders of Buyer
and its subsidiaries, as the case may be, since their respective incorporations.
(r) Employees. Neither Buyer nor any of its subsidiaries has
ever maintained or contributed to any "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, including, without limitation, any stock
option plan, stock purchase plan, deferred compensation plan, or other similar
employee benefit plan, other than Buyer's Stock Option Plans. Neither Buyer nor
any of its subsidiaries has ever contributed to any "multi-employer pension
plan," as such term is defined in Section 3(37)(A) of ERISA.
(s) SEC Reports. Buyer's report on Form 10-KSB for the
fiscal year ended September 30, 1996 filed with the SEC and all reports and
proxy statements filed by Buyer thereafter pursuant to Section 13(a) or 14(a) of
the Securities Exchange Act of 1934 do not contain a misstatement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading as of the time the document was
filed. Since the filing of such report on Form 10-KSB, no other report, proxy
statement, or other document has been required to be filed by Buyer pursuant to
Section 13(a) or 14(a) of the Securities Exchange Act of 1934 that has not been
filed.
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(t) Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate, or other information furnished by Buyer to Seller
in connection with this Agreement or any of the transactions contemplated hereby
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not misleading.
(u) Status of Buyer's Common Stock Being Issued. The shares
of Buyer's Common Stock issued in partial payment for the Transferred Assets are
validly authorized and issued, fully paid, nonassessable, authorized for trading
on the Nasdaq National Market, and free of preemptive or other similar rights,
but subject to the resale restrictions required by Rule 144 promulgated pursuant
to the Securities Act of 1933, as amended ("Rule 144").
3.4 Survival of Representations and Warranties. Each of the
representations and warranties contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement irrespective of
any investigations or inquiries made by any party or any knowledge that any
party may possess, and each party shall be entitled to rely upon such
representations and warranties irrespective of any investigations, inquiries, or
knowledge. Notwithstanding the foregoing, no claims for indemnity arising out of
a false, misleading, or otherwise incorrect representation or warranty may be
made after one year from the Closing Date, and neither Buyer or Designated
Subsidiary on the one hand nor Seller or the Designated MTL Partners on the
other shall be responsible for any indemnity claim for an amount less than
$250,000 or greater than $4,000,000 arising out of a false, misleading, or
otherwise incorrect representation or warranty relating to this Agreement;
provided, however, that the foregoing limitation will have no force or effect
with respect to any defect in the stock or promissory note constituting a
portion of the purchase price for the assets and properties being sold
hereunder.
SECTION 4
COVENANTS OF SELLER AND MTL PARTNERS
4.1 Covenants of Seller and MTL Partners. Seller and the Designated MTL
Partners further agree, unless Buyer otherwise agrees in writing, subsequent to
the Closing Date:
(a) Satisfaction of Obligations. Seller shall pay and
discharge, as promptly as practicable after the Closing Date, all outstanding
obligations and liabilities not being assumed by Designated Subsidiary or
provide adequate reserves so that Designated Subsidiary will have no
responsibilities to Seller's creditors except as specifically assumed pursuant
to Section 1.2.
(b) Filing of Tax Returns and Forms. As promptly as
practicable after the Closing Date, Seller or the MTL Partners shall, at their
cost and expense, (i) prepare and file or cause to be prepared and filed all
federal, state, and local partnership and income tax returns and pay any amounts
due for taxes for all prior fiscal years and the period from the end of its last
fiscal year to the date of its liquidation and dissolution, and (ii) prepare and
file or cause to be prepared and filed all federal, state, and local forms
(including, but not limited to, Forms 1099 and W-2) and pay all taxes or
withholding amounts for all employment-related taxes for all periods through the
Closing Date.
(c) Change of Name. Seller shall promptly change its name to
a name that does not include the words "Motorsport Traditions."
4.2 Further Assurances. From time to time, on and after the Closing
Date, as and when requested by Buyer or Designated Subsidiary, the general
partners of Seller as of the Closing Date shall, for and on behalf and in the
name of Seller or otherwise, execute and deliver all such deeds, bills of sale,
assignments, and other instruments and shall take or cause to be taken such
further or other actions as Buyer or Designated Subsidiary may deem necessary or
desirable in order to confirm of record or otherwise to Buyer or Designated
Subsidiary title to and possession of all of the Transferred Assets and
otherwise to carry out fully the provisions and purposes of this
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Agreement. In addition, Seller shall give Buyer access to all records of Seller
not purchased hereunder, and Buyer shall give Seller access to all records of
Buyer to the extent relevant to the transactions contemplated hereby.
SECTION 5
GENERAL
5.1 Costs and Indemnity Against Finders. Each party hereto shall be
responsible for its own costs and expenses in negotiating and performing this
Agreement and hereby indemnifies and holds the other parties harmless against
any claim for finders' fees based on alleged retention of a finder by it.
5.2 Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance, and enforcement shall be governed by and
construed in accordance with the laws of the state of Arizona, notwithstanding
any Arizona or other conflict-of-law provisions to the contrary.
5.3 Notices. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received when delivered against receipt
or when deposited in the United States mails, first class postage prepaid,
addressed as set forth below:
<TABLE>
<CAPTION>
<S> <C>
If to Buyer or Designated Subsidiary: If to Seller or the Designated MTL Partners:
2401 West First Street 2835 Armentrout Drive
Tempe, Arizona 85281 Concord, North Carolina 28205
Attention: Fred W. Wagenhals Attention: Kenneth R. Barbee
Tel: (602) 894-0100 Tel: (704) 784-2700
Fax: (602) 967-1403 Fax: (704) 784-2707
with a copy given in the manner with a copy given in the manner
prescribed above, to: prescribed above, to:
O'Connor, Cavanagh, Anderson, Robinson, Bradshaw & Hinson, P.A.
Killingsworth & Beshears, P.A. 101 North Tryon Street, Suite 1900
One East Camelback Road Charlotte, North Carolina 28246-1900
Phoenix, Arizona 85012 Attention: Stokley G. Caldwell, Jr., Esq.
Attention: Robert S. Kant, Esq. Tel: (704) 377-8332
Tel: (602) 263-2606 Fax: (704) 378-4000
Fax: (602) 263-2900
</TABLE>
Any party may alter the address to which communications or copies are
to be sent by giving notice to such other parties of change of address in
conformity with the provisions of this paragraph for the giving of notice.
5.4 Binding Nature of Agreement; No Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors, and assigns, except that no party may assign,
delegate, or transfer its rights or obligations under this Agreement without the
prior written consent of the other parties hereto. Any assignment, delegation,
or transfer made in violation of this Section 5.4 shall be null and void.
5.5 Entire Agreement. This Agreement contains the entire understanding
among the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
inducements, and conditions, express or implied, oral or written, except as
herein contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.
11
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5.6 Paragraph Headings. The paragraph headings in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ACTION PERFORMANCE COMPANIES, INC. MIDLAND LEASING, INC.
By:_______________________________ By:_______________________________
Its:______________________________ Its:______________________________
MTL ACQUISITION, INC. MOTORSPORTS BY MAIL, INC.
By:_______________________________ By:_______________________________
Its:______________________________ Its:______________________________
MOTORSPORT TRADITIONS LIMITED
PARTNERSHIP
By:_______________________________
General Partner
12
- --------------------------------------------------------------------------------
EXCHANGE AGREEMENT
DATED AS OF JANUARY 1, 1997
AMONG
ACTION PERFORMANCE COMPANIES, INC.,
KENNETH R. BARBEE, AND
JEFFERY M. GORDON
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1
EXCHANGE OF SHARES............................ 1
SECTION 2
REPRESENTATIONS AND WARRANTIES...................... 1
2.1 Representations and Warranties of Seller............................ 1
(a) Due Incorporation, Good Standing, and Qualification........ 1
(b) Capital Stock.............................................. 1
(c) Options, Warrants, and Rights.............................. 1
(d) Subsidiaries............................................... 2
(e) Financial Statements....................................... 2
(f) Books and Records.......................................... 2
(g) No Material Change......................................... 2
(h) Actions in the Ordinary Course of Business................. 2
(i) Title to Properties........................................ 2
(j) Litigation................................................. 3
(k) Rights and Licenses........................................ 3
(l) No Violation............................................... 3
(m) Taxes...................................................... 3
(n) Accounts Receivable........................................ 3
(o) Contracts.................................................. 3
(p) Compliance with Law and Other Regulations.................. 4
(q) Insurance.................................................. 4
(r) Articles, Bylaws, and Minute Books......................... 4
(s) Employees.................................................. 4
(t) No Payments to Directors, Officers, Shareholders or Others. 4
(u) Accuracy of Statements..................................... 4
2.2 Further Representations and Warranties of Sellers................... 4
(a) Ownership of Capital Stock of CMP.......................... 5
(b) Rights to Acquire Shares................................... 5
(c) Power to Execute Agreement................................. 5
(d) Agreement Not in Breach of Other Instruments............... 5
(e) Reliance Upon Seller's Advisors............................ 5
(f) Intent and Access.......................................... 5
2.3 Representations and Warranties of Buyer............................. 5
(a) Due Incorporation, Good Standing, and Qualification........ 6
(b) Corporate Authority........................................ 6
(c) Capital Stock.............................................. 6
(d) Options, Warrants, and Rights.............................. 6
(e) Subsidiaries............................................... 6
(f) Financial Statements....................................... 6
(g) No Material Change......................................... 7
(h) Title to Assets and Properties............................. 7
(i) Litigation................................................. 7
(j) Rights and Licenses........................................ 7
(k) No Violation............................................... 7
i
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(l) Taxes...................................................... 7
(m) Accounts Receivable........................................ 8
(n) Contracts.................................................. 8
(o) Compliance with Law and Other Regulations.................. 8
(p) Insurance.................................................. 8
(q) Articles, Bylaws, and Minute Books......................... 8
(r) Employees.................................................. 8
(s) SEC Reports................................................ 8
(t) Accuracy of Statements..................................... 9
(u) Status of Buyer Common Stock Being Issued.................. 9
2.4 Survival of Representations and Warranties.......................... 9
SECTION 3
COVENANTS OF SELLERS........................... 9
3.1 Covenants of Sellers................................................ 9
(a) Filing of Tax Returns and Payment of Taxes................. 9
(b) Section 338(h)(10) Election................................ 9
3.2 Further Assurances......................................... 10
SECTION 4
GENERAL................................. 10
4.1 Costs and Indemnity Against Finders................................. 10
4.2 Controlling Law..................................................... 10
4.3 Notices............................................................. 10
4.4 Binding Nature of Agreement; No Assignment.......................... 10
4.5 Entire Agreement.................................................... 11
4.6 Paragraph Headings.................................................. 11
4.7 Counterparts........................................................ 11
ii
<PAGE>
EXCHANGE AGREEMENT
AGREEMENT dated as of January 1, 1997, among ACTION PERFORMANCE
COMPANIES, INC., an Arizona corporation ("Buyer"); and KENNETH R. BARBEE and
JEFFERY M. GORDON (each, a "Seller" and together, "Sellers").
Buyer and Sellers desire that Buyer acquire all of Sellers' shares of
capital stock (the "Shares") of Creative Marketing and Promotions, Inc., a North
Carolina corporation ("CMP") in exchange for shares of Buyer's Common Stock, all
on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth herein, the parties agree as follows:
SECTION 1
EXCHANGE OF SHARES
1.1 Exchange of Shares. Based upon and subject to the representations,
warranties, covenants, agreements, and other terms and conditions set forth in
this Agreement, as of the date of this Agreement (the "Closing Date"), the
Sellers hereby convey, transfer, assign, and deliver the Shares to Buyer in
exchange for an aggregate of 285,714 shares of Buyer's common stock, par value
$.01 per share (the "Buyer's Common Stock"), valued at $17.50 per share. Each
Seller hereby conveys, transfers, assigns, and delivers to Buyer the number of
Shares set forth beside such Seller's name on Schedule 1.1 hereto, in exchange
for the number of shares of Buyer's Common Stock set forth beside such Seller's
name on Schedule 1.1 hereto. Buyer and each of the Sellers hereby acknowledges
receipt of the Shares and the Buyer's Common Stock, respectively.
SECTION 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Sellers. Except as otherwise set
forth in the Sellers' Disclosure Schedule heretofore delivered by Sellers to and
acknowledged as received by Buyer, Sellers jointly and severally represent and
warrant to Buyer as follows:
(a) Due Incorporation, Good Standing, and Qualification. CMP
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation with all requisite corporate
power and authority to own, operate, and lease its assets and properties and to
carry on its business as now being conducted. CMP is not subject to any material
disability by reason of the failure to be duly qualified as a foreign
corporation for the transaction of business or to be in good standing under the
laws of any jurisdiction. Sellers have heretofore delivered to Buyer a list
setting forth, as of the date of this Agreement, each jurisdiction in which (i)
CMP currently conducts it business or has in the past conducted its business on
any basis, (ii) CMP is qualified to do business, and (iii) CMP is qualified for
the purposes of sales and income taxes.
(b) Capital Stock. As of the date hereof, CMP has an
authorized capital stock consisting of 100,000 shares of Common Stock, $1.00 par
value, of which 4,000 shares are issued and outstanding and all of which are
owned by Sellers, free and clear of all claims, liens, charges, and
encumbrances. All of the issued and outstanding shares of capital stock of CMP
have been validly authorized and issued and are fully paid and nonassessable.
(c) Options, Warrants, and Rights. CMP does not have
outstanding any options, warrants, or other rights to purchase, or securities or
other obligations convertible into or exchangeable for, or contracts,
<PAGE>
commitments, agreements, arrangements, or understandings to issue, any shares of
its capital stock or other securities.
(d) Subsidiaries. CMP has no subsidiaries. CMP does not own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest in any
corporation or other business.
(e) Financial Statements. The Balance Sheet of CMP as of
November 30, 1995, and the Statements of Income and Retained Earnings and Cash
Flows of CMP for the year ended November 30, 1995 have been audited by Greer &
Walker, L.L.P., certified public accountants, and the Balance Sheet of CMP as of
November 30, 1996 and the Statements of Income and Retained Earnings and Cash
Flow of CMP for the 12 months ended November 30, 1996 have been prepared by CMP
without audit. All of the foregoing financial statements have been prepared in
accordance with generally accepted accounting principles, which were applied on
a consistent basis, are correct and complete, and present fairly, in all
material respects, the consolidated financial position, results of operations,
and changes in financial position of CMP as of their respective dates and for
the periods indicated. CMP does not have any material liabilities or obligations
of a type that would be included in a balance sheet prepared in accordance with
generally accepted accounting principles, whether related to tax or non-tax
matters, accrued or contingent, due or not yet due, liquidated or unliquidated,
or otherwise, except as and to the extent disclosed or reflected in the Base
Balance Sheet or Sellers' Disclosure Schedule or incurred since the date of the
Base Balance Sheet in the ordinary course of business.
(f) Books and Records. The books of account and other
corporate records of CMP are complete and accurate, have been maintained in
accordance with good business practices, and the matters contained therein are
appropriately reflected in CMP's financial statements.
(g) No Material Change. Since November 30, 1996, there has not
been and there is not threatened (i) any material adverse change in the
business, assets, properties, financial condition, or operating results of CMP,
(ii) any loss or damage (whether or not covered by insurance) to any of the
assets or properties of CMP, which materially affects or impairs its ability to
conduct its business, or (iii) any mortgage or pledge of any assets or
properties of CMP, or any indebtedness incurred by CMP other than indebtedness,
not material in the aggregate, incurred in the ordinary course of business.
(h) Actions in the Ordinary Course of Business. Since November
30, 1996, CMP has not (i) taken any action outside of the ordinary and usual
course of business; (ii) borrowed any money or become contingently liable for
any obligation or liability of another; (iii) failed to pay all of its debts and
obligations as they became due; (iv) incurred any debt, liability or obligation
of any nature to any party except for obligations arising from the purchase of
goods or the rendition of services in the ordinary course of business, none of
which aggregate more than $100,000 with respect to the same supplier or
customer; (v) knowingly waived any right of substantial value; (vi) failed to
use its best efforts to preserve its business organization intact, to keep
available the services of its employees, or to preserve its relationships with
its customers, suppliers and others with which it deals; or (vii) increased or
committed to increase the salary, fee or compensation of any officer, employee,
independent contractor, agent, firm or person performing services for it.
(i) Title to Properties. CMP has good and marketable title to
all of its real and personal assets and properties, including all assets and
properties reflected in the Base Balance Sheet or acquired subsequent to
November 30, 1996, except assets or properties disposed of subsequent to that
date in the ordinary course of business. Such assets and properties are subject
to no mortgage, indenture, pledge, lien, claim, encumbrance, charge, security
interest, or title retention or other security arrangement, except for liens for
the payment of federal, state, and other taxes, the payment of which is neither
delinquent nor subject to penalties, and except for other liens and encumbrances
incidental to the conduct of the business of CMP or the ownership of its assets
or properties, which were not incurred in connection with the borrowing of money
or the obtaining of advances and which do not
2
<PAGE>
in the aggregate materially detract from the value of the assets or properties
of CMP or materially impair the use thereof in the operation of its business,
except in each case as disclosed in the Base Balance Sheet. All leases pursuant
to which CMP leases any substantial amount of real or personal property are
valid and effective in accordance with their respective terms.
(j) Litigation. There are no actions, suits, proceedings, or
other litigation pending or, to the knowledge of CMP, threatened against CMP, at
law or in equity, or before or by any federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or instrumentality
that, if determined adversely to CMP, would individually or in the aggregate
have a material adverse effect on the business, assets, properties, operating
results, prospects, or condition, financial or otherwise, of CMP.
(k) Rights and Licenses. CMP has provided Buyer with a list of
all of its trademarks, trademark rights, trade names, trade name rights, and
licenses.
(l) No Violation. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not violate or
result in a breach by CMP of, or constitute a default under, or conflict with,
or cause any acceleration of any obligation with respect to, (i) any provision
or restriction of any charter, bylaw, loan, indenture, or mortgage of CMP, or
(ii) any provision or restriction of any lien, lease agreement, contract,
instrument, order, judgment, award, decree, ordinance, or regulation or any
other restriction of any kind or character to which any assets or properties of
CMP is subject or by which CMP is bound.
(m) Taxes. CMP has duly filed in correct form all Tax Returns
(as defined below) relating to the activities of CMP required or due to be filed
(with regard to applicable extensions) on or prior to the Closing Date. All such
Tax Returns are accurate and complete in all material respects, and CMP has paid
or made provision for the payment of all Taxes (as defined below) that have been
incurred or are due or claimed to be due from it by federal, state, or local
taxing authorities for all periods ending on or before the Closing Date, other
than Taxes or other charges that are not delinquent or are being contested in
good faith and have not been finally determined and have been disclosed to
Buyer. The amounts set up as reserves for Taxes on the books of CMP are
sufficient in the aggregate for the payment of all unpaid Taxes (including any
interest or penalties thereon), whether or not disputed, accrued, or applicable.
No claims for taxes or assessments are being asserted or threatened against CMP.
Sellers have furnished to Buyer copies of all Tax Returns filed for or by CMP
since its inception. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies, or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, transfer, license,
payroll, and franchise taxes, imposed by the United States, or any state, local
or foreign government or subdivision or agency thereof and any interest,
penalties or additions attributable thereto, and the term "Tax Return" shall
mean any report, return, or other information required to be supplied to any
taxing authority or required by any taxing authority to be supplied to any other
person. CMP has duly and validly filed elections for S corporation status under
the Internal Revenue Code; none of such elections have been revoked or
terminated; and neither CMP nor any shareholder of CMP has taken any action that
would cause a termination of such S election.
(n) Accounts Receivable. The accounts receivable of CMP have
been acquired in the ordinary course of business and, to the knowledge of
Seller, are valid and enforceable, and are fully collectible, subject to no
known defenses, set-offs, or counterclaims, except to the extent of the reserve
reflected in the books of CMP or in CMP's Disclosure Schedule or in such other
amount not greater than $500,000 unless subject to setoff as a result of actions
by Buyer.
(o) Contracts. CMP is not a party to (i) any plan or contract
providing for bonuses, pensions, options, stock purchases, deferred
compensation, retirement payments, or profit sharing, (ii) any collective
bargaining or other contract or agreement with any labor union, (iii) any lease,
installment purchase agreement, or other contract with respect to any real or
personal property used or proposed to be used in its operations, excepting, in
each case, items included within aggregate amounts disclosed or reflected in the
Base
3
<PAGE>
Balance Sheet, (iv) any employment agreement or other similar arrangement not
terminable by it upon 30 days or less notice without penalty to it, (v) any
contract or agreement for the purchase of any commodity, material, fixed asset,
or equipment in excess of $100,000, (vi) any contract or agreement creating an
obligation of $100,000 or more, (vii) any contract or agreement that by its
terms does not terminate or is not terminable by it upon 30 days or less notice
without penalty to it, (viii) any loan agreement, indenture, promissory note,
conditional sales agreement, or other similar type of arrangement, (ix) any
material license agreement, or (x) any contract that may result in a material
loss or obligation to it. All material contracts, agreements, and other
arrangements to which CMP is a party are valid and enforceable in accordance
with their terms; CMP and, to CMP's knowledge, all other parties to each of the
foregoing have performed in any material respects all obligations required to be
performed to date; and neither CMP nor, to CMP's knowledge, any such other party
is in default or in arrears under the terms of any of the foregoing.
(p) Compliance with Law and Other Regulations. CMP is not
subject to or has been threatened with any material fine, penalty, liability, or
disability as the result of its failure to comply with any requirement of
federal, state, local, or foreign law or regulation or any requirement of any
governmental body or agency having jurisdiction over it, the conduct of its
business, the use of its assets and properties, or any premises occupied by it.
(q) Insurance. CMP maintains in full force and effect
insurance coverage on its assets, properties, premises, operations, and
personnel in such amounts as CMP deems appropriate, all as set forth on Sellers'
Disclosure Schedule.
(r) Articles, Bylaws, and Minute Books. Sellers have
heretofore delivered to Buyer true and complete copies of the Articles of
Incorporation and Bylaws of CMP as currently in effect. The minute books of CMP
contain complete and accurate records of all meetings and other corporate
actions held or taken by the Boards of Directors (or committees of the Boards of
Directors) and shareholders of CMP since its incorporation.
(s) Employees. CMP has never maintained or contributed to any
"employee benefit plan," as such term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including, without
limitation, any stock option plan, stock purchase plan, deferred compensation
plan, or other similar employee benefit plan. CMP never contributed to any
"multi-employer pension plan," as such term is defined in Section 3(37)(A) of
ERISA.
(t) No Payments to Directors, Officers, Shareholders or
Others. Except to the extent that the following will have no material adverse
effect on the purchase by Buyer of the Shares or the business, assets, or
properties of CMP pursuant to this Agreement, since November 30, 1996, there has
not been any purchase or redemption of any shares of capital stock of CMP or any
transfer, distribution or payment by CMP, directly or indirectly, of any money
or other assets or properties to any director, officer, shareholder or any of
their affiliates or other person other than the payment of compensation for
services actually rendered at rates not in excess of the rates prevailing on the
Base Balance Sheet or payments in the ordinary course of business or for goods
or services in other than arm's length transactions.
(u) Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate, or other information furnished by CMP or Sellers
to Buyer in connection with this Agreement or any of the transactions
contemplated hereby contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein, in light of circumstances in which they are made, not misleading.
2.2 Further Representations and Warranties of Sellers. Each Seller
makes the following further representations and warranties as to himself:
4
<PAGE>
(a) Ownership of Capital Stock of CMP. Such Seller owns the
number of Shares set forth beside such Seller's name on Schedule 1.1 hereto.
Such Seller has good, marketable and unencumbered title to such Shares, and
there are no restrictions on his right to transfer such Shares to Buyer pursuant
to this Agreement.
(b) Rights to Acquire Shares. Such Seller does not have any
outstanding options, warrants, or other rights to purchase or subscribe for or
contracts or commitments to sell, or any interests, instruments, evidences of
indebtedness or other securities convertible in any manner into, any shares of
CMP's capital stock.
(c) Power to Execute Agreement. Such Seller has full power and
authority to execute, deliver, and perform this Agreement, and this Agreement is
the legal and binding obligation of such Seller, enforceable against such Seller
in accordance with its items, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or
hereafter in effect relating to creditors' rights, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought.
(d) Agreement Not in Breach of Other Instruments. The
execution and delivery of this Agreement, the consummation of the transactions
hereby contemplated, and the fulfillment of the terms hereof, will not result in
the breach of any term or provision of, or constitute a default under, or
conflict with, or cause the acceleration of any obligation under, any agreement
or other instrument of any description to which such Seller is a party or by
which such Seller is bound, or any judgment, decree, order or award of any
court, governmental body or arbitrator, or any law, rule or regulation
applicable to such Seller.
(e) Reliance Upon Seller's Advisors. Such Seller acknowledges
that he has been encouraged to rely upon the advice of his legal counsel and
accountants or other financial advisers with respect to the financial, tax, and
other considerations relating to the acquisition of the Buyer's Common Stock.
Such Seller represents and warrants that he has reviewed with the his own tax
advisors the federal, state, local, and foreign tax consequences of the
investment in Buyer's Common Stock. Such Seller is relying solely on such
advisors and not on any statements or representations of Buyer or any of its
officers, directors, employees, or agents and understands that such Seller (and
not Buyer) shall be responsible for his own tax liability, if any, that may
arise as a result of the acquisition of Buyer's Common Stock or the transactions
contemplated by this Agreement.
(f) Intent and Access. Such Seller is acquiring the shares of
Buyer's Common Stock without a view to the public distribution or resale in
violation of any applicable federal or state securities laws. Such Seller
acknowledges that the shares of Buyer's Common Stock are not registered under
the Securities Act of 1933, as amended or any state securities laws and cannot
be sold publicly without registration thereunder or an exemption from such
registration. Such Seller understands that certificates for such shares will
contain a legend with respect to the restrictions on transfer under federal and
applicable state securities laws as well as the fact that the shares are
"restricted securities" under such federal and state laws. Such Seller has been
furnished with such information, both financial and non-financial, with respect
to the operations, business, capital structure, and financial position of Buyer
and its subsidiaries as he believes necessary and has been given the opportunity
to ask questions of and receive answers from Buyer and its subsidiaries and
their officers concerning Buyer and its subsidiaries. Without limiting the
foregoing, such Seller specifically acknowledges the receipt of Buyer's Form
10-KSB Report for the fiscal year ended September 30, 1996, Buyer's Proxy
Statement dated January 29, 1996, Buyer's 1996 Annual Report to Shareholders,
Buyer's Prospectus dated May 29, 1996, Buyer's Current Report on Form 8-K dated
June 20, 1996, and Buyer's Current Report on Form 8-K dated November 7, 1996.
Notwithstanding the foregoing, Sellers understand that Buyer will promptly
undertake to register the Buyer's Common Stock.
2.3 Representations and Warranties of Buyer. Except as otherwise set
forth in the Buyer Disclosure Schedule heretofore delivered by Buyer to Sellers,
and except as disclosed in any document heretofore filed by Buyer with the
Securities and Exchange Commission ("SEC"), Buyer represents and warrants to
Sellers as follows:
5
<PAGE>
(a) Due Incorporation, Good Standing, and Qualification. Buyer
and each of its subsidiaries are corporations duly organized, validly existing,
and in good standing under the laws of their jurisdictions of incorporation with
all requisite corporate power and authority to own, operate, and lease their
assets and properties and to carry on their business as now being conducted.
Neither Buyer nor any of its subsidiaries is subject to any material disability
by reason of the failure to be duly qualified as a foreign corporation for the
transaction of business or to be in good standing under the laws of any
jurisdiction. As used in this Agreement with reference to Buyer, the term
"subsidiaries" shall include all direct or indirect subsidiaries of Buyer.
(b) Corporate Authority. Buyer has the corporate power and
authority to enter into this Agreement and carry out the transactions
contemplated hereby. The Board of Directors of Buyer has duly authorized the
execution, delivery, and performance of this Agreement. No other corporate
proceedings on the part of Buyer, including a meeting of Buyer's shareholders,
are necessary to authorize the execution and delivery by Buyer of this Agreement
or the consummation by Buyer of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by, and constitutes a legal,
valid, and binding agreement of, Buyer, enforceable against it in accordance
with its terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' rights, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought.
(c) Capital Stock. As of the date hereof, Buyer has authorized
capital stock consisting of 25,000,000 shares of Common Stock, $.01 par value,
of which 13,094,962 shares are issued and outstanding, and 5,000,000 shares of
Preferred Stock, no par value, of which no shares are issued and outstanding. As
of such date, 1,166,303 shares of Buyer Common Stock were reserved for issuance
upon the exercise of outstanding stock options and warrants. All of the issued
and outstanding shares of capital stock of Buyer and each of its subsidiaries
have been, and Buyer's Common Stock, when issued pursuant to this Agreement will
be, validly authorized and issued and fully paid and nonassessable.
(d) Options, Warrants, and Rights. Neither Buyer nor any of
its subsidiaries has outstanding any options, warrants, or other rights to
purchase, or securities or other obligations convertible into or exchangeable
for, or contracts, commitments, agreements, arrangements or understandings to
issue, any shares of their capital stock or other securities, other than those
referred to in Section 2.2(c).
(e) Subsidiaries. The outstanding shares of capital stock of
the subsidiaries of Buyer owned by Buyer or any of its subsidiaries are owned
free and clear of all claims, liens, charges, and encumbrances. Buyer does not
own, directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest in any
corporation or other business.
(f) Financial Statements. The Consolidated Balance Sheets of
Buyer and its subsidiaries as of September 30, 1995 and September 30, 1996 and
the Consolidated Statements of Operations, the Consolidated Statements of
Shareholders' Equity, and the Consolidated Statements of Cash Flows of Buyer and
its subsidiaries for the three years ended September 30, 1996, and all related
schedules and notes to the foregoing, have been reported on by Arthur Andersen
LLP, independent public accountants. All of the foregoing financial statements
have been prepared in accordance with generally accepted accounting principles,
which were applied on a consistent basis (except as described therein), are
correct and complete, and present fairly, in all material respects, the
financial position, results of operations, and changes of financial position of
Buyer and its subsidiaries as of their respective dates and for the periods
indicated. Neither Buyer nor any of its subsidiaries has any material
liabilities or obligations of a type that would be included in a balance sheet
prepared in accordance with generally accepted accounting principles, whether
related to tax or non-tax matters, accrued or contingent, due or not yet due,
liquidated or unliquidated or otherwise, except as and to the extent disclosed
or reflected in the Consolidated Balance Sheet of Buyer and its subsidiaries as
of September 30, 1996, or incurred since September 30, 1996, in the ordinary
course of business or as contemplated by this Agreement.
6
<PAGE>
(g) No Material Change. Since September 30, 1996, there has
not been and there is not threatened (i) any material adverse change in the
business, assets, properties, financial condition, or operating results of Buyer
or its subsidiaries taken as a whole, (ii) any loss or damage (whether or not
covered by insurance) to any of the assets or properties of Buyer or its
subsidiaries, which materially affects or impairs their ability to conduct their
business, or (iii) any mortgage or pledge of any material amount of the assets
or properties of Buyer or any of its subsidiaries, or any indebtedness incurred
by Buyer or any of its subsidiaries, other than indebtedness, not material in
the aggregate, incurred in the ordinary course of business.
(h) Title to Assets and Properties. Buyer and its subsidiaries
have good and marketable title to all of their respective real and personal
assets and properties, including all assets and properties reflected in the
Consolidated Balance Sheet of Buyer and its subsidiaries as of September 30,
1996, or acquired subsequent to September 30, 1996, except assets or properties
disposed of subsequent to that date in the ordinary course of business. Such
assets and properties are subject to no mortgage, indenture, pledge, lien,
claim, encumbrance, charge, security interest, or title retention or other
security arrangement, except for liens for the payment of federal, state, and
other taxes, the payment of which is neither delinquent nor subject to
penalties, and except for other liens and encumbrances incidental to the conduct
of the business of Buyer and its subsidiaries or the ownership of their assets
or properties, which were not incurred in connection with the borrowing of money
or the obtaining of advances, and which do not in the aggregate materially
detract from the value of the assets or properties of Buyer and its subsidiaries
taken as a whole or materially impair the use thereof in the operation of their
respective businesses, except in each case as disclosed in the Consolidated
Balance Sheet as of September 30, 1996. All leases pursuant to which Buyer or
any of its subsidiaries lease any substantial amount of real or personal
property are valid and effective in accordance with their respective terms.
Buyer and each of its subsidiaries own or have the right to use all assets and
properties necessary to conduct their business as currently conducted.
(i) Litigation. There are no actions, suits, proceedings, or
other litigation pending or, to the knowledge of Buyer, threatened against Buyer
or any of its subsidiaries, at law or in equity, or before or by any federal,
state, municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality that, if determined adversely to Buyer or its
subsidiaries, would individually or in the aggregate have a material adverse
effect on the business, assets, properties, operating results, prospects, or
condition, financial or otherwise, of Buyer and its subsidiaries taken as a
whole.
(j) Rights and Licenses. Neither Buyer nor any of its
subsidiaries is subject to any material disability or liability by reason of its
failure to possess any trademark, trademark right, trade name, trade name right,
or license.
(k) No Violation. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not violate or
result in a breach by Buyer or any of its subsidiaries of, or constitute a
default under, or conflict with, or cause any acceleration of any obligation
with respect to, (i) any provision or restriction of any charter, bylaw, loan,
indenture, or mortgage of Buyer or any of its subsidiaries, or (ii) any
provision or restriction of any lien, lease agreement, contract, instrument,
order, judgment, award, decree, ordinance, or regulation or any other
restriction of any kind or character to which any assets or properties of Buyer
or any of its subsidiaries is subject or by which Buyer or any of its
subsidiaries is bound.
(l) Taxes. Buyer has duly filed in correct form all Tax
Returns relating to the activities of Buyer and its subsidiaries required or due
to be filed (with regard to applicable extensions) on or prior to the Closing
Date. All such Tax Returns are accurate and complete in all material respects,
and Buyer has paid or made provision for the payment of all Taxes that have been
incurred or are due or claimed to be due from it by federal, state, or local
taxing authorities for all periods ending on or before the Closing Date, other
than Taxes or other charges that are not delinquent or are being contested in
good faith and have not been finally determined and have been disclosed to
Seller. The amounts set up as reserves for Taxes on the books of Buyer and its
subsidiaries are sufficient in the aggregate for the payment of all unpaid Taxes
(including any interest or penalties thereon), whether
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or not disputed, accrued, or applicable. No claims for taxes or assessments are
being asserted or threatened against Buyer or any of its subsidiaries.
(m) Accounts Receivable. The accounts receivable of Buyer and
its subsidiaries have been acquired in the ordinary course of business, are
valid and enforceable, and are fully collectible, subject to no known defenses,
setoffs, or counterclaims, except to the extent of the reserve reflected in the
books of Buyer and its subsidiaries or in such other amount that is not material
in the aggregate.
(n) Contracts. Neither Buyer nor any of its subsidiaries is a
party to (i) any plan or contract providing for bonuses, pensions, options,
stock purchases, deferred compensation, retirement payments, or profit sharing,
(ii) any collective bargaining or other contract or agreement with any labor
union, (iii) any lease, installment purchase agreement, or other contract with
respect to any real or personal property used or proposed to be used in its
operations excepting, in each case, items included within aggregate amounts
disclosed or reflected in the Consolidated Balance Sheet of Buyer and its
subsidiaries as of September 30, 1996, (iv) any employment agreement or other
similar arrangement not terminable by it upon 30 days or less notice without
penalty to it, (v) any contract or agreement for the purchase of any commodity,
material, fixed asset, or equipment in excess of $100,000, (vi) any contract or
agreement creating an obligation of $100,000 or more, (vii) any contract or
agreement that by its terms does not terminate or is not terminable by it upon
30 days or less notice without penalty to it, (viii) any loan agreement,
indenture, promissory note, conditional sales agreement, or other similar type
of arrangement, (ix) any material license agreement, or (x) any contract that
may result in a material loss or obligation to it. All material contracts,
agreements, and other arrangements to which Buyer or any of its subsidiaries is
a party are valid and enforceable in accordance with their terms; Buyer, its
subsidiaries, and all other parties to each of the foregoing have performed all
obligations required to be performed to date; neither Buyer, nor any of its
subsidiaries, nor any such other party is in default or in arrears under the
terms of any of the foregoing; and no condition exists or event has occurred
that, with the giving of notice or lapse of time or both, would constitute a
default under any of them.
(o) Compliance with Law and Other Regulations. Neither Buyer
nor any of its subsidiaries is subject to or has been threatened with any
material fine, penalty, liability, or disability as the result of its failure to
comply with any requirement of federal, state, local, or foreign law or
regulation or any requirement of any governmental body or agency having
jurisdiction over it, the conduct of its business, the use of its assets and
properties, or any premises occupied by it.
(p) Insurance. Buyer and each of its subsidiaries maintains in
full force and effect insurance coverage on their assets, properties, premises,
operations, and personnel in such amounts as Buyer deems appropriate.
(q) Articles, Bylaws, and Minute Books. Buyer has heretofore
delivered to Sellers true and complete copies of its Articles of Incorporation
and Bylaws of Buyer as currently in effect. The minute books of Buyer contain
complete and accurate records of all meetings and other corporate actions held
or taken by the Boards of Directors (or committees of the Boards of Directors)
and shareholders of Buyer since its incorporation.
(r) Employees. Neither Buyer nor any of its subsidiaries has
ever maintained or contributed to any "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, including, without limitation, any stock
option plan, stock purchase plan, deferred compensation plan, or other similar
employee benefit plan, other than Buyer's Stock Option Plans. Neither Buyer nor
any of its subsidiaries has ever contributed to any "multi-employer pension
plan," as such term is defined in Section 3(37)(A) of ERISA.
(s) SEC Reports. Buyer's report on Form 10-KSB for the fiscal
year ended September 30, 1996 filed with the SEC and all reports and proxy
statements filed by Buyer thereafter pursuant to Section 13(a) or 14(a) of the
Securities Exchange Act of 1934 do not contain a misstatement of a material fact
or omit to state
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a material fact required to be stated therein or necessary to make the
statements therein not misleading as of the time the document was filed. Since
the filing of such report on Form 10-KSB, no other report, proxy statement, or
other document has been required to be filed by Buyer pursuant to Section 13(a)
or 14(a) of the Securities Exchange Act of 1934 that has not been filed.
(t) Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate, or other information furnished by Buyer to Sellers
in connection with this Agreement or any of the transactions contemplated hereby
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not misleading.
(u) Status of Buyer Common Stock Being Issued. The shares of
Buyer's Common Stock issued in exchange for the Shares are validly authorized
and issued, fully paid, nonassessable, authorized for trading on the Nasdaq
National Market, and free of preemptive or other similar rights, but subject to
the resale restrictions required by Rule 144 promulgated pursuant to the
Securities Act of 1933, as amended ("Rule 144").
2.4 Survival of Representations and Warranties. Each of the
representations and warranties contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement irrespective of
any investigations or inquiries made by any party or any knowledge that any
party may possess, and each party shall be entitled to rely upon such
representations and warranties irrespective of any investigations, inquiries, or
knowledge. Notwithstanding the foregoing, no claims for indemnity arising out of
a false, misleading, or otherwise incorrect representation or warranty may be
made after one year from the Closing Date, and neither Buyer nor Sellers shall
be responsible for any indemnity claim for an amount less than $250,000 or
greater than $4,000,000 arising out of a false, misleading, or otherwise
incorrect representation or warranty relating to this Agreement; provided,
however, that the foregoing limitation will have no force or effect with respect
to any defect of Buyer's Common Stock.
SECTION 3
COVENANTS OF SELLERS
3.1 Covenants of Sellers. Each Seller further agrees, unless Buyer
otherwise agrees in writing, subsequent to the Closing Date:
(a) Filing of Tax Returns and Payment of Taxes. As promptly as
practicable after the Closing Date, Sellers shall, at their cost and expense,
prepare or cause to be prepared all federal, state, and local S corporation Tax
Returns for all periods prior to the Closing Date. Not less than 30 days prior
to the anticipated date for filing such returns, Sellers shall provide a copy of
each such Tax Returns to Buyer for its review and consent or approval. Sellers
shall make any revisions to such Tax Returns that Buyer may reasonably request.
Upon approval of such Tax Returns by Buyer, such approval not to be unreasonably
withheld, Sellers shall promptly file such Tax Returns or cause them to be
filed. Each Seller agrees that Sellers shall be jointly and severally
responsible for any and all tax obligations of CMP or the Sellers arising as a
result of CMP's status as an S corporation prior to the Closing Date. Each
Seller agrees that Sellers shall promptly pay any and all Taxes determined to be
owed by CMP or either or both of the Sellers as a result of CMP's status as an S
corporation prior to the Closing Date.
(b) Section 338(h)(10) Election. In the event that Buyer
determines that it is eligible to file an election under Section 338(h)(10) of
the Internal Revenue Code of 1986, as amended, with respect to the exchange of
Shares and Buyer's Common Stock pursuant to this Agreement, Sellers will, upon
request by Buyer, promptly join in the filing of such an election and in making
corresponding elections under any state or local tax law. Buyer shall be
responsible for preparing all such elections, including preparation of forms
required to be filed in order to make such elections.
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3.2 Further Assurances. On and after the Closing Date, Sellers and
Buyer shall execute and deliver all such deeds, bills of sale, assignments, and
other instruments and shall take or cause to be taken such further or other
actions as any party may reasonably request from time to time in order to
effectuate the transactions provided for herein. The parties shall cooperate
with each other and with their respective counsel and accountants in connection
with any steps to be taken as a part of their respective obligations under this
Agreement.
SECTION 4
GENERAL
4.1 Costs and Indemnity Against Finders. Each party hereto shall be
responsible for its own costs and expenses in negotiating and performing this
Agreement and hereby indemnifies and holds the other parties harmless against
any claim for finders' fees based on alleged retention of a finder by it.
4.2 Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance, and enforcement shall be governed by and
construed in accordance with the laws of the state of Arizona, notwithstanding
any Arizona or other conflict-of-law provisions to the contrary.
4.3 Notices. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received when delivered against receipt
or when deposited in the United States mails, first class postage prepaid,
addressed as set forth below:
If to Buyer: If to Sellers:
2401 West First Street 2835 Armentrout Drive
Tempe, Arizona 85281 Concord, North Carolina 28205
Attention: Fred W. Wagenhals Attention: Kenneth R. Barbee
Tel: (602) 894-0100 Tel: (704) 784-2700
Fax: (602) 967-1403 Fax: (704) 784-2707
with a copy given in the manner with a copy given in the manner
prescribed above, to: prescribed above, to:
O'Connor, Cavanagh, Anderson, Robinson, Bradshaw & Hinson, P.A.
Killingsworth & Beshears, P.A. 101 North Tryon Street
One East Camelback Road Suite 1900
Phoenix, Arizona 85012 Charlotte, North Carolina 28246-1900
Attention: Robert S. Kant, Esq. Attention: Stokley G. Caldwell, Jr., Esq.
Tel: (602) 263-2606 Tel: (704) 377-8332
Fax: (602) 263-2900 Fax: (704) 378-4000
Any party may alter the address to which communications or copies are
to be sent by giving notice to such other parties of change of address in
conformity with the provisions of this paragraph for the giving of notice.
4.4 Binding Nature of Agreement; No Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors, and assigns, except that no party may assign,
delegate, or transfer its rights or obligations under this Agreement without the
prior written consent of the other parties hereto. Any assignment, delegation,
or transfer made in violation of this Section 4.4 shall be null and void.
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4.5 Entire Agreement. This Agreement contains the entire understanding
among the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
inducements, and conditions, express or implied, oral or written, except as
herein contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.
4.6 Paragraph Headings. The paragraph headings in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
4.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ACTION PERFORMANCE COMPANIES, INC.
By:___________________________________
Its:__________________________________
______________________________________
Kenneth R. Barbee
______________________________________
Jeffery M. Gordon
11
PROMISSORY NOTE
$1,600,000 January 1, 1997
FOR VALUE RECEIVED, MTL ACQUISITION, INC., an Arizona
corporation, its successors and assigns ("Maker"), hereby promises to pay to the
order of MOTORSPORT TRADITIONS LIMITED PARTNERSHIP, a North Carolina limited
partnership or its successors or assigns ("Payee"), at the office of Payee,
located at 2835 Armentrout Drive, Concord, North Carolina 28205, the principal
amount of $1,600,000, together with interest on the principal balance
outstanding hereunder, from (and including) the date hereof until (but not
including) the date of payment, at the interest rate specified below, in
accordance with the following terms and conditions:
1. Stated Interest Rate. Except as provided in Section 2
below, the principal balance outstanding hereunder shall bear interest, until
fully paid, at 4% per annum (the "Stated Interest Rate").
2. Default Interest Rate. The Default Interest Rate shall be
12% per annum. The principal balance outstanding hereunder from time to time
shall bear interest at the Default Interest Rate from the date of the occurrence
of an Event of Default (as hereinafter defined) hereunder until the earlier of
(a) the date on which the principal balance outstanding hereunder, together with
all accrued interest and other amounts payable hereunder, is paid in full; or
(b) the date on which such Event of Default is timely cured.
3. Payments. This Note shall be payable as follows:
(a) Twenty-three (23) equal monthly installments of
principal of Sixty-six Thousand Dollars ($66,000.00) each, due and payable on
the first day of each month, commencing on February 1, 1997, together with
interest on the unpaid balance at the Stated Interest Rate.
(b) All unpaid principal and accrued but unpaid
interest thereon and all other amounts payable hereunder shall be due and
payable on December 31, 1998.
4. Prepayment. Maker may prepay all or any portion of the
interest and the unpaid principal balance of this Note at any time, or from time
to time, without penalty or premium.
5. Application and Place of Payments. Payments received by
Payee with respect to the indebtedness evidenced hereby shall be applied in such
order and manner as Payee in its sole and absolute discretion may elect. Unless
Payee otherwise elects, payments received by Payee shall be applied first to
accrued and unpaid interest, next to the principal balance then outstanding
hereunder, and the remainder to Additional Sums (as hereinafter defined) or
other costs or added charges provided for in this Note. Payments hereunder shall
be made at the address for Payee first set forth above or at such other address
as Payee may specify to Maker in writing.
6. Events of Default; Acceleration. The occurrence of any one
or more of the following events shall constitute an "Event of Default"
hereunder, and upon such Event of Default, the entire principal balance
outstanding hereunder, together with all accrued interest and other amounts
payable hereunder, at the election of Payee, shall become immediately due and
payable, without any notice to Maker, provided that in the case of any of the
Events of Default in paragraphs (b), (c) or (d) below, the remainder of the debt
evidenced hereby shall automatically become due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by Maker:
(a) Nonpayment of principal, interest, or other
amounts when the same shall become due and payable hereunder, and Maker does not
cure such failure to pay within three days after the date such payment is due;
or
<PAGE>
(b) The failure of Maker to comply with any provision
of this Note; or
(c) The dissolution, winding-up, liquidation or
termination of the existence of Maker or the sale or disposition of
substantially all of the assets of Maker's business; or
(d) The making by Maker of an assignment for the
benefit of its creditors; or
(e) The appointment of a receiver for Maker or the
involuntary filing against Maker, which is not stayed or dismissed within 30
days of filing, or the voluntary filing by Maker of a petition or application
for relief under federal bankruptcy law or any similar state or federal law.
(f) An Event of Default by Maker under the License
Agreement of even date between Maker and JG Motorsports, Inc., the License
Agreement of even date among Maker, JG Motorsports, Inc., and Hasbro, Inc. (to
the extent such default arises from circumstances involving Maker rather than
Hasbro, Inc.), or the License Agreement dated as of September 1, 1996 between JG
Motorsports, Inc. and Creative Marketing and Promotions, Inc. (to the extent
such default arises from circumstances occurring after January 1, 1997).
7. Contracted For Interest.
(a) Maker agrees to pay an effective contracted for
rate of interest equal to the rate of interest resulting from all interest
payable as provided in this Note, plus the additional rate of interest resulting
from the Additional Sums. The Additional Sums shall consist of all fees,
charges, goods, things in action, or any other sums or things of value (other
than interest payable as provided in this Note) paid or payable by Maker,
pursuant to this Note, that may be deemed to be interest for the purpose of any
law of the state of Arizona that may limit the maximum amount of interest to be
charged with respect to this lending transaction. The Additional Sums shall be
deemed to be interest for the purposes of any such law only.
(b) Maker understands and believes that this
transaction complies with the usury laws of the state of Arizona; however, if
any interest or other charges in connection with this transaction are ever
determined to exceed the maximum amount permitted by law, then Maker agrees that
(i) the amount of interest or charges payable pursuant to this transaction shall
be reduced to the maximum amount permitted by law; and (ii) any excess amount
previously collected from Maker in connection with this transaction, which
exceeded the maximum amount permitted by law, will be credited against the
principal balance then outstanding hereunder. If the outstanding principal
balance hereunder has been paid in full, the excess amount paid will be refunded
to Maker.
8. Costs of Collection. Maker agrees to pay all costs of
collection, including, without limitation, attorneys' fees, whether or not suit
is filed, and all costs of suit and preparation for suit (whether at trial or
appellate level), in the event any payment of principal, interest, or other
amount is not paid when due, or if at any time Payee should incur any attorneys'
fees in any proceeding under any federal bankruptcy law (or any similar state or
federal law) in connection with the obligations evidenced hereby. In the event
of any court proceeding, court costs and attorneys' fees shall be set by the
court and not by the jury and shall be included in any judgment obtained by
Payee.
9. No Waiver by Payee. Maker hereby waives presentment,
protest, notice of dishonor, and notice of acceleration of maturity. No failure
to accelerate the debt evidenced hereby by reason of default hereunder,
acceptance of a past-due installment, or other indulgence granted from time to
time shall be construed as a novation of this Note or as a waiver of such right
of acceleration or of the right of Payee thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such right
of acceleration or any other right granted hereunder or by applicable law. No
extension of the time for payment of this Note shall operate to release,
discharge, modify, change or affect the original liability of Maker under this
Note, either in whole or in part, unless Payee agrees otherwise in writing.
Maker agrees to continue to remain bound for the payment of principal, interest,
and all other sums due under this Note notwithstanding any changes by way of
release, surrender, exchange, modification, substitution of, failure to perfect
or maintain perfection of any security for this Note. No
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<PAGE>
delay or failure of Payee in exercising any right hereunder shall affect such
right, nor shall any single or partial exercise of any right preclude further
exercise thereof.
10. Governing Law. This Note shall be construed in accordance
with and governed by the laws of the state of Arizona without regard to the
choice of law rules of the state of Arizona.
11. Time of Essence. Time is of the essence of this Note and
each and every provision hereof.
12. Conflicts; Inconsistency. In the event of any conflict or
inconsistency between the provisions of this Note and the provisions of any one
or more of the other documents executed in connection with this transaction, the
provisions of this Note shall govern and control to the extent necessary to
resolve such conflict or inconsistency.
13. Amendments. No amendment, modification, change, waiver,
release, or discharge hereof and hereunder shall be effective unless evidenced
by an instrument in writing and signed by the party against whom enforcement is
sought.
14. Severability. The invalidity of any provision of this Note
or portion of a provision shall not affect the validity of any other provision
of this Note or the remaining portion of the applicable provision.
15. Binding Nature. The provisions of this Note shall be
binding upon and inure to the benefit of Maker and Payee and their respective
heirs, personal representatives, successors, and assigns, as applicable.
16. Notices. All notices, requests, demands, and other
communications required or permitted under this Note shall be in writing and
shall be deemed to have been duly given, made, and received when delivered
against receipt, upon receipt of a facsimile transmission, or upon actual
receipt of registered or certified mail, postage prepaid, return receipt
requested, addressed as set forth below:
If to Maker:
2401 West First Street
Tempe, Arizona 85281
Attention: Fred W. Wagenhals
Phone: (602) 517-3710
Fax: (602) 967-1403
with a copy:
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
Suite 1100
One East Camelback
Phoenix, Arizona 85012
Attention: Robert S. Kant, Esq.
Phone: (602) 263-2606
Fax: (602) 263-2900
3
<PAGE>
If to Payee:
2835 Armentrout Drive
Concord, North Carolina 28205
Attention: Kenneth R. Barbee
Phone: (704) 784-2700
Fax: (704) 784-2707
with a copy to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
Attention: Stokley G. Caldwell, Jr., Esq.
Phone: (704) 377-8332
Fax: (704) 378-4000
Either party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this section for the giving of notice.
17. Construction. Maker and Payee participated in the drafting
of this Note, and this document was reviewed by the respective legal counsel for
Maker and Payee. The normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be applied
to the interpretation of this Note. The language of this Note shall be construed
as a whole according to its fair meaning. The word "include(s)" means
"include(s), without limitation," and the word "including" means "including, but
not limited to." No inference in favor of, or against, Maker or Payee shall be
drawn from the fact that one party has drafted any portion hereof.
IN WITNESS WHEREOF, Maker has executed this Note as of the
date first set forth above.
MTL ACQUISITION, INC.
By:______________________________________
Its:_____________________________________
4
<PAGE>
GUARANTEE
---------
The undersigned, Action Performance Companies, Inc.
("Guarantor"), hereby unconditionally guarantees the performance, including
without limitation, the payment obligations (the "Obligations"), of MTL
Acquisition, Inc. ("Maker") under the $1,600,000 promissory note of MTL
Acquisition, Inc. dated January 1, 1997 (the "Note") payable to Motorsport
Traditions Limited Partnership ("Payee"). The undersigned agrees that the term
"maker" in the Note shall include the undersigned with respect to any
obligations, events of default, or similar matters set forth in the Note.
The Guarantor hereby expressly waives: (a) notice of
acceptance of this Guaranty by Payee and of all extensions of credit to Maker by
Payee; (b) presentment and demand for payment of any of the Obligations; (c)
protest and notice of dishonor or of default to the Guarantor or to any other
party with respect to the Obligations or with respect to any security therefor;
(d) notice of Payee's obtaining, amending, substituting for, releasing, waiving
or modifying any security interest, liens, or encumbrances now or hereafter
securing the Obligations, or Payee's subordinating, compromising, discharging or
releasing such security interests, liens or encumbrances; (e) to the extent
permitted by applicable law, all other notices to which the Guarantor might
otherwise be entitled; (f) any requirement that Payee protect, secure, perfect
or insure any security interest, lien or other charge or encumbrance on any
property; (g) demand for payment under this Guaranty; and (h) any right to
assert against Payee, as a defense, counterclaim, set-off, or cross-claim any
defense (legal or equitable), set-off, counterclaim or claim that the Guarantor
may now or hereafter have against Maker.
The Guarantor agrees that this Guaranty may be enforced by
Payee without the necessity at any time of resorting to or exhausting any other
security or collateral and without the necessity at any time of having recourse
to the Note or any collateral now or hereafter securing the Obligations or
otherwise, and Guarantor hereby waives the right to require Payee to proceed
against Maker, or any co-guarantor or to require Payee to pursue any other
remedy or enforce any other right. The Guarantor further agrees that nothing
contained herein shall prevent Payee from suing on the Note or foreclosing its
security interest in or lien on any collateral now or hereafter securing the
Obligations or from exercising any other rights available to them under the
Note, the Asset Purchase Agreement between Maker, Guarantor and Payee of even
date herewith, or any other document or instrument executed in connection with
the Obligations if neither Maker nor the Guarantor timely perform the
obligations of Maker thereunder, and the exercise of any of the aforesaid rights
and the completion of any foreclosure proceedings shall not constitute a
discharge of any of the Guarantor's obligations hereunder; it being the purpose
and intent of the Guarantor that the Guarantor's obligations hereunder shall be
absolute, independent and unconditional under any and all circumstances. Neither
the Guarantor's obligations under this Guaranty nor any remedy for the
enforcement thereof shall be impaired, modified, changed or released in any
manner whatsoever by an impairment, modification, change, release or limitation
of the liability of Maker or any co-guarantor or by reason of Maker's or any co-
guarantor's bankruptcy or insolvency. The Guarantor acknowledges that the term
"Obligations" as used herein includes any payments made by Maker to Payee and
subsequently recovered by Maker or a trustee for Maker pursuant to Maker's
bankruptcy or insolvency.
ACTION PERFORMANCE COMPANIES, INC.
By:______________________________________
Its:_____________________________________
Dated: January 1, 1997
5
EXECUTION COPY
- --------------------------------------------------------------------------------
ACTION PERFORMANCE COMPANIES, INC.
$20,000,000
IN AGGREGATE PRINCIPAL AMOUNT
8.05% SENIOR NOTES DUE JANUARY 2, 1999
-------------------------
NOTE PURCHASE AGREEMENT
-------------------------
Dated as of January 2, 1997
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
Section Page
- ------- ----
1. AUTHORIZATION OF NOTES.............................................. 1
2. SALE AND PURCHASE OF NOTES; USE OF PROCEEDS......................... 2
2.1. Sale and Purchase of Notes................................. 2
2.2. Use of Proceeds............................................ 2
2.3. Subsidiary Guaranty........................................ 2
3. CLOSING............................................................. 2
4. CONDITIONS TO CLOSING............................................... 3
4.1. Representations and Warranties............................. 3
4.2. Performance; No Default.................................... 3
4.3. Compliance Certificates.................................... 3
4.4. Opinions of Counsel........................................ 4
4.5. Purchase Permitted By Applicable Law, etc.................. 4
4.6. Absence of Certain Events.................................. 4
4.7. Sale of Other Notes........................................ 4
4.8. Payment of Fees............................................ 5
4.9. Private Placement Number................................... 5
4.10. Consents and Approvals..................................... 5
4.11. Subsidiary Guaranty........................................ 5
4.12. Proceedings and Documents.................................. 5
4.13. Existing Liens............................................. 5
4.14. Standby Letter of Credit................................... 5
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... 6
5.1. Organization; Power and Authority.......................... 6
5.2. Authorization, etc......................................... 6
5.3. Disclosure................................................. 6
5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates................................................. 7
5.5. Financial Statements....................................... 7
5.6. Compliance with Laws, Other Instruments, etc............... 8
5.7. Governmental Authorizations, etc........................... 8
5.8. Litigation; Observance of Agreements, Statutes and Orders.. 8
5.9. Taxes...................................................... 9
5.10. Title to Property; Leases.................................. 9
5.11. Licenses, Permits, etc..................................... 9
5.12. Compliance with ERISA...................................... 10
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Section Page
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5.13. Private Offering by the Company............................ 11
5.14. Use of Proceeds; Margin Regulations........................ 11
5.15. Existing Debt; Future Liens................................ 11
5.16. Foreign Assets Control Regulations, etc.................... 12
5.17. Status under Certain Statutes.............................. 12
5.18. Environmental Matters...................................... 12
5.19. No Event of Default........................................ 13
5.20. Internal Accounting Controls............................... 13
6. REPRESENTATIONS OF THE PURCHASER.................................... 13
6.1. Purchase for Investment.................................... 13
6.2. Source of Funds............................................ 13
7. INFORMATION AS TO COMPANY........................................... 14
7.1. Financial and Business Information......................... 14
7.2. Officer's Certificate...................................... 17
7.3. Inspection................................................. 17
8. PREPAYMENT OF THE NOTES............................................. 18
8.1. No Prepayment.............................................. 18
8.2. Mandatory Offer to Prepay in Event of Change of Control.... 18
8.3. Maturity; Surrender, etc................................... 19
8.4. Purchase of Notes.......................................... 20
8.5. Make-Whole Amount.......................................... 20
9. AFFIRMATIVE COVENANTS............................................... 21
9.1. Compliance with Law........................................ 21
9.2. Insurance.................................................. 22
9.3. Maintenance of Properties.................................. 22
9.4. Maintenance of Licenses.................................... 22
9.5. Payment of Taxes and Claims................................ 22
9.6. Corporate Existence, etc................................... 23
9.7. Nature of Business......................................... 23
9.8. Notice of Certain Events and Conditions.................... 23
9.9. Payment of Notes; Maintenance of Books and Office.......... 23
9.10. Compliance with ERISA...................................... 24
9.11. Further Assurances......................................... 24
10. NEGATIVE COVENANTS.................................................. 24
10.1. Maintenance of Consolidated Funded Debt to Consolidated
EBITDA..................................................... 24
10.2. Fixed Charges Coverage Ratio Maintenance................... 25
10.3. Maintenance of Consolidated Net Worth...................... 25
10.4. Limitations on Liens....................................... 25
10.5. Subsidiary Debt............................................ 25
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Section Page
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10.6. Consolidation and Merger................................... 26
10.7. Sale of Assets............................................. 26
10.8. Transactions with Affiliates............................... 26
10.9. Advances to Dormant Subsidiaries........................... 27
11. EVENTS OF DEFAULT................................................... 27
12. REMEDIES ON DEFAULT, ETC............................................ 29
12.1. Acceleration............................................... 29
12.2. Other Remedies............................................. 30
12.3. Rescission................................................. 30
12.4. No Waivers or Election of Remedies, Expenses, etc.......... 30
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES....................... 31
13.1. Registration of Notes...................................... 31
13.2. Transfer and Exchange of Notes............................. 31
13.3. Replacement of Notes....................................... 32
14. PAYMENTS ON NOTES................................................... 32
14.1. Place of Payment........................................... 32
14.2. Home Office Payment........................................ 33
15. EXPENSES, ETC....................................................... 33
15.1. Transaction Expenses....................................... 33
15.2. Survival................................................... 34
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT........................................................... 34
17. AMENDMENT AND WAIVER................................................ 34
17.1. Requirements............................................... 34
17.2. Solicitation of Holders of Notes........................... 34
17.3. Binding Effect, etc........................................ 35
17.4. Notes held by Company, etc................................. 35
18. NOTICES............................................................. 35
19. REPRODUCTION OF DOCUMENTS........................................... 36
20. CONFIDENTIAL INFORMATION............................................ 36
21. SUBSTITUTION OF PURCHASER........................................... 37
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Section Page
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22. MISCELLANEOUS....................................................... 38
22.1. Successors and Assigns..................................... 38
22.2. Payments Due on Non-Business Days.......................... 38
22.3. Indemnity for Funds Availability at Closing................ 38
22.4. Severability............................................... 39
22.5. Construction............................................... 39
22.6. Counterparts............................................... 39
22.8. Governing Law.............................................. 39
22.9. Jury Trial................................................. 39
22.10.Consent to Jurisdiction....................................... 40
SCHEDULE I -- INFORMATION RELATING TO
PURCHASERS
SCHEDULE II -- DEFINED TERMS
SCHEDULE 4.6 -- Assumption of Certain Liabilities
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and
Ownership of Subsidiary Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.15 -- Existing Debt
SCHEDULE 5.18 -- Environmental Matters
SCHEDULE 5.20 -- Confidential Information
EXHIBIT A -- Form of 8.05% Senior Note due January 2, 1999
EXHIBIT B -- Form of Subsidiary Guaranty
EXHIBIT C-I -- Form of Opinion of Special Counsel for the
Company
EXHIBIT C-II -- Form of Opinion of Special Counsel
for the Purchasers
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ACTION PERFORMANCE COMPANIES, INC.
2401 West First Street
Tempe, Arizona 85281
Telephone: (602) 894-0100
Telecopier: (602) 894-6316
====================================
NOTE PURCHASE AGREEMENT
====================================
Dated as of January 2, 1997
TO EACH OF THE PURCHASERS OF THE NOTES
(AS DEFINED HEREIN) NAMED IN THE
ATTACHED SCHEDULE I:
-----------
Ladies and Gentlemen:
Action Performance Companies, Inc., an Arizona corporation
(the "Company"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company has duly authorized the issue and sale of
$20,000,000 in aggregate principal amount of its 8.05% Senior Notes due January
2, 1999 (such notes, together with all notes in the form annexed hereto as
Exhibit A issued in exchange or replacement for, or on registration of transfer
of, such notes, including any such notes issued in substitution therefor
pursuant to Section 13 hereof or the Other Agreements (as hereinafter defined)
are hereinafter called the "Notes"). Each Note shall bear interest from the date
thereof until such Note shall become due and payable in accordance with the
terms thereof and hereof (whether at maturity, by acceleration or otherwise) at
the rate of 8.05% per annum, payable semiannually on each January 15 and July 15
(each an "Interest Payment Date"), commencing July 15, 1997, and shall have a
stated maturity of January 2, 1999. Interest shall be computed on the basis of a
three hundred sixty (360) day year of twelve (12) thirty (30) day months. Each
Note shall bear interest on any overdue principal, including any overdue payment
or prepayment of principal and premium, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest, at the rate equal to 2%
per annum in excess of the interest rate applicable to timely payments thereon.
If the Company shall have paid or agreed to pay any interest or premium on any
Note in excess of that permitted by law, then it is the express intent of the
Company and the holder thereof that all excess amounts previously paid or to be
paid by the Company be applied to reduce the principal balance of such Note, and
the provisions thereof immediately be deemed reformed and the amounts thereafter
collectable thereunder reduced, without the
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necessity of the execution of any new document, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for thereunder.
2. SALE AND PURCHASE OF NOTES; USE OF PROCEEDS.
2.1. Sale and Purchase of Notes.
Upon and subject to the terms and conditions hereof and in
reliance on your representations and warranties contained in Section 6.1 and
Section 6.2 of this Agreement and the representations and warranties of the
Other Purchasers contained in Section 6.1 and Section 6.2 of the Other
Agreements, the Company agrees to sell to you, and upon and subject to the terms
and conditions of this Agreement and in reliance upon the representations and
warranties of the Company contained in this Agreement, you agree to purchase
from the Company, Notes in the aggregate principal amount specified opposite
your name in Schedule I hereto at a purchase price equal to one hundred percent
(100%) of such principal amount (the "Purchase Price"). Contemporaneously with
entering into this Agreement, the Company is entering into separate Note
Purchase Agreements (the "Other Agreements") identical with this Agreement with
each of the other purchasers named in Schedule I hereto (the "Other
Purchasers"), providing for the sale at such Closing to each of the Other
Purchasers of Notes in the principal amount specified opposite its name in
Schedule I hereto. Your obligations hereunder and the obligations of each Other
Purchaser (each, a "Purchaser") under this Agreement and under the Other
Agreements are several and not joint obligations and you shall have no
obligation under any Other Agreement and no liability to any Person for the
performance or non-performance by any Other Purchaser thereunder.
2.2. Use of Proceeds.
The proceeds of the sale of the Notes on the Closing Date will
be used by the Company to repay a portion of the outstanding principal amount of
and accrued interest on the $24,000,000 Promissory Note, dated November 7, 1996,
issued by SII Acquisition, Inc., a Subsidiary of the Company which is an Arizona
corporation now known as Sports Image, Inc. in connection with the acquisition
of the assets of Sports Image, Inc., a North Carolina corporation.
2.3. Subsidiary Guaranty.
The Notes will be unconditionally guaranteed by each of the
Subsidiary Guarantors pursuant to the Subsidiary Guaranty.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and
the Other Purchasers shall occur at the offices of Orrick, Herrington &
Sutcliffe LLP, 666 Fifth Avenue, 18th Floor, New York, New York 10103, at 10:00
a.m., New York City time, at a closing (the "Closing") on January 2, 1997 or on
such other Business Day thereafter on or prior to January 15, 1997 (the "Closing
Date") as may be agreed upon by the Company and you and the Other
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Purchasers. At the Closing, the Company will deliver to you one or more duly
executed Notes dated the Closing Date and registered in your name (or in the
name of your nominee) and in the principal amount or amounts specified opposite
your name in Schedule I hereto, against delivery by you to the Company or its
order of immediately available funds in the amount of the purchase price
therefor by wire transfer of immediately available funds for the account of the
Company to account number 2-000-000-450506 at First Union National Bank of North
Carolina, Charlotte, North Carolina, ABA # 053000-219. If at the Closing the
Company shall fail to tender such Notes to you as provided above in this Section
3, or any of the conditions specified in Section 4 hereof shall not have been
fulfilled to your satisfaction, you shall, at your election, be relieved of all
further obligations under this Agreement, without thereby waiving any rights you
may have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold
to you at the Closing is subject to the fulfillment to your satisfaction, prior
to or at the Closing, of the following conditions:
4.1. Representations and Warranties.
The representations and warranties of the Company in this
Agreement or otherwise made in writing by or on behalf of the Company in
connection with the transactions contemplated hereby shall be correct when made
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such Closing Date.
4.2. Performance; No Default.
The Company shall have performed and complied with all
agreements, conditions and obligations contained in this Agreement required to
be performed or complied with by it prior to or on the Closing Date, and after
giving effect to the issue and sale of the Notes (and the application of the
proceeds thereof as contemplated by Section 2.2 hereof) no Default or Event of
Default shall have occurred and be continuing.
4.3. Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to
you an Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.6 have been fulfilled.
(b) Secretary's Certificate. The Company and each Subsidiary
Guarantor shall have delivered to you a certificate certifying (i) the name and
signature of each of the officers (A) who is authorized to sign on its behalf,
as applicable, the Agreement, the Other Agreements, the Subsidiary Guaranty and
the Notes and (B) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection with
the Agreement, the Other Agreements, the Subsidiary Guaranty and the Notes, as
applicable and (ii) as to its
3
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certificate of incorporation, by-laws and resolutions attached to such
certificate and other corporate proceedings relating to the authorization,
execution and delivery of the Notes, this Agreement, the Other Agreements and
the Subsidiary Guaranty, as applicable.
4.4. Opinions of Counsel.
You shall have received opinions in form and substance
satisfactory to you, dated the Closing Date (i) from O'Connor, Cavanagh,
Anderson, Killingsworth & Beshears, P.A., special counsel for the Company,
substantially in the form set forth in Exhibit C-I hereto and covering such
other matters incident to the transactions contemplated hereby as you or your
special counsel may reasonably request (and the Company hereby instructs its
counsel to deliver such opinion to you), and (ii) from Orrick, Herrington &
Sutcliffe LLP, your special counsel in connection with such transactions,
substantially in the form set forth in Exhibit C-II hereto and covering such
other matters incident to the transactions contemplated hereby as you may
reasonably request.
4.5. Purchase Permitted By Applicable Law, etc.
On the Closing Date, your purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions permitting limited investments by
insurance companies without restriction as to the character of the particular
investment, (ii) not violate any applicable law or regulation (including,
without limitation, Regulation G, T or X of the Board of Governors of the
Federal Reserve System) and (iii) not subject you to any tax, penalty or
liability under or pursuant to any applicable law or regulation, which law or
regulation was not in effect on the date hereof. If requested by you, you shall
have received an Officer's Certificate certifying as to such matters of fact as
you may reasonably specify to enable you to determine whether such purchase is
so permitted.
4.6. Absence of Certain Events.
Since September 30, 1996, there shall not have occurred any
Material Adverse Effect and neither the Company nor any Subsidiary shall have
changed its jurisdiction of incorporation, consolidated with, merged into, or
sold, leased or otherwise disposed of its assets and properties as an entirety
or substantially as an entirety to any Person or, except as set forth on
Schedule 4.6 hereto, succeeded to all or substantially all or any substantial
part of the liabilities of any other Person.
4.7. Sale of Other Notes.
Contemporaneously with the Closing the Company shall sell to
the Other Purchasers and the Other Purchasers shall purchase from the Company
the Notes to be purchased by them at the Closing as specified in Schedule I
hereto.
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4.8. Payment of Fees.
The Company shall have paid the reasonable legal fees and
disbursements of Orrick, Herrington & Sutcliffe LLP and all other fees and
disbursements for which the Company is obligated pursuant to Section 15.1 hereof
and for which the Company shall have received invoices on or prior to the
Business Day preceding the Closing Date.
4.9. Private Placement Number.
A private placement number shall have been assigned to the
Notes by the CUSIP Service Bureau of Standard & Poor's Ratings Group, at the
Company's expense, and evidence thereof shall have been delivered to you and
your special counsel.
4.10. Consents and Approvals.
The Company shall have delivered to each Purchaser an
Officer's Certificate, dated the Closing Date, listing any necessary consents,
waivers, approvals, authorizations, registrations, filings and notifications of
the character referred to in Section 5.7 hereof, to which shall be attached
evidence satisfactory to you that the same have been obtained or made and are in
full force and effect, or stating that none is necessary.
4.11. Subsidiary Guaranty.
The Subsidiary Guaranty shall have been duly executed and
delivered by each Subsidiary Guarantor.
4.12. Proceedings and Documents.
All corporate and other proceedings and actions taken on or
prior to the Closing Date in connection with the transactions contemplated by
this Agreement and all documents and instruments incident to such transactions
shall be satisfactory to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or certified or other
copies of such documents as you or they may reasonably request.
4.13. Existing Liens.
The Company shall have delivered to you a copy of an executed
Uniform Commercial Code termination statement, in a form sufficient for filing,
releasing all Liens of Wells Fargo HSBC Trading Bank N.A. on the assets and
properties of the Company.
4.14. Standby Letter of Credit
First Union National Bank of North Carolina shall have issued
a Standby Letter of Credit in favor of Wells Fargo HSBC Trading Bank N.A., in
form and substance satisfactory to you, dated the Closing Date, and supporting
the obligations of the Company under the Credit
5
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Agreement, dated April 1996, by and between the Company and Wells Fargo HSBC
Trading Bank, N.A.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. Organization; Power and Authority.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation, and is
duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company has the corporate power and authority to
own or hold under lease the properties it purports to own or hold under lease,
to transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Other Agreements and the Notes and to perform the
provisions hereof and thereof.
5.2. Authorization, etc.
This Agreement and the Other Agreements and the Notes have
been duly authorized by all necessary corporate action on the part of the
Company, and each of this Agreement and the Other Agreements, constitutes, and
upon execution and delivery thereof each Note will constitute, a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Subsidiary Guaranty has been duly
authorized by all necessary corporate action on the part of each Subsidiary
Guarantor, and the Subsidiary Guaranty constitutes a legal, valid and binding
obligation of each such Subsidiary Guarantor, enforceable against such
Subsidiary Guarantor in accordance with its terms, except as such enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3. Disclosure.
Except as disclosed in Schedule 5.3 hereto, this Agreement,
the Other Agreements, the Subsidiary Guaranty, the documents, certificates or
other writings delivered to you by or on behalf of the Company in connection
with the transactions contemplated hereby and the financial statements listed in
Schedule 5.5 hereto, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Except as expressly described in Schedule 5.3 hereto, since September
30, 1996 there has been
6
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no change in the financial condition, operations, business, properties or
prospects of the Company or any Subsidiary except changes that individually or
in the aggregate could not reasonably be expected to have a Material Adverse
Effect. There is no fact known to the Company that could reasonably be expected
to have a Material Adverse Effect that has not been set forth herein or in the
other documents, certificates and other writings delivered to you by or on
behalf of the Company specifically for use in connection with the transactions
contemplated hereby.
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates.
(a) Schedule 5.4 hereto contains (except as noted therein)
complete and correct lists (i) of the Company's Subsidiaries, showing, as to
each Subsidiary, the correct name thereof, the jurisdiction of its organization,
and the percentage of shares of each class of its capital stock or similar
equity interests outstanding owned by the Company and each other Subsidiary,
(ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the
Company's directors and senior officers.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 5.4 hereto as being owned
by the Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and clear
of any Lien (except as otherwise disclosed in Schedule 5.4 hereto).
(c) Each Subsidiary identified in Schedule 5.4 hereto is a
corporation or other legal entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and is duly
qualified as a foreign corporation or other legal entity and is in good standing
in each jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Each such Subsidiary has the corporate or other
power and authority to own or hold under lease the properties it purports to own
or hold under lease and to transact the business it transacts and proposes to
transact.
(d) No Subsidiary is a party to, or otherwise subject to any
legal restriction or any agreement (other than this Agreement, the Other
Agreements, the Subsidiary Guaranty, the agreements listed on Schedule 5.4
hereto and customary limitations imposed by corporate law statutes) restricting
the ability of such Subsidiary to pay dividends out of profits or make any other
similar distributions of profits to the Company or any of its Subsidiaries that
owns outstanding shares of capital stock or similar equity interests of such
Subsidiary.
5.5. Financial Statements.
The Company has delivered to each Purchaser copies of the
financial statements of the Company and its Subsidiaries listed on Schedule 5.5
hereto. All of said financial statements (including in each case the related
schedules and notes) fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of the
7
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respective dates specified in such Schedule and the consolidated results of
their operations and cash flows for the respective periods so specified and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).
5.6. Compliance with Laws, Other Instruments, etc.
Neither the Company nor any Subsidiary is in violation of any
term or provision of its corporate charter or by-laws or certificate of
partnership or partnership agreement, as the case may be. Neither the Company
nor any Subsidiary is in violation of any term or provision of any agreement,
indenture, mortgage, lease or other instrument or agreement to which it is a
party or by which it or any of its properties may be bound or affected, or in
violation of any existing law, governmental rule or regulation or any order of
any court, arbitrator or other Governmental Authority applicable to it, the
consequences of which violation, either in any one case or in the aggregate,
would reasonably be expected to have a Material Adverse Effect. Neither the
execution and delivery of this Agreement, the Other Agreements, the Subsidiary
Guaranty and the Notes nor the consummation of the transactions contemplated
hereby and thereby nor the performance of the terms and provisions hereof and
thereof will result in any breach of, or constitute a default under, or result
in (or require) the creation of any Lien in respect of any property of the
Company or any Subsidiary under any indenture, mortgage, lease, bank loan,
credit agreement, other agreement or instrument, or partnership agreement,
partnership certificate, corporate charter or by-law to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, or violate any existing law,
governmental rule or regulation or any order of any court, arbitrator or
Governmental Authority applicable to the Company or any Subsidiary, except, any
such breach, default, creation of Lien or violation which, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
5.7. Governmental Authorizations, etc.
No consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is required in connection
with the execution, delivery or performance by the Company of this Agreement,
the Other Agreements or the Notes or in connection with the execution, delivery
or performance by the Subsidiary Guarantors of the Subsidiary Guaranty, or the
consummation of the transactions contemplated hereby and thereby, including the
offer, issuance, sale and delivery by the Company of the Notes to you, or the
fulfillment of, or compliance by the Company or the Subsidiary Guarantor with,
the terms and provisions hereof and thereof.
5.8. Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule 5.8 hereto, there are no
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary or any property of
the Company or any Subsidiary in any court or before any arbitrator of any kind
or before or by any Governmental Authority that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
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(b) Neither the Company nor any Subsidiary is in default under
any term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.9. Taxes.
The Company and its Subsidiaries have filed all tax returns
that are required to have been filed in any jurisdiction, and have paid all
taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the amount
of which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Company knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. The charges, accruals
and reserves on the books of the Company and its Subsidiaries, if any, in
respect of federal, state or other taxes for all fiscal periods are adequate.
The federal income tax liabilities of the Company and its Subsidiaries have been
determined by the Internal Revenue Service and paid for all Fiscal Years up to
and including the Fiscal Year ended September 30, 1996.
5.10. Title to Property; Leases.
The Company and its Subsidiaries have good and sufficient
title to their respective properties that individually or in the aggregate are
Material, including all such properties reflected in the most recent audited
balance sheet referred to in Section 5.5 hereof or purported to have been
acquired by the Company or any Subsidiary after said date (except as sold or
otherwise disposed of in the ordinary course of business), in each case free and
clear of Liens other than Permitted Liens. All leases that individually or in
the aggregate are Material are valid and subsisting and are in full force and
effect in all material respects.
5.11. Licenses, Permits, etc.
Except as disclosed in Schedule 5.11 hereto and
notwithstanding the exception set forth in the last sentence of Section 5.6
hereof,
(a) the Company and its Subsidiaries own or possess the rights
to use and hold free from burdensome restrictions and known conflicts
with the rights of others all licenses, permits, franchises,
authorizations, patents, copyrights, service marks, trademarks and
trade names, and all rights with respect to the foregoing, necessary
for the conduct of their respective businesses as now conducted and as
proposed to be conducted;
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(b) to the best knowledge of the Company, no product of the
Company infringes any license, permit, franchise, authorization,
patent, copyright, service mark, trademark, trade name or other right
owned by any other Person; and
(c) to the best knowledge of the Company, there is no
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or
any of its Subsidiaries.
5.12. Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities
under each of the Plans (other than Multiemployer Plans), determined as of the
end of such Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most recent actuarial
valuation report, did not exceed the aggregate current value of the assets of
such Plan allocable to such benefit liabilities determined as of the end of such
Plan's most recently ended plan year. The term "benefit liabilities" has the
meaning specified in Section 4001 of ERISA and the terms "current value" and
"present value" have the meanings specified in Section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under Section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation
(determined as of the last day of the Company's most recently ended Fiscal Year
in accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage mandated by
Section 4980B of the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the
issuance and sale of the Notes hereunder will not involve any transaction that
is subject to the prohibitions of Section 406 of ERISA or in connection with
which a tax could be imposed pursuant to Sec-
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tion 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the
first sentence of this Section 5.12(e) is made in reliance upon and subject to
(i) the accuracy of your representation in Section 6.2 hereof as to the sources
of the funds used to pay the purchase price of the Notes to be purchased by you
and (ii) the assumption, made solely for the purpose of making such
representation, that Department of Labor Interpretive Bulletin 75-2 with respect
to prohibited transactions remains valid in the circumstances of the
transactions contemplated herein.
5.13. Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has
offered the Notes or any similar securities for sale to, or solicited any offer
to buy any of the same from, or otherwise approached or negotiated in respect
thereof with, any Person other than you, the Other Purchasers and not more than
twenty-five (25) other Institutional Investors, each of which has been offered
the Notes at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Notes to the registration requirements of Section 5 of
the Securities Act or to the registration or qualification requirements of any
securities or blue sky law of any applicable jurisdiction.
5.14. Use of Proceeds; Margin Regulations.
The Company will apply the proceeds of the sale of the Notes
as set forth in Section 2.2 hereof. No part of the proceeds from the sale of the
Notes hereunder will be used, directly or indirectly, for the purpose of buying
or carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207, as amended), or for the
purpose of buying or carrying or trading in any securities under such
circumstances as to involve the Company in a violation of Regulation X of said
Board (12 CFR 224, as amended) or to involve any broker or dealer in a violation
of Regulation T of said Board (12 CFR 220, as amended). None of the transactions
contemplated by this Agreement (including, without limitation, the direct or
indirect use of the proceeds from the sale of the Notes hereunder) will violate
or result in a violation of Section 7 of the Exchange Act or any regulations
issued pursuant thereto, including, without limitation, said Regulation G,
Regulation T and Regulation X. As used in this Section, the terms "margin stock"
and "purpose of buying or carrying" shall have the meanings assigned to them in
said Regulation G.
5.15. Existing Debt; Future Liens.
(a) Schedule 5.15 hereto sets forth a complete and correct
list of all outstanding Debt of the Company and its Subsidiaries as of the date
hereof, and shows as to each item of Debt listed thereon the obligor, the
aggregate principal amount outstanding on the date hereof and the final maturity
thereof, since which date there has been no Material change in the amounts,
interest rates, sinking funds, instalment payments or maturities of the Debt of
the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in
default and no waiver of default is currently in effect in the payment of any
principal or interest on any Debt of the Company or such Subsidiary and no event
or condition exists with respect to any Debt of the Company or any Subsidiary
that would permit (or that with notice or the lapse of time,
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or both, would permit) one or more Persons to cause such Debt to become due and
payable before its stated maturity or before its regularly scheduled dates of
payment.
(b) The Company has delivered to each Purchaser true, correct
and complete copies of each of the executed Bank Documents and neither the
Company nor any Subsidiary is in default under any term of any of the Bank
Documents.
(c) Except as disclosed in Schedule 5.15 hereto, neither the
Company nor any Subsidiary has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien other than a
Permitted Lien. The Company will file the Uniform Commercial Code termination
statement described in Section 4.13 hereof, or cause such termination statement
to be filed, on the Closing Date.
5.16. Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its
use of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. Status under Certain Statutes.
Neither the Company nor any Subsidiary is subject to
regulation under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as
amended, or the Federal Power Act, as amended.
5.18. Environmental Matters.
Except as disclosed in Schedule 5.18 hereto, neither the
Company nor any Subsidiary has knowledge of any claim or has received any notice
of any claim, and no proceeding has been instituted raising any claim against
the Company or any of its Subsidiaries or any of their respective real
properties now or formerly owned, leased or operated by any of them or other
assets, alleging any damage to the environment or violation of any Environmental
Laws, except, in each case, such as could not reasonably be expected to result
in a Material Adverse Effect. Except as disclosed in Schedule 5. 18 hereto,
(a) neither the Company nor any Subsidiary has
knowledge of any facts which would give rise to any claim,
public or private, of violation of Environmental Laws or
damage to the environment emanating from, occurring on or in
any way related to real properties now or formerly owned,
leased or operated by any of them or to other assets or their
use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;
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(b) neither the Company nor any of its Subsidiaries
has stored any Hazardous Materials on real properties now or
formerly owned, leased or operated by any of them and has not
disposed of any Hazardous Materials in a manner contrary to
any Environmental Laws in each case in any manner that could
reasonably be expected to result in a Material Adverse Effect;
and
(c) all buildings on all real properties now owned,
leased or operated by the Company or any of its Subsidiaries
are in compliance with applicable Environmental Laws, except
where failure to comply could not reasonably be expected to
result in a Material Adverse Effect.
5.19. No Event of Default.
No event has occurred and is continuing, and no condition
exists, that, if the Notes had been issued and were outstanding on the date
hereof, would constitute a Default or and Event of Default.
5.20. Internal Accounting Controls.
The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability and (iii) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. Purchase for Investment.
You represent that you are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or for the
account of one or more pension or trust funds and not with a view to the
distribution thereof; provided that the disposition of your or their property
shall at all times be within your or their control. You understand that the
Notes have not been registered under the Securities Act and may be resold only
in accordance with Section 13.2 hereof.
6.2. Source of Funds.
You represent to the Company that the purchase of the Notes
either (a) is being funded solely out of an insurance company general investment
account which either (i) would be exempt from the prohibited transactions rules
of ERISA and the Code under Prohibited Transaction Class Exemption 95-60,
published by the Department of Labor in the Federal
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Register on July 12, 1995 (60 F.R. 35925, July 12, 1995) or (ii) exclusively
supports either contracts not issued to any "employee benefit plan" as defined
in Section 3(3) of ERISA which is subject to Title I of ERISA or any "plan"
within the meaning of Section 4975 of the Code or policies which constitute
"guaranteed benefit policies" under Section 401(b) of ERISA; (b) is not being
funded with the assets of any (i) "employee benefit plan" within the meaning of
Section 3(3) of ERISA which is subject to Title I of ERISA, (ii) "plan" within
the meaning of Section 4975 of the Code or (iii) entity deemed to hold "plan
assets" within the meaning of 29 C.F.R. ss.2510.3-101 of any such employee
benefit plan or plans, with respect to which the Company or any ERISA Affiliate
is a party in interest (as defined in Section 3(14) of ERISA) or a disqualified
person (as defined in Section 4975 of the Code) or (c) is not a prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code because you have a statutory, class or administrative exemption from such
prohibited transaction rules for the purchase and holding of Notes.
7. INFORMATION AS TO COMPANY.
7.1. Financial and Business Information.
The Company shall deliver to each holder of Notes:
(a) Quarterly Statements -- within forty-five (45) days after
the end of each Fiscal Quarter in each Fiscal Year of the Company
(other than the last Fiscal Quarter of each such Fiscal Year),
duplicate copies of,
(i) a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such Fiscal Quarter, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such Fiscal Quarter and (in the case of the
second and third Fiscal Quarters) for the portion of the
Fiscal Year ending with such Fiscal Quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous Fiscal Year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments; provided that delivery of copies of the Company's
Quarterly Report on Form 10-Q prepared in compliance with the
requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section
7.1(a) if such delivery is made within one (1) Business Day after the
date such Quarterly Report on Form 10-Q has been timely filed or deemed
to have been timely filed;
(b) Annual Statements -- within ninety (90) days after the end
of each Fiscal Year of the Company, duplicate copies of,
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(i) an audited consolidated balance sheet of the
Company and its Subsidiaries, as at the end of such Fiscal
Year, and
(ii) audited consolidated statements of income,
changes in shareholders' equity and cash flows of the Company
and its Subsidiaries, for such Fiscal Year,
setting forth in each case in comparative form the figures for the
previous Fiscal Year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied
(A) by an opinion thereon of independent certified
public accountants of recognized national standing, which
opinion shall state that such financial statements present
fairly, in all material respects, the financial position of
the companies being reported upon and their results of
operations and cash flows and have been prepared in conformity
with GAAP, and that the examination of such accountants in
connection with such financial statements has been made in
accordance with generally accepted auditing standards, and
that such audit provides a reasonable basis for such opinion
in the circumstances; and
(B) a certificate of such accountants stating that
they have reviewed this Agreement and stating further whether,
in making their audit, they have become aware of any condition
or event that then constitutes a Default or an Event of
Default, and, if they are aware that any such condition or
event then exists, specifying the nature and period of the
existence thereof (it being understood that such accountants
shall not be liable, directly or indirectly, for any failure
to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted auditing
standards or did not make such an audit);
provided that the delivery of the Company's Annual Report on Form 10-K
for such Fiscal Year (together with the Company's annual report to
shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) prepared in accordance with the requirements therefor and
filed with the Securities and Exchange Commission, together with the
accountant's certificate described in clause (B) above, shall be deemed
to satisfy the requirements of this Section 7.1(b) if such delivery is
made within one (1) Business Day after the date such Annual Report on
Form 10-K has been timely filed or deemed to have been timely filed;
(c) SEC and Other Reports -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or
proxy statement sent by the Company or any Subsidiary to public
securities holders generally, and (ii) each regular or periodic report,
each registration statement (without exhibits except as expressly
requested by such holder), and each prospectus and all amendments
thereto filed by the Company or any Subsidiary with the Securities and
Exchange Commission and of all press releases and other statements made
available generally by the Company or any Subsidiary to the public
concerning developments that are Material;
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(d) Notice of Default or Event of Default -- promptly, and in
any event within five (5) days after a Responsible Officer becoming
aware of the existence of any Default or Event of Default or that any
Person has given any notice or taken any action with respect to a
claimed default hereunder or that any Person has given any notice or
taken any action with respect to a claimed default of the type referred
to in Section 11(f) hereof, a written notice specifying the nature and
period of existence thereof and what action the Company is taking or
proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five
(5) days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:
(i) with respect to any Plan, any "reportable event",
as defined in Section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date hereof;
or
(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multi- employer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
"employee benefit plans" (as defined in Section 3(3) of
ERISA), or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA, such penalty or excise tax
provisions or Section 401(a)(29) or Section 412 of the Code,
if such liability or Lien, taken together with any other such
liabilities or Liens then existing, could reasonably be
expected to have a Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in
any event within thirty (30) days of receipt thereof, copies of any
notice to the Company or any Subsidiary from any federal or state
Governmental Authority relating to any order, ruling, statute or other
law or regulation that could reasonably be expected to have a Material
Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries or relating to the ability of the Company to
perform its obligations hereunder and under the Notes as from time to
time may be reasonably requested by any holder of Notes.
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7.2. Officer's Certificate.
Each set of financial statements delivered to a holder of
Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a
certificate of a Senior Financial Officer, in such capacity, setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.8
hereof, inclusive, during and as of the end of the quarterly or annual
period covered by the statements then being furnished (including with
respect to each such Section, where applicable, the calculations of the
maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation of
the amount, ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall not
have disclosed the existence during such period of any condition or
event that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including, without limitation,
any such event or condition resulting from the failure of the Company
or any Subsidiary to comply with any Environmental Law), specifying the
nature and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.
7.3. Inspection.
The Company shall permit the representatives of each holder of
Notes:
(a) No Default -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and its independent public
accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the
Company and its Subsidiaries), and to visit the other offices and
properties of the Company and each Subsidiary, all at such reasonable
times and as often as may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists,
at the expense of the Company to visit and inspect any of the offices
or properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs,
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finances and accounts of the Company and its Subsidiaries), all at such
times and as often as may be requested.
8. PREPAYMENT OF THE NOTES.
8.1. No Prepayment.
Except as provided in Section 8.2 hereof, the Company shall not prepay
the Notes in whole or in part at any time prior to January 2, 1999 without the
prior written consent of the Required Holders.
8.2. Mandatory Offer to Prepay in Event of Change of Control.
(a) In the event that a Change of Control (as defined in
Section 8.2(d) hereof) is to occur, the Company shall (i) deliver to each holder
of a Note a Section 8.2 Notice and Offer to Prepay pursuant to Section 8.2(b)
hereof and (ii) unless such holder declines prepayment as to one or more Notes
it holds by delivering a Section 8.2(c) Response pursuant to Section 8.2(c)
hereof, prepay all, but not less than all, of the Notes held by such holder as
to which prepayment is not declined, as hereinafter provided. Any prepayment of
Notes pursuant to this Section 8.2 shall be made at a prepayment price equal to
the principal amount of Notes to be prepaid, together with interest accrued
thereon to the date of prepayment, plus a premium equal to the Make-Whole
Amount.
(b) Not later than thirty (30) days and not more than sixty
(60) days prior to a Change of Control, the Company shall give written notice to
each holder of a Note that the Company anticipates or has knowledge of a Change
of Control and of such holder's right to elect to be prepaid hereunder arising
as a result thereof (a "Section 8.2 Notice and Offer to Prepay"). Such Section
8.2 Notice and Offer to Prepay shall state: (i) that such notice is delivered
pursuant to this Section 8.2(b); (ii) the proposed date of and a description of
the circumstances surrounding such Change of Control; (iii) the date by which a
holder of a Note must deliver a Section 8.2 Response pursuant to Section 8.2(c)
hereof in order to decline prepayment; and (iv) the date on which the Company
will prepay the Notes held by such holder of a Note if the holder of a Note does
not deliver a Section 8.2(c) Response pursuant to Section 8.2(c) hereof, which
prepayment date shall be the date of the occurrence of a Change of Control (the
"Section 8.2 Special Prepayment Date"). No failure by the Company to deliver a
Section 8.2 Notice and Offer to Prepay to any holder of a Note shall limit the
holder's right to exercise such election. In the event that the Company fails to
deliver a Section 8.2 Notice and Offer to Prepay to any holder of a Note prior
to the occurrence of the Change of Control, such holder shall be deemed for the
purposes of this Section 8.2 to have received such Section 8.2 Notice and Offer
to Prepay on the earlier of (i) the date on which it first obtains actual
knowledge of a Change of Control or (ii) the Section 8.2 Special Prepayment
Date, and, unless such holder delivers a Section 8.2(c) Response pursuant to
Section 8.2(c) hereof, the Company shall prepay the Notes held by such holder on
the Section 8.2 Special Prepayment Date.
(c) To decline prepayment pursuant to this Section 8.2 of one
or more of the Notes held by it, a holder of a Note shall deliver to the Company
such holder's notice that it
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declines prepayment pursuant to this Section 8.2 with respect to the Notes
designated therein (a "Section 8.2(c) Response"). Such Section 8.2(c) Response
shall be delivered to the Company (i) on or before the fifteenth (15th) Business
Day prior to the Section 8.2 Special Prepayment Date if the Company delivers a
Section 8.2 Notice and Offer to Prepay pursuant to Section 8.2(b) or (ii) at any
time on or prior to the Section 8.2 Special Prepayment Date if the Company fails
to deliver a Section 8.2 Notice and Offer to Prepay. The Section 8.2(c) Response
shall set forth the name of such holder and the statement that it declines
prepayment pursuant to this Section 8.2 with respect to the Notes designated
therein. Promptly and in any event within two (2) Business Days after receipt of
a holder's Section 8.2(c) Response, the Company shall, by written notice to such
holder of a Note, acknowledge receipt thereof. If the Company has delivered a
Section 8.2 Notice and Offer to Prepay to each holder of a Note and on or prior
to the fifteenth (15th) day prior to the Section 8.2 Special Prepayment Date,
the Company shall not have received a Section 8.2(c) Response from a holder of a
Note (or shall have received a Section 8.2(c) Response with respect to some but
not all the Notes held by such holder), (i) the Company shall promptly, but in
any case within one (1) Business Day after the expiration of such 15-day period,
deliver written notice to such holder that all of the Notes held by such holder
(or all of the Notes held by such holder with respect to which such holder shall
not have declined prepayment in such holder's Section 8.2(c) Response) will be
prepaid pursuant to this Section 8.2 on the Section 8.2 Special Prepayment Date
and (ii) the full unpaid principal amount of the Notes outstanding, together
with interest accrued thereon to the Section 8.2 Special Prepayment Date, plus a
premium equal to the Make-Whole Amount, shall become due and payable on the
Section 8.2 Special Prepayment Date.
(d) For the purposes of this Section 8.2, a "Change of
Control" shall be deemed to have occurred in the event that: (i) the Principal
Shareholder shall cease to own, directly or indirectly, at least 1,700,000
shares of the Voting Stock of the Company, free and clear of Liens; provided
that, in the event the Company shall at any time subdivide its outstanding
shares of Voting Stock into a greater number of shares or combine its
outstanding shares of Voting Stock into a smaller number of shares, the number
of shares required to be owned by the Principal Shareholder pursuant to this
clause (i) shall be proportionately increased or decreased, as the case may be;
(ii) the Principal Shareholder shall cease to be entitled, directly or
indirectly, through ownership of Voting Stock of the Company, by contract or
otherwise, to direct or cause the direction of the management and policies of
the Company (including the power to name a majority of the members of the Board
of Directors of the Company); or (iii) the Principal Shareholder shall cease to
be the chief executive officer of the Company (a) for any reason other than his
death or legal disability, or (b) due to his death or legal disability, and a
successor satisfactory to the Required Holders does not assume his
responsibilities and position within thirty (30) days of such cessation.
8.3. Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to Section
8.2 hereof, the principal amount of each Note to be prepaid shall mature and
become due and payable on the date fixed for such prepayment, together with
interest on such principal amount accrued to such date and the applicable
Make-Whole Amount, if any. From and after such date, unless the Company shall
fail to pay such principal amount when so due and payable, together with the
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interest and Make-Whole Amount, if any, as aforesaid, interest on such principal
amount shall cease to accrue. Any Note paid or prepaid in full shall be
surrendered to the Company and cancelled and shall not be reissued, and no Note
shall be issued in lieu of any prepaid principal amount of any Note.
8.4. Purchase of Notes.
The Company will not and will not permit any Affiliate to
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
8.5. Make-Whole Amount.
The term "Make-Whole Amount" means, with respect to any Note,
an amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal; provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2
hereof or has become or is declared to be immediately due and payable
pursuant to Section 12.1 hereof, as the context requires.
"Discounted Value" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Note, 0.50% over the yield to maturity implied by (i)
the yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to such
Called Principal, on the display designated as "Page 678" on the
Telerate Access Service (or such other display as may replace Page 678
on Telerate Access Service) for actively traded U.S. Treasury
securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date; or (ii) if such
yields are not reported as of such time or the yields reported as of
such time are not ascertainable, the Treasury Constant Maturity Series
Yields reported, for the latest day for which such yields have been so
reported as of the second Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of
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such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to and
greater than the Remaining Average Life and (2) the actively traded
U.S. Treasury security with the duration closest to and less than the
Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth year)
that will elapse between the Settlement Date with respect to such
Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date; provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or Section 12.1 hereof.
"Settlement Date" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 hereof or has become or is declared to be
immediately due and payable pursuant to Section 12.1 hereof, as the
context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants and agrees that so long as any of the
Notes are outstanding:
9.1. Compliance with Law.
The Company will and will cause each of its Subsidiaries to
comply with all laws, ordinances or governmental rules or regulations to which
each of them is subject, including, without limitation, Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
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9.2. Insurance.
The Company will and will cause each of its Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
9.3. Maintenance of Properties.
The Company will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times; provided that this Section 9.3 shall not
prevent the Company or any Subsidiary from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is desirable in the
conduct of its business and the Company has concluded that such discontinuance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
9.4. Maintenance of Licenses.
(a) The Company will maintain the rights to use and will hold
free from burdensome restrictions and known conflicts, and will cause each of
its Subsidiaries to maintain the rights to use and hold free from burdensome
restrictions, all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names or rights thereto
necessary for the conduct of their respective businesses as now conducted or as
proposed to be conducted; provided that this Section 9.4(a) shall not prevent
the Company or any Subsidiary from terminating or discontinuing the use of any
such license, permit, franchise, authorization, patent, copyright, service mark,
trademark or trade name if such termination or discontinuance is desirable in
the conduct of its business and, such termination or discontinuance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) The Company will fully comply with, and will cause each of
its Subsidiaries to fully comply with, the terms and conditions of each license,
permit, franchise, authorization, patent, copyright, service mark, trademark or
trade name referred to in Section 9.4(a) and the terms and conditions of any
agreements relating thereto, unless, in the good faith judgment of the Company,
the noncompliance with any such terms and conditions could not, individually or
in the aggregate, have a Material Adverse Effect.
9.5. Payment of Taxes and Claims.
The Company will and will cause each of its Subsidiaries to
file all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes
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and assessments have become due and payable and before they have become
delinquent and all claims for which sums have become due and payable that have
or might become a Lien on properties or assets of the Company or any Subsidiary;
provided that neither the Company nor any Subsidiary need pay any such tax or
assessment or claims if (i) the amount, applicability or validity thereof is
contested by the Company or such Subsidiary on a timely basis in good faith and
in appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
9.6. Corporate Existence, etc.
The Company will at all times preserve and keep in full force
and effect its corporate existence. Subject to Section 10.6 and Section 10.7
hereof, the Company will at all times preserve and keep in full force and effect
the corporate existence of each of its Subsidiaries (unless merged into the
Company or a Subsidiary) and all rights and franchises of the Company and its
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise could not, individually or in the aggregate, have
a Material Adverse Effect.
9.7. Nature of Business.
The Company will not, and will not permit any Subsidiary to,
engage in any line of business other than the lines of business in which the
Company is engaged on the Closing Date, or any other related business which is
substantially related to the lines of business in which the Company is currently
engaged, namely, the design and marketing of licensed products relating to
motorsports racing, unless the revenues generated by such other lines of
business do not exceed twenty percent (20%) of Consolidated Revenues for any
Fiscal Quarter.
9.8. Notice of Certain Events and Conditions.
The Company will give prompt written notice to each holder of
an outstanding Note of any event of default (or any event which with notice of
lapse of time or both would constitute an event of default) under any evidence
of Debt in an aggregate amount of $1,000,000 or more of the Company or any of
its Subsidiaries or under any indenture, mortgage or other agreement or
instrument relating to any such evidence of Debt, or under any other agreement
or instrument relating to preferred stock (or comparable equity interest) of the
Company or any Subsidiary or under any Material lease for or in respect of which
the Company or any Subsidiary may be liable.
9.9. Payment of Notes; Maintenance of Books and Office.
The Company will duly and punctually pay the principal of,
premium (if any) and interest on the Notes in accordance with the terms of the
Notes, this Agreement and the Other Agreements. The Company will, and will cause
each of its Subsidiaries to, maintain a system of accounting established and
administered in accordance with GAAP, keep proper books of
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record and account in which full, true and correct entries are made of its
business transactions and set aside appropriate reserves, all in accordance with
GAAP. The Company will maintain its principal office at a location in the United
States of America where notices, presentations and demands in respect of this
Agreement and the Notes may be made upon it and will notify, in writing, each
holder of a Note of any change of location of such office, and such office shall
be maintained at 2401 West First Street, Tempe, Arizona, 85281 until such time
as the Company shall notify the holders of the Notes of any such change.
9.10. Compliance with ERISA.
The Company shall, and shall cause its ERISA Affiliates to
comply with the provisions of ERISA and the Code with respect to any Plan
sponsored by or contributed to by it or any ERISA Affiliate except for instances
of noncompliance that could not reasonably be expected to result in a Material
Adverse Effect. The Company shall not (i) terminate or permit any ERISA
Affiliate to terminate any Plan in a manner that results in any Material
liability (other than liabilities to pay benefits pursuant to the terms of such
Plans or collectively bargained agreements) of the Company or any ERISA
Affiliate to the PBGC or any other Person or (ii) permit the occurrence of any
Reportable Event that presents a material risk of a termination by the PBGC of
any Plan pursuant to Section 4042 of ERISA or any other event or condition that
presents such a material risk. The Company shall, and shall cause its ERISA
Affiliates to make full and timely payment of all amounts required to be
contributed under the terms of each Plan and each Multiemployer Plan and the
laws applicable thereto.
9.11. Further Assurances.
The Company agrees that it will, and will cause each
Subsidiary to, do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged or delivered, all such other acts, agreements,
instruments and assurances, including the execution and delivery by each future
Subsidiary of a Subsidiary Joinder in the form of Attachment 1 to Exhibit B
hereto, as the holders of the Notes shall reasonably require to better
accomplish and effectuate the intentions and provisions of the Notes, the
Subsidiary Guaranty, this Agreement, and the Other Agreements.
10. NEGATIVE COVENANTS.
The Company covenants and agrees that so long as any of the
Notes are outstanding:
10.1. Maintenance of Consolidated Funded Debt to Consolidated EBITDA.
The Company will not permit, at any time, the ratio of
Consolidated Funded Debt to Consolidated EBITDA to be greater than 2.00 to 1.00.
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10.2. Fixed Charges Coverage Ratio Maintenance.
The Company will not permit, at any time, the Fixed Charges
Coverage Ratio to be less than 5.00 to 1.00.
10.3. Maintenance of Consolidated Net Worth.
The Company will not permit, at any time, Consolidated Net
Worth to be less than the sum of (a) $26,000,000, plus (b) an aggregate amount
equal to fifty percent (50%) of its Consolidated Net Income for each completed
Fiscal Quarter beginning with the Fiscal Quarter that includes the Closing Date
(but, in each case, only if a positive number).
10.4. Limitations on Liens.
Neither the Company nor any Subsidiary will create, incur,
assume or suffer to exist any Lien other than Permitted Liens. In any case
wherein any such assets are subjected or become subject to a Lien in violation
of this Section 10.4, the Company will make or cause to be made provision
whereby the Notes will be secured equally and ratably with all obligations
secured by such Lien, and in any case the Notes shall have the benefit, to the
full extent that, and with such priority as, the holders of the Notes may be
entitled under applicable law, of an equitable Lien on such assets securing (in
the manner as aforesaid) the Notes and such other obligations; provided,
however, that any Lien created, incurred or suffered to exist in violation of
this Section 10.4 shall constitute an Event of Default hereunder, whether or not
any such provision is made pursuant to this Section 10.4.
10.5. Subsidiary Debt.
The Company will not at any time permit any Subsidiary to,
directly or indirectly, create, incur, assume, guarantee, have outstanding, or
otherwise become or remain directly or indirectly liable with respect to, any
Debt other than:
(a) Debt of a Subsidiary outstanding on the Closing Date and
disclosed in Schedule 5.15 hereto and any extension, renewal or
refunding thereof, provided that the principal amount thereof is not
increased on or after the Closing Date and no Default or Event of
Default exists at the time of such extension, renewal or refunding;
(b) Debt of a Subsidiary owed to the Company;
(c) Debt of a Subsidiary outstanding at the time such
Subsidiary becomes a Subsidiary and any extension, renewal or refunding
thereof, provided that (i) such Debt shall not have been incurred in
contemplation of such Subsidiary becoming a Subsidiary and (ii)
immediately after such Subsidiary becomes a Subsidiary no Default or
Event of Default shall exist, and provided further that the principal
amount of such Debt is not increased on or after the Closing Date as a
result of any extension, renewal or refunding thereof and no Default or
Event of Default exists at the time of such extension, renewal or
refunding; and
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(d) Debt of a Subsidiary in addition to that otherwise
permitted by the foregoing provisions of this Section 10.5, provided
that on the date the Subsidiary incurs or otherwise becomes liable with
respect to any such additional Debt and immediately after giving effect
thereto and the concurrent retirement of any other Debt, (i) no Default
or Event of Default exists, and (ii) the sum of (x) the aggregate
amount of Debt of the Company secured by Liens and (y) the total amount
of all Debt for which all Subsidiaries are then liable (excluding the
Subsidiary Guaranty and Debt owed to the Company) does not exceed five
percent (5%) of Consolidated Total Assets.
10.6. Consolidation and Merger.
Neither the Company nor any Subsidiary will merge into or
consolidate with any other Person or permit any other Person to merge into or
consolidate with it except:
(a) the Company may permit any Person to merge into it so long
as (i) the Company shall be the surviving entity, and (ii) immediately
before and after giving effect to the transaction, no Default or Event
of Default shall exist; and
(b) any Subsidiary may merge into or consolidate with the
Company, so long as the Company shall be the surviving entity, and any
Subsidiary may permit any Person to merge into it, so long as the
Subsidiary shall be the surviving entity, in each case, so long as,
immediately before and after giving effect to the transaction, no
Default or Event of Default shall exist.
10.7. Sale of Assets.
The Company will not, and will not permit any Subsidiary to,
make any Transfer except (a) the Company may, and may permit any Subsidiary to,
make a Transfer, in the ordinary course of its business, of assets that
constitute inventory held for sale or materials or equipment no longer required
in the operation of its business; (b) the Company may, and may permit any
Subsidiary to, make a Transfer to any Subsidiary, or to the Company, as the case
may be; or (c) the Company may, and may permit any Subsidiary to, make a
Transfer, so long as all assets subject to any Transfers occurring from the date
hereof until January 2, 1999 (i) do not have a cumulative Disposition Value
exceeding twenty-five percent (25%) of Consolidated Total Assets as of the last
day of the Fiscal Quarter most recently ended and (ii) did not account for more
than twenty-five percent (25%) of Consolidated Revenues during the four Fiscal
Quarters (taken as a whole) most recently ended.
10.8. Transactions with Affiliates.
The Company will not and will not permit any Subsidiary to
enter into directly or indirectly any transaction or group of related
transactions (including without limitation the purchase, lease, sale or exchange
of properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and
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upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable arm's-length transaction
with a Person not an Affiliate.
10.9. Advances to Dormant Subsidiaries.
The Company will not and will not permit any Subsidiary to
make any Transfer of its assets, capital contribution or loan to, or otherwise
advance any funds to, either of the Dormant Subsidiaries.
11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following
conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any
Note for more than five (5) Business Days after the same becomes due
and payable; or
(c) the Company defaults in the performance of or compliance
with any term contained in Sections 10.1 through 10.8; or
(d) the Company defaults in the performance of or compliance
with any term contained herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 11) and such default is not
remedied within thirty (30) days after the earlier of (i) a Responsible
Officer obtaining actual knowledge of such default and (ii) the Company
receiving written notice of such default from any holder of a Note (any
such written notice to be identified as a "notice of default" and to
refer specifically to this paragraph (d) of Section 11); provided,
however, that if the Company shall have commenced to remedy such
default within such thirty (30) day period, then the Company shall have
an additional thirty (30) day period to complete the remedy of such
default; or
(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or incorrect
in any Material respect on the date as of which made; or
(f) (i) the Company or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any
principal of or premium or make-whole amount or interest on any Debt
that is outstanding in an aggregate principal amount of at least
$1,000,000 beyond any period of grace provided with respect thereto, or
(ii) the Company or any Subsidiary is in default in the performance of
or compliance with any term of any evidence of any Debt in an aggregate
outstanding principal amount of at least $1,000,000 or of any mortgage,
indenture or other agreement relating thereto or any
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other condition exists, and as a consequence of such default or
condition such Debt has become, or has been declared (or one or more
Persons are entitled to declare such Debt to be), due and payable
before its stated maturity or before its regularly scheduled dates of
payment, or (iii) as a consequence of the occurrence or continuation of
any event or condition (other than the passage of time or the right of
the holder of Debt to convert such Debt into equity interests), (x) the
Company or any Subsidiary has become obligated to purchase or repay
Debt before its regular maturity or before its regularly scheduled
dates of payment in an aggregate outstanding principal amount of at
least $1,000,000, or (y) one or more Persons have the right to require
the Company or any Subsidiary so to purchase or repay Debt in an
aggregate outstanding principal amount of at least $1,000,000; or
(g) the Company or any Subsidiary (i) is generally not paying,
or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement
or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy, insolvency, reorganization, moratorium or
other similar law of any jurisdiction, (iii) makes an assignment for
the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property,
(v) is adjudicated as insolvent or to be liquidated, or (vi) takes
corporate action for the purpose of any of the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the Company
or any of its Subsidiaries, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, or constituting an order for relief
or approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any of its
Subsidiaries, or any such petition shall be filed against the Company
or any of its Subsidiaries and such petition shall not be dismissed
within sixty (60) days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against one or more of
the Company and its Subsidiaries and which judgments are not, within
sixty (60) days after entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within sixty (60) days after the
expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under Section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably expected
to be filed with the PBGC or the PBGC shall have instituted proceedings
under ERISA Section 4042 to terminate or appoint a trustee to
administer any Plan or the PBGC shall have notified the Company or any
ERISA Affiliate that a Plan may become a subject of any
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such proceedings, (iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of Section 4001(a)(18) of ERISA) under
all Plans, determined in accordance with Title IV of ERISA, shall
exceed $500,000, (iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the
Code relating to employee benefit plans, (v) the Company or any ERISA
Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or
any Subsidiary establishes or amends any employee welfare benefit plan
that provides post-employment welfare benefits in a manner that would
increase the liability of the Company or any Subsidiary thereunder; and
any such event or events described in clauses (i) through (vi) above,
either individually or together with any other such event or events,
could reasonably be expected to have a Material Adverse Effect; or
(k) the Subsidiary Guaranty shall cease to be in full force
and effect for any reason other than as a result of the merger or
consolidation of any Subsidiary Guarantor into the Company or another
Subsidiary, or the Company or any Subsidiary Guarantor shall assert in
writing that the Subsidiary Guaranty has ceased to be in full force and
effect.
12. REMEDIES ON DEFAULT, ETC.
12.1. Acceleration.
(a) If an Event of Default with respect to the Company
described in paragraph (g) or (h) of Section 11 hereof, all the Notes then
outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is
continuing, any holder or holders of more than 66 2/3% in principal amount of
the Notes at the time outstanding may at any time at its or their option, by
notice or notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b)
of Section 11 hereof has occurred and is continuing, any holder or holders of
Notes at the time outstanding affected by such Event of Default may at any time,
at its or their option, by notice or notices to the Company, declare all the
Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section
12.1, whether automatically or by declaration, such Notes will forthwith mature
and the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for)
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and that the provision for payment of a Make-Whole Amount by the Company in the
event that the Notes are prepaid or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of such right
under such circumstances.
12.2. Other Remedies.
If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 12.1 hereof, the holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.
12.3. Rescission.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1 hereof, if (a) the Company has
paid all overdue interest on the Notes, all principal of and Make-Whole Amount,
if any, on any Notes that are due and payable and are unpaid other than by
reason of such declaration, and all interest on such overdue principal and
Make-Whole Amount, if any, and (to the extent permitted by applicable law) any
overdue interest in respect of the Notes, at the rate specified in the Notes,
(b) all Events of Default and Defaults, other than non-payment of amounts that
have become due solely by reason of such declaration, have been cured or have
been waived pursuant to Section 17 hereof, and (c) no judgment or decree has
been entered for the payment of any monies due pursuant hereto or to the Notes,
then (i) if the Notes have been declared due and payable pursuant to clause (b)
of Section 12.1 hereof, the holders of not less than 66 2/3% in principal amount
of the Notes then outstanding may rescind and annul any such declaration and its
consequences, by written notice to the Company and (ii) if the Notes have been
declared due and payable pursuant to clause (c) of Section 12.1 hereof, any
holder or holders of Notes at the time outstanding may rescind and annul any
such declaration made by such holder or holders and its consequences, by written
notice to the Company. No rescission and annulment under this Section 12.3 will
extend to or affect any subsequent Event of Default or Default or impair any
right consequent thereon.
12.4. No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of
any Note in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any Note upon any
holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section 15
hereof, the Company will pay to the holder of each Note on demand such further
amount as shall be sufficient to cover all costs and expenses of such holder
incurred in any enforcement or
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collection under this Section 12, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. Registration of Notes.
The Company shall keep, at its expense, at its principal
executive office a register for the registration and registration of transfers
of Notes. The name and address of each holder of one or more Notes, each
transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note, promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2. Transfer and Exchange of Notes.
(a) Subject to Section 13.2(b) hereof, upon surrender of any Note at
the principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or such holder's attorney duly authorized in
writing and accompanied by the address for notices of each transferee of such
Note or part thereof), the Company shall execute and deliver, at the Company's
expense (except as provided below), one or more new Notes (as requested by the
holder thereof) in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit A hereto. Each such new Note shall be dated and bear
interest from the date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest shall have been
paid thereon. The Company may require payment of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any such transfer of
Notes. Notes shall not be transferred in denominations of less than $1,000,000;
provided that if necessary to enable the registration of transfer by a holder of
its entire holding of Notes, one Note may be in a denomination of less than
$1,000,000. Any transferee, by its acceptance of a Note registered in its name
(or the name of its nominee), shall be deemed to have made the representation
set forth in Section 6.2 hereof.
(b) No transfer or sale (including, without limitation, by
pledge or hypothecation) of the Notes by any holder shall be effective unless
(a) the Notes are registered under the Securities Act or such transfer is
permitted pursuant to an available exemption from such registration requirement
and (b) the proposed transferee represents to you that such transfer or sale of
the Notes either (i) is being funded solely out of an insurance company general
investment account which either (x) would be exempt from the prohibited
transactions rules of ERISA and the Code under Prohibited Transaction Class
Exemption 95-60, published by the
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Department of Labor in the Federal Register on July 12, 1995 (60 F.R. 35925,
July 12, 1995) or (y) exclusively supports either contracts not issued to any
"employee benefit plan" as defined in Section 3(3) of ERISA which is subject to
Title I of ERISA or any "plan" within the meaning of and which is subject to
Section 4975 of the Code or policies which constitute "guaranteed benefit
policies" under Section 401(b) of ERISA; (ii) is not being funded with the
assets of any (x) "employee benefit plan" within the meaning of Section 3(3) of
ERISA which is subject to Title I of ERISA, (y) "plan" within the meaning of and
which is subject to Section 4975 of the Code or (z) entity deemed to hold "plan
assets" within the meaning of 29 C.F.R. ss.2510.3-101 of any such plan, with
respect to which the Company or any ERISA Affiliate is a party in interest (as
defined in Section 3(14) of ERISA) or a disqualified person (as defined in
Section 4975 of the Code) or (iii) is not a non-exempt prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the Code because a
statutory, class or administrative exemption from such prohibited transaction
rules applies to the purchase and holding of Notes.
13.3. Replacement of Notes.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of any Note (which evidence shall be, in the case of an Institutional
Investor, notice from such Institutional Investor of such ownership and such
loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original Purchaser or any Affiliate
thereof, such Person's own unsecured agreement of indemnity shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
14. PAYMENTS ON NOTES.
14.1. Place of Payment.
Subject to Section 14.2 hereof, payments of principal,
Make-Whole Amount, if any, and interest becoming due and payable on the Notes
shall be made in Tempe, Arizona at the principal office of the Company at 2401
West First Street in such jurisdiction. The Company may at any time, by notice
to each holder of a Note, change the place of payment of the Notes so long as
such place of payment shall be either the principal office of the Company in the
United States jurisdiction or the principal office of a bank or trust company in
the United States.
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14.2. Home Office Payment.
So long as you or your nominee shall be the holder of any
Note, and notwithstanding anything contained in Section 14.1 hereof or in such
Note to the contrary, the Company will pay all sums becoming due on such Note
for principal, Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below your name in Schedule I hereto, or by
such other method or at such other address as you shall have from time to time
specified to the Company in writing for such purpose, without the presentation
or surrender of such Note or the making of any notation thereon, except that
upon written request of the Company made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, you shall surrender
such Note for cancellation, reasonably promptly after any such request, to the
Company at its principal executive office or at the place of payment most
recently designated by the Company pursuant to Section 14.1 hereof. Prior to any
sale or other disposition of any Note held by you or your nominee you will, at
your election, either endorse thereon the amount of principal paid thereon and
the last date to which interest has been paid thereon or surrender such Note to
the Company in exchange for a new Note or Notes pursuant to Section 13.2 hereof.
The Company will afford the benefits of this Section 14.2 to any Institutional
Investor that is the direct or indirect transferee of any Note purchased by you
under this Agreement and that has made the same agreement relating to such Note
as you have made in this Section 14.2.
15. EXPENSES, ETC.
15.1. Transaction Expenses.
Whether or not the transactions contemplated hereby are
consummated, the Company will pay all reasonable costs and expenses (including
reasonable attorneys' fees of a special counsel and, if reasonably required,
local or other counsel) incurred by you and each Other Purchaser or holder of a
Note in connection with such transactions and in connection with any amendments,
waivers or consents under or in respect of this Agreement, the Other Agreements,
the Subsidiary Guaranty or the Notes (whether or not such amendment, waiver or
consent becomes effective), including, without limitation: (a) the reasonable
costs and expenses incurred in enforcing or defending (or determining whether or
how to enforce or defend) any rights under this Agreement, the Other Agreements,
the Subsidiary Guaranty or the Notes or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this
Agreement, the Other Agreements, the Subsidiary Guaranty or the Notes, or by
reason of being a holder of any Note, and (b) the reasonable costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save you and each other holder of a Note
harmless from, all claims in respect of any fees, costs or expenses if any, of
brokers and finders (other than those retained by you).
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15.2. Survival.
The obligations of the Company under this Section 15 will
survive the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement, the Other Agreements, the Subsidiary
Guaranty or the Notes, and the termination of this Agreement, the Other
Agreements or the Subsidiary Guaranty.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.
All representations and warranties contained herein shall
survive the execution and delivery of this Agreement and the Notes, the purchase
or transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between you and the Company and
supersede all prior agreements and understandings relating to the subject matter
hereof.
17. AMENDMENT AND WAIVER.
17.1. Requirements.
This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the Required Holders, except that (a) no amendment or waiver of any
of the provisions of Sections 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term
(as it is used therein), will be effective as to you unless consented to by you
in writing; and (b) no such amendment or waiver may, without the written consent
of the holder of each Note at the time outstanding affected thereby, (i) subject
to the provisions of Section 12 hereof relating to acceleration or rescission,
change the amount or time of any prepayment or payment of principal of, or
reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage
of the principal amount of the Notes the holders of which are required to
consent to any such amendment or waiver, or (iii) amend any of Sections 8,
11(a), 11(b), 12, 17 or 20.
17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this
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Section 17 to each holder of outstanding Notes promptly following the date on
which it is executed and delivered by, or receives the consent or approval of,
the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any holder of
Notes as consideration for or as an inducement to the entering into any waiver
or amendment of any of the terms and provisions hereof by any holder of Notes
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
17.3. Binding Effect, etc.
Any amendment or waiver consented to as provided in this
Section 17 applies equally to all holders of Notes and is binding upon them and
upon each future holder of any Note and upon the Company without regard to
whether such Note has been marked to indicate such amendment or waiver. No such
amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of such Note. As used
herein, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
17.4. Notes held by Company, etc.
Solely for the purpose of determining whether the holders of
the requisite percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or the Notes, or have directed the taking of any
action provided herein or in the Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of
its Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be
in writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), (b) by registered or certified mail with return receipt
requested (postage prepaid) or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule I hereto, or at such
other address as you or it shall have specified to the Company in
writing;
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(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company
in writing; or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of Fred W. Wagenhals or
at such other address as the Company shall have specified to the holder
of each Note in writing, with a copy to Christopher Besing at such
address and a copy to Robert S. Kant, O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A., Suite 1100, One East Camelback Road,
Phoenix, Arizona 85012-1656; or
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may hereafter
be executed; (b) documents received by you at the Closing (except the Notes
themselves); and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential
Information" means information delivered to you by or on behalf of the Company
or any Subsidiary in connection with the transactions contemplated by or
otherwise pursuant to this Agreement that is proprietary in nature and that was
clearly marked or labeled or otherwise adequately identified when received by
you as being confidential information of the Company or such Subsidiary or is
identified on Schedule 20 hereto as being confidential information of the
Company or any Subsidiary previously delivered to you; provided that such term
does not include information that (a) was publicly known or otherwise known to
you prior to the time of such disclosure; (b) subsequently becomes publicly
known through no act or omission by you or any person acting on your behalf; (c)
otherwise becomes known to you other than through disclosure by the Company or
any Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 hereof that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you; provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents, attorneys and
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<PAGE>
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes); (ii) your financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20; (iii) any other holder of any Note, (iv) any Person to which you
sell or offer to sell such Note or any part thereof or any participation therein
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (v) any Person
from which you offer to purchase any security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 20), (vi) any federal or state
regulatory authority having jurisdiction over you; (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
Subject to Section 13.2(b) hereof, you shall have the right to
substitute any one of your Affiliates as the purchaser of the Notes that you
have agreed to purchase hereunder, by written notice to the Company, which
notice shall be signed by both you and such Affiliate, shall contain such
Affiliate's agreement to be bound by this Agreement and shall contain a
confirmation by such Affiliate of the accuracy with respect to it of the
representations set forth in Section 6 hereof. Upon receipt of such notice,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall be deemed to refer to such Affiliate in lieu of you. In the
event that such Affiliate is so substituted as a purchaser hereunder and such
Affiliate thereafter transfers to you all of the Notes then held by such
Affiliate, upon receipt by the Company of notice of such transfer, wherever the
word "you" is used in this Agreement (other than in this Section 21), such word
shall no longer be deemed to refer to such Affiliate, but shall refer to you,
and you shall have all the rights of an original holder of the Notes under this
Agreement.
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22. MISCELLANEOUS.
22.1. Successors and Assigns.
All covenants and other agreements contained in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of their respective successors and assigns (including, without limitation, any
subsequent holder of a Note) whether so expressed or not, except that in the
case of a successor to the Company by consolidation or merger or a transfer of
its assets, this Agreement shall inure to the benefit of such successor or
transferee only if it becomes such in accordance with either Section 10.6 or
Section 10.7 hereof. The provisions of this Agreement are intended to be for the
benefit of all holders from time to time of the Notes, and shall be enforceable
by any such holder, whether or not an express assignment to such holder of
rights under this Agreement has been made by you or your successor or assign.
22.2. Payments Due on Non-Business Days.
If the last or appointed day for the taking of any action
required or permitted hereby or by the Notes (including, but not limited to, the
payment of principal of, or interest or premium, if any, on the Notes) shall be
a Saturday, Sunday or a day which is not a Business Day in New York, New York,
Phoenix, Arizona or Greensboro, North Carolina, then such action may be taken on
the next succeeding day which is a Business Day in such city; provided, however,
that if, pursuant to the provisions of this Section 22.2, the time for the
payment of any amount in respect of the Notes is postponed, interest on such
amount shall continue to accrue during the period of such postponement.
22.3. Indemnity for Funds Availability at Closing.
In connection with the closing under this Agreement, the
Company is requesting that you make available for funding an amount equal to the
Purchase Price. If, for any reason, the closing does not occur as scheduled on
the Closing Date, the Company hereby agrees to protect, indemnify and hold you
harmless from and against any and all losses, liabilities, obligations, expenses
(including, with limitation, reasonable attorneys' fees and expenses) imposed
upon or incurred by or asserted against you in any way resulting from, caused by
or arising out of the failure of the closing to occur as scheduled on the
Closing Date, including, without limitation, any and all losses resulting from
the inability to reinvest any amounts reserved, set aside or otherwise to be
made available at the scheduled closing at a rate of interest equal to or
greater than the rate of interest on the Notes. The obligations of the Company
under this Section 22.3 shall survive the payment or prepayment of the Notes and
the termination of this Agreement.
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22.4. Severability.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.5. Construction.
Each covenant contained herein shall be construed (absent
express provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse compliance with any
other covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.6. Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be an original but all of which together shall constitute
one instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.7. Accounting Terms.
All accounting terms used herein which are not expressly
defined in this Agreement have the meanings respectively given to them in
accordance with GAAP; all computations made pursuant to this Agreement shall be
made in accordance with GAAP and all balance sheets and other financial
statements shall be prepared in accordance with GAAP.
22.8. Governing Law.
This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the State
of New York excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.
22.9. Jury Trial.
THE COMPANY AND THE NOTEHOLDERS, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY
AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
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22.10. Consent to Jurisdiction.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT,
THE OTHER AGREEMENTS, THE SUBSIDIARY GUARANTY OR THE NOTES MAY BE BROUGHT BY ANY
HOLDER IN THE COURTS OF THE STATE OF NEW YORK OR THE STATE OF NORTH CAROLINA OR
OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK OR FOR THE
MIDDLE DISTRICT OF NORTH CAROLINA, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE
COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE BASED ON THE GROUNDS OF FORUM
NONCONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTION.
* * * * *
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If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement and return
it to the Company, whereupon the foregoing shall become a binding agreement
between you and the Company.
Very truly yours,
ACTION PERFORMANCE COMPANIES,
INC.
By /s/Christopher S. Besing
----------------------------------
Name: Christopher S. Besing
Title: Vice President,
Treasurer, and Chief
Financial Officer
The foregoing is hereby
agreed to as of the
date thereof.
JEFFERSON-PILOT LIFE INSURANCE COMPANY
By: /s/Robert E. Whalen, II
-----------------------------
Name: Robert E. Whalen, II
Title: Second Vice President
ALEXANDER HAMILTON LIFE INSURANCE
COMPANY OF AMERICA
By: /s/Robert E. Whalen, II
-----------------------------
Name: Robert E. Whalen, II
Title: Second Vice President
FIRST ALEXANDER HAMILTON LIFE
INSURANCE COMPANY
By: /s/ Robert A. Reed
-----------------------------
Name: Robert A. Reed
Title: Secretary
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SCHEDULE II
-----------
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "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 the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"Agreement" means this Note Purchase Agreement (together with the
Schedules and Exhibits hereto) as it may be from time to time amended, modified
or supplemented in accordance with its terms.
"Bank Documents" means the Credit Agreement, dated as of the Closing
Date, among the Company, certain Subsidiaries and Affiliates of the Company and
First Union National Bank of North Carolina and all other documents, instruments
and agreements executed in connection with the $16,000,000 credit facility made
available to the Company by First Union National Bank of North Carolina pursuant
to such Credit Agreement.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City or Phoenix are required or authorized
to be closed.
"Capitalized Lease Obligations" means, with respect to any Person, the
aggregate amount which, in accordance with GAAP, is required to be reported as a
liability on the balance sheet of such Person at such time in respect of such
Person's interest as lessee under a Capital Lease.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Change of Control" is defined in Section 8.2.
II-1
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SCHEDULE II
-----------
"Closing" is defined in Section 3.
"Closing Date" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Company" means Action Performance Companies, Inc., an Arizona
corporation.
"Confidential Information" is defined in Section 20.
"Consolidated" means, when used with reference to Fixed Charges or
Funded Debt, the aggregate of Fixed Charges or Funded Debt, as the case may be,
of the Company and its Subsidiaries, after eliminating all offsetting debits and
credits between the Company and its Subsidiaries and all other terms required to
be eliminated in accordance with GAAP. Calculations of Consolidated EBITDA,
Consolidated Revenues, Consolidated Fixed Charges and Consolidated Income
Available for Fixed Charges shall be made on a consolidating pro forma basis, as
if (i) any consolidation or merger with or into any Person by the Company or any
Subsidiary, any Transfer of all or substantially all of the assets of the
Company or any Subsidiary to any Person or any Transfer of all or substantially
all of the assets of any Person to the Company or any Subsidiary that has
occurred during the preceding four Fiscal Quarters had occurred at the
commencement of such period and (ii) any Debt incurred or assumed by the Company
and its Subsidiaries during the preceding four Fiscal Quarters (other than any
refinancing of Debt to the extent that the principal amount of such Debt did not
increase) had been in effect at the commencement of such period.
"Consolidated EBITDA" means, with respect to any date of determination,
the sum of (a) Consolidated Net Income for the most recently ended four Fiscal
Quarters and (b) the amount of all Interest Charges, depreciation, amortization,
income taxes, deferred items and other non-cash expenses of the Company and its
Subsidiaries, but only to the extent deducted in the determination of
Consolidated Net Income for the most recently ended four Fiscal Quarters.
"Consolidated Net Income" means, with reference to any period, the net
income (or loss) of the Company and its Subsidiaries for such period (taken as a
cumulative whole), as determined in accordance with GAAP, after eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other terms required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP; provided that there shall be excluded:
II-2
<PAGE>
(a) subject to clause (i) of the definition of "Consolidated"
herein, the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary or is merged into or consolidated with the Company
or a Subsidiary, and the income (or loss) of any Person, substantially
all of the assets of which have been acquired in any manner, realized
by such other Person prior to the date of acquisition;
(b) the income (or loss) of any Person (other than a
Subsidiary) in which the Company or any Subsidiary has an ownership
interest, except to the extent that any such income has been actually
received by the Company or such Subsidiary in the form of cash
dividends or similar cash distributions;
(c) the undistributed earnings of any Subsidiary to the extent
that the declaration or payment of dividends or similar distributions
by such Subsidiary is not at the time permitted by the terms of its
charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Subsidiary;
(d) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of
income accrued during such period;
(e) any aggregate net gain (but not any aggregate net loss)
during such period arising from the sale, conversion, exchange or other
disposition of capital assets (such term to include, without
limitation, (i) all non-current assets and, without duplication, (ii)
the following, whether or not current: all fixed assets, whether
tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets, and all Securities);
(f) any gains resulting from any write-up of any assets (but
not any loss resulting from any writedown of any assets);
(g) any net gain from the collection of the proceeds of life
insurance policies;
(h) any gain arising from the acquisition of any Security, or
the extinguishment, under GAAP, of any Debt, of the Company or any
Subsidiary;
(i) any net income or gain (but not any net loss) during such
period from (i) any change in accounting principles in accordance with
GAAP, (ii) any prior period adjustments resulting from any change in
accounting principles in according with GAAP, (iii) any extraordinary
items, or (iv) any discontinued operations or the disposition thereof;
(j) any deferred credit representing the excess of equity in
any Subsidiary at the date of acquisition over the cost of the
investment in such Subsidiary; and
(k) any portion of such net income that cannot be freely
converted into United States Dollars.
II-3
<PAGE>
"Consolidated Income Available for Fixed Charges" means, with respect
to any period, Consolidated Net Income for such period plus all amounts deducted
in the computation thereof on account of (a) Fixed Charges and (b) taxes imposed
on or measured by income or excess profits.
"Consolidated Net Worth" means, at any time, (a) Consolidated Total
Assets minus (b) the total liabilities of the Company and its Subsidiaries which
would be shown as liabilities on a consolidated balance sheet of the Company and
its Subsidiaries as of such time prepared in accordance with GAAP.
"Consolidated Revenues" means the revenue of the Company and its
Subsidiaries for the applicable period, as determined in accordance with GAAP,
after eliminating all offsetting debits and credits between the Company and its
Subsidiaries and all other terms required to be eliminated in the course of the
preparation of consolidated financial statements of the Company and its
Subsidiaries in accordance with GAAP.
"Consolidated Total Assets" means, as of any date of determination, the
total assets of the Company and its Subsidiaries which would be shown as assets
on a consolidated balance sheet of the Company and its Subsidiaries as of such
time prepared in accordance with GAAP, after eliminating all amounts properly
attributable to minority interests, if any, in the stock and surplus of
Subsidiaries.
"Current Maturities of Funded Debt" means, at any time and with respect
to any item of Funded Debt, the portion of such Funded Debt outstanding at such
time which by the terms of such Funded Debt or the terms of any instrument or
agreement relating thereto is due on demand or within one year from such time
(whether by sinking fund, other required prepayment or final payment at
maturity) and is not directly or indirectly renewable, extendible or refundable
at the option of the obligor under an agreement or firm commitment in effect at
such time to a date one year or more from such time.
"Debt" means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including, without limitation, all
liabilities created or arising under any conditional sale or other title
retention agreement with respect to any such property);
(c) its Capital Lease Obligations;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities);
II-4
<PAGE>
(e) its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account by
banks and other financial institutions (whether or not representing
obligations for borrowed money); and
(f) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (e) hereof.
Debt of any Person shall include all obligations of such Person of the character
described in clauses (a) through (f) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed to
be extinguished under GAAP.
"Default" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"Disposition Value" means, at any time, with respect to any property
(a) in the case of property that does not constitute Subsidiary Stock,
the book value thereof, valued at the time of such disposition in good faith
by the Company, and
(b) in the case of property that constitutes Subsidiary Stock, an
amount equal to that percentage of book value of the assets of the
Subsidiary that issued such stock as is equal to the percentage that the
book value of such Subsidiary Stock represents of the book value of all of
the outstanding capital stock of such Subsidiary (assuming, in making such
calculations, that all Securities convertible into such capital stock are so
converted and giving full effect to all transactions that would occur or be
required in connection with such conversion) determined at the time of the
disposition thereof, in good faith by the Company.
"Dormant Subsidiary" means each of Racing Collectibles, Inc., a Florida
corporation and Racing Collectables, Inc., a Florida corporation.
"Environmental Laws" means any and all federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.
"Event of Default" is defined in Section 11.
II-5
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fiscal Quarter" means a fiscal quarter of the Company or any of its
Subsidiaries which shall be any quarterly period ending on March 31, June 30,
September 30 or December 31 of any year.
"Fiscal Year" means, with respect to any Person, a fiscal year of such
Person. The term "Fiscal Year," when used without reference to any Person, shall
mean a Fiscal Year of the Company ending on September 30, of any year.
"Fixed Charges" means, with respect to any date of determination, the
sum of (a) Interest Charges for the most recently ended four Fiscal Quarters and
(b) Lease Rentals for the most recently ended four Fiscal Quarters.
"Fixed Charges Coverage Ratio" means, as of any date of determination
thereof, the ratio of (a) Consolidated Income Available for Fixed Charges for
the most recently ended four Fiscal Quarters to (b) Consolidated Fixed Charges
for such period.
"Funded Debt" means, with respect to any Person, all Debt of such
Person which by its terms or by the terms of any instrument or agreement
relating thereto matures, or which is otherwise payable or unpaid, one year or
more from, or is directly or indirectly renewable or extendible at the option of
the obligor in respect thereof to a date one year or more (including, without
limitation, an option of such obligor under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of one
year or more) from, the date of the creation thereof; provided that Funded Debt
shall include, as at any date of determination, Current Maturities of Funded
Debt.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts jurisdiction
over any properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory
or administrative functions of, or pertaining to, any such government.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such
II-6
<PAGE>
Person guaranteeing or in effect guaranteeing (whether by reason of being a
general partner of a partnership or otherwise) any indebtedness, dividend or
other obligation of any other Person in any manner, whether directly or
indirectly, including (without limitation) obligations incurred through an
agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment
of such indebtedness or obligation, or (ii) to maintain any working capital
or other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.
"Institutional Investor" means (a) any original purchaser of a Note and
(b) any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.
"Interest Payment Date" is defined in Section 1.
"Interest Charges" means, with reference to any period, the sum
(without duplication) of the following (in each case, eliminating all offsetting
debits and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
II-7
<PAGE>
GAAP): (a) all interest in respect of Debt of the Company and its Subsidiaries
(including imputed interest on Capitalized Lease Obligations) deducted in
determining Consolidated Net Income for such period, together with all interest
capitalized or deferred during such period and not deducted in determining
Consolidated Net Income for such period, and (b) all debt discount and expense
amortized or required to be amortized in the determination of Consolidated Net
Income for such period.
"Lease Rentals" means, with reference to any period, the sum of rental
and other obligations required to be paid during such period by the Company or
any Subsidiary as lessee under all leases of real or personal property (other
than Capital Leases), excluding any amount required to be paid by the lessee
(whether or not therein designated as rental or additional rental) on account of
maintenance and repairs, insurance, taxes, assessments, water rates and similar
charges; provided that, if at the date of determination, any such rental or
other obligations (or portion thereof) are contingent or not otherwise
definitely determinable by the terms of the related lease, the amount of such
obligations (or such portion thereof) (i) shall be assumed to be equal to the
amount of such obligations for the period of 12 consecutive calendar months
immediately preceding the date of determination or (ii) if the related lease was
not in effect during such preceding 12-month period, shall be the amount
estimated by a Senior Financial Officer of the Company on a reasonable basis and
in good faith.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Make-Whole Amount" is defined in Section 8.6.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company,
or the Company and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a Material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company, or the Company and its Subsidiaries taken as a whole; or (b) the
ability of the Company to perform its obligations under this Agreement, the
Other Agreements and the Notes; or (c) the validity or enforceability of this
Agreement, the Other Agreements or the Notes.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
II-8
<PAGE>
"Other Agreements" is defined in Section 2.
"Other Purchasers" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in Title IV of ERISA or any successor thereto.
"Permitted Liens" means:
(a) Liens 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 and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with the provisions of
GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens (other than any lien imposed under ERISA
or Section 401(a)(29) or 412 of the Code) imposed by law and created in the
ordinary course of business and Liens on deposits made to obtain the release of
such Liens if (i) the underlying obligations are not overdue or (ii) such Liens
are being contested in good faith by appropriate proceedings and with respect to
which adequate reserves or other appropriate provisions are being maintained in
accordance with the provisions of GAAP;
(c) Liens (other than any lien imposed under ERISA or Section
401(a)(29) or 412 of the Code) incurred on 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 the repayment of Debt), statutory obligations and other
similar obligations or arising as a result of progress payments under contracts;
(d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), rights-of-way, covenants, consents,
reservations, encroachments, variations and other restrictions, charges or
encumbrances (whether or not recorded) which do not interfere materially with
the ordinary conduct of the business of the Company or its Subsidiaries and
which do not materially detract from the value of the property to which they
attach or materially impair the use thereof to the Company or its Subsidiaries;
(e) building restrictions, zoning laws and other statutes, laws, rules,
regulations, ordinances and restrictions, and any amendments thereto, now or at
any time hereafter adopted by any Governmental Authority having jurisdiction;
(f) any judgment Lien unless it constitutes or may create an Event of
Default;
(g) Liens (including any Capital Leases) originally created to secure
payment of a portion of the purchase price relating to any property which the
Company or any Subsidiary acquires after the Closing Date, but, with respect to
any such Lien, such property shall be purchased not more than 60 days prior to
the date of the creation of such Lien; provided,
II-9
<PAGE>
however, that (i) no such Lien shall be created in or attach to any other asset
at the time owned by the Company or any Subsidiary and (ii) the outstanding
principal amount of Debt secured by any such Lien shall not at any time exceed
75% (or 100% in the case of property the acquisition of which is financed
through a Capital Lease) of the fair market value of such property at the time
of acquisition thereof;
(h) Liens on property or assets of the Company or any of its
Subsidiaries securing Debt owing to the Company or to another Subsidiary;
(i) Liens existing on the Closing Date and listed in Schedule 5.15
hereto;
(j) other Liens not otherwise permitted by clauses (a) through (i) of
this definition of "Permitted Liens" securing Debt of the Company or any of its
Subsidiaries permitted hereunder; provided that at all times the sum of (i) the
aggregate amount of such Debt of the Company secured by such Liens and (ii) all
Debt of the Subsidiaries (excluding the Subsidiary Guaranty and Debt owed to the
Company) does not exceed five percent (5%) of Consolidated Total Assets; and
(k) extensions, renewals or replacements of any Lien referred to in
clauses (a) through (j) of this definition of "Permitted Liens"; provided that
the principal amount of the debt or obligation secured thereby is not increased
and that any such extension, renewal or replacement is limited to the property
originally encumbered by the Lien.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Preferred Stock" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Principal Shareholder" means Fred W. Wagenhals, the president and
chief executive officer of the Company.
"property" or "properties" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"Purchase Price" is defined in Section 2.1.
"Purchaser" is defined in Section 2.1.
II-10
<PAGE>
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"Required Holders" means, at any time, the holders of at least 662/3%
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"Section 8.2 Notice and Offer to Prepay" is defined in Section 8.2.
"Section 8.2 Special Prepayment Date" is defined in Section 8.2.
"Section 8.2(c) Response" is defined in Section 8.2.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Security" has the meaning set forth in Section 2(1) of the Securities
Act.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"Subsidiary Stock" means, with respect to any Person, the stock (or any
options or warrants to purchase stock or other Securities exchangeable for or
convertible into stock) of any Subsidiary of such Person.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Guarantor" means each of Sports Image, Inc., an Arizona
corporation, and MTL Acquisition, Inc., an Arizona corporation, and each other
Subsidiary of the Company that from time to time becomes a party to the
Subsidiary Guaranty or otherwise guarantees the obligations of the Company
pursuant to this Agreement.
"Subsidiary Guaranty" means the Subsidiary Guaranty dated as of the
Closing Date, substantially in the form of Exhibit B hereto, as it may be
modified and supplemented and in effect from time to time.
II-11
<PAGE>
"Transfer" means the sale, lease, transfer, conveyance, abandonment or
other disposition, directly or indirectly, in a single transaction or a series
of transactions of all or any part of a Person's assets.
"Voting Stock" as applied to any corporation or limited liability
company shall mean all shares of any class or classes (however designated), or
other securities of such corporation or limited liability company, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
II-12
<PAGE>
EXHIBIT A
[FORM OF NOTE]
ACTION PERFORMANCE COMPANIES, INC.
8.05% SENIOR NOTE DUE JANUARY 2, 1999
No. [_____] January 2, 1997
$[_______] PPN: 004933 A* 8
FOR VALUE RECEIVED, the undersigned, ACTION PERFORMANCE COMPANIES, INC.
(herein called the "Company"), a corporation organized and existing under the
laws of the State of Arizona, hereby promises to pay to [ ], or registered
assigns, the principal sum of [ ] DOLLARS on January 2, 1999, with interest
(computed on the basis of a 360-day year of twelve 30-day months) (a) on the
unpaid balance thereof at the rate of 8.05% per annum from the date hereof,
payable semiannually, on the fifteenth day of January and July in each year,
commencing July 15, 1997, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Make-Whole Amount (as defined in the Note
Purchase Agreements referred to below), payable semiannually as aforesaid (or,
at the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to 2% per annum in excess of the interest rate
applicable to timely payments hereon.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the office of the Company at 2401 West First Street, Tempe, Arizona
85281 or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreements
referred to below, in each case subject to the right of the registered holder
hereof under the Note Purchase Agreement to receive direct payment in
immediately available funds.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of
January 2, 1997 (as from time to time amended, the "Note Purchase Agreements"),
between the Company and the respective Purchasers named therein and is entitled
to the benefits thereof. Each holder of this Note will be deemed, by its
acceptance hereof, (i) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreements and (ii) to have made the
representations set forth in Section 6.2 of the Note Purchase Agreements.
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<PAGE>
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreements. This Note is also
subject to prepayment, in whole, at the times and on the terms specified in
Section 8.2 of the Note Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note shall be governed by and construed in accordance with the law
of the State of New York.
ACTION PERFORMANCE COMPANIES, INC.
By: ________________________________
Name:
Title:
A-2
<PAGE>
EXHIBIT B
SUBSIDIARY GUARANTY
-------------------
THIS SUBSIDIARY GUARANTY, dated as of January 2, 1997, is executed by each
of the undersigned (each such entity and each entity which hereafter executes
and delivers a Subsidiary Joinder in substantially the form of Attachment 1
hereto to be referred to herein as a "Guarantor"), in favor of each of the
holders from time to time of the 8.05% Senior Notes due January 2, 1999 (the
"Notes") issued by Action Performance Companies, Inc., an Arizona corporation
(the "Company") (collectively, the "Noteholders").
RECITALS
--------
A. The Company and the original Noteholders have entered into separate but
identical Note Purchase Agreements, each dated as of January 2, 1997 (as each
may be amended from time to time, the "Agreements"), pursuant to which
$20,000,000 in aggregate principal amount of the Notes were issued. Capitalized
terms used herein and not otherwise defined herein are used with the meanings
assigned thereto in the Agreements.
B. Each Guarantor is a direct or indirect Subsidiary of the Company. Each
Guarantor acknowledges that the issuance of the Notes by the Company pursuant to
the Agreements will benefit each such Guarantor by making funds available to
such Guarantor through the Company and by enhancing the financial strength of
the consolidated group of which each Guarantor and the Company are members.
C. The execution and delivery of this Subsidiary Guaranty by each existing
Subsidiary of the Company is a condition precedent to the execution and delivery
by the original Noteholders of the Agreements and the Company has covenanted in
the Agreements that Subsidiary Joinders shall be duly executed by each future
Subsidiary of the Company.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Guarantor hereby agrees with the Noteholders as follows:
1. Definitions and Interpretation.
-------------------------------
(a) Definitions. When used in this Subsidiary Guaranty, the following terms
shall have the following respective meanings:
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<PAGE>
"Adjusted Maximum Guaranty Amount" shall mean, with respect to any
Guarantor, the Maximum Guaranty Amount of such Guarantor, limited to the
extent provided in Subparagraph 2(d) hereof (except that, for purposes of
the Adjusted Maximum Guaranty Amount of a Guarantor only, any assets or
liabilities of such Guarantor arising under Paragraph 5 hereof shall be
ignored).
"Adjusted Net Worth" shall mean, with respect to a Guarantor at any
time, the remainder of (i) the fair value of the assets of such Guarantor as
of such date, minus (ii) the fair value of the liabilities of such Guarantor
as of such date (excluding, however, any liability of such Guarantor
hereunder), such assets and liabilities to be determined in accordance with
any state or federal fraudulent conveyance or transfer law which is
applicable to this Subsidiary Guaranty.
"Agreements" shall have the meaning given to that term in the Recital A
hereof.
"Aggregate Guaranty Payments" shall mean, with respect to any Guarantor
at any time, the aggregate net amount of all payments made by such Guarantor
under this Subsidiary Guaranty (including, without limitation, under
Paragraph 5 hereof) at or prior to such time.
"Company" shall have the meaning given to that term in the preamble
hereof.
"Disallowed Post-Commencement Interest and Expenses" shall mean
interest computed at the rate provided in the Agreements and claims for
reimbursement, costs, expenses or indemnities under the terms of the
Agreements, the Subsidiary Guaranty or the Notes accruing or claimed at any
time after the commencement of any Insolvency Proceeding, if the claim for
such interest, reimbursement, costs, expenses or indemnities is not
allowable, allowed or enforceable against Company in such Insolvency
Proceeding.
"Fair Share" shall mean, with respect to any Guarantor at any time, an
amount equal to (i) a fraction, the numerator which is the Maximum Guaranty
Amount of such Guarantor and the denominator of which is the aggregate
Maximum Guaranty Amounts of all Guarantors, multiplied by (ii) the aggregate
amount paid by all Funding Guarantors under this Subsidiary Guaranty at or
prior to such time.
"Fair Share Shortfall" shall mean, with respect to any Guarantor at any
time, the amount, if any, by which the Fair Share of such Guarantor at such
time exceeds the Aggregate Guaranty Payments of such Guarantor at such time.
"Funding Guarantor" shall have the meaning given to that term in
Paragraph 5 hereof.
"Guaranteed Obligations" shall mean all principal (including any
prepayments of principal), premium, if any, and all interest on the Notes,
and all other indebtedness and obligations of the Company to the Noteholders
under the Agreements and the Notes,
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<PAGE>
including, without limitation, all fees, taxes, charges, expenses,
attorneys' fees and accountants' fees chargeable to the Company or payable
by the Company thereunder.
"Guarantor" shall have the meaning given to that term in the preamble
hereof.
"Insolvency Proceeding" shall mean any case or proceeding under the
United States Bankruptcy Code or any other similar law, rule or regulation
of the United States or any jurisdiction or any other action or proceeding
for the reorganization, liquidation, appointment of a receiver,
rearrangement of debts, marshalling of assets or similar action relating to
the Company or any Guarantor, their respective creditors or any substantial
part of their respective assets, whether or not any such case, proceeding or
action is voluntary or involuntary.
"Notes" shall have the meaning given to that term in the preamble
hereof.
"Noteholders" shall have the meaning given to that term in the preamble
hereof.
"Maximum Guaranty Amount" shall mean, with respect to any Guarantor, at
any time, the greatest of (a) ninety-five percent (95%) of the Adjusted Net
Worth of such Guarantor at such time, (b) ninety-five percent (95%) of the
Adjusted Net Worth of such Guarantor on the date hereof and (c) the value
derived by such Guarantor from the Guaranteed Obligations incurred at or
prior to such time.
"Subsidiary Joinder" shall mean an instrument substantially in the form
of Attachment 1 hereto.
Unless otherwise indicated in this Subsidiary Guaranty, all accounting terms
used in this Subsidiary Guaranty shall be construed, and all accounting and
financial computations hereunder or thereunder shall be computed, in
accordance with GAAP.
2. Guaranty.
(a) Payment Guaranty. Each Guarantor unconditionally guarantees and promises
to pay and perform as and when due, whether at stated maturity, upon
acceleration or otherwise, any and all of the Guaranteed Obligations. If any
Insolvency Proceeding relating to the Company is commenced, each Guarantor
further unconditionally guarantees and promises to pay and perform, upon the
demand of any Noteholder any Guaranteed Obligations allocable to such Noteholder
(including any related Disallowed Post-Commencement Interest and Expenses) in
accordance with the terms of the Agreements and the Notes, whether or not such
obligations are then due and payable by the Company and whether or not such
obligations are modified, reduced or discharged in such Insolvency Proceeding.
This Subsidiary Guaranty is a guaranty of payment and not of collection.
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<PAGE>
(b) Continuing Guaranty. This Subsidiary Guaranty is an irrevocable
continuing guaranty of the Guaranteed Obligations which shall continue in effect
until all of the Guaranteed Obligations have been fully, finally and
indefeasibly paid. If any payment on any Guaranteed Obligation is set aside,
avoided or rescinded or otherwise recovered from any Noteholder, such recovered
payment shall constitute a Guaranteed Obligation hereunder and, if this
Subsidiary Guaranty was previously released or terminated, it automatically
shall be fully reinstated, as if such payment was never made.
(c) Independent Obligation. The liability of each Guarantor hereunder is
independent of the Guaranteed Obligations and of the obligations of each other
Guarantor hereunder, and a separate action or actions may be brought and
prosecuted against each Guarantor irrespective of whether action is brought
against the Company, any other Guarantor or any other guarantor of the
Guaranteed Obligations or whether the Company, any other Guarantor or any other
guarantor of the Guaranteed Obligations is joined in any such action or actions.
(d) Fraudulent Transfer Limitation. If, in any action to enforce this
Subsidiary Guaranty, any court of competent jurisdiction determines that
enforcement against any Guarantor for the full amount of the Guaranteed
Obligations is not lawful under or would be subject to avoidance under Section
548 of the United States Bankruptcy Code or any applicable provision of any
comparable law of any state or other jurisdiction, the liability of such
Guarantor under this Subsidiary Guaranty shall be limited to the maximum amount
lawful and not subject to such avoidance.
(d) Maximum Guaranty Amount. The liability of each Guarantor under this
Subsidiary Guaranty shall not at any time exceed such Guarantor's Maximum
Guaranty Amount; provided, however, that the Noteholders may permit the
Guaranteed Obligations to exceed the foregoing limitation without affecting each
Guarantor's liability hereunder.
3. Authorizations, Waivers, Etc.
(a) Authorizations. Each Guarantor authorizes the Noteholders, in their
discretion, without notice to such Guarantor, irrespective of any change in the
financial condition of the Company, such Guarantor, any other Guarantor or any
other guarantor of the Guaranteed Obligations since the date hereof, and without
affecting or impairing in any way the liability of such Guarantor hereunder,
from time to time to:
(i) renew, compromise, extend, accelerate or otherwise change the time
for payment or performance of, or otherwise amend or modify the Agreements
and the Notes or change the terms of the Guaranteed Obligations or any part
thereof, including increase or decrease of the rate of interest thereon;
(ii) accept and hold security for the payment or performance of the
Guaranteed Obligations and exchange, enforce, waive or release any such
security; apply such security
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<PAGE>
and direct the order or manner of sale thereof; and purchase such security
at public or private sale;
(iii) otherwise exercise any right or remedy they may have against the
Company, such Guarantor, any other Guarantor, any other guarantor of the
Guaranteed Obligations;
(iv) settle, compromise with, release or substitute any one or more
makers, endorsers or guarantors of the Guaranteed Obligations; and
(v) assign the Guaranteed Obligations, this Subsidiary Guaranty, the
Agreements or the Notes in whole or in part to the extent provided herein
and in the Agreements and the Notes.
(b) Waivers. Each Guarantor hereby waives:
(i) any right to require any Noteholder to (A) proceed against the
Company, any other Guarantor or any other guarantor of the Guaranteed
Obligations, (B) proceed against or exhaust any security received from the
Company, such Guarantor, any other Guarantor or any other guarantor of the
Guaranteed Obligations or otherwise marshall the assets of the Company, such
Guarantor, any other Guarantor or any other guarantor of the Guaranteed
Obligations or (C) pursue any other remedy in the Noteholder's power
whatsoever;
(ii) any defense arising by reason of the application by the Company of
the proceeds of any borrowing;
(iii) any defense resulting from the absence, impairment or loss of any
right of reimbursement, subrogation, contribution or other right or remedy
of Guarantor against the Company, any other Guarantor, any other guarantor
of the Guaranteed Obligations or any security, whether resulting from an
election by any Noteholder to foreclose upon security by nonjudicial sale,
or otherwise;
(iv) any setoff or counterclaim of the Company or any defense which
results from any disability or other defense of the Company or the cessation
or stay of enforcement from any cause whatsoever of the liability of the
Company (including, without limitation, the lack of validity or
enforceability of any of the Subsidiary Guaranty, the Agreements and the
Notes);
(v) any defense based upon any law, rule or regulation which provides
that the obligation of a surety must not be greater or more burdensome than
the obligation of the principal;
(vi) until all of the Guaranteed Obligations have been fully, finally
and indefeasibly paid, any right of subrogation, reimbursement,
indemnification or contribution and other similar right to enforce any
remedy which, the Noteholders or any other Person now has or may hereafter
have against the Company on account of the Guaranteed Obligations, and any
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<PAGE>
benefit of, and any right to participate in, any security now or hereafter
received by any Noteholder or any other Person on account of the Guaranteed
Obligations;
(vii) all presentments, demands for performance, notices of
non-performance, notices delivered under the Agreements, the Subsidiary
Guaranty and the Notes, protests, notice of dishonor, and notices of
acceptance of this Subsidiary Guaranty and of the existence, creation or
incurring of new or additional Guaranteed Obligations and notices of any
public or private foreclosure sale;
(viii) the benefit of any statute of limitations to the extent
permitted by law;
(ix) any appraisement, valuation, stay, extension, moratorium
redemption or similar law or similar rights for marshalling;
(x) any right to be informed by any Noteholder of the financial
condition of the Company, any other Guarantor or any other guarantor of the
Guaranteed Obligations or any change therein or any other circumstances
bearing upon the risk of nonpayment or nonperformance of the Guaranteed
Obligations;
(xi) until all of the Guaranteed Obligations have been fully, finally
and indefeasibly paid, any right to revoke this Subsidiary Guaranty;
(xii) any defense arising from an election for the application of
Section 1111(b)(2) of the United States Bankruptcy Code which applies to the
Guaranteed Obligations;
(xiii) any defense based upon any borrowing or grant of a security
interest under Section 364 of the United States Bankruptcy Code; and
(xiv) any right it may have to a fair value hearing to determine the
size of a deficiency judgment following any foreclosure on any security for
the Guaranteed Obligations.
(c) Financial Condition of the Company, Etc. Each Guarantor is fully
aware of the financial condition and affairs of the Company. Each Guarantor
has executed this Subsidiary Guaranty without reliance upon any
representation, warranty, statement or information concerning the Company
furnished to such Guarantor by any Noteholder and has, independently and
without reliance on any Noteholder, and based on such documents and
information as it has deemed appropriate, made its own appraisal of the
financial condition and affairs of the Company and of other circumstances
affecting the risk of nonpayment or nonperformance of the Guaranteed
Obligations. Each Guarantor is in a position to obtain, and assumes full
responsibility for obtaining, any additional information about the financial
condition and affairs of the Company and of other circumstances affecting
the risk of nonpayment or nonperformance of the Guaranteed Obligations and
will, independently and without reliance upon any Noteholder, and based on
such documents and information as it
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<PAGE>
shall deem appropriate at the time, continue to make its own appraisals and
decisions in taking or not taking action in connection with this Subsidiary
Guaranty.
4. Subordination. Each Guarantor hereby subordinates any and all debts,
liabilities and obligations owed to such Guarantor by the Company or any
Subsidiary of Company (the "Subordinated Obligations") to the Guaranteed
Obligations as provided in this Paragraph 4.
(a) Prohibited Payments, Etc. Until the occurrence of a Default or an Event
of Default or any default by any Guarantor hereunder, each Guarantor and its
Subsidiaries may receive regularly scheduled payments from the Company on
account of Subordinated Obligations. After the occurrence and during the
continuance of any Default or Event of Default or any default by any Guarantor
hereunder (including the commencement and continuation of any Insolvency
Proceeding relating to the Company), however, unless the Required Holders
otherwise request, no Guarantor shall, demand, accept or take any action to
collect any payment on account of the Subordinated Obligations.
(b) Prior Payment of Guaranteed Obligations. In any Insolvency Proceeding
relating to the Company, each Guarantor agrees that the Noteholders shall be
entitled to receive payment of all Guaranteed Obligations (including any and all
Disallowed Post-Commencement Interest and Expenses) before such Guarantor
receives payment of any Subordinated Obligations.
(c) Turn-Over. After the occurrence and during the continuance of any
Default or Event of Default (including the commencement and continuation of any
Insolvency Proceeding relating to Company), each Guarantor shall, if the
Required Holders so request, collect, enforce and receive payments on account of
the Subordinated Obligations as trustee for the Noteholders and deliver such
payments to the Noteholders on account of the Guaranteed Obligations (including
any and all Disallowed Post-Commencement Interest and Expenses), together with
any necessary endorsements or other instruments of transfer, but without
reducing or affecting in any manner the liability of such Guarantor under the
other provisions of this Subsidiary Guaranty.
(d) Authorization to Enforce Subordinated Obligations. After the occurrence
and during the continuance of any Default or Event of Default or any default by
a Guarantor hereunder (including the commencement and continuation of any
Insolvency Proceeding relating to the Company), any Noteholder is authorized and
empowered (but without any obligation to so do), in its discretion, (i) in the
name of each Guarantor, to collect and enforce, and to submit claims in respect
of, Subordinated Obligations and to apply any amounts received thereon to the
Guaranteed Obligations (including any and all Disallowed Post-Commencement
Interest and Expenses), and (ii) to require each Guarantor (A) to collect and
enforce, and to submit claims in respect of, Subordinated Obligations and (B) to
pay any amounts received on such obligations to such Noteholder for application
to the Guaranteed Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses).
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<PAGE>
5. Contribution among Guarantors. The Guarantors desire to allocate among
themselves, in a fair and equitable manner, their rights of contribution from
each other when any payment is made by any Guarantor under this Subsidiary
Guaranty. Accordingly, if any payment is made by any Guarantor under this
Subsidiary Guaranty (a "Funding Guarantor") that exceeds its Fair Share, the
Funding Guarantor shall be entitled to a contribution from each other Guarantor
in the amount of such other Guarantor's Fair Share Shortfall, so that all such
contributions shall cause each Guarantor's Aggregate Guaranty Payments to equal
its Fair Share. The amounts payable as contributions hereunder shall be
determined by the Funding Guarantor as of the date on which the related payment
or distribution is made by the Funding Guarantor, and such determination shall
be binding on the other Guarantors absent manifest error. The allocation and
right of contribution among the Guarantors set forth in this Paragraph 5 shall
not be construed to limit in any way the liability of any Guarantor under this
Subsidiary Guaranty or the amount of the Guaranteed Obligations.
6. Indemnification by Guarantors. Without limitation of any other obligations of
Guarantors or remedies of the Noteholders under this Guaranty, the Guarantors
shall indemnify, defend and save and hold harmless the Noteholders from and
against, and shall pay on demand, any and all losses, liabilities, damages, and
reasonable costs and expenses (including the reasonable fees and disbursements
of the Noteholders' legal counsel) suffered or incurred by any Noteholder as a
result of any failure of any of the Guaranteed Obligations to be the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as enforcement may be limited by bankruptcy,
insolvency or other similar Laws affecting the rights of creditors generally.
7. Miscellaneous.
(a) Notices. Except as otherwise provided herein, all notices, requests,
demands, consents, instructions or other communications to or upon any Guarantor
or any Noteholder under this Subsidiary Guaranty shall be in writing and faxed,
mailed or delivered, if to a Guarantor, at its respective facsimile number or
address set forth below or in the respective Subsidiary Joinder for such
Guarantor or, if to any Noteholder, at the address or facsimile number specified
beneath the heading "All other communications" under the name of such Noteholder
in Schedule I to the Agreements (or to such other facsimile number or address
for any party as indicated in any notice given by that party to the other
parties). All such notices and communications shall be effective (i) when sent
by overnight service of recognized standing, on the second Business Day
following the deposit with such service; (ii) when mailed, first class postage
prepaid and addressed as aforesaid through the United States Postal Service,
upon receipt; (iii) when delivered by hand, upon delivery; and (iv) when faxed,
upon confirmation of receipt.
B-8
<PAGE>
Guarantor: Sports Image, Inc.
2401 West First Street
Tempe, Arizona 85281
Attn: Fred W. Wagenhals
Telephone: (602) 894-0100
Facsimile: (602) 894-6316
Guarantor: MTL Acquisition, Inc.
2401 West First Street
Tempe, Arizona 85281
Attn: Fred W. Wagenhals
Telephone: (602) 894-0100
Facsimile: (602) 894-6316
with copies to: Action Performance Companies, Inc.
2401 West First Street
Tempe, Arizona 85281
Attn: Christopher S. Besing
Telephone: (602) 894-0100
Facsimile: (602) 894-6316
O'Connor, Cavanagh, Anderson, Killingsworth
& Beshears, P.A.
Suite 1100
One East Camelback Road
Phoenix, Arizona 85012-1656
Attn: Robert S. Kant
Telephone: (602) 263-2606
Facsimile: (602) 263-2900
(b) Payments. Each Guarantor shall make all payments required hereunder to
any Noteholder in accordance with the payment information set forth on Schedule
I to the Agreements on demand. If any amounts required to be paid by a Guarantor
under this Subsidiary Guaranty are not paid when due, such Guarantor shall pay
interest on the aggregate, outstanding balance of such amounts from the date due
until those amounts are paid in full at a rate equal to 2% per annum in excess
of the interest rate applicable to timely payments on the Notes.
(c) Expenses. Each Guarantor shall pay on demand (i) all reasonable fees and
expenses, including reasonable attorneys' fees and expenses, incurred by the
Noteholders in connection with the preparation, execution and delivery of, and
the exercise of its duties under, this Subsidiary Guaranty and the preparation,
execution and delivery of amendments and waivers
B-9
<PAGE>
hereunder and (ii) all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by the Noteholders in connection with the
enforcement or attempted enforcement of this Subsidiary Guaranty or any of the
Guaranteed Obligations or in preserving any of the Noteholders' rights and
remedies (including, without limitation, all such fees and expenses incurred in
connection with any "workout" or restructuring affecting the Agreements, the
Notes, the Subsidiary Guaranty or the Guaranteed Obligations or any bankruptcy
or similar proceeding involving Guarantor, any other Guarantor, the Company or
any of their affiliates).
(d) Waivers; Amendments. This Subsidiary Guaranty may not be amended or
modified, nor may any of its terms be waived, except by written instruments
signed by each Guarantor and the Required Holders. Each waiver or consent under
any provision hereof shall be effective only in the specific instances for the
purpose for which given. No failure or delay on any Noteholder's part in
exercising any right hereunder shall operate as a waiver thereof or of any other
right nor shall any single or partial exercise of any such right preclude any
other further exercise thereof or of any other right.
(e) Assignments. This Subsidiary Guaranty shall be binding upon and inure to
the benefit of the Noteholders, the Guarantors and their respective successors
and assigns; provided, however, that no Guarantor may assign or transfer any of
its rights and obligations under this Subsidiary Guaranty without the prior
written consent of the Required Holders, and, provided, further, that any
Noteholder may sell, assign and delegate its respective rights and obligations
hereunder only as permitted by the Agreements. All references in this Subsidiary
Guaranty to any Person shall be deemed to include all permitted successors and
assigns of such Person.
(f) Cumulative Rights, etc. The rights, powers and remedies of the
Noteholders under this Subsidiary Guaranty shall be in addition to all rights,
powers and remedies given to the Noteholders by virtue of any applicable law,
rule or regulation of any Governmental Authority, the Agreement, the Notes or
any other agreement, all of which rights, powers, and remedies shall be
cumulative and may be exercised successively or concurrently without impairing
any Noteholder's rights hereunder. Each Guarantor waives any right to require
any Noteholder to proceed against any Person or to pursue any remedy in such
Noteholder's power.
(g) Payments Free of Taxes, Etc. All payments made by each Guarantor under
this Subsidiary Guaranty shall be made by each Guarantor free and clear of and
without deduction for any and all present and future taxes, levies, charges,
deductions and withholdings. In addition, each Guarantor shall pay upon demand
any stamp or other taxes, levies or charges of any jurisdiction with respect to
the execution, delivery, registration, performance and enforcement of this
Subsidiary Guaranty. If any taxes, levies, charges or other amounts are required
to be withheld from any amounts payable to any Noteholder hereunder, the amounts
so payable to such Noteholder shall be increased to the extent necessary to
yield to such Noteholder (after payment of all such amounts) any such amounts
payable hereunder in the amounts specified in this Subsidiary Guaranty. Upon
request by any Noteholder, each Guarantor shall furnish evidence satisfactory to
such Noteholder that all requisite authorizations and
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<PAGE>
approvals by, and notices to and filings with, governmental authorities and
regulatory bodies have been obtained and made and that all requisite taxes,
levies and charges have been paid.
(h) Partial Invalidity. If at any time any provision of this Subsidiary
Guaranty is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Subsidiary Guaranty nor the legality, validity
or enforceability of such provision under the law of any other jurisdiction
shall in any way be affected or impaired thereby.
(i) Joint and Several Obligation. The obligations of the Guarantors under
this Subsidiary Guaranty are joint and several obligations of each Guarantor and
may be freely enforced against each Guarantor, for the full amount of the
Guaranteed Obligations, without regard to whether enforcement is sought or
available against any other Guarantor.
(j) Governing Law. This Subsidiary Guaranty shall be governed by and
construed in accordance with the laws of the State of New York without reference
to conflicts of law rules.
(k) Jury Trial. EACH GUARANTOR AND THE NOTEHOLDERS, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS SUBSIDIARY GUARANTY.
(l) Consent to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS SUBSIDIARY GUARANTY MAY BE BROUGHT BY ANY NOTEHOLDER IN THE COURTS OF THE
STATE OF NEW YORK OR THE STATE OF NORTH CAROLINA OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK OR FOR THE MIDDLE DISTRICT OF
NORTH CAROLINA, AND, BY EXECUTION AND DELIVERY OF THIS SUBSIDIARY GUARANTY OR
ITS RESPECTIVE SUBSIDIARY JOINDER, EACH GUARANTOR HEREBY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THE AFORESAID COURTS. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE BASED ON THE
GROUNDS OF FORUM NONCONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTION.
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<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Subsidiary Guaranty to be
executed as of the day and year first above written.
SPORTS IMAGE, INC.
By:________________________
Name:
Title:
MTL ACQUISITION, INC.
By:________________________
Name:
Title:
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<PAGE>
ATTACHMENT 1
------------
SUBSIDIARY JOINDER
------------------
THIS SUBSIDIARY JOINDER (this "Joinder"), dated as of ____________, ____, is
executed by [NEW SUBSIDIARY], a _________ [corporation] [partnership] [etc.]
(the "New Subsidiary") in favor of each of the holders from time to time of the
8.05% Senior Notes due January 2, 1999 (the "Notes") issued by Action
Performance Companies, Inc., an Arizona corporation (the "Company")
(collectively, the "Noteholders").
RECITALS
--------
A. The Company and the original Noteholders have entered into separate but
identical Note Purchase Agreements, each dated as of January 2, 1997 (as each
may be amended from time to time, the "Agreements"), pursuant to which
$20,000,000 in aggregate principal amount of the Notes were issued.
B. The New Subsidiary is a direct or indirect Subsidiary of the Company and
acknowledges that the issuance of the Notes by the Company pursuant to the
Agreements will benefit the New Subsidiary by making funds available to the New
Subsidiary through the Company and by enhancing the financial strength of the
consolidated group of which the New Subsidiary and the Company are members.
C. The execution and delivery of the Subsidiary Guaranty by the then
existing Subsidiaries of the Company was a condition precedent to the execution
and delivery by the original Noteholders of the Agreements and the Company has
covenanted in the Agreements that Subsidiary Joinders shall be duly executed by
each future Subsidiary of the Company.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the New Subsidiary hereby agrees with the Noteholders as follows:
1. Definitions and Interpretation. Unless otherwise defined herein, all
capitalized terms used herein and defined in the Subsidiary Guaranty shall have
the respective meanings given to those terms in the Subsidiary Guaranty.
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<PAGE>
2. Agreement to be Bound. The New Subsidiary agrees that, on and as of the
Effective Date, it shall become a Guarantor under the Subsidiary Guaranty and
shall be bound by all the provisions of the Subsidiary Guaranty to the same
extent as if the New Subsidiary had executed the Subsidiary Guaranty on the
Closing Date.
3. Waiver. Without limiting the generality of the waivers in the Subsidiary
Guaranty, the New Subsidiary specifically agrees to be bound by the Subsidiary
Guaranty and waives any right to notice of acceptance of its execution of this
Joinder and of its agreement to be bound by the Subsidiary Guaranty.
4. Governing Law. This Joinder shall be governed by, and construed in accordance
with, the laws of the State of New York.
IN WITNESS WHEREOF, the New Subsidiary has caused this Joinder to be
executed by its duly authorized officer.
[NEW SUBSIDIARY]
By:________________________
Name:
Title:
Address:
[_________________________]
[_________________________]
[_________________________]
Attn: [___________________]
Telephone: [(___) ___-____]
Facsimile: [(___) ___-____]
1-2
CREDIT AGREEMENT
Dated as of January 2, 1997
among
ACTION PERFORMANCE COMPANIES, INC.
as Borrower,
Certain Subsidiaries and Affiliates,
as Guarantors,
AND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS..........................................................1
1.1 Definitions.......................................................1
1.2 Computation of Time Periods......................................21
1.3 Accounting Terms.................................................21
SECTION 2 CREDIT FACILITIES...................................................21
2.1 Revolving Loans..................................................21
(a) Commitment.......................................................21
(b) Notices..........................................................22
(c) Interest Rate....................................................22
(d) Repayment........................................................22
(e) Revolving Note...................................................22
2.2 Letter of Credit Facility........................................22
2.3 Bankers' Acceptances.............................................25
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES......................26
3.1 Default Rate.....................................................26
3.2 Extension and Conversion.........................................26
3.3 Prepayments......................................................27
3.4 Termination and Reduction of Commitments.........................27
3.5 Fees.............................................................28
3.6 Capital Adequacy.................................................28
3.7 Inability To Determine Interest Rate.............................29
3.8 Illegality.......................................................29
3.9 Requirements of Law..............................................29
3.10 Taxes...........................................................30
3.11 Indemnity.......................................................31
3.12 Payments, Computations, Etc.....................................32
SECTION 4 GUARANTY............................................................32
4.1 The Guarantee....................................................32
4.2 Obligations Unconditional........................................33
4.3 Reinstatement....................................................34
4.4 Certain Additional Waivers.......................................34
4.5 Remedies.........................................................34
4.6 Rights of Contribution...........................................35
4.7 Continuing Guarantee.............................................35
SECTION 5 CONDITIONS..........................................................35
5.1 Conditions to Closing............................................35
5.2 Conditions to All Extensions of Credit...........................37
SECTION 6 REPRESENTATIONS AND WARRANTIES......................................38
6.1 Financial Condition..............................................38
6.2 No Changes or Restricted Payments................................38
i
<PAGE>
6.3 Organization; Existence; Compliance with Law.....................38
6.4 Power; Authorization; Enforceable Obligations....................39
6.5 No Legal Bar.....................................................39
6.6 No Material Litigation...........................................39
6.7 No Default.......................................................40
6.8 Ownership of Property; Liens.....................................40
6.9 Intellectual Property............................................40
6.10 No Burdensome Restrictions......................................40
6.11 Taxes...........................................................40
6.12 ERISA...........................................................40
6.13 Governmental Regulations, Etc...................................42
6.14 Subsidiaries....................................................43
6.15 Purpose of Extensions of Credit.................................43
6.16 Environmental Matters...........................................43
SECTION 7 AFFIRMATIVE COVENANTS...............................................44
7.1 Financial Statements.............................................44
7.2 Certificates; Other Information..................................45
7.3 Notices..........................................................46
7.4 Payment of Obligations...........................................47
7.5 Conduct of Business and Maintenance of Existence.................47
7.6 Maintenance of Property; Insurance...............................47
7.7 Inspection of Property; Books and Records; Discussions...........48
7.8 Environmental Laws...............................................48
7.9 Financial Covenants..............................................49
7.10 Additional Guaranties...........................................49
7.11 Use of Proceeds.................................................49
SECTION 8 NEGATIVE COVENANTS..................................................49
8.1 Indebtedness.....................................................50
8.2 Liens............................................................51
8.3 Nature of Business...............................................51
8.4 Consolidation, Merger, Sale or Purchase of Assets, Capital
Expenditures, etc................................................51
8.5 Advances, Investments and Loans..................................52
8.6 Transactions with Affiliates.....................................52
8.7 Ownership of Equity Interests....................................52
8.8 Fiscal Year......................................................53
8.9 Prepayments of Indebtedness, etc.................................53
8.10 Restricted Payments.............................................53
8.11 Sale Leasebacks.................................................53
8.12 No Further Negative Pledges.....................................53
SECTION 9 EVENTS OF DEFAULT...................................................54
9.1 Events of Default................................................54
9.2 Acceleration; Remedies...........................................56
SECTION 10 MISCELLANEOUS......................................................57
10.1 Notices.........................................................57
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10.2 Right of Set-Off................................................58
10.3 Benefit of Agreement............................................58
10.4 No Waiver; Remedies Cumulative..................................58
10.5 Payment of Expenses, etc........................................59
10.6 Amendments, Waivers and Consents................................59
10.7 Counterparts....................................................59
10.8 Headings........................................................60
10.9 Survival........................................................60
10.10 Governing Law; Submission to Jurisdiction; Venue...............60
10.11 Severability...................................................60
10.12 Entirety.......................................................61
10.13 Binding Effect; Termination....................................61
10.14 Conflict.......................................................61
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SCHEDULES
Schedule 2.1(b) Form of Notice of Borrowing
Schedule 2.1(e) Form of Revolving Note
Schedule 2.2(b) Form of Notice of Request for Letter of Credit
Schedule 2.3(b) Form of Notice of Request for Banker's Acceptance
Schedule 3.2 Form of Notice of Extension/Conversion
Schedule 5.1(f) Secretary's Certificate
Schedule 6.6 Description of Legal Proceedings
Schedule 6.8 Liens
Schedule 6.14 Subsidiaries
Schedule 7.2(b) Form of Officer's Compliance Certificate
Schedule 7.11-1 Form of Joinder Agreement
Schedule 8.1 Indebtedness
Schedule 8.5 Existing Investments
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of January 2, 1997 (the "Credit
Agreement"), is by and among ACTION PERFORMANCE COMPANIES, INC., an Arizona
corporation (the "Borrower"), the subsidiaries and affiliates identified on the
signature pages hereto and such other subsidiaries and affiliates as may from
time to time become Guarantors hereunder in accordance with the provisions
hereof (the "Guarantors") and FIRST UNION NATIONAL BANK OF NORTH CAROLINA (the
"Bank").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Bank provide a $16 million
credit facility for the purposes hereinafter set forth;
WHEREAS, the Bank has agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
-----------
1.1 Definitions.
As used in this Credit Agreement, the following terms shall
have the meanings specified below unless the context otherwise requires:
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date by execution of a Joinder Agreement.
"Affiliate" means, with respect to any Person, any other
Person (i) directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person or (ii) directly or
indirectly owning or holding ten percent (10%) or more of the equity
interest in such Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"Alternate Base Rate" means for any day, a rate per annum
equal to the greatest of (a) the Prime Rate in effect on such day and
(b) the Federal Funds Effective Rate in effect on such day plus 1/2 of
1%. For purposes hereof: "Prime Rate" shall mean, at any time, the rate
of interest per annum publicly announced from time to time by the Bank
at its principal office in Charlotte, North Carolina as its prime rate.
Each change in the Prime
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Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that
the rate announced publicly by the Bank as its Prime Rate is an index
or base rate and shall not necessarily be its lowest or best rate
charged to its customers or other banks; and "Federal Funds Effective
Rate" shall mean, for any day, the weighted average of the rates on
overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published on the next succeeding Business
Day, the average of the quotations for the day of such transactions
received by the Bank from three federal funds brokers of recognized
standing selected by it. If for any reason the Bank shall have
determined (which determination shall be conclusive in the absence of
manifest error) that it is unable to ascertain the Federal Funds
Effective Rate, for any reason, including the inability or failure of
the Bank to obtain sufficient quotations in accordance with the terms
thereof, the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition, as appropriate,
until the circumstances giving rise to such inability no longer exist.
Any change in the Alternate Base Rate due to a change in the Prime Rate
or the Federal Funds Effective Rate shall be effective on the opening
of business on the date of such change.
"Alternate Base Rate Loan" means any Loan bearing interest at
a rate determined by reference to the Alternate Base Rate.
"Attributed Principal Amount" means, on any day, with respect
to any Securitization Transaction entered into by any member of the
Consolidated Group, the aggregate amount (with respect to any such
transaction, the "Invested Amount") paid to, or borrowed by, such
Person as of such date under such Securitization Transaction, minus the
aggregate amount received by the applicable Receivables Financier and
applied to the reduction of the Invested Amount under such
Securitization Transaction.
"BA Commitment" means the commitment of the Bank to create and
discount Bankers' Acceptances, and to honor payment obligations
relating thereto.
"BA Discount Reference Rate" shall mean, with respect to any
Bankers' Acceptance, the current quoted discount rate for bankers'
acceptances of the Bank on the date of creation of such Bankers'
Acceptance for bankers' acceptances in an amount substantially equal to
the face amount of such Bankers' Acceptance and having the same
maturity as such Bankers' Acceptance.
"BA Documents" shall mean, with respect to any Bankers
Acceptance such documents and agreements as the Bank reasonably may
require in connection with the creation of such Bankers' Acceptance.
"BA Obligations" means, at any time, without duplication, the
sum of (i) the maximum aggregate amount which is, or at any time
thereafter may become, payable by the Bank under all Bankers'
Acceptances then outstanding, plus (ii) the aggregate BA Reimbursement
Obligations at such time.
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<PAGE>
"BA Reimbursement Obligation" means, at any time, with respect
to any Bankers' Acceptance, the obligation of the Borrower to reimburse
the Bank for the face amount of a matured Bankers' Acceptance.
"Bankers' Acceptance" means a draft drawn by the Borrower, on
and accepted and discounted by, the Bank in accordance with the
provisions of Section 2.3.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Bankruptcy Event" means, with respect to any Person, the
occurrence of any of the following with respect to such Person: (i) a
court or governmental agency having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
ordering the winding up or liquidation of its affairs; or (ii) there
shall be commenced against such Person an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or any case, proceeding or other action for the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its
Property or for the winding up or liquidation of its affairs, and such
involuntary case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded for a period of sixty (60)
consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or make any general assignment for the
benefit of creditors; or (iv) such Person shall be unable to, or shall
admit in writing its inability to, pay its debts generally as they
become due.
"Borrower" means the Person identified as such in the heading
hereof, together with any permitted successors and assigns.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina or
Phoenix, Arizona are authorized or required
by law to close, except that, when used in connection with a LIBOR Rate
Loan, such day shall also be a day on which dealings between banks are
carried on in U.S. dollar deposits in London, England, Charlotte, North
Carolina and New York, New York.
"Capital Lease" means, as applied to any Person, any lease of
any Property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Capital Lease Obligation" means the capital lease obligations
relating to a Capital Lease determined in accordance with GAAP.
3
<PAGE>
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated time deposits and certificates
of deposit of (i) the Bank, or (ii) any domestic commercial bank of
recognized standing (y) having capital and surplus in excess of
$500,000,000 and (z) whose short-term commercial paper rating from S&P
is at least A-1 or the equivalent thereof or from Moody's is at least
P-1 or the equivalent thereof (any the Bank being an "Approved Bank"),
in each case with maturities of not more than 270 days from the date of
acquisition, (c) commercial paper and variable or fixed rate notes
issued by any Approved Bank (or by the parent corporation thereof) and
maturing within six months of the date of acquisition, (d) repurchase
agreements entered into by a Person with the Bank or trust company
(including any of the Banks) or recognized securities dealer having
capital and surplus in excess of $500,000,000 for direct obligations
issued by or fully guaranteed by the United States of America in which
such Person shall have a perfected first priority security interest
(subject to no other Liens) and having, on the date of purchase
thereof, a fair market value of at least 100% of the amount of the
repurchase obligations, (e) obligations of any State of the United
States or any political subdivision thereof, the interest with respect
to which is exempt from federal income taxation under Section 103 of
the Code, having a long term rating of at least AA- or Aa-3 by S&P or
Moody's, respectively, and maturing within three years from the date of
acquisition thereof, (f) Investments in municipal auction preferred
stock (i) rated AAA (or the equivalent thereof) or better by S&P or Aaa
(or the equivalent thereof) or better by Moody's and (ii) with
dividends that reset at least once every 365 days and (g) Investments,
classified in accordance with GAAP as current assets, in money market
investment programs registered under the Investment Borrower Act of
1940, as amended, which are administered by reputable financial
institutions having capital of at least $100,000,000 and the portfolios
of which are limited to Investments of the character described in the
foregoing subdivisions (a), (b), (c), (e) and (f).
"Change of Control" shall be deemed to have occurred in the
event that:
(i) the Principal Shareholder shall cease to own,
directly or indirectly, at least 1,700,000 shares of Voting
Stock of the Borrower, free and clear of Liens;
(ii) the Principal Shareholder shall cease to be
entitled, directly or indirectly, through ownership of Voting
Stock of the Borrower, by contract or otherwise, to direct or
cause the direction of the management and policies of the
Borrower (including the power to name a majority of the
members of the Board of Directors of the Borrower);
(iii) the Principal Shareholder shall cease to be the
chief executive officer of the Borrower (a) for any reason
other than his death or legal disability, or (b) due to his
death or legal disability, and a successor satisfactory to the
Bank
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<PAGE>
does not assume his responsibilities and position within
thirty (30) days of such cessation.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed also to
refer to any successor sections.
"Commitment" means the Revolving Commitment, the LOC
Commitment and the BA Commitment.
"Commitment Fee" shall have the meaning given such term in
Section 3.5(a).
"Commitment Period" means the period from and including the
Closing Date to but not including the earlier of (i) the Termination
Date, or (ii) the date on which the Revolving Commitment terminates in
accordance with the provisions of this Credit Agreement.
"Consolidated" means, when used with reference to Fixed
Charges or Funded Debt, the aggregate of Fixed Charges or Funded Debt,
as the case may be, of the Borrower and its Subsidiaries, after
eliminating all offsetting debts and credits between the Borrower and
its Subsidiaries and all other terms required to be eliminated in
accordance with GAAP. Calculations of Consolidated EBITDA, Consolidated
Revenues, Consolidated Fixed Charges and Consolidated Income Available
for Fixed Charges shall be made on a consolidating pro forma basis, as
if (i) any consolidation or merger with or into any Person by the
Borrower or any Subsidiary, any Transfer of all or substantially all of
the assets of the Borrower or any Subsidiary to any Person or any
Transfer of all or substantially all of the assets of any Person to the
Borrower or any Subsidiary that has occurred during the preceding four
Fiscal Quarters had occurred at the commencement of such period and
(ii) any Indebtedness incurred or assumed by the Borrower and its
Subsidiaries during the preceding four Fiscal Quarters (other than any
refinancing of Indebtedness to the extent that the principal amount of
such Indebtedness did not increase) had been in effect at the
commencement of such period.
"Consolidated EBITDA" means, with respect to any date of
determination, the sum of (a) Consolidated Net Income for the most
recently ended four Fiscal Quarters and (b) the amount of all Interest
Charges, depreciation, amortization, income taxes, deferred items and
other non-cash expenses of the Borrower and its Subsidiaries, but only
to the extent deducted in the determination of Consolidated Net Income
for the most recently ended four Fiscal Quarters;
"Consolidated Group" means the Borrower and its consolidated
subsidiaries, as determined in accordance with GAAP.
5
<PAGE>
"Consolidated Income Available for Fixed Charges" means, with
respect to any period, Consolidated Net Income for such period plus all
amounts deducted in the computation thereof on account of (a) Fixed
Charges and (b) taxes imposed on or measured by income or excess
profits.
"Consolidated Net Income" means, with reference to any period,
the net income (or loss) of the Borrower and its Subsidiaries for such
period (taken as a cumulative whole), as determined in accordance with
GAAP, after eliminating all offsetting debits and credits between the
Borrower and its Subsidiaries and all other terms required to be
eliminated in the course of the preparation of consolidated financial
statements of the Borrower and its Subsidiaries in accordance with
GAAP; provided that there shall be excluded:
(a) subject to clause (i) of the definition of
"Consolidated" herein, the income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary or is merged
into or consolidated with the Borrower or a Subsidiary, and
the income (or loss) of any Person, substantially all of the
assets of which have been acquired in any manner, realized by
such other Person prior to the date of acquisition;
(b) the income (or loss) of any Person (other than a
Subsidiary) in which the Borrower or any Subsidiary has an
ownership interest, except to the extent that any such income
has been actually received by the Borrower or such Subsidiary
in the form of cash dividends or similar cash distributions;
(c) the undistributed earnings of any Subsidiary to
the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time
permitted by the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary;
(d) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve
was made out of income accrued during such period;
(e) any aggregate net gain (but not any aggregate net
loss) during such period arising from the sale, conversion,
exchange or other disposition of capital assets (such term to
include, without limitation, (i) all non-current assets and,
without duplication, (ii) the following, whether or not
current: all fixed assets, whether tangible or intangible, all
inventory sold in conjunction with the disposition of fixed
assets, and all Securities);
(f) any gains resulting from any write-up of any
assets (but not any loss resulting from any writedown of any
assets);
(g) any net gain from the collection of the proceeds
of life insurance policies;
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<PAGE>
(h) any gain arising from the acquisition of any
Security, or the extinguishment, under GAAP, of any
Indebtedness, of the Borrower or any Subsidiary;
(i) any net income or gain (but not any net loss)
during such period from (i) any change in accounting
principles in accordance with GAAP, (ii) any prior period
adjustments resulting from any change in accounting principles
in accordance with GAAP, (iii) any extraordinary items, or
(iv) any discontinued operations or the disposition thereof;
(j) any deferred credit representing the excess of
equity in any Subsidiary at the date of acquisition over the
cost of the investment in such Subsidiary; and
(k) any portion of such net income that cannot be
freely converted into United States Dollars.
"Consolidated Net Worth" means, at any time, (a) Consolidated
Total Assets minus (b) the total liabilities of the Borrower and its
Subsidiaries which would be shown as liabilities on a consolidated
balance sheet of the Borrower and its Subsidiaries as of such time
prepared in accordance with GAAP.
"Consolidated Revenues" means the revenue of the Borrower and
its Subsidiaries for the applicable period, as determined in accordance
with GAAP, after eliminating all offsetting debits and credits between
the Borrower and its Subsidiaries and all other terms required to be
eliminated in the course of the preparation of consolidated financial
statements of the Borrower and its Subsidiaries in accordance with
GAAP.
"Consolidated Total Assets" means, as of any date of
determination, the total assets of the Borrower and its Subsidiaries
which would be shown as assets on a consolidated balance sheet of the
Borrower and its Subsidiaries as of such time prepared in accordance
with GAAP, after eliminating all amounts properly attributable to
minority interests, if any, in the stock and surplus of Subsidiaries.
"Consolidated Total Tangible Assets" means Consolidated Total
Assets less and except goodwill and other intangible assets of the
Borrower and its Subsidiaries on a consolidated basis determined in
accordance with GAAP.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any material
agreement, instrument or undertaking to which such Person is a party or
by which it or any of its Property is bound.
"Credit Documents" means a collective reference to this Credit
Agreement, the Revolving Note, the LOC Documents, the BA Documents,
each Joinder Agreement and all other related agreements and documents
issued or delivered hereunder or thereunder or pursuant hereto or
thereto.
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"Credit Party" means any of the Borrower and the Guarantors.
"Current Maturities of Funded Debt" means, at any time and
with respect to any item of Funded Debt, the portion of such Funded
Debt outstanding at such time which by the terms of such Funded Debt or
the terms of any instrument or agreement relating thereto is due on
demand or within one year from such time (whether by sinking fund,
other required prepayment or final payment at maturity) and is not
directly or indirectly renewable, extendible or refundable at the
option of the obligor under an agreement or firm commitment in effect
at such time to a date one year or more from such time.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Domestic Credit Party" means any Credit Party which is
incorporated or organized under the laws of any State of the United
States or the District of Columbia.
"Domestic Subsidiary" means any Subsidiary which is
incorporated or organized under the laws of any State of the United
States or the District of Columbia.
"Eligible Bankers' Acceptance" means a Bankers' Acceptance
which meets the requirements of 12 U.S.C. ss.372(a).
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity which is under common
control with any Credit Party within the meaning of Section 4001(a)(14)
of ERISA, or is a member of a group which includes the Borrower and
which is treated as a single employer under Sections 414(b) or (c) of
the Code.
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<PAGE>
"ERISA Event" means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (ii) the
withdrawal by the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate from a Multiple Employer Plan during a plan year in which it
was a substantial employer (as such term is defined in Section
4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan;
(iii) the distribution of a notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA;
(iv) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any
event or condition which could reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; (vi) the complete or
partial withdrawal of the Borrower, any Subsidiary of the Borrower or
any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for
imposition of a lien under Section 302(f) of ERISA exist with respect
to any Plan; or (vii) the adoption of an amendment to any Plan
requiring the provision of security to such Plan pursuant to Section
307 of ERISA.
"Eurodollar Reserve Percentage" for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next
higher 1/100th of 1%), which is in effect for such day as prescribed by
the Federal Reserve Board (or any successor) for determining the
maximum reserve requirement (including without limitation any basic,
supplemental or emergency reserves) in respect of Eurocurrency
liabilities, as defined in Regulation D of such Board as in effect from
time to time, or any similar category of liabilities for a member bank
of the Federal Reserve System in New York City.
"Event of Default" means such term as defined in Section 9.1.
"Extension of Credit" means, as to the Bank, the making of, or
participation in, a Loan by the Bank, the issuance or extension of a
Letter of Credit or the creation and discount of a Bankers' Acceptance.
"Fees" means all fees payable pursuant to Section 3.5.
"First Union" means First Union National Bank of North
Carolina and its successors.
"Fiscal Quarter" means a fiscal quarter of the Borrower or any
of its Subsidiaries which shall be any quarterly period ending on March
31, June 30, September 30 or December 31 of any year.
"Fiscal Year" means, with respect to any Person, a fiscal year
of such Person.. The term "Fiscal Year, " when used without reference
to any Person, shall mean a Fiscal Year of the Borrower ending on
September 30, of any year.
"Fixed Charges" means, with respect to any date of
determination, the sum of (a) Interest Charges for the most recently
ended four Fiscal Quarters and (b) Lease Rentals for the most recently
ended four Fiscal Quarters.
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<PAGE>
"Fixed Charges Coverage Ratio" means, as of any date of
determination thereof, the ratio of (a) Consolidated Income Available
for Fixed Charges for the most recently ended four Fiscal Quarters to
(b) Consolidated Fixed Charges for such period.
"Foreign Credit Party" means a Credit Party which is not a
Domestic Credit Party.
"Foreign Subsidiary" means a Subsidiary which is not a
Domestic Subsidiary.
"Funded Debt" means, with respect to any Person, all
Indebtedness of such Person which by its terms or by the terms of any
instrument or agreement relating thereto matures, or which is otherwise
payable or unpaid, one year or more from, or is directly or indirectly
renewable or extendible at the option of the obligor in respect thereof
to a date one year or more (including, without limitation, an option of
such obligor under a revolving credit or similar agreement obligating
the lender or lenders to extend credit over a period of one year or
more) from, the date of the creation thereof; provided that Funded Debt
shall include, as at any date of determination, Current Maturities of
Funded Debt.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of
Section 1.3 hereof.
"Gordon Transactions" means (i) the acquisition by the
Borrower of all of the outstanding stock of Creative Marketing and
Promotions, Inc., a North Carolina corporation ("CMP"), and (ii) the
acquisition by MTL Acquisition, Inc., an Arizona corporation ("MTL") of
the assets and assumption of certain liabilities of Motorsports
Traditions Limited Partnership, a North Carolina limited partnership.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantor" means each of those other Persons identified as a
"Guarantor" on the signature pages hereto, and each Additional Credit
Party which may hereafter execute a Joinder Agreement, together with
their successors and permitted assigns.
"Guaranteed Obligations" means, as to each Guarantor, without
duplication, (i) all obligations of the Borrower to the Bank, whenever
arising, under this Credit Agreement , the Revolving Note or the other
Credit Documents relating to the Obligations hereunder, and (ii) all
liabilities and obligations, whenever arising, owing from the Borrower
to the Bank, or any Affiliate of the Bank, arising under any Hedging
Agreement relating to Obligations hereunder.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and
10
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including without limitation any obligation, whether or not contingent,
(i) to purchase any such Indebtedness or any Property constituting
security therefor, (ii) to advance or provide funds or other support
for the payment or purchase of any such Indebtedness or to maintain
working capital, solvency or other balance sheet condition of such
other Person (including without limitation keep well agreements,
maintenance agreements, comfort letters or similar agreements or
arrangements) for the benefit of any holder of Indebtedness of such
other Person, (iii) to lease or purchase Property, securities or
services primarily for the purpose of assuring the holder of such
Indebtedness, or (iv) to otherwise assure or hold harmless the holder
of such Indebtedness against loss in respect thereof. The amount of any
Guaranty Obligation hereunder shall (subject to any limitations set
forth therein) be deemed to be an amount equal to the outstanding
principal amount (or maximum principal amount, if larger) of the
Indebtedness in respect of which such Guaranty Obligation is made.
"Hedging Agreements" means any interest rate protection
agreement or foreign currency exchange agreement between the Borrower
and the Bank, or any Affiliate of the Bank.
"Indebtedness" of any Person means (i) all obligations of such
Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made, (iii) all obligations of
such Person under conditional sale or other title retention agreements
relating to Property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (iv) all obligations
of such Person issued or assumed as the deferred purchase price of
Property or services purchased by such Person (other than trade debt
incurred in the ordinary course of business and due within six months
of the incurrence thereof) which would appear as liabilities on a
balance sheet of such Person, (v) all obligations of such Person under
take-or-pay or similar arrangements or under commodities agreements,
(vi) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production
from, Property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, provided that for
purposes hereof the amount of such Indebtedness shall be limited to the
greater of (A) the amount of such Indebtedness as to which there is
recourse to such Person and (B) the fair market value of the property
which is subject to the Lien, (vii) all Guaranty Obligations of such
Person, (viii) the principal portion of all obligations of such Person
under Capital Leases, (ix) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange
agreements, commodity purchase or option agreements or other interest
or exchange rate or commodity price hedging agreements (including, but
not limited to, the Hedging Agreements), (x) the maximum amount of all
standby letters of credit issued or bankers' acceptances facilities
created for the account of such Person and, without duplication, all
drafts drawn thereunder (to the extent unreimbursed), (xi) all
preferred stock issued by such Person and required by the terms thereof
to be redeemed, or for which mandatory sinking fund payments are due,
by a fixed date, (xii) the outstanding Attributed Principal Amount
under any Securitization Financing and (xiii) the principal balance
outstanding under any synthetic lease, tax retention operating lease,
off- balance sheet loan
11
<PAGE>
or similar off-balance sheet financing product to which such Person is
a party, where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease
in accordance with GAAP. The Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer, but only to the extent
to which there is recourse to such Person for payment of such
Indebtedness.
"Interest Charges" means, with reference to any period, the
sum (without duplication) of the following (in each case, eliminating
all offsetting debits and credits between the Borrower and its
Subsidiaries and all other items required to be eliminated in the
course of the preparation of consolidated financial statements of the
Borrower and its Subsidiaries in accordance with GAAP): (a) all
interest in respect of Indebtedness of the Borrower and its
Subsidiaries (including imputed interest on Capital Lease Obligations)
deducted in determining Consolidated Net Income for such period,
together with all interest capitalized or deferred during such period
and not deducted in determining Consolidated Net Income for such
period, and (b) all debt discount and expense amortized or required to
be amortized in the determination of Consolidated Net Income for such
period.
"Interest Payment Date" (a) as to any Alternate Base Rate
Loan, the last day of each March, June, September and December to occur
while such Loan is outstanding, (b) as to any LIBOR Rate Loan having an
Interest Period of three months or less, the last day of such Interest
Period, and (c) as to any LIBOR Rate Loan having an Interest Period
longer than three months, each day which is three months after the
first day of such Interest Period and the last day of such Interest
Period.
"Interest Period" with respect to any LIBOR Rate Loan,
(i) initially, the period commencing on the borrowing
date or conversion date, as the case may be, with respect to
such LIBOR Rate Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in the notice of
borrowing or notice of conversion given with respect thereto;
and
(ii) thereafter, each period commencing on the last day
of the immediately preceding Interest Period applicable to
such LIBOR Rate Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice
to the Bank not less than three Business Days prior to the
last day of the then current Interest Period with respect
thereto;
provided that the foregoing provisions are subject to the following:
(A) if any Interest Period pertaining to a LIBOR Rate
Loan would otherwise end on a day that is not a Business Day,
such Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately
preceding Business Day;
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<PAGE>
(B) any Interest Period pertaining to a LIBOR Rate
Loan that begins on the last Business Day of a calendar month
(or on a day for which 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 the relevant calendar
month;
(C) if the Borrower shall fail to give notice as
provided above, the Borrower shall be deemed to have selected
an Alternate Base Rate Loan to replace the affected LIBOR Rate
Loan;
(D) any Interest Period in respect of any Loan that
would otherwise extend beyond the Termination Date shall end
on the Termination Date; and
(E) no more than 4 LIBOR Rate Loans may be in effect
at any time. For purposes hereof, LIBOR Rate Loans with
different Interest Periods shall be considered as separate
LIBOR Rate Loans, even if they shall begin on the same date
and have the same duration, although borrowings, extensions
and conversions may, in accordance with the provisions hereof,
be combined at the end of existing Interest Periods to
constitute a new LIBOR Rate Loan with a single Interest
Period.
"Invested Amount" shall have the meaning given such term in
the definition of Attributed Principal Amount.
"Investment", in any Person, means any loan or advance to such
Person, any purchase or other acquisition of any capital stock,
warrants, rights, options, obligations or other securities of, or
equity interest in, such Person, any capital contribution to such
Person or any other investment in such Person, including, without
limitation, any Guaranty Obligation incurred for the benefit of such
Person.
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Schedule 7.10 hereto, executed and delivered by an
Additional Credit Party in accordance with the provisions of Section
7.10.
"Lease Rentals" means, with reference to any period, the sum
of rental and other obligations required to be paid during such period
by the Borrower or any Subsidiary as lessee under all leases of real or
personal property (other than Capital Leases), excluding any amount
required to be paid by the lessee (whether or not therein designated as
rental or additional rental) on account of maintenance and repairs,
insurance, taxes, assessments, water rates and similar charges;
provided that, if at the date of determination, any such rental or
other obligations (or portion thereof) are contingent or not otherwise
definitely determinable by the terms of the related lease, the amount
of such obligations (or such portion thereof) (i) shall be assumed to
be equal to the amount of such obligations for the period of 12
consecutive calendar months immediately preceding the date of
determination or (ii) if the related lease was not in effect during
such preceding 12-month period, shall be the amount estimated by the
chief financial officer or controller of the Borrower on a reasonable
basis and in good faith.
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<PAGE>
"Letter of Credit" means any letter of credit issued by the
Bank for the account of the Borrower in accordance with the terms of
Section 2.2.
"Letter of Credit Fee" shall have the meaning given such term
in Section 3.5(b).
"LIBOR" means the arithmetic mean (rounded to the nearest
1/100th of 1%) of the offered rates for deposits in U.S. Dollars for a
period equal to the Interest Period selected which appears on the
Telerate Page 3750 at approximately 11:00 A.M. London time, two (2)
Business Days prior to the commencement of the applicable Interest
Period. If, for any reason, such rate is not available, then "LIBOR"
shall mean the rate per annum at which, as determined by the Bank, U.S.
Dollars in the amount of $5,000,000 are being offered to leading banks
at approximately 11:00 A.M. London time, two (2) Business Days prior to
the commencement of the applicable Interest Period for settlement in
immediately available funds by leading banks in the London interbank
market for a period equal to the Interest Period selected.
"LIBOR Rate" means a rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) determined by the Bank
pursuant to the following formula:
LIBOR Rate = LIBOR
-------------------------------------------
1.00 minus Eurodollar Reserve Percentage
"LIBOR Rate Loan" means Loans the rate of interest applicable
to which is based on the LIBOR Rate.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, and
any lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans.
"LOC/BA Committed Amount" means such term as defined in
Section 2.2.
"LOC Commitment" means the commitment of the Bank to issue,
and to honor payment obligations under, Letters of Credit hereunder.
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or
providing for (i) the rights and obligations of the parties concerned
or at risk or (ii) any collateral security for such obligations.
14
<PAGE>
"LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (ii) the aggregate amount of all drawings
under Letters of Credit honored by the Bank but not theretofore
reimbursed.
"Material Adverse Effect" means a material adverse effect on
(i) the condition (financial or otherwise), operations, business,
assets, liabilities or prospects of the Consolidated Group taken as a
whole, (ii) the ability of the Credit Parties taken as a whole to
perform any material obligation under the Credit Documents to which it
is a party or (iii) the rights and remedies of the Bank under the
Credit Documents.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Laws,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such Borrower in the business
of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate and at least one
employer other than the Borrower, any Subsidiary of the Borrower or any
ERISA Affiliate are contributing sponsors.
"Non-Excluded Taxes" means such term as is defined in Section
3.10.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Schedule 2.1(b), as required by Section
2.1(b).
"Notice of Extension/Conversion" means the written notice of
extension or conversion in substantially the form of Schedule 3.2, as
required by Section 3.2.
"Obligations" means, collectively, the Revolving Loans, the
LOC Obligations and the BA Obligations.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Organizational Documents" means, as to any Person, the
certificate of incorporation and by-laws or other organizational or
governing documents of such Person.
15
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereof.
"Permitted Investments" means Investments which are either (i)
cash and Cash Equivalents; (ii) accounts receivable created, acquired
or made in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms; (iii) Investments consisting
of stock, obligations, securities or other property received in
settlement of accounts receivable (created in the ordinary course of
business) from bankrupt obligors; (iv) Investments existing as of the
Closing Date and set forth in Schedule 8.5, (v) Guaranty Obligations
permitted by Section 8.1; (vi) acquisitions permitted by Section
8.4(d); (vii) transactions permitted by Section 8.6, (viii) loans to
employees, directors or officers in connection with the award of
convertible bonds or stock under a stock incentive plan, stock option
plan or other equity-based compensation plan or arrangement in the
aggregate not to exceed $500,000 (calculated on the exercise price for
any such shares) in the aggregate at any time outstanding; (ix) other
advances or loans to employees, directors, officers or agents not to
exceed $250,000 in the aggregate at any time outstanding; (x) advances
or loans to customers or suppliers that do not exceed $250,000 in the
aggregate at any one time outstanding, (xi) Investments by members of
the Consolidated Group and their Subsidiaries and Affiliates existing
on the Closing Date, (xii) Investments by a Credit Party in and to a
Domestic Credit Party and (xiii) other loans, advances and investments
of a nature not contemplated in the foregoing subsections in an amount
not to exceed in the aggregate at any time outstanding an amount equal
to the sum of $250,000 plus an amount equal to the "unused" portion of
Restricted Payments which are permitted, but not made, in any fiscal
year.
"Permitted Liens" means:
(i) Liens in favor of the Bank;
(ii) Liens (other than Liens created or
imposed under ERISA) for taxes, assessments or governmental
charges or levies not yet due or Liens for taxes being
contested in good faith by appropriate proceedings for which
adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such
Lien is not yet subject to foreclosure, sale or loss on
account thereof);
(iii) statutory Liens of landlords and Liens
of carriers, warehousemen, mechanics, materialmen and
suppliers and other Liens imposed by law or pursuant to
customary reservations or retentions of title arising in the
ordinary course of business, provided that such Liens secure
only amounts not yet due and payable or, if due and payable,
are unfiled and no other action has been taken to enforce the
same or are being contested in good faith by appropriate
proceedings for which adequate reserves determined in
accordance with GAAP have been established (and as to which
the Property subject to any such Lien is not yet subject to
foreclosure, sale or loss on account thereof);
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<PAGE>
(iv) Liens (other than Liens created or
imposed under ERISA) incurred or deposits made by the Borrower
and its Subsidiaries in the ordinary course of business in
connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the
performance of tenders, statutory obligations, bids, leases,
government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for
the payment of borrowed money);
(v) Liens in connection with attachments or
judgments (including judgment or appeal bonds) provided that
the judgments secured shall, within 30 days after the entry
thereof, have been discharged or execution thereof stayed
pending appeal, or shall have been discharged within 30 days
after the expiration of any such stay;
(vi) easements, rights-of-way, restrictions
(including zoning restrictions), minor defects or
irregularities in title and other similar charges or
encumbrances not, in any material respect, impairing the use
of the encumbered Property for its intended purposes;
(vii) Liens securing purchase money and
sale/leaseback Indebtedness (including Capital Leases) to the
extent permitted under Section 8.1(d), provided that any such
Lien attaches only to the Property financed or leased and such
Lien attaches thereto concurrently with or within 90 days
after the acquisition thereof in connection with the purchase
money transactions and within 30 days after the closing of any
sale/leaseback transaction;
(viii) leases or subleases granted to others
not interfering in any material respect with the business of
any member of the Consolidated Group;
(ix) any interest of title of a lessor
under, and Liens arising from UCC financing statements (or
equivalent filings, registrations or agreements in foreign
jurisdictions) relating to, leases permitted by this Credit
Agreement;
(x) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods;
(xi) Liens deemed to exist in connection
with Investments in repurchase agreements permitted under
Section 8.5;
(xii) normal and customary rights of setoff
upon deposits of cash in favor of banks or other depository
institutions; and
(xiii) Liens existing as of the Closing Date
and set forth on Schedule 6.8; provided that no such Lien
shall at any time be extended to or cover any Property other
than the Property subject thereto on the Closing Date.
17
<PAGE>
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated) or any Governmental
Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate is (or,
if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" within the meaning of Section 3(5)
of ERISA.
"Principal Shareholder" means Fred W. Wagenhals, the president
and chief executive officer of the Borrower.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Receivables Financier" means, in connection with a
Securitization Transaction, the Person which provides financing for
such transaction whether by purchase, loan or otherwise in respect of
Receivables.
"Regulation G, T, U, or X" means Regulation G, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the environment (including the abandonment or
discarding of barrels, containers and other closed receptacles
containing any Materials of Environmental Concern).
"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the
notice requirement has been waived by regulation.
"Requirement of Law" means, as to any Person, any law, treaty,
rule or regulation or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding
upon such Person or any of its material property is subject.
"Responsible Officer" means the Chief Financial Officer and
the Controller.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of stock now or hereafter outstanding, except (A) a dividend payable
solely in shares of that class to the holders of that class and (B)
dividends and other distributions payable to a Credit Party, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any
class of stock now or hereafter outstanding, and (iii) 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 now or
hereafter outstanding.
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<PAGE>
"Revolving Commitment" means the commitment of the Bank to
make Revolving Loans hereunder.
"Revolving Commitment Increase Date" means the date upon which
all of the following shall have occurred:
(a) the definitive acquisition agreements relating to
the Gordon Transactions shall have been delivered to, and
reviewed and approved by, the Bank;
(b) the Bank shall have completed such due diligence
relating to the Gordon Transactions as it may deem
appropriate;
(c) the Gordon Transactions shall have been
consummated prior to or contemporaneously with the increase in
the Revolving Commitment on the Revolving Commitment Increase
Date;
(d) CMP shall be joined as a Guarantor hereunder in
accordance with the provisions of Section 7.10 (accompanied by
supporting resolutions, incumbency certificates, corporate
formation and organizational documentation and opinions of
counsel as the Bank may reasonably request);
(e) the conditions of Section 5.2 shall be met as if
an Extension of Credit were made on such date.
"Revolving Committed Amount" means such term as defined in
Section 2.1(a).
"Revolving Loans" shall have the meaning assigned to such term
in Section 2.1(a).
"Revolving Note" means the promissory note of the Borrower in
favor of the Bank evidencing the Revolving Loans in substantially the
form attached as Schedule 2.1(e), as such promissory note may be
amended, modified, supplemented, extended, renewed or replaced from
time to time.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
"Securitization Transaction" means any financing transaction
or series of financing transactions that have been or may be entered
into by a member of the Consolidated Group pursuant to which such
member of the Consolidated Group may sell, convey or otherwise transfer
to (i) a Subsidiary or affiliate, or (ii) any other Person, or may
grant a security interest in, any Receivables or interests therein
secured by merchandise or services financed thereby (whether such
Receivables are then existing or arising in the future) of such member
of the Consolidated Group, and any assets related thereto, including
without limitation, all security interests in merchandise or services
financed thereby, the proceeds of such Receivables, and other assets
which are
19
<PAGE>
customarily sold or in respect of which security interests are
customarily granted in connection with securitization transactions
involving such assets.
"Security" shall have the meaning set forth in Section 2(1) of
the Securities Act of 1933, as amended from time to time.
"Senior Note Agreement" means the Note Purchase Agreement
dated as of January 2, 1997 issued by the Borrower in connection with
the Senior Notes, as modified, supplemented, renewed and replaced from
time to time.
"Senior Notes" means those $20,000,000, 8.05% Senior Notes of
the Borrower due January 2, 1999, as amended, modified, supplemented,
renewed and replaced from time to time.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
Employer Plan.
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, any class
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by
such Person directly or indirectly through Subsidiaries, and (b) any
partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than 50% of
the voting interests at any time. Unless otherwise identified,
"Subsidiary" or "Subsidiaries" shall mean Subsidiaries of the Borrower.
"Termination Date" means March 31, 1998, or if extended with
the written consent of the Bank, such later date as to which the
Termination Date may be extended.
"Transfer" means the sale, lease, transfer, conveyance,
abandonment or other disposition, directly or indirectly, in a single
transaction or a series of transactions of all or any part of a
Person's assets.
"Voting Stock" means, with respect to any Person, capital
stock issued by such Person the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of
directors (or persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the happening of
such a contingency.
"Wells Fargo Letter of Credit" means that standby Letter of
Credit issued hereunder on the Closing Date in favor of Wells Fargo
HSBC Trade Bank, N.A. in support of certain existing commercial letters
of credit issued for the account of the Borrower and its Subsidiaries.
"Wholly Owned Subsidiary" of any Person means any Subsidiary
100% of whose Voting Stock or other equity interests is at the time
owned by such Person directly or indirectly through other Wholly Owned
Subsidiaries.
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1.2 Computation of Time Periods.
For purposes of computation of periods of time hereunder, the
word "from" means "from and including" and the words "to" and "until" each mean
"to but excluding."
1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Bank hereunder shall be prepared, in accordance with GAAP applied on a
consistent basis. All calculations made for the purposes of determining
compliance with this Credit Agreement shall (except as otherwise expressly
provided herein) be made by application of GAAP applied on a basis consistent
with the most recent annual or quarterly financial statements delivered pursuant
to Section 7.1 hereof (or, prior to the delivery of the first financial
statements pursuant to Section 7.1 hereof, consistent with the annual audited
financial statements referenced in Section 6.1(i)); provided, however, if (a)
the Borrower shall object to determining such compliance on such basis at the
time of delivery of such financial statements due to any change in GAAP or the
rules promulgated with respect thereto or (b) the Bank shall so object in
writing within 30 days after delivery of such financial statements, then such
calculations shall be made on a basis consistent with the most recent financial
statements delivered by the Borrower to the Bank as to which no such objection
shall have been made.
SECTION 2
CREDIT FACILITIES
-----------------
2.1 Revolving Loans.
(a) Commitment.
During the Commitment Period, subject to the terms and conditions
hereof, the Bank agrees to make revolving loans to the Borrower upon request up
to an aggregate principal amount at any time outstanding (the "Revolving
Committed Amount") of:
(i) from the Closing Date until the sooner of the Revolving
Commitment Increase Date or September 30, 1997, SIX MILLION DOLLARS
($6,000,000);
(ii) from the Revolving Commitment Increase Date until
September 30, 1997, TEN MILLION DOLLARS ($10,000,000); and
(iii) from September 30, 1997 until the Termination Date, SIX
MILLION DOLLARS ($6,000,000).
The Loans hereunder may consist of Alternate Base Rate Loans or LIBOR Rate
Loans, or a combination thereof; provided that no more than 4 LIBOR Rate Loans
may be outstanding at any time. The obligation of the Bank to make Loans
hereunder and to extend, or convert Loans
21
<PAGE>
into, LIBOR Rate Loans is subject to the condition that the Representations and
Warranties set forth herein are true and correct in all material respects
(except as to items stated as of a particular time).
(b) Notices.
Requests by the Borrower for Loans hereunder, and for extensions or
conversions of Loans hereunder, shall be made by written notice (or telephone
notice promptly confirmed in writing) by 12:00 Noon Charlotte, North Carolina
time on (i) the Business Day prior to the requested borrowing, extension or
conversion in the case of Alternate Base Rate Loans and (ii) the third Business
Day prior to the requested borrowing, extension or conversion in the case of
LIBOR Rate Loans. Each request shall be in a minimum principal amount of
$1,000,000 in the case of LIBOR Rate Loans and $100,000 in the case of Alternate
Base Rate Loans and, in each case, integral multiples of $100,000 in excess
thereof, and shall specify the date of the requested borrowing, extension or
conversion, the aggregate amount to be borrowed, extended or converted and if an
extension of conversion, the Loan which is being extended or converted, and
whether the borrowing, extension or conversion shall consist of LIBOR Rate
Loans, Alternate Base Rate Loans or combination thereof. If the Borrower shall
fail to specify (A) the type of Loan requested for a borrowing, the request
shall be deemed a request for a Alternate Base Rate Loan, (B) the duration of
the applicable Interest Period in the case of LIBOR Rate Loans, the request
shall be deemed to be a request for an Interest Period of one month. Unless
extended in accordance with the provisions hereof, LIBOR Rate Loans shall be
converted to Alternate Base Rate Loans at the end of the applicable Interest
Period. A form of Notice of Borrowing is attached as Schedule 2.1(b).
(c) Interest Rate.
Subject to the provisions of Section 3.1, the Revolving Loans hereunder
shall bear interest at a per annum rate equal to (i) in the case of LIBOR Rate
Loans, the LIBOR Rate plus 1.90%, and (ii) in the case of Alternate Base Rate
Loans, the Alternate Base Rate. Interest will be payable in arrears on each
Interest Payment Date.
(d) Repayment.
The Revolving Loans shall be due and payable on the Termination Date,
together with accrued interest and fees.
(e) Revolving Note.
The Revolving Loans shall be evidenced by the Revolving Note.
2.2 Letter of Credit Facility.
(a) Issuance. During the Commitment Period, subject to the terms and
conditions hereof and of the LOC Documents, if any, and such other terms and
conditions which the Bank may reasonably require, the Bank shall issue such
Letters of Credit as the Borrower may request for its own account or for the
account of another Credit Party as provided herein, in a form
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acceptable to the Bank, for the purposes hereinafter set forth; provided that
the sum of LOC Obligations plus BA Obligations shall not exceed SIX MILLION
DOLLARS ($6,000,000) at any time (the "LOC/BA Committed Amount). Other than the
Wells Fargo Letter of Credit, Letters of Credit issued hereunder shall be trade
or commercial letters of credit (as opposed to standby letters of credit) and
shall not have an original expiry date more than six months from the date of
issuance or extension, nor an expiry date, whether as originally issued or by
extension, extending beyond the Termination Date. Each Letter of Credit shall
comply with the related LOC Documents The issuance date of each Letter of Credit
shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a Letter of
Credit shall be submitted by the Borrower to the Bank at least three (3)
Business Days prior to the requested date of issuance (or such shorter period as
may be agreed by the Bank). A form of Notice of Request for Letter of Credit is
attached as Schedule 2.2(b).
(c) Reimbursement. In the event of any drawing under any Letter of
Credit, the Bank will promptly notify the Borrower. The Borrower promises to
reimburse the Bank on the day of drawing under any Letter of Credit (either with
the proceeds of a Revolving Loan obtained hereunder or otherwise) in same day
funds. If the Borrower shall fail to reimburse the Bank as provided hereinabove,
the unreimbursed amount of such drawing shall bear interest at a per annum rate
equal to the Alternate Base Rate plus two percent (2%). The Borrower's
reimbursement obligations hereunder shall be absolute and unconditional under
all circumstances irrespective of any rights of setoff, counterclaim or defense
to payment the Borrower may claim or have against the Bank, the beneficiary of
the Letter of Credit drawn upon or any other Person, including without
limitation any defense based on any failure of the Borrower or any other Credit
Party to receive consideration or the legality, validity, regularity or
unenforceability of the Letter of Credit.
(d) Designation of other Credit Parties as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit Agreement,
including without limitation Section 2.2(a) hereof, a Letter of Credit issued
hereunder may contain a statement to the effect that such Letter of Credit is
issued for the account of a Credit Party, provided that notwithstanding such
statement, the Borrower shall be the actual account party for all purposes of
this Credit Agreement for such Letter of Credit and such statement shall not
affect the Borrower's reimbursement obligations hereunder with respect to such
Letter of Credit.
(e) Renewal, Extension. The renewal or extension of any Letter of
Credit shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(f) Uniform Customs and Practices. The Bank may have the Letters of
Credit be subject to The Uniform Customs and Practice for Documentary Credits,
as published as of the date of issue by the International Chamber of Commerce
(the "UCP"), in which case the UCP may be incorporated therein and deemed in all
respects to be a part thereof.
(g) Indemnification; Nature of Bank's Duties.
(i) In addition to its other obligations under this Section
2.2, the Borrower hereby agrees to protect, indemnify, pay and save the
Bank harmless from and against any and all
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claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) that the Bank may incur
or be subject to as a consequence, direct or indirect, of (A) the
issuance of any Letter of Credit or (B) the failure of the Bank to
honor a drawing under a Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de
jure or de facto government or governmental authority (all such acts or
omissions, herein called "Government Acts").
(ii) As between the Borrower and the Bank, the Borrower shall
assume all risks of the acts, omissions or misuse of any Letter of
Credit by the beneficiary thereof. The Bank shall not be responsible:
(A) for the form, validity, sufficiency, accuracy, genuineness or legal
effect of any document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (B) for the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer
or assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (D)
for any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under a Letter of Credit or of the
proceeds thereof; and (E) for any consequences arising from causes
beyond the control of the Bank, including, without limitation, any
Government Acts. None of the above shall affect, impair, or prevent the
vesting of the Bank's rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or
omitted by the Bank, under or in connection with any Letter of Credit
or the related certificates, if taken or omitted in good faith, shall
not put the Bank under any resulting liability to the Borrower or any
other Credit Party. It is the intention of the parties that this Credit
Agreement shall be construed and applied to protect and indemnify the
Bank against any and all risks involved in the issuance of the Letters
of Credit, all of which risks are hereby assumed by the Borrower (on
behalf of itself and each of the other Credit Parties), including,
without limitation, any and all Government Acts. The Bank shall not, in
any way, be liable for any failure by the Bank or anyone else to pay
any drawing under any Letter of Credit as a result of any Government
Acts or any other cause beyond the control of the Bank.
(iv) Nothing in this subsection (g) is intended to limit the
reimbursement obligations of the Borrower contained in subsection (c)
above. The obligations of the Borrower under this subsection (g) shall
survive the termination of this Credit Agreement. No act or omissions
of any current or prior beneficiary of a Letter of Credit shall in any
way affect or impair the rights of the Bank to enforce any right, power
or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary contained in this
subsection (i), the Borrower shall have no obligation to indemnify the
Bank in
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respect of any liability incurred by the Bank (A) arising out of the
gross negligence or willful misconduct of the Bank, as determined by a
court of competent jurisdiction, or (B) caused by the Bank's failure to
pay under any Letter of Credit after presentation to it of a request
strictly complying with the terms and conditions of such Letter of
Credit, as determined by a court of competent jurisdiction, unless such
payment is prohibited by any law, regulation, court order or decree.
(h) Conflict with LOC Documents. In the event of any conflict between
this Credit Agreement and any LOC Document (including any letter of credit
application), this Credit Agreement shall control.
2.3 Bankers' Acceptances.
---------------------
(a) Bankers' Acceptance Commitment. During the Commitment Period,
subject to the terms and conditions hereof and of the BA Documents, if any,
executed in connection with the creation of each Bankers' Acceptance and such
other terms and conditions which the Bank may reasonably require, the Bank shall
create and discount such Bankers' Acceptances as the Borrower may request from
time to time as provided herein, in a form acceptable to the Bank; provided that
the sum of LOC Obligations plus the BA Obligations shall not at any time exceed
the LOC/BA Committed Amount, and provided further that the Borrower shall not be
entitled to request any Bankers' Acceptance which, if created, would result in
more than ten (10) separate Bankers' Acceptances being outstanding hereunder at
any time. The maturity of any Bankers' Acceptances shall be the date 30, 60 or
90 days after the creation thereof, as the Borrower may elect; provided that, no
such maturity shall extend beyond the date falling five (5) days before the
Termination Date. Each Bankers' Acceptance shall comply with the related BA
Documents and shall be executed on behalf of the Borrower and presented to the
Bank pursuant to such procedures as are provided for in such BA Documents or
otherwise provided or required by the Bank. The face amount of any Bankers'
Acceptance shall be in a minimum amount of $500,000 and integral multiples of
$500,000 in excess thereof. The creation and maturity date of each Bankers'
Acceptance shall be a Business Day. Notwithstanding the foregoing, the Bank
shall not be obligated to create or discount any Bankers' Acceptance (i) that is
not an Eligible Bankers' Acceptance, or (ii) if creation thereof would cause the
BA Agent to exceed the maximum amount of outstanding bankers' acceptances
permitted by applicable law.
(b) Notice and Requests. Any request for the creation and discount of a
Bankers' Acceptance shall be submitted to the Bank by 9:30 A.M. (Charlotte,
North Carolina time) on the requested date of creation and discount by
completion of a Bankers' Acceptance Request substantially in the form of
Schedule 2.3(b) (a "BA Request") and shall be accompanied by such documents as
are specified therein and in the related BA Documents.
(c) Discount of Bankers' Acceptances. Upon the creation by the Bank of
a Bankers' Acceptance, the Bank shall discount such Committed Bankers'
Acceptance by deducting from the face amount thereof a discount equal to the sum
of BA Discount Reference Rate plus 1.90% (the "Applicable BA Discount Rate")
applied against the face amount of the Bankers' Acceptance for the term thereof,
and the Bank shall make the net amount available in immediately available funds
to the Borrower. The Bank may retain or rediscount, at its election, any
Bankers' Acceptance and
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the amount received by the Bank upon payment thereof at maturity or upon
rediscounting shall be solely for the account of the Bank.
(d) Reimbursement. The Bank shall give prompt notice to the Borrower in
each case of its honor of a mature Bankers' Acceptance. The Borrower shall
thereupon reimburse the Bank on the same day on which the Bank honors a matured
Bankers' Acceptance for the full amount of the related BA Reimbursement
Obligation in Dollars and in immediately available funds. If the Borrower shall
fail to reimburse the Bank as provided hereinabove, the related BA Reimbursement
Obligation shall bear interest at a per annum rate equal to the Alternate Base
Rate plus two percent (2%). The Borrower's reimbursement obligations hereunder
shall be absolute and unconditional under all circumstances irrespective of any
rights of set-off, counterclaim or defense to payment the Borrower may claim or
have against the Bank or any other Person.
(e) Eligibility Requirement. The Borrower agrees that, in the event
that any Bankers' Acceptance created (or to be created) shall not be an Eligible
Bankers' Acceptance, the Borrower shall, upon demand by the Bank, pay to the
Bank additional amounts sufficient to compensate the Bank for any increased
costs resulting therefrom (including without limitation costs resulting from any
reserve requirement, premium liability to the Federal Deposit Insurance
Corporation, or a higher discount rate). A detailed statement as to the amount
of such increased costs, prepared in good faith and submitted by the Bank to the
Borrower, shall be conclusive and binding for all purposes, absent manifest
error in computation.
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
----------------------------------------------
3.1 Default Rate.
Upon the occurrence, and during the continuance, of an Event
of Default, the principal of and, to the extent permitted by law, interest on
the Loans and any other amounts owing hereunder or under the other Credit
Documents shall bear interest, payable on demand, at a per annum rate 2% greater
than the rate which would otherwise be applicable (or if no rate is applicable,
whether in respect of interest, fees or other amounts, then 2% greater than the
Alternate Base Rate).
3.2 Extension and Conversion.
Subject to the terms of Section 5.2, the Borrower shall have
the option, on any Business Day, to extend existing Loans into a subsequent
permissible Interest Period or to convert Loans into Loans of another interest
rate type; provided, however, that (i) except as provided in Section 3.8, LIBOR
Rate Loans may be converted into Alternate Base Rate Loans only on the last day
of the Interest Period applicable thereto, (ii) LIBOR Rate Loans may be
extended, and Alternate Base Rate Loans may be converted into LIBOR Rate Loans,
only if no Default or Event of Default is in existence on the date of extension
or conversion, (iii) Loans extended as, or converted into, LIBOR Rate Loans
shall be subject to the terms of the definition of "Interest Period" set forth
in Section 1.1 and shall be in such minimum amounts as provided in Section
2.1(b), and (iv) any request for extension or conversion of a LIBOR Rate Loan
which shall fail to
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specify an Interest Period shall be deemed to be a request for an Interest
Period of one month. Each such extension or conversion shall be effected by the
Borrower by giving a Notice of Extension/Conversion (or telephone notice
promptly confirmed in writing) to the Bank prior to 11:00 A.M. (Charlotte, North
Carolina time) on the Business Day of, in the case of the conversion of a LIBOR
Rate Loan into a Alternate Base Rate Loan, and on the third Business Day prior
to, in the case of the extension of a LIBOR Rate Loan as, or conversion of a
Alternate Base Rate Loan into, a LIBOR Rate Loan, the date of the proposed
extension or conversion, specifying the date of the proposed extension or
conversion, the Loans to be so extended or converted, the types of Loans into
which such Loans are to be converted and, if appropriate, the applicable
Interest Periods with respect thereto. Each request for extension or conversion
shall be irrevocable and shall constitute a representation and warranty by the
Borrower of the matters specified in subsections (a) through (d) of Section 5.2.
In the event the Borrower fails to request extension or conversion of any LIBOR
Rate Loan in accordance with this Section, or any such conversion or extension
is not permitted or required by this Section, then such LIBOR Rate Loan shall be
automatically converted into a Alternate Base Rate Loan at the end of the
Interest Period applicable thereto. The Bank shall give the Bank notice as
promptly as practicable of any such proposed extension or conversion affecting
any Loan.
3.3 Prepayments.
(a) Voluntary Prepayments. Revolving Loans may be repaid in
whole or in part without premium or penalty; provided that (i) LIBOR Rate Loans
may be prepaid only upon three (3) Business Days' prior written notice to the
Bank and must be accompanied by payment of any amounts owing under Section 3.11,
and (ii) partial prepayments shall be minimum principal amounts of $1,000,000,
in the case of LIBOR Rate Loans, and $100,000, in the case of Alternate Base
Rate Loans, and in integral multiples of $100,000 in excess thereof.
(b) Mandatory Prepayments. If at any time, (A) the aggregate
principal amount of Revolving Loans shall exceed the Revolving Committed Amount,
or (B) the sum of LOC Obligations plus BA Obligations shall exceed the LOC/BA
Committed Amount, the Borrower shall immediately make payment on the Revolving
Loans and/or to a cash collateral account in respect of the LOC Obligations
and/or BA Obligations, in an amount sufficient to eliminate the deficiency.
(c) Application. Unless otherwise specified by the Borrower,
prepayments made hereunder shall be applied first to Alternate Base Rate Loans,
then to LIBOR Rate Loans in direct order of Interest Period maturities and then
to a cash collateral account to secure LOC Obligations and BA Obligations.
Amounts prepaid hereunder may be reborrowed in accordance with the provisions
hereof.
3.4 Termination and Reduction of Commitments
(a) Voluntary Reductions. The Commitments hereunder may be
terminated or permanently reduced in whole or in part upon three (3) Business
Days' prior written notice to the Bank, provided that (i) after giving effect to
any such voluntary reduction the aggregate amount of Revolving Loans shall not
exceed the Revolving Committed Amount and the sum of LOC Obligations plus BA
Obligations shall not exceed the LOC Committed Amount, and (ii)
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partial reductions shall be minimum principal amount of $1,000,000, and in
integral multiples of $100,000 in excess thereof.
(b) Mandatory Reduction. The Commitments hereunder shall
terminate on the Termination Date.
3.5 Fees.
(a) Commitment Fee. In consideration of the Revolving
Commitments hereunder, the Borrower agrees to pay to the Bank a commitment fee
(the "Commitment Fee") equal to three-eighths of one percent (.375%) per annum
on the average daily unused amount of the Revolving Committed Amount for the
applicable period. The Commitment Fee shall be payable quarterly in arrears on
the 5th day following the last day of each calendar quarter for the immediately
preceding quarter (or portion thereof) beginning with the first such date to
occur after the Closing Date.
(b) Letter of Credit Fees. The Borrower agrees to pay to the
Bank (collectively, the "Letter of Credit Fees"):
(A) with regard to standby Letters of Credit
(including the Wells Fargo Letter of Credit), a fee equal to
1.90% per annum on the average daily maximum amount available
to be drawn under standby Letters of Credit from the date of
issuance to the date of expiration, payable quarterly in
arrears at the end of each calendar quarter thereafter;
(B) with regard to trade or commercial Letters of
Credit, such fronting and negotiation fees as may be mutually
agreed upon by the Bank and the Borrower from time to time;
and
(C) customary charges of the Bank with respect to the
issuance, amendment, transfer, administration, cancellation
and conversion of, and drawings under, such Letters of Credit
as may be mutually agreed upon by the Bank and the Borrowers
from time to time.
(c) Upfront Fee. The Borrower agrees to pay to the Bank on or
before the Closing Date an upfront fee of $25,000 (against which the $2,500 Due
Diligence deposit shall be credited).
3.6 Capital Adequacy.
If the Bank has determined, after the date hereof, that the
adoption or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by the Bank with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Bank's capital or assets as a consequence of its
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commitments or obligations hereunder to a level below that which the Bank could
have achieved but for such adoption, effectiveness, change or compliance (taking
into consideration the Bank's policies with respect to capital adequacy), then,
upon notice from the Bank to the Borrower, the Borrower shall be obligated to
pay to the Bank such additional amount or amounts as the Bank determines in good
faith will compensate the Bank for such reduction. Each determination by the
Bank of amounts owing under this Section shall, absent manifest error, be
conclusive and binding on the parties hereto.
3.7 Inability To Determine Interest Rate.
If prior to the first day of any Interest Period, the Bank shall have
determined (which determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, the Bank shall give telecopy or telephonic notice
thereof to the Borrower as soon as practicable thereafter. If such notice is
given (a) any LIBOR Rate Loans requested to be made on the first day of such
Interest Period shall be made as Alternate Base Rate Loans and (b) any Loans
that were to have been converted on the first day of such Interest Period to or
continued as LIBOR Rate Loans shall be converted to or continued as Alternate
Base Rate Loans. Until such notice has been withdrawn by the Bank, no further
LIBOR Rate Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Alternate Base Rate Loans to LIBOR Rate Loans.
3.8 Illegality.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for the Bank to make or
maintain LIBOR Rate Loans as contemplated by this Credit Agreement, (a) the Bank
shall promptly give written notice of such circumstances to the Borrower (which
notice shall be withdrawn whenever such circumstances no longer exist), (b) the
commitment of the Bank hereunder to make LIBOR Rate Loans, continue LIBOR Rate
Loans as such and convert a Alternate Base Rate Loan to LIBOR Rate Loans shall
forthwith be canceled and, until such time as it shall no longer be unlawful for
the Bank to make or maintain LIBOR Rate Loans, the Bank shall then have a
commitment only to make a Alternate Base Rate Loan when a LIBOR Rate Loan is
requested and (c) the Loans then outstanding as LIBOR Rate Loans, if any, shall
be converted automatically to Alternate Base Rate Loans on the respective last
days of the then current Interest Periods with respect to such Loans or within
such earlier period as required by law. If any such conversion of a LIBOR Rate
Loan occurs on a day which is not the last day of the then current Interest
Period with respect thereto, the Borrower shall pay to the Bank such amounts, if
any, as may be required pursuant to Section 3.11.
3.9 Requirements of Law.
If, after the date hereof, the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof applicable to
the Bank, or compliance by the Bank with any request or directive (whether or
not having the force of law) from any central bank or other Governmental
Authority, in each case made subsequent to the Closing Date:
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(a) shall subject the Bank to any tax of any kind
whatsoever with respect to any Letter of Credit, any LIBOR Rate Loans
made by it or its obligation to make LIBOR Rate Loans, or change the
basis of taxation of payments to the Bank in respect thereof (except
for (i) Non-Excluded Taxes covered by Section 3.10 (including
Non-Excluded Taxes imposed solely by reason of any failure of the Bank
to comply with its obligations under Section 3.10) and (ii) changes in
taxes measured by or imposed upon the overall net income of the Bank or
its applicable lending office, or any branch or affiliate thereof, and
all franchise taxes, branch taxes, taxes on doing business or taxes on
the overall capital or net worth of the Bank or its applicable lending
office, or any branch or affiliate thereof, in each case imposed in
lieu of net income taxes);
(b) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of the Bank which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(c) shall impose on the Bank any other condition (excluding
any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to the Bank, by
an amount which the Bank deems to be material, of making, converting into,
continuing or maintaining LIBOR Rate Loans or issuing or participating in
Letters of Credit or creating and discounting Bankers' Acceptances or to reduce
any amount receivable hereunder in respect thereof, then, in any such case, upon
notice to the Borrower from the Bank in accordance herewith, the Borrower shall
be obligated to promptly pay the Bank, upon its demand, any additional amounts
necessary to compensate the Bank for such increased cost or reduced amount
receivable, provided that, in any such case, the Borrower may elect to convert
the LIBOR Rate Loans made by the Bank hereunder to Alternate Base Rate Loans by
giving the Bank at least one Business Day's notice of such election, in which
case the Borrower shall promptly pay to the Bank, upon demand, without
duplication, such amounts, if any, as may be required pursuant to Section 3.11.
If the Bank becomes entitled to claim any additional amounts pursuant to this
subsection, it shall provide prompt notice thereof to the Borrower certifying
(x) that one of the events described in this Section has occurred and describing
in reasonable detail the nature of such event, (y) as to the increased cost or
reduced amount resulting from such event and (z) as to the additional amount
demanded by the Bank and a reasonably detailed explanation of the calculation
thereof. Such a certificate as to any additional amounts payable pursuant to
this Section submitted by the Bank to the Borrower shall be conclusive and
binding on the parties hereto in the absence of manifest error. This covenant
shall survive the termination of this Credit Agreement and the payment of the
Loans and all other amounts payable hereunder.
3.10 Taxes.
Except as provided below in this Section, all payments made by the
Borrower under this Credit Agreement and the Revolving Note shall be made free
and clear of, and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
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collected, withheld or assessed by any court, or governmental body, agency or
other official, excluding taxes measured by or imposed upon the overall net
income of the Bank or its applicable lending office, or any branch or Affiliate
thereof, and all franchise taxes, branch taxes, taxes on doing business or taxes
on the overall capital or net worth of the Bank or its applicable lending
office, or any branch or Affiliate thereof, in each case imposed in lieu of net
income taxes, imposed: (i) by the jurisdiction under the laws of which the Bank,
applicable lending office, branch or Affiliate is organized or is located, or in
which its principal executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii) by reason
of any connection between the jurisdiction imposing such tax and the Bank,
applicable lending office, branch or Affiliate other than a connection arising
solely from the Bank having executed, delivered or performed its obligations, or
received payment under or enforced, this Credit Agreement or the Revolving Note.
If any such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings ("Non- Excluded Taxes") are required to be withheld
from any amounts payable to the Bank hereunder or under the Revolving Note, (A)
the amounts so payable to the Bank shall be increased to the extent necessary to
yield to the Bank (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in this
Credit Agreement and the Revolving Note, and (B) as promptly as possible
thereafter the Borrower shall send to the Bank for its own account, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Bank the required receipts
or other required documentary evidence, the Borrower shall indemnify the Bank
for any incremental taxes, interest or penalties that may become payable by the
Bank as a result of any such failure. The agreements in this Section shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
3.11 Indemnity.
The Borrower promises to indemnify the Bank and to hold the Bank
harmless from any loss or expense which the Bank may sustain or incur (other
than through the Bank's gross negligence or willful misconduct) as a consequence
of (a) default by the Borrower in making a borrowing of, conversion into or
continuation of LIBOR Rate Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrower in making any prepayment of a LIBOR Rate Loan after
the Borrower has given a notice thereof in accordance with the provisions of
this Credit Agreement or (c) the making of a prepayment of LIBOR Rate Loans on a
day which is not the last day of an Interest Period with respect thereto. With
respect to LIBOR Rate Loans, such indemnification may include an amount equal to
the excess, if any, of (i) the amount of interest which would have accrued on
the amount so prepaid, or not so borrowed, converted or continued, for the
period from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of the applicable Interest Period (or, in the case of a
failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such LIBOR Rate Loans provided for herein over (ii) the amount of
interest (as reasonably determined by the Bank) which would have accrued to the
Bank on such amount by placing such amount on deposit for a comparable period
with leading banks in the interbank Eurodollar market. The covenants of the
Borrower set forth in this Section 3.11 shall survive the
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termination of this Credit Agreement and the payment of the Loans and all other
amounts payable hereunder.
3.12 Payments, Computations, Etc.
Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Bank in Dollars in immediately available funds,
without offset, deduction, counterclaim or withholding of any kind, at the
Bank's office specified in Section 10.1 not later than 2:00 P.M. (Charlotte,
North Carolina time) on the date when due. Payments received after such time
shall be deemed to have been received on the next succeeding Business Day. The
Bank may (but shall not be obligated to) debit the amount of any such payment
which is not made by such time to any ordinary deposit account of the Borrower
maintained with the Bank (with notice to the Borrower). The Borrower shall, at
the time it makes any payment under this Credit Agreement, specify to the Bank
the Loans, LOC Obligations, BA Obligations, Fees, interest or other amounts
payable by the Borrower hereunder to which such payment is to be applied (and in
the event that it fails so to specify, or if such application would be
inconsistent with the terms hereof, the Bank shall apply such payment in such
manner as the Bank may determine to be appropriate in respect of obligations
owing by the Borrower hereunder). Whenever any payment hereunder shall be stated
to be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day (subject to accrual of interest and
Fees for the period of such extension), except that in the case of LIBOR Rate
Loans, if the extension would cause the payment to be made in the next following
calendar month, then such payment shall instead be made on the next preceding
Business Day. Except as expressly provided otherwise herein, all computations of
interest and Fees shall be made on the basis of actual number of days elapsed
over a year of 360 days, except with respect to computation of interest on
Alternate Base Rate Loans which (unless the Alternate Base Rate is determined by
reference to the Federal Funds Rate) shall be calculated based on a year of 365
or 366 days, as appropriate. Interest shall accrue from and include the date of
borrowing, but exclude the date of payment.
SECTION 4
GUARANTY
--------
4.1 The Guarantee.
Each of the Guarantors hereby jointly and severally guarantees to the
Bank, to each Affiliate of the Bank that enters into a Hedging Agreement and to
the Bank as hereinafter provided the prompt payment of the Guaranteed
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantors hereby further
agree that if any of the Guaranteed Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as
mandatory cash collateralization or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Guaranteed Obligations, the same will be promptly paid in full when due (whether
at extended maturity, as a mandatory prepayment, by acceleration or otherwise)
in accordance with the terms of such extension or renewal.
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Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents or Hedging Agreements, to the extent the
obligations of a Guarantor shall be adjudicated to be invalid or unenforceable
for any reason (including, without limitation, because of any applicable state
or federal law relating to fraudulent conveyances or transfers) then the
obligations of each Guarantor hereunder shall be limited to the maximum amount
that is permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).
4.2 Obligations Unconditional.
The obligations of the Guarantors under Section 4.1 hereof are joint
and several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents or Hedging
Agreements, or any other agreement or instrument referred to therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 4.2 that the obligations of the
Guarantors hereunder shall be absolute and unconditional under any and all
circumstances. Each Guarantor agrees that such Guarantor shall have no right of
subrogation, indemnity, reimbursement or contribution against the Borrower or
any other Guarantor of the Guaranteed Obligations for amounts paid under this
Guaranty until such time as the Bank (and any Affiliates of the Bank entering
into Hedging Agreements) has been paid in full, all Commitments under the Credit
Agreement have been terminated and no Person or Governmental Authority shall
have any right to request any return or reimbursement of funds from the Bank in
connection with monies received under the Credit Documents or Hedging
Agreements. Without limiting the generality of the foregoing, it is agreed that,
to the fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder
which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of
the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of any
of the Credit Documents, any Hedging Agreement or any other agreement
or instrument referred to in the Credit Documents or Hedging Agreements
shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall
be accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements
shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Bank as security
for any of the Guaranteed Obligations shall fail to attach or be
perfected; or
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(v) any of the Guaranteed Obligations shall be determined to
be void or voidable (including, without limitation, for the benefit of
any creditor of any Guarantor) or shall be subordinated to the claims
of any Person (including, without limitation, any creditor of any
Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Bank exhaust any right, power or remedy
or proceed against any Person under any of the Credit Documents, any Hedging
Agreement or any other agreement or instrument referred to in the Credit
Documents or Hedging Agreements, or against any other Person under any other
guarantee of, or security for, any of the Guaranteed Obligations.
4.3 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Guaranteed Obligations is rescinded
or must be otherwise restored by any holder of any of the Guaranteed
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Bank on demand for all reasonable costs and expenses (including, without
limitation, fees and expenses of counsel) incurred by the Bank in connection
with such rescission or restoration, including any such costs and expenses
incurred in defending against any claim alleging that such payment constituted a
preference, fraudulent transfer or similar payment under the Bankruptcy Code,
insolvency or similar law.
4.4 Certain Additional Waivers.
Without limiting the generality of the provisions of this Section 4,
each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. ss.ss.
26-7 through 26-9, inclusive. Each Guarantor further agrees that such Guarantor
shall have no right of recourse to security for the Guaranteed Obligations,
except through the exercise of the rights of subrogation pursuant to Section
4.2.
4.5 Remedies.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Bank, on the other hand, the
Guaranteed Obligations may be declared to be forthwith due and payable as
provided in Section 9.2 hereof (and shall be deemed to have become automatically
due and payable in the circumstances provided in said Section 9.2) for purposes
of Section 4.1 hereof notwithstanding any stay, injunction or other prohibition
preventing such declaration (or preventing the Guaranteed Obligations from
becoming automatically due and payable) as against any other Person and that, in
the event of such declaration (or the Guaranteed Obligations being deemed to
have become automatically due and payable), the Guaranteed Obligations (whether
or not due and payable by any other Person) shall forthwith become due and
payable by the Guarantors for purposes of said Section 4.1.
4.6 Rights of Contribution.
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The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
succeeding provisions of this Section 4.6), pay to such Excess Funding Guarantor
an amount equal to such Guarantor's Pro Rata Share (as defined below and
determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess Payment
(as defined below). The payment obligation of any Guarantor to any Excess
Funding Guarantor under this Section 4.6 shall be subordinate and subject in
right of payment to the prior payment in full of the obligations of such
Guarantor under the other provisions of this Section 4, and such Excess Funding
Guarantor shall not exercise any right or remedy with respect to such excess
until payment and satisfaction in full of all of such obligations. For purposes
of this Section 4.6, (i) "Excess Funding Guarantor" shall mean, in respect of
any obligations arising under the other provisions of this Section 4 (hereafter,
the "Excess Funding Guarantied Obligations"), a Guarantor that has paid an
amount in excess of its Pro Rata Share of the Excess Funding Guarantied
Obligations; (ii) "Excess Payment" shall mean, in respect of any Excess Funding
Guarantied Obligations, the amount paid by an Excess Funding Guarantor in excess
of its Pro Rata Share of such Excess Funding Guarantied Obligations; and (iii)
"Pro Rata Share", for the purposes of this Section 4.6, shall mean, for any
Guarantor, the ratio (expressed as a percentage) of (a) the amount by which the
aggregate present fair saleable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair saleable value of all assets and other properties of the
Borrower and all of the Guarantors exceeds the amount of all of the debts and
liabilities (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Borrower and the Guarantors
hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor becomes a party hereto subsequent to the Closing Date, then
for the purposes of this Section 4.6 such subsequent Guarantor shall be deemed
to have been a Guarantor as of the Closing Date and the information pertaining
to, and only pertaining to, such Guarantor as of the date such Guarantor became
a Guarantor shall be deemed true as of the Closing Date).
4.7 Continuing Guarantee.
The guarantee in this Section 4 is a continuing guarantee, and shall
apply to all Guaranteed Obligations whenever arising.
SECTION 5
CONDITIONS
----------
5.1 Conditions to Closing.
This Credit Agreement shall become effective, and the initial
Extensions of Credit may be made, upon the satisfaction of the following
conditions precedent:
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(a) Execution of Credit Agreement and Credit Documents.
Receipt of fully executed copies of this Credit Agreement and the Revolving
Note.
(b) Senior Note Placement. Evidence satisfactory to the Bank
of the issuance by the Borrower of the Senior Notes and receipt of the net
proceeds therefrom, together with certified copies of the Senior Notes and the
Senior Note Agreement relating thereto.
(c) Financial Information. Receipt of financial information
regarding the Borrower and its Subsidiaries, as may be requested by, and in each
case in form and substance satisfactory to the Bank.
(d) Absence of Legal Proceedings. Except as disclosed in
Schedule 6.6, the absence of any action, suit, investigation or proceeding
pending in any court or before any arbitrator or governmental instrumentality
which if adversely determined could reasonably be expected to have a Material
Adverse Effect on the Consolidated Group taken as a whole.
(e) Legal Opinions. Receipt of an opinion of counsel for the
Credit Parties relating to the Credit Documents and the transactions
contemplated herein, in form and substance satisfactory to the Bank.
(f) Corporate Documents. Receipt of the following (or their
equivalent) for each of the Credit Parties:
(i) Articles of Incorporation. Copies of the articles
of incorporation or charter documents certified to be true and complete
as of a recent date by the appropriate governmental authority of the
state of its incorporation.
(ii) Resolutions. Copies of resolutions of the Board
of Directors approving and adopting the respective Credit Documents,
the transactions contemplated therein and authorizing execution and
delivery thereof, certified by a secretary or assistant secretary as of
the Closing Date to be true and correct and in force and effect as of
such date.
(iii) Bylaws. Copies of the bylaws certified by a
secretary or assistant secretary as of the Closing Date to be true and
correct and in force and effect as of such date.
(iv) Good Standing. Copies, where applicable, of
certificates of good standing, existence or its equivalent certified as
of a recent date by the appropriate governmental authorities of the
state of incorporation and each other state in which the failure to so
qualify and be in good standing would have a Material Adverse Effect on
the business or operations in such state.
(v) Officer's Certificate. An officer's certificate
for each of the Credit Parties dated as of the Closing Date
substantially in the form of Schedule 5.1(f) with appropriate
insertions and attachments.
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(g) Fees. Receipt of all Fees, if any, owing to the Bank.
(h) Section 5.2 Conditions. The conditions specified in
Section 5.2 shall be satisfied.
(i) Additional Matters. All other documents and legal matters
in connection with the transactions contemplated by this Credit Agreement shall
be reasonably satisfactory in form and substance to the Bank.
5.2 Conditions to All Extensions of Credit.
The obligation of the Bank to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent on the date of making
such Extension of Credit:
(a) Representations and Warranties. The representations and
warranties made by the Credit Parties herein or in any other Credit Documents or
which are contained in any certificate furnished at any time under or in
connection herewith shall be true and correct in all material respects on and as
of the date of such Extension of Credit as if made on and as of such date
(except for those which expressly relate to an earlier date).
(b) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date or after giving
effect to the Extension of Credit to be made on such date unless such Default or
Event of Default shall have been waived in accordance with this Credit
Agreement.
(c) No Material Adverse Effect. No circumstances, events or
conditions shall have occurred since the date of the audited financial
statements referenced in Section 6.1 which would have a Material Adverse Effect.
(d) Additional Conditions to Revolving Loans. If a Revolving
Loan is made pursuant to Section 2.1, all conditions set forth therein shall
have been satisfied.
(e) Additional Conditions to Letters of Credit. If such
Extension of Credit is made pursuant to Section 2.2, all conditions set forth
therein shall have been satisfied.
(f) Additional Conditions to Bankers' Acceptances. If such
Extension of Credit is made pursuant to Section 2.3, all conditions set forth
therein shall have been satisfied.
Each request for Extension of Credit (including extensions and
conversions) and each acceptance by the Borrower of an Extension of Credit
(including extensions and conversions) shall be deemed to constitute a
representation and warranty by the Borrower as of the date of such Extension of
Credit that the applicable conditions in subsections (a), (b) and (c), and in
(d), (e) or (f) of this Section have been satisfied.
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SECTION 6
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Bank to enter into this Credit Agreement and to make
Extensions of Credit herein provided for, each of the members of the
Consolidated Group parties hereto hereby represents and warrants to the Bank
that:
6.1 Financial Condition.
Each of the financial statements described below (copies of which have
heretofore been provided to the Bank), have been prepared in accordance with
GAAP consistently applied throughout the periods covered thereby, are complete
and correct in all material respects and present fairly the financial condition
and results from operations of the entities and for the periods specified,
subject in the case of interim Borrower-prepared statements to normal year-end
adjustments:
(i) an audited consolidated balance sheet of the Borrower and
its consolidated subsidiaries dated as of September 30, 1996, together
with related statements income and cash flows certified by Arthur
Andersen LLP, certified public accountants; and
(ii) a Borrower-prepared consolidated balance sheet of the
Borrower and its consolidated subsidiaries dated as of June 30, 1996,
together with related consolidated statements of income and cash flows.
6.2 No Changes or Restricted Payments.
Since the date of the audited financial statements referenced in
Section 6.1(i), (a) there has been no circumstance, development or event
relating to or affecting the members of the Consolidated Group which has had or
would be reasonably expected to have a Material Adverse Effect, and (b) except
as permitted herein, no Restricted Payments have been made by any members of the
Consolidated Group, other than those permitted hereunder.
6.3 Organization; Existence; Compliance with Law.
Each of the members of the Consolidated Group (a) is a corporation duly
organized, validly existing in good standing under the laws of the jurisdiction
of its organization, (b) has the corporate or other necessary power and
authority, and the legal right to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign entity and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and in good standing would not, in the aggregate, have a Material
Adverse Effect, and (d) is in compliance with all Organizational Documents and
Requirements of Law, except to the extent that the failure to comply therewith
would not, in the aggregate, be reasonably expected to have a Material Adverse
Effect.
6.4 Power; Authorization; Enforceable Obligations.
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Each of the Credit Parties has the corporate or other necessary power
and authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance by it of the Credit Documents
to which it is a party. No consent or authorization of, filing with, notice to
or other act by or in respect of, any Governmental Authority or any other Person
is required in connection with the borrowings hereunder or with the execution,
delivery or performance of any Credit Documents by the Credit Parties (other
than those which have been obtained, such filings as are required by the
Securities and Exchange Commission and to fulfill other reporting requirements
with Governmental Authorities) or with the validity or enforceability of any
Credit Document against the Credit parties. Each Credit Document to which it is
a party constitutes a legal, valid and binding obligation of such Credit Parties
enforceable against such Credit Parties in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.5 No Legal Bar.
The execution, delivery and performance of the Credit Documents, the
borrowings hereunder and the use of the Extensions of Credit will not violate
any Requirement of Law or any Contractual Obligation of any member of the
Consolidated Group (except those as to which waivers or consents have been
obtained, and will not result in, or require, the creation or imposition of any
Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or Contractual Obligation other than the Liens arising under
or contemplated in connection with the Credit Documents. No member of the
Consolidated Group is in default under or with respect to any of its Contractual
Obligations in any respect which would reasonably be expected to have a Material
Adverse Effect.
6.6 No Material Litigation.
Except as disclosed on Schedule 6.6 (as updated from time to time with
the consent of the Bank), no claim, litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the best
knowledge of the Credit Parties, threatened by or against, any members of the
Consolidated Group or against any of their respective properties or revenues
which (a) relate to the Credit Documents or any of the transactions contemplated
hereby or thereby, (b) if adversely determined, would reasonably be expected to
have a Material Adverse Effect. Set forth on Schedule 6.6 (as updated from time
to time with the consent of the Bank) is a summary of all material claims,
litigation, investigations and proceedings pending or, to the best knowledge of
the Credit Parties, threatened by or against the members of the Consolidated
Group or against any of their respective properties or revenues, and none of
such actions, individually or in the aggregate, if adversely determined is
reasonably expected to have a Material Adverse Effect, except as disclosed on
Schedule 6.6 (as updated from time to time with the consent of the Bank).
6.7 No Default.
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No Default or Event of Default has occurred and is continuing.
6.8 Ownership of Property; Liens.
Each of members of the Consolidated Group has good record and
marketable title in fee simple to, or a valid leasehold interest in, all its
material real property, and good title to, or a valid leasehold interest in, all
its other material property, and none of such property is subject to any Lien,
except for Permitted Liens.
6.9 Intellectual Property.
Each of the members of the Consolidated Group owns, or has the legal
right to use, all United States trademarks, tradenames, copyrights, technology,
know-how and processes, if any, necessary for each of them to conduct its
business as currently conducted (the "Intellectual Property") except for those
the failure to own or have such legal right to use would not be reasonably
expected to have a Material Adverse Effect. No claim has been asserted and is
pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does any Credit Party know of any such claim, and the use of such
Intellectual Property by the members of the Consolidated Group does not infringe
on the rights of any Person, except for such claims and infringements that in
the aggregate, would not be reasonably expected to have a Material Adverse
Effect.
6.10 No Burdensome Restrictions.
No Requirement of Law, Organizational Document or Contractual
Obligation of the members of the Consolidated Group would be reasonably expected
to have a Material Adverse Effect.
6.11 Taxes.
Each of the members of the Consolidated Group has filed or caused to be
filed all United States federal income tax returns and all other material tax
returns which, to the best knowledge of the Credit Parties, are required to be
filed and has paid (a) all taxes shown to be due and payable on said returns or
(b) all taxes shown to be due and payable on any assessments of which it has
received notice made against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority (other than any (i) taxes, fees or other charges with respect to which
the failure to pay, in the aggregate, would not have a Material Adverse Effect
or (ii) taxes, fees or other charges the amount or validity of which are
currently being contested and with respect to which reserves in conformity with
GAAP have been provided on the books of such Person), and no tax Lien has been
filed, and, to the best knowledge of the Credit Parties, no claim is being
asserted, with respect to any such tax, fee or other charge.
6.12 ERISA
Except as would not reasonably be expected to have a Material Adverse
Effect:
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(a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no ERISA Event has occurred, and, to
the best knowledge of the Credit Parties, no event or condition has occurred or
exists as a result of which any ERISA Event could reasonably be expected to
occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the Code,
whether or not waived, has occurred with respect to any Plan; (iii) each Plan
has been maintained, operated, and funded in compliance with its own terms and
in material compliance with the provisions of ERISA, the Code, and any other
applicable federal or state laws; and (iv) no lien in favor of the PBGC or a
Plan has arisen or is reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA), whether or not vested, under each
Single Employer Plan, as of the last annual valuation date prior to the date on
which this representation is made or deemed made (determined, in each case, in
accordance with Financial Accounting Standards Board Statement 87, utilizing the
actuarial assumptions used in such Plan's most recent actuarial valuation
report), did not exceed as of such valuation date the fair market value of the
assets of such Plan.
(c) No member of the Consolidated Group nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be reasonably
expected to incur, any withdrawal liability under ERISA to any Multiemployer
Plan or Multiple Employer Plan. No member of the Consolidated Group nor any
ERISA Affiliate would become subject to any withdrawal liability under ERISA if
any member of the Consolidated Group or any ERISA Affiliate were to withdraw
completely from all Multiemployer Plans and Multiple Employer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No member of the Consolidated Group nor any ERISA Affiliate
has received any notification that any Multiemployer Plan is in reorganization
(within the meaning of Section 4241 of ERISA), is insolvent (within the meaning
of Section 4245 of ERISA), or has been terminated (within the meaning of Title
IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit
Parties, reasonably expected to be in reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has
occurred with respect to a Plan which has subjected or may subject any member of
the Consolidated Group or any ERISA Affiliate to any liability under Sections
406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which any member of the Consolidated
Group or any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability.
(e) No member of the Consolidated Group nor any ERISA Affiliates has
any material liability with respect to "expected post-retirement benefit
obligations" within the meaning of the Financial Accounting Standards Board
Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of
ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply
has been administered in compliance in all material respects of such sections.
6.13 Governmental Regulations, Etc.
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(a) No part of the proceeds of the Loans will be used,
directly or indirectly, for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation G or Regulation U, or
for the purpose of purchasing or carrying or trading in any securities.
If requested by the Bank, the Borrower will furnish to the Bank a
statement to the foregoing effect in conformity with the requirements
of FR Form U-1 referred to in said Regulation U. No indebtedness being
reduced or retired out of the proceeds of the Loans was or will be
incurred for the purpose of purchasing or carrying any margin stock
within the meaning of Regulation U or any "margin security" within the
meaning of Regulation T. "Margin stock" within the meanings of
Regulation U does not constitute more than 25% of the value of the
consolidated assets of the Borrower and its Subsidiaries. None of the
transactions contemplated by this Credit Agreement (including, without
limitation, the direct or indirect use of the proceeds of the Loans)
will violate or result in a violation of the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, or
regulations issued pursuant thereto, or Regulation G, T, U or X.
(b) None of the members of the Consolidated Group is subject
to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act or the Investment Borrower Act of 1940, each as
amended. In addition, none of the members of the Consolidated Group is
(i) an "investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, and is not
controlled by such a company, or (ii) a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(c) No director, executive officer or principal shareholder of
any member of the Consolidated Group is a director, executive officer
or principal shareholder of the Bank. For the purposes hereof the terms
"director", "executive officer" and "principal shareholder" (when used
with reference to the Bank) have the respective meanings assigned
thereto in Regulation O issued by the Board of Governors of the Federal
Reserve System.
(d) Each of the members of the Consolidated Group has obtained
all material licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its respective Property
and to the conduct of its business.
(e) None of the members of the Consolidated Group is in
violation of any applicable statute, regulation or ordinance of the
United States of America, or of any state, city, town, municipality,
county or any other jurisdiction, or of any agency thereof (including
without limitation, environmental laws and regulations), which
violation could reasonably be expected to have a Material Adverse
Effect.
(f) Each of the members of the Consolidated Group is current
with all material reports and documents, if any, required to be filed
with any state or federal securities commission or similar agency and
is in full compliance in all material respects with all applicable
rules and regulations of such commissions.
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6.14 Subsidiaries.
Set forth on Schedule 6.14 are all the Subsidiaries of the Borrower at
the Closing Date, the jurisdiction of their incorporation and the direct or
indirect ownership interest of the Borrower therein.
6.15 Purpose of Extensions of Credit.
The Extensions of Credit will be used to refinance existing Funded
Debt, finance the Gordon Transactions and other permitted acquisitions and to
finance working capital and other corporate purposes. The Letters of Credit
shall be used only for or in connection with appeal bonds, reimbursement
obligations arising in connection with surety and reclamation bonds,
reinsurance, domestic or international trade transactions and obligations not
otherwise aforementioned relating to transactions entered into by the applicable
account party in the ordinary course of business.
6.16 Environmental Matters.
Except as disclosed on Schedule 6.6 and as would not reasonably be
expected to have a Material Adverse Effect:
(a) Each of the facilities and properties owned, leased or operated by
the members of the Consolidated Group (the "Properties") and all operations at
the Properties are in compliance with all applicable Environmental Laws, and
there is no violation of any Environmental Law with respect to the Properties or
the businesses operated by the members of the Consolidated Group (the
"Businesses"), and there are no conditions relating to the Businesses or
Properties that could give rise to liability under any applicable Environmental
Laws.
(b) None of the Properties contains, or has previously contained, any
Materials of Environmental Concern at, on or under the Properties in amounts or
concentrations that constitute or constituted a violation of, or could give rise
to liability under, Environmental Laws.
(c) None of the members of the Consolidated Group has received any
written or verbal notice of, or inquiry from any Governmental Authority
regarding, any violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Businesses, nor
does any member of the Consolidated Group have knowledge or reason to believe
that any such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties, or generated, treated, stored or disposed of
at, on or under any of the Properties or any other location, in each case by or
on behalf any members of the Consolidated Group in violation of, or in a manner
that would be reasonably likely to give rise to liability under, any applicable
Environmental Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the best knowledge of any Credit Party, threatened, under any
Environmental Law to which any
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member of the Consolidated Group is or will be named as a party, nor are there
any consent decrees or other decrees, consent orders, administrative orders or
other orders, or other administrative or judicial requirements outstanding under
any Environmental Law with respect to any member of the Consolidated Group, the
Properties or the Businesses.
(f) There has been no release or, threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations (including, without limitation, disposal) of any member of the
Consolidated Group in connection with the Properties or otherwise in connection
with the Businesses, in violation of or in amounts or in a manner that could
give rise to liability under Environmental Laws.
SECTION 7
AFFIRMATIVE COVENANTS
---------------------
Each of the Credit Parties covenants and agrees that on the Closing
Date, and so long as this Credit Agreement is in effect and until the
Commitments have been terminated, no Obligations remain outstanding and all
amounts owing hereunder or in connection herewith have been paid in full, each
of the members of the Consolidated Group party hereto shall:
7.1 Financial Statements.
Furnish, or cause to be furnished, to the Bank:
(a) Audited Financial Statements. As soon as available, but in
any event within 90 days after the end of each fiscal year, an audited
consolidated balance sheet of the Borrower and its subsidiaries as of
the end of the fiscal year and the related consolidated statements of
income, retained earnings, shareholders' equity and cash flows for the
year, audited by Arthur Andersen LLP, or other firm of independent
certified public accountants of nationally recognized standing
reasonably acceptable to the Bank, setting forth in each case in
comparative form the figures for the previous year, reported without a
"going concern" or like qualification or exception, or qualification
indicating that the scope of the audit was inadequate to permit such
independent certified public accountants to certify such financial
statements without such qualification.
(b) Borrower-Prepared Financial Statements. As soon as
available, but in any event
(i) within 45 days after the end of each of the first
three fiscal quarters, a Borrower-prepared consolidated
balance sheet of the Borrower and its subsidiaries as of the
end of the quarter and related Borrower-prepared consolidated
statements of income, retained earnings, shareholders' equity
and cash flows for such quarterly period and for the fiscal
year to date;
(ii) within 60 days after the end of the fourth
fiscal quarter, a Borrower- prepared consolidated balance
sheet of the Borrower and its subsidiaries as of the end of
the quarter and related Borrower-prepared consolidated
statements of
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income, retained earnings, shareholders' equity and cash flows
for such quarterly period and for the fiscal year to date;
(iii) within 30 days prior to the end of each fiscal
year, an annual business plan and budget for the members of
the Consolidated Group, containing, among other things, pro
forma financial statements for the next fiscal year,
in each case setting forth in comparative form the consolidated figures
for the corresponding period or periods of the preceding fiscal year or
the portion of the fiscal year ending with such period, as applicable,
in each case subject to normal recurring year-end audit adjustments.
All such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments) and to be prepared in reasonable detail and ,in the
case of the annual and quarterly financial statements provided in accordance
with subsections (a) and (b) above, in accordance with GAAP applied consistently
throughout the periods reflected therein) and further accompanied by a
description of, and an estimation of the effect on the financial statements on
account of, a change in the application of accounting principles as provided in
Section 1.3.
7.2 Certificates; Other Information.
Furnish, or cause to be furnished, to the Bank:
(a) Accountant's Certificate and Reports. Concurrently with
the delivery of the financial statements referred to in subsection
7.1(a) above, a certificate of the independent certified public
accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of
any Default or Event of Default, except as specified in such
certificate.
(b) Officer's Certificate. Concurrently with the delivery of
the financial statements referred to in Sections 7.1(a) and 7.1(b)
above, a certificate of a Responsible Officer in such capacity and not
individually stating that, to the best of such Responsible Officer's
knowledge and belief, (i) the financial statements fairly present in
all material respects the financial condition of the parties covered by
such financial statements, (ii) during such period the members of the
Consolidated Group have observed or performed in all material respects
the covenants and other agreements hereunder and under the other Credit
Documents relating to them, and satisfied in all material respects the
conditions, contained in this Credit Agreement to be observed,
performed or satisfied by them, (iii) such Responsible Officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate and (iv) such certificate shall include
the calculations required to indicate compliance with Section 7.9. A
form of Officer's Certificate is attached as Schedule 7.2(b).
(c) Accountants' Reports. Promptly upon receipt, a copy of any
final (as distinguished from a preliminary or discussion draft)
"management letter" or other
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similar report submitted by independent accountants or financial
consultants to the members of the Consolidated Group in connection with
any annual, interim or special audit.
(d) Public Information. Within thirty days after the same are
sent, copies of all reports (other than those otherwise provided
pursuant to subsection 7.1) and other financial information which any
member of the Consolidated Group sends to its public stockholders, and
within thirty days after the same are filed, copies of all financial
statements and non-confidential reports which any member of the
Consolidated Group may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental
Authority.
(e) Other Information. Promptly, such additional financial and
other information as the Bank may from time to time reasonably request.
7.3 Notices.
Give notice to the Bank of:
(a) Defaults. Immediately (and in any event within two (2)
Business Days) after a Responsible Officer of a Credit Party knows or
has reason to know thereof, the occurrence of any Default or Event of
Default.
(b) Contractual Obligations. Promptly, the initiation of any
default or event of default under any Contractual Obligation of any
member of the Consolidated Group which would reasonably be expected to
have a Material Adverse Effect.
(c) Legal Proceedings. Promptly, any litigation, or any
investigation or proceeding (including without limitation, any
environmental proceeding) known to any member of the Consolidated Group
(other than those disclosed in Schedule 6.6), or any material
development in respect thereof (including those matters disclosed on
Schedule 6.6), affecting any member of the Consolidated Group which, if
adversely determined, would reasonably be expected to have a Material
Adverse Effect.
(d) ERISA. Promptly, after any Responsible Officer of the
Borrower knows or has reason to know of (i) any event or condition,
including, but not limited to, any Reportable Event, that constitutes,
or might reasonably lead to, an ERISA Event; (ii) with respect to any
Multiemployer Plan, the receipt of notice as prescribed in ERISA or
otherwise of any withdrawal liability assessed against any of their
ERISA Affiliates, or of a determination that any Multiemployer Plan is
in reorganization or insolvent (both within the meaning of Title IV of
ERISA); (iii) the failure to make full payment on or before the due
date (including extensions) thereof of all amounts which the members of
the Consolidated Group or any ERISA Affiliate are required to
contribute to each Plan pursuant to its terms and as required to meet
the minimum funding standard set forth in ERISA and the Code with
respect; or (iv) any change in the funding status of any Plan that
reasonably could be expected to have a Material Adverse Effect;
together with a description of any such event or condition or a copy of
any such notice and a statement
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by the chief financial officer of the Borrower briefly setting forth
the details regarding such event, condition, or notice, and the action,
if any, which has been or is being taken or is proposed to be taken by
the Credit Parties with respect thereto. Promptly upon request, the
members of the Consolidated Group shall furnish the Bank with such
additional information concerning any Plan as may be reasonably
requested, including, but not limited to, copies of each annual
report/return (Form 5500 series), as well as all schedules and
attachments thereto required to be filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each "plan year" (within the meaning of Section 3(39)
of ERISA).
(e) Other. Promptly, any other development or event which a
Responsible Officer determines could reasonably be expected to have a
Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the relevant Credit Parties propose to take with respect
thereto.
7.4 Payment of Obligations.
Pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, in accordance with prudent business
practice (subject, where applicable, to specified grace periods) all material
obligations of each member of the Consolidated Group of whatever nature and any
additional costs that are imposed as a result of any failure to so pay,
discharge or otherwise satisfy such obligations, except (i) when the amount or
validity of such obligations and costs is currently being contested in good
faith by appropriate proceedings and reserves, if applicable, in conformity with
GAAP with respect thereto have been provided on the books of the Consolidated
Group, as the case may be, and (ii) to the extent that the failure to so pay,
discharge or otherwise satisfy such obligations would not have a Material
Adverse Effect.
7.5 Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same general type as now
conducted by it on the date hereof and similar or related businesses with
respect to motorsports products except to the extent that failure to comply
therewith would not, in the aggregate, have a Material Adverse Effect; preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges, licenses and franchises
necessary or desirable in the normal conduct of its business; and comply with
all Contractual Obligations and Requirements of Law applicable to it except to
the extent that failure to comply with such Contractual Obligations and
Requirements of Law would not, in the aggregate, have a Material Adverse Effect.
7.6 Maintenance of Property; Insurance.
Keep all material Property useful and necessary in its business in
reasonably good working order and condition (ordinary wear and tear excepted);
maintain with financially sound and reputable insurance companies casualty,
liability and such other insurance (which may
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include plans of self-insurance) with such coverage and deductibles, and in such
amounts as may be consistent with prudent business practice and in any event
consistent with normal industry practice (except to any greater extent as may be
required by the terms of any of the other Credit Documents); and furnish to the
Bank, upon written request, full information as to the insurance carried.
7.7 Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its businesses and
activities; and permit, during regular business hours and upon reasonable
notice, the Bank to visit and inspect any of its properties and examine and make
abstracts (including photocopies) from any of its books and records (other than
materials protected by the attorney-client privilege and materials which the
Credit Parties may not disclose without violation of a confidentiality
obligation binding upon them) at any reasonable time, and to discuss the
business, operations, properties and financial and other condition of the
members of the Consolidated Group with officers and employees of the members of
the Consolidated Group and with their independent certified public accountants.
The cost of the inspection referred to in the preceding sentence shall be for
the account of the Bank unless an Event of Default has occurred and is
continuing, in which case the cost of such inspection shall be for the account
of the Credit Parties.
7.8 Environmental Laws.
(a) Comply in all material respects with, and take reasonable actions
to ensure compliance in all material respects by all tenants and
subtenants, if any, with, all applicable Environmental Laws and obtain
and comply in all material respects with and maintain, and take
reasonable actions to ensure that all tenants and subtenants obtain and
comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required
by applicable Environmental Laws except to the extent that failure to
do so would not reasonably be expected to have a Material Adverse
Effect;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with
all lawful orders and directives of all Governmental Authorities
regarding Environmental Laws except to the extent that the same are
being contested in good faith by appropriate proceedings and the
failure to do or the pendency of such proceedings would not reasonably
be expected to have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless the Bank, and its employees,
agents, officers and directors, from and against any and all claims,
demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable
to the operations of the members of the Consolidated Group or the
Properties, or any orders,
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requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney's and consultant's
fees, investigation and laboratory fees, response costs, court costs
and litigation expenses, except to the extent that any of the foregoing
arise out of the gross negligence or willful misconduct of the party
seeking indemnification therefor. The agreements in this paragraph
shall survive repayment of the Loans and all other amounts payable
hereunder, and termination of the Commitments.
7.9 Financial Covenants.
(a) Maintenance of Consolidated Funded Debt to Consolidated EBITDA. The
Borrower will not permit, at any time, the ratio of Consolidated Funded Debt to
Consolidated EBITDA to be greater than 2.00 to 1.00.
(b) Fixed Charges Coverage Ratio Maintenance. The Borrower will not
permit, at any time, the Fixed Charges Coverage Ratio to be less than 5.00 to
1.00.
(c) Maintenance of Consolidated Net Worth. The Borrower will not
permit, at any time, Consolidated Net Worth to be less than the sum of (a)
$26,000,000, plus (b) an aggregate amount equal to fifty percent (50%) of its
Consolidated Net Income for each completed Fiscal Quarter beginning with the
Fiscal Quarter that includes the Closing Date (but, in each case, only if a
positive number).
7.10 Additional Guaranties.
(a) Domestic Subsidiaries. At any time any Person becomes a
Domestic Subsidiary, the Borrower will promptly notify the Bank thereof
and cause such Domestic Subsidiary to become a Guarantor hereunder by
(i) execution of a Joinder Agreement, and (ii) delivery of supporting
resolutions, incumbency certificates, corporation formation and
organizational documentation and opinions of counsel as the Bank may
reasonably request.
(b) Foreign Subsidiaries. At any time any Person becomes a
Foreign Subsidiary, the Borrower will promptly notify the Bank thereof
and cause delivery of supporting resolutions, incumbency certificates,
corporation formation and organizational documentation and opinions of
counsel as the Bank may reasonably request.
7.11 Use of Proceeds.
Extensions of Credit will be used solely for the purposes provided in
Section 6.15.
SECTION 8
NEGATIVE COVENANTS
------------------
Each of the Credit Parties covenants and agrees that on the Closing
Date, and so long as this Credit Agreement is in effect and until the
Commitments have been terminated, no
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Obligations remain outstanding and all amounts owing hereunder or in connection
herewith, have been paid in full, no member of the Consolidated Group shall:
8.1 Indebtedness.
Contract, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness arising or existing under this Credit
Agreement and the other Credit Documents;
(b) Indebtedness evidenced by the Senior Notes in an aggregate
principal amount not to exceed $20,000,000;
(c) Indebtedness set forth in Schedule 8.1, and renewals,
refinancings and extensions thereof on terms and conditions no less
favorable than for such existing Indebtedness;
(d) Capital Lease Obligations and Indebtedness incurred, in
each case, to provide all or a portion of the purchase price or costs
of construction of an asset or, in the case of a sale/leaseback
transaction as described in Section 8.11, to finance the value of such
asset owned by a member of the Consolidated Group, provided that (i)
such Indebtedness when incurred shall not exceed the purchase price or
cost of construction of such asset or, in the case of a sale/leaseback
transaction, the fair market value of such asset, (ii) no such
Indebtedness shall be refinanced for a principal amount in excess of
the principal balance outstanding thereon at the time of such
refinancing, and (iii) the total amount of all such Indebtedness shall
not exceed $2,000,000 at any time outstanding;
(e) Indebtedness and obligations owing under interest rate
protection agreements relating to the Obligations hereunder and under
interest rate, commodities and foreign currency exchange protection
agreements entered into in the ordinary course of business to manage
existing or anticipated risks and not for speculative purposes;
(f) unsecured intercompany Indebtedness owing by a member of
the Consolidated Group to another member of the Consolidated Group
(subject, however, to the limitations of Section 8.5 in the case of the
member of the Consolidated Group extending the intercompany loan,
advance or credit);
(g) other unsecured Funded Debt of the Borrower in the
aggregate at any time outstanding of up to an amount equal to five
percent (5%) of Consolidated Total Tangible Assets as of the end of the
immediately preceding Fiscal Quarter; and
(h) Guaranty Obligations of Indebtedness permitted under this
Section 8.1.
8.2 Liens.
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Contract, create, incur, assume or permit to exist any Lien with
respect to any of their respective property or assets of any kind (whether real
or personal, tangible or intangible), whether now owned or hereafter acquired,
except for Permitted Liens.
8.3 Nature of Business.
Alter the character of their business in any material respect from that
conducted as of the Closing Date and similar or related businesses with respect
thereto.
8.4 Consolidation, Merger, Sale or Purchase of Assets, Capital
Expenditures, etc.
(a) Dissolve, liquidate or wind up their affairs, except (i) in
connection with a disposition of assets permitted by the terms of subsection (c)
hereof and (ii) for the dissolution and liquidation of a wholly-owned Subsidiary
of a Credit Party where the parent Credit Party receives the assets of such
Subsidiary;
(b) Enter into any transaction of merger or consolidation; provided,
however, that, so long as no Default or Event of Default would be directly or
indirectly caused as a result thereof,
(i) a member of the Consolidated Group (other than the
Borrower) may merge or consolidate with another member of the
Consolidated Group, provided that (A) if the Borrower is a party
thereto, it shall be the surviving corporation, (B) if a Credit Party
shall be a party thereto, it shall be the surviving corporation, and
(C) the surviving corporation shall be a Domestic Credit Party or shall
become a Domestic Credit Party pursuant to the terms of Section 7.10
concurrently with consummation of the merger or consolidation;
(ii) a member of the Consolidated Group (other than the
Borrower) may merge or consolidate with any Person that is not a
Subsidiary, provided that the applicable conditions set forth in the
foregoing subsection (i) of this Section 8.4(b), in Section 7.10
regarding joinder of certain Subsidiaries as Credit Parties, and in
Section 8.4(d) regarding acquisitions, are complied with in connection
with any such acquisition by merger.
(c) Sell, lease, transfer or otherwise dispose of any Property
(including without limitation pursuant to any sale/leaseback transaction) other
than (i) the sale of inventory in the ordinary course of business for fair
consideration, (ii) the sale or disposition of machinery and equipment no longer
used or useful in the conduct of such Person's business, and (iii) other sales
of assets, provided that (A) after giving effect to such sale or other
disposition, the aggregate book value of assets sold or otherwise disposed of
pursuant to this clause (iii), or the revenues therefrom, in any given fiscal
year does not exceed an amount equal to the lesser of 15% of Consolidated Total
Tangible Assets as of the end of the immediately preceding Fiscal Quarter or 15%
of Consolidated Revenues for the immediately preceding four Fiscal Quarters, and
(B) after giving effect to such sale or other disposition, no Default or Event
of Default would exist hereunder.
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(d) Except
(i) for the Gordon Transactions,
(ii) as otherwise permitted by Section 8.4(b)(i), and
(iii) for Investments in entities in which less than 50% is
(or, as a result of the transaction, will be) owned by a Credit Party
where such Investments are permitted by subclause (xiii) of the
definition of "Permitted Investments",
purchase, lease or otherwise acquire (in a single transaction or a series of
related transactions) all or any substantial part of the Property of any other
Person, at a purchase price or acquisition cost (including Indebtedness assumed)
in any given fiscal year in the aggregate for all such acquisitions in excess of
an amount equal to five percent (5%) of Consolidated Total Tangible Assets as of
the end of the immediately preceding Fiscal Quarter, without the prior written
consent of the Bank.
(e) Take or permit any action, or fail to take any action, the effect
of which would be to cause a Domestic Credit Party to lose its status as such,
other than as expressly permitted in this Section.
8.5 Advances, Investments and Loans.
Lend money or extend credit or make advances to any Person, or purchase
or acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, or otherwise make an Investment in, any Person
except for Permitted Investments.
8.6 Transactions with Affiliates.
Enter into or permit to exist any transaction or series of
transactions, whether or not in the ordinary course of business, with any
officer, director, shareholder or Affiliate other than (i) transactions
permitted by Section 8.1, Section 8.4(b), Section 8.5 or Section 8.10, (ii)
customary fees and expenses paid to directors and (iii) where such transactions
are on terms and conditions substantially as favorable as would be obtainable in
a comparable arm's-length transaction with a Person other than an officer,
director, shareholder or Affiliate.
8.7 Ownership of Equity Interests.
Issue, sell, transfer, pledge or otherwise dispose of any partnership
interests, shares of capital stock or other equity or ownership interests
("Equity Interests") in any member of the Consolidated Group other than the
Borrower, except (i) issuance, sale or transfer of Equity Interests to a Credit
Party by a Subsidiary of such Credit Party, (ii) in connection with a
transaction permitted by Section 8.4, and (iii) as needed to qualify directors
under applicable law.
8.8 Fiscal Year.
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Change its Fiscal Year.
8.9 Prepayments of Indebtedness, etc.
(a) After the issuance thereof, amend or modify (or permit the
amendment or modification of), the terms of any other Funded Debt in a manner
adverse to the interests of the Bank (including specifically shortening any
maturity or average life to maturity or requiring any payment sooner than
previously scheduled or increasing the interest rate or fees applicable
thereto);
(b) Make any prepayment, redemption, defeasance or acquisition for
value of (including without limitation, by way of depositing money or securities
with the trustee with respect thereto before due for the purpose of paying when
due), or refund, refinance or exchange of any Funded Debt (other than
intercompany Indebtedness permitted hereunder) other than regularly scheduled
payments of principal and interest on such Funded Debt, except to the extent
permitted by Section 8.10.
8.10 Restricted Payments.
Make or permit Restricted Payments in the aggregate for any Fiscal Year
in excess of an amount equal to 35% of Consolidated Net Income (if positive) for
the immediately preceding Fiscal Year, without the prior written consent of the
Bank.
8.11 Sale Leasebacks.
Except as permitted pursuant to Section 8.1(c) and (d) hereof, directly
or indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
Property (whether real or personal or mixed), whether now owned or hereafter
acquired, (i) which such Person has sold or transferred or is to sell or
transfer to any other Person other than a Credit Party or (ii) which such Person
intends to use for substantially the same purpose as any other Property which
has been sold or is to be sold or transferred by such Person to any other Person
in connection with such lease.
8.12 No Further Negative Pledges.
Except with respect to the Senior Note Agreement relating to (i) the
Senior Notes, (ii) Indebtedness incurred pursuant to Section 8.1(g), and (iii)
prohibitions against other encumbrances on specific Property encumbered to
secure payment of particular Indebtedness (which Indebtedness relates solely to
such specific Property, and improvements and accretions thereto, and is
otherwise permitted hereby), no member of the Consolidated Group will enter
into, assume or become subject to any agreement prohibiting or otherwise
restricting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired, or requiring the grant of any
security for such obligation if security is given for some other obligation.
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SECTION 9
EVENTS OF DEFAULT
-----------------
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal of any of
the Loans or of any reimbursement obligations relating to Letters of
Credit or Bankers' Acceptances, or
(ii) default, and such defaults shall continue for five (5) or
more Business Days, in the payment when due of any interest on the
Loans or on any reimbursement obligations, or of any Fees or other
amounts owing hereunder, under any of the other Credit Documents or in
connection herewith or therewith; or
(b) Representations. Any representation, warranty or statement made or
deemed to be made herein, in any of the other Credit Documents, or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove untrue in any material respect on the date as of which it
was deemed to have been made; or
(c) Covenants.
(i) Default in the due performance or observance of any term,
covenant or agreement contained in Section 7.3(a), 7.9, 7.10 or 8.1
through 8.12 (except in the case of negative covenants contained in
Sections 8.1 through 8.12, those Defaults which may occur or arise
other than on account of or by affirmative or intentional act of the
Borrower or event or condition which the Borrower shall with knowledge
permit to exist, all of which shall be subject to the provisions of
clause (ii) hereof), inclusive, or
(ii) Default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in
subsections (a), (b) or (c)(i) of this Section 9.1) contained in this
Credit Agreement and such default shall continue unremedied for a
period of at least 30 days after the earlier of a responsible officer
of a Credit Party becoming aware of such default or notice thereof by
the Bank or, if such default cannot reasonably be remedied within such
30 day period, an additional period not to exceed 30 days, provided
that remedy is commenced within the original 30 day period and is
diligently and continuously pursued; or
(d) Other Credit Documents. (i) Any Credit Party shall default in the
due performance or observance of any material term, covenant or agreement in any
of the other Credit Documents (subject to applicable grace or cure periods, if
any), or (ii) except as to the
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Credit Party which is dissolved, released or merged or consolidated out of
existence as the result of or in connection with a dissolution, merger or
disposition permitted by Section 8.4(a), Section 8.4(b) or Section 8.4(c), any
Credit Document shall fail to be in full force and effect or to give the Bank
any material part of the Liens, rights, powers and privileges purported to be
created thereby; or
(e) Guaranties. Except as to the Credit Party which is dissolved,
released or merged or consolidated out of existence as the result of or in
connection with a dissolution, merger or disposition permitted by Section
8.4(a), Section 8.4(b) or Section 8.4(c), the guaranty given by any Guarantor
hereunder or any material provision thereof shall cease to be in full force and
effect, or any Guarantor hereunder or any Person acting by or on behalf of such
Guarantor shall deny or disaffirm such Guarantor's obligations under such
guaranty, or any Guarantor shall default in payment under such guaranty; or
(f) Bankruptcy, etc. A Bankruptcy Event shall occur with respect to any
member of the Consolidated Group; or
(g) Defaults under Other Agreements. With respect to any Indebtedness
(other than Indebtedness outstanding under this Credit Agreement) in excess of
$1,000,000 in the aggregate for the Consolidated Group taken as a whole, without
duplication, (A) (1) any member of the Consolidated Group shall default in any
payment (beyond the applicable grace period with respect thereto, if any) with
respect to any such Indebtedness, or (2) the occurrence and continuance of a
default in the observance or performance relating to such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event or condition shall occur or condition exist, the
effect of which default or other event or condition is to cause, or permit, the
holder or holders of such Indebtedness (or trustee or agent on behalf of such
holders) to cause any such Indebtedness to become due prior to its stated
maturity; or (B) any such Indebtedness shall be declared due and payable, or
required to be prepaid other than by a regularly scheduled required prepayment,
prior to the stated maturity thereof; or
(h) Judgments. Any member of the Consolidated Group shall fail within
30 days of the date due and payable to pay, bond or otherwise discharge any
judgment, settlement or order for the payment of money which judgment,
settlement or order, when aggregated with all other such judgments, settlements
or orders due and unpaid at such time, exceeds $2,000,000, and which is not
stayed on appeal (or for which no motion for stay is pending) or is not
otherwise being executed; or
(i) ERISA. Any of the following events or conditions, if such event or
condition could reasonably be expected to have a Material Adverse Effect: (1)
any "accumulated funding deficiency," as such term is defined in Section 302 of
ERISA and Section 412 of the Code, whether or not waived, shall exist with
respect to any Plan, or any lien shall arise on the assets of a member of the
Consolidated Group or any ERISA Affiliate in favor of the PBGC or a Plan; (2) an
ERISA Event shall occur with respect to a Single Employer Plan, which is, in the
reasonable opinion of the Bank, likely to result in the termination of such Plan
for purposes of Title IV of ERISA; (3) an ERISA Event shall occur with respect
to a Multiemployer Plan or Multiple Employer Plan, which is, in the reasonable
opinion of the Bank, likely to result in (i) the termination of such Plan for
purposes of Title IV of ERISA, or (ii) a member of the Consolidated
55
<PAGE>
Group or any ERISA Affiliate incurring any liability in connection with a
withdrawal from, reorganization of (within the meaning of Section 4241 of
ERISA), or insolvency of (within the meaning of Section 4245 of ERISA) such
Plan; or (4) any prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall
occur which may subject a member of the Consolidated Group or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA
or Section 4975 of the Code, or under any agreement or other instrument pursuant
to which a member of the Consolidated Group or any ERISA Affiliate has agreed or
is required to indemnify any person against any such liability; or
(j) Ownership. There shall occur a Change of Control; or
(k) Senior Notes. The occurrence of an Event of Default under the
Senior Notes.
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter,
the Bank may, by written notice to the Borrower and the other Credit Parties
take any of the following actions:
(i) Termination of Commitments. Declare the Commitments terminated
whereupon the Commitments shall be immediately terminated.
(ii) Acceleration. Declare the unpaid principal of and any accrued
interest in respect of all Loans, any reimbursement obligations relating
to Letters of Credit and Bankers' Acceptances and any and all other
indebtedness or obligations of any and every kind owing by the Credit
Parties to the Bank hereunder to be due whereupon the same shall be
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each of the Credit
Parties.
(iii) Cash Collateral. Direct the Borrower to pay (and the Borrower
agrees that upon receipt of such notice, or upon the occurrence of an
Event of Default under Section 9.1(f), it will immediately pay) to the
Bank additional cash, to be held by the Bank in a cash collateral account
as additional security for the LOC Obligations and BA Obligations in an
amount equal to the maximum aggregate amount which may be drawn under all
Letters of Credits and Bankers' Acceptances then outstanding.
(iv) Enforcement of Rights. Enforce any and all rights and interests
created and existing under the Credit Documents and all rights of
set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations relating to Letters of Credit and Bankers'
Acceptances, all accrued interest in respect thereof, all accrued and unpaid
Fees and other indebtedness or obligations owing to the Bank hereunder
automatically shall immediately become due and payable without presentment,
demand, protest
56
<PAGE>
or the giving of any notice or other action by the Bank, all of which are hereby
waived by the Credit Parties.
SECTION 10
MISCELLANEOUS
-------------
10.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (iv) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address, in the case of the Borrower, Guarantors and
the Bank, set forth below or at such other address as such party may specify by
written notice to the other parties hereto:
if to the Borrower or the Guarantors:
ACTION PERFORMANCE COMPANIES, INC.
2401 West First Street
Tempe, Arizona 85281
Attn: Fred W. Wagenhals
Telephone: (602) 894-0100
Telecopy: (602) 967-1403
with a copy to:
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears
One East Camelback Road, Suite 1100
Phoenix, Arizona 85012-1656
Attn: Robert S. Kant
Telephone: (602) 263-2606
Telecopy: (602) 263-2900
if to the Bank:
First Union National Bank of North Carolina
201 South College Street, Suite 1300
Charlotte, North Carolina 28288-0656
Attn: Portfolio Management
Telephone: (704) 383-4369
Telecopy: (704) 374-4820
57
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with a copy to:
First Union National Bank of North Carolina
301 S. Tryon Street, N.C. Corporate Banking
Charlotte, North Carolina 28288-0145
Attn: Tracey Gillespie
Vice Preisdent
Telephone: (704) 383-7645
Telecopy: (704) 374-4000
10.2 Right of Set-Off.
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, the Bank is authorized at any time and from
time to time, without presentment, demand, protest or other notice of any kind
(all of which rights being hereby expressly waived), to set-off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by the Bank (including, without
limitation branches, agencies or Affiliates of the Bank wherever located) to or
for the credit or the account of any Credit Party against obligations and
liabilities of such Person to the Bank hereunder, under the Revolving Note, the
other Credit Documents or otherwise, irrespective of whether the Bank shall have
made any demand hereunder and although such obligations, liabilities or claims,
or any of them, may be contingent or unmatured, and any such set-off shall be
deemed to have been made immediately upon the occurrence of an Event of Default
even though such charge is made or entered on the books of the Bank subsequent
thereto.
10.3 Benefit of Agreement.
This Credit Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto; provided that none of the Credit Parties may assign or transfer any of
its interests without prior written consent of the Bank.
10.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Bank in exercising any right,
power or privilege hereunder or under any other Credit Document and no course of
dealing between the Bank and any of the Credit Parties shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies provided herein are cumulative
and not exclusive of any rights or remedies which the Bank would otherwise have.
No notice to or demand on any Credit Party in any case shall entitle the
Borrower or any other Credit Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the Bank
to any other or further action in any circumstances without notice or demand,
except as expressly provided otherwise herein or in other Credit Documents.
58
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10.5 Payment of Expenses, etc.
The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses (A) of the Bank in connection with the negotiation, preparation,
execution and delivery and administration of this Credit Agreement and the other
Credit Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and expenses of Moore & Van
Allen, PLLC, special counsel to the Bank) and any amendment, waiver or consent
relating hereto and thereto including, but not limited to, any such amendments,
waivers or consents resulting from or related to any work-out, renegotiation or
restructure relating to the performance by the Credit Parties under this Credit
Agreement and (B) of the Bank in connection with enforcement of the Credit
Documents and the documents and instruments referred to therein (including,
without limitation, in connection with any such enforcement, the reasonable fees
and disbursements of counsel for the Bank); (ii) pay and hold the Bank harmless
from and against any and all present and future stamp and other similar taxes
with respect to the foregoing matters and save the Bank harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to the Bank) to pay such taxes;
and (iii) indemnify the Bank, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses incurred by any of them as
a result of, or arising out of, or in any way related to, or by reason of (A)
any investigation, litigation or other proceeding (whether or not the
Bank is a party thereto) related to the entering into and/or performance of any
Credit Document or the use of proceeds of any Loans (including other extensions
of credit) hereunder or the consummation of any other transactions contemplated
in any Credit Document, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding or (B) the presence or Release of any Materials
of Environmental Concern at, under or from any Property owned, operated or
leased by the Borrower or any of its Subsidiaries, or the failure by the
Borrower or any of its Subsidiaries to comply with any Environmental Law (but
excluding, in the case of either of clause (A) or (B) above, any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of
gross negligence or willful misconduct on the part of the Person to be
indemnified).
10.6 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Bank and the Credit
Parties directly affected thereby.
10.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
10.8 Headings.
59
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The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
10.9 Survival.
All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.9, 3.11 or 10.5 shall survive the execution and delivery of
this Credit Agreement, the making of the Loans, the issuance of the Letters of
Credit, the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder, and all
representations and warranties made by the Credit Parties herein shall survive
delivery of the Revolving Note and the making of the Loans hereunder.
10.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA. Any legal action or proceeding with respect to this Credit Agreement
or any other Credit Document may be brought in the courts of the State of North
Carolina in Mecklenburg County, or of the United States for the Western District
of North Carolina, and, by execution and delivery of this Credit Agreement, each
of the Credit Parties hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the nonexclusive jurisdiction of
such courts. Nothing herein shall affect the right of the Bank to commence legal
proceedings or to otherwise proceed against any Credit Party in any other
jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Credit Agreement or any other Credit Document brought in the courts referred to
in subsection (a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE BANK, THE BORROWER AND
THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT
AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
10.11 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in
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full force and effect and shall be construed without giving effect to the
illegal, invalid or unenforceable provisions.
10.12 Entirety.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
10.13 Binding Effect; Termination.
(a) This Credit Agreement shall become effective at such time on or
after the Closing Date when it shall have been executed by the Borrower, the
Guarantors and the Bank, and thereafter this Credit Agreement shall be binding
upon and inure to the benefit of the Borrower, the Guarantors and the Bank and
their respective successors and assigns.
(b) The term of this Credit Agreement shall be until no Loans or other
Obligations or any other amounts payable hereunder or under any of the other
Credit Documents shall remain outstanding and until all of the Commitments
hereunder shall have expired or been terminated.
10.14 Conflict.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
[Signature Page to Follow]
61
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: ACTION PERFORMANCE COMPANIES, INC.,
an Arizona corporation
By:/s/Christopher S. Besing
------------------------
Name: Christopher S. Besing
Title: Vice President, Treasurer and
Chief Financial Officer
GUARANTORS: SPORTS IMAGE, INC.,
an Arizona corporation
By:/s/Christopher S. Besing
------------------------
Name: Christopher S. Besing
Title: Vice President, Treasurer and
Chief Financial Officer
MTL ACQUISITION, INC.,
an Arizona corporation
By:/s/Christopher S. Besing
------------------------
Name: Christopher S. Besing
Title: Vice President, Treasurer and
Chief Financial Officer
BANK: FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By:/s/David Silands
------------------------
Name: David Siland
Title: Vice President
<PAGE>
Schedule 2.1(b)
---------------
FORM OF NOTICE OF BORROWING
First Union National Bank of North Carolina
201 S. College Street, Suite 1300
Charlotte, North Carolina 28288-0656
Attention: Portfolio Management
Re: Credit Agreement dated as of January 2, 1997 (as amended and
modified, the "Credit Agreement") among ACTION PERFORMANCE
COMPANIES, INC., the Guarantors identified therein and First
Union National Bank of North Carolina. Terms used but not
otherwise defined herein shall have the meanings provided in
the Credit Agreement.
Ladies and Gentlemen:
The undersigned, ACTION PERFORMANCE COMPANIES, INC., an Arizona corporation,
being the Borrower under the above-referenced Credit Agreement hereby gives
notice pursuant to Section 2.1(b) of the Credit Agreement of a request for a
Revolving Loan as follows
(A) Date of Borrowing
(which is a Business Day) _______________________
(B) Principal Amount of
Borrowing _______________________
(C) Interest rate basis _______________________
(D) Interest Period and the
last day thereof _______________________
In accordance with the requirements of Section 5.2 of the Credit Agreement, the
undersigned Borrower hereby certifies that:
(a) The representations and warranties contained in the Credit
Agreement and the other Credit Documents are true and correct in all
material respects as of the date of this request, and will be true and
correct after giving effect to the requested Extension of Credit
(except for those which expressly relate to an earlier date).
(b) No Default or Event of Default exists, or will exist after
giving effect to the requested Extension of Credit.
<PAGE>
(c) No circumstances, events or conditions have occurred since
the date of the audited financial statements referenced in Section 6.1
of the Credit Agreement which would have a Material Adverse Effect.
(d) All conditions set forth in Section 2.1 as to the making
of Revolving Loans have been satisfied.
Very truly yours,
ACTION PERFORMANCE COMPANIES, INC.
By:_______________________________
Name:
Title:
2
<PAGE>
Schedule 2.1(e)
---------------
FORM OF REVOLVING NOTE
$10,000,000 January 2, 1997
FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to
the order of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, and its successors and
assigns, on or before the Termination Date to the office of the Bank in
immediately available funds as provided in the Credit Agreement, the principal
amount of the Bank's Revolving Committed Amount or, if less, the aggregate
unpaid principal amount of all Revolving Loans made by the Bank to the
undersigned Borrower, together with interest thereon at the rates and as
provided in the Credit Agreement.
This Note is the Revolving Note referred to in the Credit Agreement
dated as of January 2, 1997 (as amended and modified, the "Credit
Agreement")among Action Performance Companies, Inc., an Arizona corporation, the
Guarantors identified therein and First Union National Bank of North Carolina.
Terms used but not otherwise defined herein shall have the meanings provided in
the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by
this Note may, or shall, become immediately due and payable as provided in the
Credit Agreement without presentment, demand, protest or notice of any kind, all
of which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or accelerated maturity, the
undersigned Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note shall be governed by, and construed and interpreted in
accordance with, the law of the State of North Carolina.
IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
ACTION PERFORMANCE COMPANIES, INC.,
an Arizona corporation
By_________________________________
Name:
Title:
3
<PAGE>
Schedule 2.2(b)
---------------
Form of Notice of Request for Letter of Credit
[Date]
First Union National Bank of North Carolina
201 S. College Street, Suite 1300
Charlotte, NC 28288-0656
Attention: Portfolio Management
Re: Credit Agreement dated as of January 2, 1997 (as amended and
modified, the "Credit Agreement") among ACTION PERFORMANCE
COMPANIES, INC., the Guarantors identified therein and First
Union National Bank of North Carolina. Terms used but not
otherwise defined herein shall have the meanings provided in
the Credit Agreement.
Ladies and Gentlemen:
Pursuant to subsection 2.2(b) of the Credit Agreement, the undersigned
Borrower, ACTION PERFORMANCE COMPANIES, INC., hereby requests that the following
Letters of Credit be made on [date] as follows (the "Proposed Extension"):
(1) Account Party:
(2) For use by:
(3) Beneficiary:
(4) Face Amount of Letter of Credit:
(5) Date of Issuance
Delivery of Letter of Credit should be made as follows:
In accordance with the requirements of Section 5.2 of the
Credit Agreement, the undersigned Borrower hereby certifies that:
(a) The representations and warranties contained in the Credit
Agreement and the other Credit Documents are true and correct in all
material respects as of the date of this request, and will be true and
correct after giving effect to the requested Extension of Credit
(except for those which expressly relate to an earlier date).
(b) No Default or Event of Default exists, or will exist after
giving effect to the requested Extension of Credit.
4
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(c) No circumstances, events or conditions have occurred since
the date of the audited financial statements referenced in Section 6.1
of the Credit Agreement which would have a Material Adverse Effect.
(d) All conditions set forth in Section 2.2 as to the issuance
of a Letter of Credit have been satisfied.
Very truly yours,
ACTION PERFORMANCE COMPANIES, INC.
By:_______________________________
Name:
Title:
5
<PAGE>
Schedule 3.2
------------
Form of Notice of Extension/Conversion
First Union National Bank of North Carolina
201 S. College Street, Suite 1300
Charlotte, North Carolina 28288-0656
Attention: Portfolio Management
Re: Credit Agreement dated as of January 2, 1997 (as amended and
modified, the "Credit Agreement") among ACTION PERFORMANCE
COMPANIES, INC., the Guarantors identified therein and First
Union National Bank of North Carolina. Terms used but not
otherwise defined herein shall have the meanings provided in
the Credit Agreement.
Ladies and Gentlemen:
The undersigned Borrower, ACTION PERFORMANCE COMPANIES, INC. hereby
gives notice pursuant to Section 3.2 of the Credit Agreement that it requests an
extension or conversion of a Revolving Loan outstanding under the Credit
Agreement, and in connection therewith sets forth below the terms on which such
extension or conversion is requested to be made:
(A) Date of Extension or Conversion
(which is the last day of the
the applicable Interest Period) _______________________
(B) Principal Amount of
Extension or Conversion _______________________
(C) Interest rate basis _______________________
(D) Interest Period and the
last day thereof _______________________
In accordance with the requirements of Section 5.2 of the Credit
Agreement, the undersigned Borrower hereby certifies that:
(a) The representations and warranties contained in the Credit
Agreement and the other Credit Documents are true and correct in all
material respects as of the date of this request, and will be true and
correct after giving effect to the requested Extension of Credit
(except for those which expressly relate to an earlier date).
(b) No Default or Event of Default exists, or will exist after
giving effect to the requested Extension of Credit.
(c) No circumstances, events or conditions have occurred since
the date of the audited financial statements referenced in Section 6.1
of the Credit Agreement which would have a Material Adverse Effect.
(d) All conditions set forth in Section 2.1 as to the making
of Revolving Loans have been satisfied
7
<PAGE>
Very truly yours,
ACTION PERFORMANCE COMPANIES, INC.
By:_________________________________
Name:
Title:
8
<PAGE>
Schedule 7.11-1
---------------
Form of Joinder Agreement
THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________,
19__, is by and between _____________________, a ___________________ (the
"Applicant Guarantor"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, under
that certain Credit Agreement dated as of January 2, 1997 (as amended and
modified, the "Credit Agreement") by and among ACTION PERFORMANCE COMPANIES,
INC., an Arizona corporation, the Guarantors identified therein and First Union
National Bank of North Carolina, as Bank. All of the defined terms in the Credit
Agreement are incorporated herein by reference.
The Applicant Guarantor has indicated its desire to become a Guarantor
or is required by the terms of Section 7.10 of the Credit Agreement to become, a
Guarantor under the Credit Agreement.
Accordingly, the Applicant Guarantor hereby agrees as follows with the
Bank:
1. The Applicant Guarantor hereby acknowledges, agrees and confirms
that, by its execution of this Agreement, the Applicant Guarantor will be deemed
to be a party to the Credit Agreement and a "Guarantor" for all purposes of the
Credit Agreement and the other Credit Documents, and shall have all of the
obligations of a Guarantor thereunder as if it had executed the Credit Agreement
and the other Credit Documents. The Applicant Guarantor agrees to be bound by,
all of the terms, provisions and conditions contained in the Credit Documents,
including without limitation (i) all of the affirmative and negative covenants
set forth in Sections 7 and 8 of the Credit
Agreement and (ii) all of the undertakings and waivers set forth in Section 4 of
the Credit Agreement. Without limiting the generality of the foregoing terms of
this paragraph 1, the Applicant Guarantor hereby (A) jointly and severally
together with the other Guarantors, guarantees to the Bank as provided in
Section 4 of the Credit Agreement, the prompt payment and performance of the
Guaranteed Obligations in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration, as a mandatory cash collateralization or
otherwise) strictly in accordance with the terms thereof. and (B) agrees that if
any of the Guaranteed Obligations are not paid or performed in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise), the Applicant Guarantor will,
jointly and severally together with the other Guarantors, promptly pay and
perform the same, without any demand or notice whatsoever, and that in the case
of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, as a mandatory prepayment, by acceleration, as a mandatory
cash collateralization or otherwise) in accordance with the terms of such
extension or renewal.
2. The Applicant Guarantor acknowledges and confirms that it has
received a copy of the Credit Agreement and the Schedules and Exhibits thereto.
The information on the Schedules to the Credit Agreement are amended to provide
the information, if any, shown on the attached Schedule A.
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3. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
4. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina.
IN WITNESS WHEREOF, the Applicant Guarantor has caused this Joinder
Agreement to be duly executed by its authorized officers, and the Bank has
caused the same to be accepted by its authorized officer, as of the day and year
first above written.
APPLICANT GUARANTOR
By:__________________________________
Name:
Title:
Address for Notices:
Attn: _______________________
Telephone:
Telecopy:
Acknowledged and accepted:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:______________________________________
Name:
Title:
REGISTRATION AGREEMENT
REGISTRATION AGREEMENT dated as of January 1, 1997, among ACTION
PERFORMANCE COMPANIES, INC., an Arizona corporation (the "Company"); MOTORSPORTS
TRADITIONS LIMITED PARTNERSHIP, a North Carolina limited partnership ("MTL");
and MIDLAND LEASING, INC., a North Carolina corporation, ("Midland"), and
MOTORSPORTS BY MAIL, INC., a North Carolina corporation ("MBM"), which owns
substantially all of the partnership interests of MTL. (MTL, Midland, MBM, and
the other partners of MTL are collectively referred to as the "Holders.")
WITNESSETH
The Company acquired substantially all of the assets of MTL under the
terms of an Asset Purchase Agreement of even date. A portion of the
consideration for the assets of MTL included 57,142 shares of Company's Common
Stock (the "Shares"). The Shares are "restricted securities" as defined in Rule
144 under the Securities Act of 1933, as amended. As a result, there are
substantial restrictions on the ability of the Holders to sell the Shares in the
absence of registration under the Securities Act of 1933 and applicable state
securities laws. In order to enable the Holders to sell all or a portion of the
Shares, the Company has agreed to the terms of this Agreement.
NOW THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt, adequacy, and sufficiency of which are
hereby acknowledged by the parties, the parties hereby agree as follows:
1. REGISTRATION
1.1 Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Blackout Period" means any period (A) beginning
on the date on which the Company notifies the Holders (as defined below) that
(i) the Board of Directors of the Company, in its good faith judgment, has
determined that there are material developments with respect to the Company such
that it would be seriously detrimental to the Company and its shareholders to
utilize a registration statement pursuant to Sections 1.2 or 1.3 below; (ii) the
Board of Directors of the Company, in its good faith judgment, has determined
that financial statements with respect to the Company, which may be required to
utilize a registration statement pursuant to Sections 1.2 or 1.3 below, are
unavailable; or (iii) the Company has notified the Holders that it intends to
file a registration statement for a Subsequent Financing within 30 days of the
mailing of such notice in accordance with Section 2.3 hereof, and (B) ending on
the date (1) with respect to clause (i) above, as soon as practicable but not
more than 30 days after the date on which the Company notifies the Holders of
the Board of Directors' determination; (2) with respect to clause (ii) above, as
soon as financial statements sufficient to permit Company to file or permit the
utilization of a registration statement under the Act have become available; and
(3) with respect to clause (iii) above, 90 days after the effective date of the
registration statement for the Subsequent Financing.
(c) The term "Holders" means those persons owning or having
the right to acquire Registrable Securities (as defined below).
(d) The term "Maximum Includable Securities" shall mean the
maximum number of shares of each type or class of the Company's securities that
a managing or principal underwriter, in its good faith judgment, deems
practicable to offer and sell at that time in a firm commitment underwritten
offering without materially and adversely affecting the marketability or price
of the securities of the Company to be offered. When more than one type or class
of the Company's securities are to be included in a registration, the managing
or
<PAGE>
principal underwriter of the offering shall designate the maximum number of each
such type or class of securities that is included in the Maximum Includable
Securities.
(e) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(f) The term "Registrable Security" shall refer to (i) the
Shares, and (ii) any shares of Common Stock or other securities of the Company
that may subsequently be issued or issuable with respect to the Shares as a
result of a stock split or dividend or any sale, transfer, assignment, or other
transaction by the Company or a Holder involving the Shares and any securities
into which the Shares may thereafter be changed as a result of merger,
consolidation, recapitalization, or otherwise. As to any particular Registrable
Securities, such securities will cease to be Registrable Securities when they
have been distributed to the public pursuant to an offering registered under the
Act or sold to the public through a broker, dealer, or market-maker in
compliance with Rule 144 under the Act.
(g) "SEC" means the Securities and Exchange Commission.
(h) The term "Subsequent Financing" means an offering of the
Company's Common Stock or other securities convertible or exercisable into
shares of the Company's Common Stock within 36 months after the date of this
Agreement.
1.2 Mandatory Registration.
(a) Not later than 30 days after the date of this Agreement,
the Company shall file a registration statement under the Act with the SEC, and
under any applicable state securities laws, covering the Shares and shall use
its best efforts to cause the registration statement to become effective as soon
as practicable and to remain effective for a period of three years after the
date of this Agreement.
(b) The Company may include Additional Shares of Common Stock
or other securities to be sold by the Company and/or by other holders of Common
Stock or other securities in any registration statement to be filed pursuant to
this Section 1.2.
1.3 Piggy-Back Registration Rights.
(a) Except as provided in Section 1.3(e), if at any time the
Company proposes to file on its behalf and/or on behalf of any of its
securityholders a registration statement under the Act on Form S-1, S-2, or S-3
(or any other appropriate form for the general registration of securities) with
respect to any of its capital stock or other securities, the Company shall give
each Holder written notice at least 20 days before the filing with the SEC of
such registration statement. If any Holder desires to have Registrable
Securities registered pursuant to this Section 1.3, such Holder shall so advise
the Company in writing within 15 days after the date of mailing of such notice
from the Company. The Company shall thereupon include in such filing the number
of Registrable Securities for which registration is so requested, subject to its
right to reduce the number of Registrable Securities as hereinafter provided,
and shall use its best efforts to effect registration under the Act of such
Registrable Securities. Notwithstanding the foregoing, the Company shall not be
required to provide notice of filing of a registration statement and to include
therein any Registrable Securities if the proposed registration is
(i) a registration of stock options, stock purchases,
or compensation or incentive plans, or of securities issued or issuable pursuant
to any such plan, or a dividend reinvestment plan, on Form S-8 or other
comparable form then in effect; or
(ii) a registration of securities proposed to be
issued in exchange for securities or assets of, or in connection with, a merger
or consolidation with another corporation.
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(b) In the event the offering in which any Holder's
Registrable Securities are to be included pursuant to this Section 1.3 is to be
underwritten, the Company shall furnish the Holders with a written statement of
the managing or principal underwriter as to the Maximum Includable Securities as
soon as practicable after the expiration of the 15-day period provided for in
Section 1.3(a). If the total number of securities proposed to be included in
such registration statement is in excess of the Maximum Includable Securities,
the number of securities to be included within the coverage of such registration
statement shall be reduced to the Maximum Includable Securities as follows:
(i) no reduction shall be made in the number of
shares of capital stock or other securities to be registered for the account of
the Company or on behalf of any of its securityholders that have the right to
require the Company to initiate a registration of such securities; and
(ii) the number of Registrable Securities and other
securities that may be included in the registration, if any, shall be allocated
among the Holders of Registrable Securities and holders of other securities (the
"Other Holders") requesting inclusion on a pro rata basis, with the number of
each type or class of securities of each Holder and Other Holder thereof
included in the registration to be that number determined by multiplying (A) the
total number of such type or class of security included in the Maximum
Includable Securities less (B) the number of such type or class of security to
be registered for the account of the Company, by a fraction, the numerator of
which will be the total number of such type or class of security that such
Holder or Other Holder owns, and the denominator of which will be the total
number of such type or class of security owned by all Holders and Other Holders
that have requested inclusion of such type or class of security in the
registration.
(c) The Company shall, in its sole discretion, select the
underwriter or underwriters, if any, that are to undertake the sale and
distribution of the Registrable Securities to be included in a registration
statement filed under the provisions of this Section 1.3.
(d) At such time that the Company intends to effect a
Subsequent Financing, it shall notify the Holders of such intent and shall
designate the proposed offering as a Subsequent Financing. Except to the extent
that the Company, in its sole discretion, may otherwise permit, the Holders
shall have no right to have any Registrable Securities registered pursuant to
this Section 1.3 in any Subsequent Financing.
(e) The right to registration provided in this Section 1.3 is
in addition to and not in lieu of the demand registration rights provided in
Section 1.2. The provisions of this Section 1.3 shall not apply, however, to any
Holders requesting registration pursuant to this Section 1.3 that are or may be
free, at the time, to sell within the next 90-day period all of the Registrable
Securities with respect to which such registration was requested in accordance
with Rule 144 (or any similar rule or regulation) under the Act.
1.4 Obligations of the Company. Whenever required under Section 1.2 or
Section 1.3 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement on
such form as the Company deems appropriate with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective. With respect to registration statements filed pursuant to
Section 1.3 hereof, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, the Company shall keep such
registration statement effective for up to 180 days, or such shorter period as
is reasonably required to dispose of all securities covered by such registration
statement.
(b) Notify the Holders promptly after it has received notice
of the time when such registration statement has become effective or any
supplement to any prospectus forming a part of such registration statement has
been filed.
(c) Prepare and file with the SEC, and promptly notify the
Holders of the filing of, such amendments and supplements to such registration
statement and the prospectus used in connection with such
3
<PAGE>
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(d) Advise each Holder promptly after it has received notice
or obtained knowledge thereof of the issuance of any stop order by the SEC
suspending the effectiveness of any such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
(e) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(f) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business, to file a general consent
to service of process, or to become subject to tax liability in any such states
or jurisdictions, or to agree to any restrictions as to the conduct of its
business in the ordinary course thereof.
(g) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering, together with
each Holder participating in such underwritten offering, as provided in Section
1.5(c).
(h) Prepare and promptly file with the SEC, and promptly
notify such Holders of the filing of, any amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event has occurred as
the result of which any such prospectus must be amended in order that it does
not make any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading.
(i) In case any of such Holders or any underwriter for any
such Holders is required to deliver a prospectus at a time when the prospectus
then in effect may no longer be used under the Act, prepare promptly upon
request such amendment or amendments to such registration statement and such
prospectus as may be necessary to permit compliance with the requirements of the
Act.
(j) If any of the Registrable Securities are then listed on
any securities exchange or the Nasdaq Stock Market, the Company will cause all
such Registrable Securities covered by such registration statement to be listed
on such exchange or the Nasdaq Stock Market.
1.5 Obligations of Holders. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
each of the selling Holders shall:
(a) Furnish to the Company such information regarding
themselves, the Registrable Securities held by them, the intended method of sale
or other disposition of such securities, the identity of and compensation to be
paid to any underwriters proposed to be employed in connection with such sale or
other disposition, and such other information as may reasonably be required to
effect the registration of their Registrable Securities.
(b) Notify the Company, at any time when a prospectus relating
to Registrable Securities covered by a registration statement is required to be
delivered under the Act, of the happening of any event with respect to such
selling Holder as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
4
<PAGE>
(c) In the event of any underwritten public offering, each
Holder participating in such underwriting shall enter into and perform its
obligations under the underwriting agreement for such offering, and if requested
to do so by the underwriters managing such offering, each Holder shall enter
into a customary holdback agreement.
1.6 Expenses of Mandatory Registration. The Company shall bear and pay
all expenses incurred in connection with registrations, filings, or
qualifications pursuant to Section 1.2 (other than underwriting discounts and
commissions with respect to Registrable Securities included in such registration
and any fees and costs of the Holders' legal counsel or other advisors),
including (without limitation) all registration, filing, and qualification fees,
Blue Sky fees and expenses, printers' and accounting fees, costs of listing on
Nasdaq, costs of furnishing such copies of each preliminary prospectus, final
prospectus, and amendments thereto as each Holder may reasonably request, and
fees and disbursements of counsel for the Company.
1.7 Expenses of Piggy-Back Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing, or
qualification of Registrable Securities with respect to each of the
registrations pursuant to Section 1.3 (other than underwriting discounts and
commissions with respect to Registrable Securities included in such registration
and any fees and costs of the Holders' legal counsel or other advisors),
including (without limitation) all registration, filing, and qualification fees,
Blue Sky fees and expenses, printers' and accounting fees, costs of listing on
Nasdaq, costs of furnishing such copies of each preliminary prospectus, final
prospectus, and amendments thereto as each Holder may reasonably request, and
fees disbursements of counsel for the Company.
1.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) The Company will indemnify and hold harmless each Holder,
the officers and directors of each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the Securities Exchange Act of
1934, as amended (the "1934 Act"), against any losses, claims, damages, or
liabilities (joint or several) to which such person or persons may become
subject under the Act, the 1934 Act, or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions, or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in any registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company will reimburse each
such Holder, officer or director, underwriter, or controlling person for any
legal or other expenses reasonably incurred by such person or persons in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 1.8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of the Company, nor shall the Company be liable in any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon (i) a Violation that occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, underwriter, or controlling person, or (ii) the
failure of such Holder, underwriter, or controlling person to deliver a copy of
the registration statement or the prospectus, or any amendments or supplements
thereto, after the Company has furnished such person with a sufficient number of
copies of the same.
(b) Each selling Holder will indemnify and hold harmless the
Company, each of its officers and directors, and each person, if any, who
controls the Company within the meaning of the Act, any underwriter and any
other Holder selling securities in such registration statement or any of its
directors or officers or any person who controls such Holder, against any
losses, claims, damages, or liabilities (joint or several) to which the Company
or any such officer, director, controlling person, or underwriter or controlling
person may become subject, under the Act, the 1934 Act, or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent)
5
<PAGE>
that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such officer, director, controlling
person, underwriter or controlling person, other Holder, officer, director, or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 1.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Holder. Notwithstanding
anything to the contrary herein contained, a Holder's indemnity obligation, in
such person's capacity as a Holder, shall be limited to the net proceeds
received by such Holder from the offering out of which the indemnity obligation
arises.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnified party, except that such fees and expenses shall be paid by
the indemnifying party if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 1.8.
(d) The indemnification provided by this Section 1.8 shall be
a continuing right to indemnification and shall survive the registration and
sale of any of the Registrable Securities hereunder and the expiration or
termination of this Agreement.
1.9 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, as long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Act, and the 1934 Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC that permits the selling of any such
securities without registration or pursuant to such form.
1.10 Amendment and Waiver. Any amendment or waiver of any provision
under this Agreement may be effected only with the written consent of the
Company and the Holders of at least a majority of the Registrable Securities
then outstanding.
1.11 Remedies. The parties hereto acknowledge and agree that the breach
of any part of this Agreement may cause irreparable harm and that monetary
damages alone may be inadequate. The parties hereto therefore agree that any
party shall be entitled to injunctive relief or such other applicable remedy as
a court of
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competent jurisdiction may provide. Nothing contained herein will be construed
to limit any party's right to any remedies at law, including recovery of damages
for breach of any part of this Agreement.
2. MISCELLANEOUS
2.1 Notification for Benefit of Holders. In the event that (i) the
Company is actively pursuing the preparation and filing of a registration
statement for an underwritten offering in which it may be possible for the
Holders to participate pursuant to Section 1.3 of this Agreement, and (ii) the
Holders are not actively pursuing an offering or selling Registrable Securities
pursuant to an offering at that time, the Company shall promptly notify the
Holders of such activity. Upon receipt of such notice, the Holders shall cease
any sales of Registrable Securities pursuant to any registration statement or
otherwise until the earlier of (a) 90 days after receipt of such notice; (b) two
trading days after the Company files such registration statement or publicly
announces its intention to file such registration statement (subject to the
restrictions on any such sales provided for elsewhere in this Agreement); or (c)
the Company notifies the Holder that it no longer is actively pursuing such
underwritten offering. The Company shall promptly notify the Holders of any
changes in its plans for or active pursuit of such underwritten offering.
2.2 Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the laws of the state of Arizona, notwithstanding
any Arizona or other conflict-of-law provisions to the contrary.
2.3 Notices. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made, and received when delivered against
receipt, upon receipt of a facsimile transmission, or upon actual receipt of
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
(a) If to the Company:
2401 West First Street
Phoenix, Arizona 85281
Attention: Fred W. Wagenhals
Phone: (602) 517-3710
Facsimile: (602) 967-1403
with a copy given in the manner
prescribed above, to:
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
One East Camelback Road
Phoenix, Arizona 85012
Attention: Robert S. Kant, Esq.
Phone: (602) 263-2606
Facsimile: (602) 263-2900
(b) If to any Holder:
2835 Armentrout Drive
Concord, North Carolina 28205
Attention: Kenneth R. Barbee
Phone: (704) 784-2700
Facsimile: (704) 784-2707
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with a copy given in the manner
prescribed above, to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
Attention: Stokley G. Caldwell, Jr., Esq.
Phone: (704) 377-8332
Facsimile: (704) 378-4000
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change to each of the other
parties hereto in conformity with the provisions of this paragraph for the
giving of notice.
2.4 Binding Nature of Agreement. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors, and assigns.
2.5 Entire Agreement. This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.
2.6 Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
2.7 Gender. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.
2.8 Indulgences, Not Waivers. Neither the failure nor any delay on the
part of a party to exercise any right, remedy, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power, or privilege preclude any other or further
exercise of the same or any other right, remedy, power, or privilege, nor shall
any waiver of any right, remedy, power, or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power, or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
2.9 Execution in Counterparts. This 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
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories. Any photographic or xerographic copy of this Agreement, with all
signatures reproduced on one or more sets of signature pages, shall be
considered for all purposes as of it were an executed counterpart of this
Agreement.
2.10 Provisions Separable. The provisions of this Agreement are
independent and separable from each other, and no provision shall be affected or
rendered invalid or unenforceable by virtue of the fact that for any reason any
other or others of them may be invalid or unenforceable in whole or in part.
2.11 Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays, and
holidays; provided, however, that if the final day of any time period
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<PAGE>
falls on a Saturday, Sunday, or holiday, then the final day shall be deemed to
be the next day which is not a Saturday, Sunday, or holiday.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date and year first above written.
MOTORSPORTS TRADITIONS LIMITED ACTION PERFORMANCE
PARTNERSHIP COMPANIES, INC.
By:___________________________ By:_________________________________
General Partner
Its:________________________________
MIDLAND LEASING, INC.
By:___________________________
Its:__________________________
MOTORSPORTS BY MAIL, INC.
By:___________________________
Its:__________________________
9
REGISTRATION AGREEMENT
REGISTRATION AGREEMENT dated as of January 1, 1997, among ACTION
PERFORMANCE COMPANIES, INC., an Arizona corporation (the "Company"); KENNETH R.
BARBEE and JEFFERY M. GORDON together referred to as the "Holders.")
WITNESSETH
The Company acquired all of the shares of capital stock of Creative
Marketing and Promotions, Inc., a North Carolina corporation ("CMP") under the
terms of an Exchange Agreement of even date. The consideration for the capital
stock of CMP included 285,714 shares of Company's Common Stock (the "Shares").
The Shares are "restricted securities" as defined in Rule 144 under the
Securities Act of 1933, as amended. As a result, there are substantial
restrictions on the ability of the Holders to sell the Shares in the absence of
registration under the Securities Act of 1933 and applicable state securities
laws. In order to enable the Holders to sell all or a portion of the Shares, the
Company has agreed to the terms of this Agreement.
NOW THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt, adequacy, and sufficiency of which are
hereby acknowledged by the parties, the parties hereby agree as follows:
1. REGISTRATION
1.1 Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Blackout Period" means any period (A) beginning
on the date on which the Company notifies the Holders (as defined below) that
(i) the Board of Directors of the Company, in its good faith judgment, has
determined that there are material developments with respect to the Company such
that it would be seriously detrimental to the Company and its shareholders to
utilize a registration statement pursuant to Sections 1.2 or 1.3 below; (ii) the
Board of Directors of the Company, in its good faith judgment, has determined
that financial statements with respect to the Company, which may be required to
utilize a registration statement pursuant to Sections 1.2 or 1.3 below, are
unavailable; or (iii) the Company has notified the Holders that it intends to
file a registration statement for a Subsequent Financing within 30 days of the
mailing of such notice in accordance with Section 2.3 hereof, and (B) ending on
the date (1) with respect to clause (i) above, as soon as practicable but not
more than 30 days after the date on which the Company notifies the Holders of
the Board of Directors' determination; (2) with respect to clause (ii) above, as
soon as financial statements sufficient to permit Company to file or permit the
utilization of a registration statement under the Act have become available; and
(3) with respect to clause (iii) above, 90 days after the effective date of the
registration statement for the Subsequent Financing.
(c) The term "Holders" means those persons owning or having
the right to acquire Registrable Securities (as defined below).
(d) The term "Maximum Includable Securities" shall mean the
maximum number of shares of each type or class of the Company's securities that
a managing or principal underwriter, in its good faith judgment, deems
practicable to offer and sell at that time in a firm commitment underwritten
offering without materially and adversely affecting the marketability or price
of the securities of the Company to be offered. When more than one type or class
of the Company's securities are to be included in a registration, the managing
or principal underwriter of the offering shall designate the maximum number of
each such type or class of securities that is included in the Maximum Includable
Securities.
<PAGE>
(e) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(f) The term "Registrable Security" shall refer to (i) the
Shares, and (ii) any shares of Common Stock or other securities of the Company
that may subsequently be issued or issuable with respect to the Shares as a
result of a stock split or dividend or any sale, transfer, assignment, or other
transaction by the Company or a Holder involving the Shares and any securities
into which the Shares may thereafter be changed as a result of merger,
consolidation, recapitalization, or otherwise. As to any particular Registrable
Securities, such securities will cease to be Registrable Securities when they
have been distributed to the public pursuant to an offering registered under the
Act or sold to the public through a broker, dealer, or market-maker in
compliance with Rule 144 under the Act.
(g) "SEC" means the Securities and Exchange Commission.
(h) The term "Subsequent Financing" means an offering of the
Company's Common Stock or other securities convertible or exercisable into
shares of the Company's Common Stock within 36 months after the date of this
Agreement.
1.2 Mandatory Registration.
(a) Not later than 30 days after the date of this Agreement,
the Company shall file a registration statement under the Act with the SEC, and
under any applicable state securities laws, covering the Shares and shall use
its best efforts to cause the registration statement to become effective as soon
as practicable and to remain effective for a period of three years after the
date of this Agreement.
(b) The Company may include Additional Shares of Common Stock
or other securities to be sold by the Company and/or by other holders of Common
Stock or other securities in any registration statement to be filed pursuant to
this Section 1.2.
1.3 Piggy-Back Registration Rights.
(a) Except as provided in Section 1.3(e), if at any time the
Company proposes to file on its behalf and/or on behalf of any of its
securityholders a registration statement under the Act on Form S-1, S-2, or S-3
(or any other appropriate form for the general registration of securities) with
respect to any of its capital stock or other securities, the Company shall give
each Holder written notice at least 20 days before the filing with the SEC of
such registration statement. If any Holder desires to have Registrable
Securities registered pursuant to this Section 1.3, such Holder shall so advise
the Company in writing within 15 days after the date of mailing of such notice
from the Company. The Company shall thereupon include in such filing the number
of Registrable Securities for which registration is so requested, subject to its
right to reduce the number of Registrable Securities as hereinafter provided,
and shall use its best efforts to effect registration under the Act of such
Registrable Securities. Notwithstanding the foregoing, the Company shall not be
required to provide notice of filing of a registration statement and to include
therein any Registrable Securities if the proposed registration is
(i) a registration of stock options, stock purchases,
or compensation or incentive plans, or of securities issued or issuable pursuant
to any such plan, or a dividend reinvestment plan, on Form S-8 or other
comparable form then in effect; or
(ii) a registration of securities proposed to be
issued in exchange for securities or assets of, or in connection with, a merger
or consolidation with another corporation.
(b) In the event the offering in which any Holder's
Registrable Securities are to be included pursuant to this Section 1.3 is to be
underwritten, the Company shall furnish the Holders with a written statement
2
<PAGE>
of the managing or principal underwriter as to the Maximum Includable Securities
as soon as practicable after the expiration of the 15-day period provided for in
Section 1.3(a). If the total number of securities proposed to be included in
such registration statement is in excess of the Maximum Includable Securities,
the number of securities to be included within the coverage of such registration
statement shall be reduced to the Maximum Includable Securities as follows:
(i) no reduction shall be made in the number of
shares of capital stock or other securities to be registered for the account of
the Company or on behalf of any of its securityholders that have the right to
require the Company to initiate a registration of such securities; and
(ii) the number of Registrable Securities and other
securities that may be included in the registration, if any, shall be allocated
among the Holders of Registrable Securities and holders of other securities (the
"Other Holders") requesting inclusion on a pro rata basis, with the number of
each type or class of securities of each Holder and Other Holder thereof
included in the registration to be that number determined by multiplying (A) the
total number of such type or class of security included in the Maximum
Includable Securities less (B) the number of such type or class of security to
be registered for the account of the Company, by a fraction, the numerator of
which will be the total number of such type or class of security that such
Holder or Other Holder owns, and the denominator of which will be the total
number of such type or class of security owned by all Holders and Other Holders
that have requested inclusion of such type or class of security in the
registration.
(c) The Company shall, in its sole discretion, select the
underwriter or underwriters, if any, that are to undertake the sale and
distribution of the Registrable Securities to be included in a registration
statement filed under the provisions of this Section 1.3.
(d) At such time that the Company intends to effect a
Subsequent Financing, it shall notify the Holders of such intent and shall
designate the proposed offering as a Subsequent Financing. Except to the extent
that the Company, in its sole discretion, may otherwise permit, the Holders
shall have no right to have any Registrable Securities registered pursuant to
this Section 1.3 in any Subsequent Financing.
(e) The right to registration provided in this Section 1.3 is
in addition to and not in lieu of the demand registration rights provided in
Section 1.2. The provisions of this Section 1.3 shall not apply, however, to any
Holders requesting registration pursuant to this Section 1.3 that are or may be
free, at the time, to sell within the next 90-day period all of the Registrable
Securities with respect to which such registration was requested in accordance
with Rule 144 (or any similar rule or regulation) under the Act.
1.4 Obligations of the Company. Whenever required under Section 1.2 or
Section 1.3 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement on
such form as the Company deems appropriate with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective. With respect to registration statements filed pursuant to
Section 1.3 hereof, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, the Company shall keep such
registration statement effective for up to 180 days, or such shorter period as
is reasonably required to dispose of all securities covered by such registration
statement.
(b) Notify the Holders promptly after it has received notice
of the time when such registration statement has become effective or any
supplement to any prospectus forming a part of such registration statement has
been filed.
(c) Prepare and file with the SEC, and promptly notify the
Holders of the filing of, such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
3
<PAGE>
(d) Advise each Holder promptly after it has received notice
or obtained knowledge thereof of the issuance of any stop order by the SEC
suspending the effectiveness of any such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
(e) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(f) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business, to file a general consent
to service of process, or to become subject to tax liability in any such states
or jurisdictions, or to agree to any restrictions as to the conduct of its
business in the ordinary course thereof.
(g) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering, together with
each Holder participating in such underwritten offering, as provided in Section
1.5(c).
(h) Prepare and promptly file with the SEC, and promptly
notify such Holders of the filing of, any amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event has occurred as
the result of which any such prospectus must be amended in order that it does
not make any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading.
(i) In case any of such Holders or any underwriter for any
such Holders is required to deliver a prospectus at a time when the prospectus
then in effect may no longer be used under the Act, prepare promptly upon
request such amendment or amendments to such registration statement and such
prospectus as may be necessary to permit compliance with the requirements of the
Act.
(j) If any of the Registrable Securities are then listed on
any securities exchange or the Nasdaq Stock Market, the Company will cause all
such Registrable Securities covered by such registration statement to be listed
on such exchange or the Nasdaq Stock Market.
1.5 Obligations of Holders. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
each of the selling Holders shall:
(a) Furnish to the Company such information regarding
themselves, the Registrable Securities held by them, the intended method of sale
or other disposition of such securities, the identity of and compensation to be
paid to any underwriters proposed to be employed in connection with such sale or
other disposition, and such other information as may reasonably be required to
effect the registration of their Registrable Securities.
(b) Notify the Company, at any time when a prospectus relating
to Registrable Securities covered by a registration statement is required to be
delivered under the Act, of the happening of any event with respect to such
selling Holder as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(c) In the event of any underwritten public offering, each
Holder participating in such underwriting shall enter into and perform its
obligations under the underwriting agreement for such offering, and if requested
to do so by the underwriters managing such offering, each Holder shall enter
into a customary holdback agreement.
4
<PAGE>
1.6 Expenses of Mandatory Registration. The Company shall bear and pay
all expenses incurred in connection with registrations, filings, or
qualifications pursuant to Section 1.2 (other than underwriting discounts and
commissions with respect to Registrable Securities included in such registration
and any fees and costs of the Holders' legal counsel or other advisors),
including (without limitation) all registration, filing, and qualification fees,
Blue Sky fees and expenses, printers' and accounting fees, costs of listing on
Nasdaq, costs of furnishing such copies of each preliminary prospectus, final
prospectus, and amendments thereto as each Holder may reasonably request, and
fees and disbursements of counsel for the Company.
1.7 Expenses of Piggy-Back Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing, or
qualification of Registrable Securities with respect to each of the
registrations pursuant to Section 1.3 (other than underwriting discounts and
commissions with respect to Registrable Securities included in such registration
and any fees and costs of the Holders' legal counsel or other advisors),
including (without limitation) all registration, filing, and qualification fees,
Blue Sky fees and expenses, printers' and accounting fees, costs of listing on
Nasdaq, costs of furnishing such copies of each preliminary prospectus, final
prospectus, and amendments thereto as each Holder may reasonably request, and
fees disbursements of counsel for the Company.
1.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) The Company will indemnify and hold harmless each Holder,
the officers and directors of each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the Securities Exchange Act of
1934, as amended (the "1934 Act"), against any losses, claims, damages, or
liabilities (joint or several) to which such person or persons may become
subject under the Act, the 1934 Act, or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions, or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in any registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company will reimburse each
such Holder, officer or director, underwriter, or controlling person for any
legal or other expenses reasonably incurred by such person or persons in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 1.8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of the Company, nor shall the Company be liable in any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon (i) a Violation that occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, underwriter, or controlling person, or (ii) the
failure of such Holder, underwriter, or controlling person to deliver a copy of
the registration statement or the prospectus, or any amendments or supplements
thereto, after the Company has furnished such person with a sufficient number of
copies of the same.
(b) Each selling Holder will indemnify and hold harmless the
Company, each of its officers and directors, and each person, if any, who
controls the Company within the meaning of the Act, any underwriter and any
other Holder selling securities in such registration statement or any of its
directors or officers or any person who controls such Holder, against any
losses, claims, damages, or liabilities (joint or several) to which the Company
or any such officer, director, controlling person, or underwriter or controlling
person may become subject, under the Act, the 1934 Act, or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such officer, director, controlling person, underwriter or controlling
person, other Holder, officer, director, or controlling person in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement
5
<PAGE>
contained in this Section 1.8(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Holder. Notwithstanding anything to the
contrary herein contained, a Holder's indemnity obligation, in such person's
capacity as a Holder, shall be limited to the net proceeds received by such
Holder from the offering out of which the indemnity obligation arises.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnified party, except that such fees and expenses shall be paid by
the indemnifying party if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 1.8.
(d) The indemnification provided by this Section 1.8 shall be
a continuing right to indemnification and shall survive the registration and
sale of any of the Registrable Securities hereunder and the expiration or
termination of this Agreement.
1.9 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, as long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Act, and the 1934 Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC that permits the selling of any such
securities without registration or pursuant to such form.
1.10 Amendment and Waiver. Any amendment or waiver of any provision
under this Agreement may be effected only with the written consent of the
Company and the Holders of at least a majority of the Registrable Securities
then outstanding.
1.11 Remedies. The parties hereto acknowledge and agree that the breach
of any part of this Agreement may cause irreparable harm and that monetary
damages alone may be inadequate. The parties hereto therefore agree that any
party shall be entitled to injunctive relief or such other applicable remedy as
a court of competent jurisdiction may provide. Nothing contained herein will be
construed to limit any party's right to any remedies at law, including recovery
of damages for breach of any part of this Agreement.
6
<PAGE>
2. MISCELLANEOUS
2.1 Notification for Benefit of Holders. In the event that (i) the
Company is actively pursuing the preparation and filing of a registration
statement for an underwritten offering in which it may be possible for the
Holders to participate pursuant to Section 1.3 of this Agreement, and (ii) the
Holders are not actively pursuing an offering or selling Registrable Securities
pursuant to an offering at that time, the Company shall promptly notify the
Holders of such activity. Upon receipt of such notice, the Holders shall cease
any sales of Registrable Securities pursuant to any registration statement or
otherwise until the earlier of (a) 90 days after receipt of such notice; (b) two
trading days after the Company files such registration statement or publicly
announces its intention to file such registration statement (subject to the
restrictions on any such sales provided for elsewhere in this Agreement); or (c)
the Company notifies the Holder that it no longer is actively pursuing such
underwritten offering. The Company shall promptly notify the Holders of any
changes in its plans for or active pursuit of such underwritten offering.
2.2 Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the laws of the state of Arizona, notwithstanding
any Arizona or other conflict-of-law provisions to the contrary.
2.3 Notices. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made, and received when delivered against
receipt, upon receipt of a facsimile transmission, or upon actual receipt of
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
(a) If to the Company:
2401 West First Street
Phoenix, Arizona 85281
Attention: Fred W. Wagenhals
Phone: (602) 517-3710
Facsimile: (602) 967-1403
with a copy given in the manner
prescribed above, to:
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
One East Camelback Road
Phoenix, Arizona 85012
Attention: Robert S. Kant, Esq.
Phone: (602) 263-2606
Facsimile: (602) 263-2900
(b) If to any Holder:
2835 Armentrout Drive
Concord, North Carolina 28205
Attention: Kenneth R. Barbee
Phone: (704) 784-2700
Facsimile: (704) 784-2707
7
<PAGE>
with a copy given in the manner
prescribed above, to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
Attention: Stokley G. Caldwell, Jr., Esq.
Phone: (704) 377-8332
Facsimile: (704) 378-4000
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change to each of the other
parties hereto in conformity with the provisions of this paragraph for the
giving of notice.
2.4 Binding Nature of Agreement. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors, and assigns.
2.5 Entire Agreement. This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.
2.6 Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
2.7 Gender. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.
2.8 Indulgences, Not Waivers. Neither the failure nor any delay on the
part of a party to exercise any right, remedy, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power, or privilege preclude any other or further
exercise of the same or any other right, remedy, power, or privilege, nor shall
any waiver of any right, remedy, power, or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power, or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
2.9 Execution in Counterparts. This 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
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories. Any photographic or xerographic copy of this Agreement, with all
signatures reproduced on one or more sets of signature pages, shall be
considered for all purposes as of it were an executed counterpart of this
Agreement.
2.10 Provisions Separable. The provisions of this Agreement are
independent and separable from each other, and no provision shall be affected or
rendered invalid or unenforceable by virtue of the fact that for any reason any
other or others of them may be invalid or unenforceable in whole or in part.
2.11 Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays, and
holidays; provided, however, that if the final day of any time period
8
<PAGE>
falls on a Saturday, Sunday, or holiday, then the final day shall be deemed to
be the next day which is not a Saturday, Sunday, or holiday.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date and year first above written.
ACTION PERFORMANCE COMPANIES, INC.
By:______________________________________
Its:_____________________________________
-----------------------------------------
Kenneth R. Barbee
-----------------------------------------
Jeffery M. Gordon
9
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
DATED AS OF JANUARY 1, 1997
BETWEEN
ACTION PERFORMANCE COMPANIES, INC.
AND
KENNETH R. BARBEE
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment.......................................................... 1
2. Full Time Occupation................................................ 1
3. Compensation and other Benefits..................................... 1
(a) Salary..................................................... 1
(b) Bonus...................................................... 1
(c) Stock Options.............................................. 1
(d) Fringe Benefits............................................ 1
(e) Reimbursement.............................................. 2
4. Term of Employment.................................................. 2
(a) Employment Term............................................ 2
(b) Termination Under Certain Circumstances.................... 2
(c) Result of Termination...................................... 2
5. Competition and Confidential Information............................ 2
(a) Interests to be Protected.................................. 2
(b) Non-Competition............................................ 3
(c) Non-Solicitation of Employees.............................. 3
(d) Confidential Information................................... 3
(e) Return of Books and Papers................................. 4
(f) Equitable Relief........................................... 4
(g) Restrictions Separable..................................... 4
6. Miscellaneous....................................................... 4
(a) Notices.................................................... 4
(b) Indulgences................................................ 5
(c) Controlling Law............................................ 5
(d) Binding Nature of Agreement................................ 5
(e) Execution in Counterpart................................... 5
(f) Provisions Separable....................................... 5
(g) Entire Agreement........................................... 5
(h) Paragraph Headings......................................... 6
7. Successors And Assigns.............................................. 6
i
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of the 1st day of January, 1997,
by and between ACTION PERFORMANCE COMPANIES, INC., an Arizona corporation
("Employer") and KENNETH R. BARBEE ("Employee").
As of the date of this Agreement, Employer has acquired all of
the outstanding stock of Creative Marketing and Promotions, Inc., a North
Carolina corporation ("CMP"), and Employer's wholly owned subsidiary, MTL
Acquisition, Inc., an Arizona corporation, has purchased substantially all the
assets of Motorsport Traditions Limited Partnership, a North Carolina limited
partnership (together with CMP, "Motorsport Traditions"). Employee served in
various executive capacities with Motorsport Traditions prior to the
acquisition. Employer intends to continue the business of Motorsport Traditions.
Employer desires that Employee serve as General Manager of Motorsport Traditions
and perform various other services for Employer, and Employee desires to accept
such employment, upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants set forth in this Agreement, the parties hereto agree as
follows:
1. Employment.
Employer hereby employs Employee, and Employee hereby accepts
such employment, as Vice President of Employee's wholly owned subsidiary, Sports
Image, Inc., an Arizona corporation ("SII"), and in such other capacities and
for such other duties and services of an executive nature as shall from time to
time be specified by Employer.
2. Full Time Occupation.
Employee shall devote such of Employee's business time,
attention, and efforts as shall be reasonably necessary for the performance of
Employee's duties under this Agreement and shall serve Employer faithfully and
diligently.
3. Compensation and other Benefits.
(a) Salary. Employer shall pay to Employee, as
compensation for the services rendered by Employee during Employee's employment
under this Agreement, a salary at a rate of $120,000 per annum, to be paid in
equal monthly installments or in such other periodic installments upon which
Employer and Employee mutually agree.
(b) Bonus. Employee shall be eligible to receive an
annual bonus in an amount of up to 20% of Employee's salary with the amount to
be determined by the Board of Directors of Employer based upon such factors as
may be deemed relevant by the directors, including the performance of Employee.
(c) Stock Options and Awards. Employee shall be
granted qualified stock options under Employer's Stock Option Plan to purchase a
total of 15,000 shares of Employer's Common Stock at a price equal to $17.50 per
share at any time or from time to time within six years of the date of grant,
such options to vest 50% on the date of grant and 50% on the first anniversary
of the grant.
(d) Fringe Benefits. Employee shall be entitled to
participate in any group insurance, pension, retirement, vacation, expense
reimbursement, and other plans, programs, or benefits approved by Employer's
Board of Directors and made available from time to time to executive personnel
of Employer generally during the term of Employee's employment hereunder. The
foregoing shall not obligate Employer to adopt or maintain any particular plan,
program, or benefit.
<PAGE>
(e) Reimbursement. Employer shall reimburse Employee
for all travel and entertainment expenses and other ordinary and necessary
business expenses incurred by Employee in connection with the business of
Employer and Employee's duties under this Agreement; provided, however, that
Employee shall not incur such expenses in an amount in excess of $5,000 during
any month without written authorization from Employer. The term "business
expenses" shall not include any item not deductible in whole or in part by
Employer for federal income tax purposes. To obtain reimbursement, Employee must
submit to Employer receipts, bills, or sales slips for the expenses incurred.
Reimbursements will be made by Employer monthly within 10 days of presentation
by Employee of satisfactory evidence of the expenses incurred.
4. Term of Employment.
(a) Employment Term. The term of Employee's
employment under this Agreement shall be for a period of two years commencing on
the date of this Agreement and continuing from year to year thereafter, unless
and until terminated by either party giving written notice to the other not less
than 60 days prior to the end of the then-current term of Employee's employment
under this Agreement.
(b) Termination Under Certain Circumstances.
Notwithstanding anything to the contrary herein contained:
(i) Death. Employee's employment shall
automatically terminate, without notice, effective upon the date of Employee's
death.
(ii) Disability. If Employee shall fail, for
a period of more than 60 consecutive days, or for 60 days within any 180-day
period, to perform any of Employee's duties under this Agreement as the result
of illness or other incapacity, Employer, at its option and upon notice to
Employee, may terminate Employee's employment effective on the date of that
notice.
(iii) Unilateral Decision of Employer.
Employer, at its option and upon notice to Employee, may terminate Employee's
employment effective on the date of that notice.
(iv) Unilateral Decision by Employee.
Employee, at his option, may terminate Employee's employment upon 90 days prior
notice to Employer.
(v) Certain Acts. If Employee engages in an
act or acts involving a felony, moral turpitude, fraud, or dishonesty, Employer,
at its option and upon notice to Employee, may terminate Employee's employment
effective on the date of that notice.
(c) Result of Termination. In the event of the
termination of Employee's employment pursuant to Sections 4(b)(i), (ii), (iv) or
(v) above, Employee shall receive no further compensation under this Agreement.
In the event of the termination of Employee's employment pursuant to Section
4(b)(iii) above, Employee shall continue to receive Employee's fixed
compensation during the remainder of the then-current term of Employee's
employment under this Agreement prior to such termination if termination is
before the end of the two-year term beginning on the date of this Agreement.
Employee shall receive no severance compensation in the event of the termination
of Employee's employment for any reason after the initial two-year term.
5. Competition and Confidential Information.
(a) Interests to be Protected. The parties
acknowledge that Employee will perform essential services for Employer, its
employees, and its shareholders during the term of Employee's employment with
Employer. Employee will be exposed to, have access to, and work with, a
considerable amount of Confidential Information (as defined below). The parties
also expressly recognize and acknowledge that the personnel of Employer have
been trained by, and are valuable to, Employer and that Employer will incur
substantial recruiting and training expenses if Employer must hire new personnel
or retrain existing personnel to fill vacancies. The parties expressly recognize
that it could seriously impair the goodwill and diminish the value of Employer's
business
2
<PAGE>
should Employee compete with Employer in any manner whatsoever. The parties
acknowledge that this covenant has an extended duration; however, they agree
that this covenant is reasonable and it is necessary for the protection of
Employer, its shareholders, and employees. For these and other reasons, and the
fact that there are many other employment opportunities available to Employee if
he should terminate his employment, the parties are in full and complete
agreement that the following restrictive covenants are fair and reasonable and
are entered into freely, voluntarily, and knowingly. Furthermore, each party was
given the opportunity to consult with independent legal counsel before entering
into this Agreement.
(b) Non-Competition. During the later of (i) 12
months of the date of this Agreement or (ii) the term of Employee's employment
with Employer and for the period ending six months after the termination of
Employee's employment with Employer (voluntarily by Employee or with cause by
Employer), Employee shall not (whether directly or indirectly, as owner,
principal, agent, stockholder, director, officer, manager, employee, partner,
participant, or in any other capacity) engage or become financially interested
in any competitive business conducted within the Restricted Territory (as
defined below) or otherwise circumvent any license agreements of Employer
relating to the business of Employer. As used herein, the term "competitive
business" shall mean (i) the design and manufacture of collectible die-cast and
pewter miniature replicas of motorsports vehicles and the design and manufacture
of licensed apparel, souvenirs, and other motorsports consumer items, including
t-shirts, hats, jackets, mugs, key chains, and drink bottles, in each case to be
distributed and sold through collector and fan clubs, wholesale distribution,
authorized retail dealers, trackside events, and promotional programs for
corporate sponsors; (ii) the development of marketing and product promotional
programs for corporate sponsors of motorsports, featuring Employer's die-cast
replicas or other products as premium awards, intended to increase brand
awareness of the products or services of the corporate sponsors; and (iii) the
design, manufacture, and sale of motorsports-related products (consisting of die
cast miniature replicas of motorsports vehicles and motorsports-related apparel
and souvenirs) specifically designed for the mass-merchandise market; and the
term "Restricted Territory" shall mean any state in which Employer or its
subsidiaries sells products or provides services during Employee's employment
hereunder. Employer acknowledges that Employee's ownership or operation of Chase
Raceware, L.L.C., Racing for Kids, L.L.C., Motorsports by Mail, Inc., Race
World, L.L.C., American Motorsports Marketing, Inc., and Cararrus Plastics, Inc.
(in the production of plastic products under manufacturing or similar
arrangements), as the businesses of such enterprises currently are conducted,
shall not be deemed "competitive businesses."
(c) Non-Solicitation of Employees. During the term of
Employee's employment and for a period of 12 months after the termination of
Employee's employment with Employer, regardless of the reason therefor, Employee
shall not directly or indirectly, for himself, or on behalf of, or in
conjunction with, any other person, company, partnership, corporation, or
governmental entity, seek to hire or hire any of Employer's or its subsidiaries'
personnel or employees for the purpose of having any such employee engage in
services that are the same as or similar or related to the services that such
employee provided for Employer or its subsidiaries.
(d) Confidential Information. Employee shall maintain
in strict secrecy all confidential or trade secret information relating to the
business of Employer and its subsidiaries (the "Confidential Information")
obtained by Employee in the course of Employee's employment, and Employee shall
not, unless first authorized in writing by Employer, disclose to, or use for
Employee's benefit or for the benefit of, any person, firm, or entity at any
time either during or subsequent to the term of Employee's employment, any
Confidential Information, except as required in the performance of Employee's
duties on behalf of Employer and its subsidiaries. For purposes hereof,
Confidential Information shall include without limitation any engineering,
drawings, or other reproduction of any kind; any trade secrets, knowledge, or
information with respect to processes, inventions, machinery, manufacturing
techniques and know-how and to the management, operational, marketing,
licensing, and distribution policies and practices of Employer and its
subsidiaries; any business methods or forms; any names or addresses of customers
or data on customers or suppliers; and any business policies or other
information relating to or dealing with the purchasing, production, sales,
marketing, and distribution policies or practices of Employer or its
subsidiaries or relating to or dealing with the management, operational, or
investment policies or practices of Employer or its subsidiaries.
3
<PAGE>
(e) Return of Books and Papers. Upon the termination
of Employee's employment with Employer for any reason, Employee shall deliver
promptly to Employer all samples or demonstration models, catalogues, files,
lists, books, records, manuals, memoranda, drawings, and specifications; all
cost, pricing, and other financial data; all customer, licensee, and supplier
information; all other written or printed materials that are the property of
Employer or its subsidiaries (and any copies of them); and all other materials
that may contain Confidential Information relating to the business of Employer
and its subsidiaries, which Employee may then have in Employee's possession,
whether prepared by Employee or not.
(f) Equitable Relief. In the event a violation of any
of the restrictions contained in this Section is established, Employer shall be
entitled to preliminary and permanent injunctive relief as well as damages and
an equitable accounting of all earnings, profits, and other benefits arising
from such violation, which right shall be cumulative and in addition to any
other rights or remedies to which Employer may be entitled. In the event of a
violation of any provision of subsection (b), (c), (f), or (g) of this Section,
the period for which those provisions would remain in effect shall be extended
for a period of time equal to that period beginning when such violation
commenced and ending when the activities constituting such violation shall have
been finally terminated in good faith.
(g) Restrictions Separable. If the scope of any
provision of this Agreement (whether in this Section 5 or otherwise) is found by
a Court to be too broad to permit enforcement to its full extent, then such
provision shall be enforced to the maximum extent permitted by law. The parties
agree that the scope of any provision of this Agreement may be modified by a
judge in any proceeding to enforce this Agreement, so that such provision can be
enforced to the maximum extent permitted by law. Each and every restriction set
forth in this Section 5 is independent and severable from the others, and no
such restriction shall be rendered unenforceable by virtue of the fact that, for
any reason, any other or others of them may be unenforceable in whole or in
part.
6. Miscellaneous.
(a) Notices. All notices, requests, demands, and
other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made, and received (i) if
personally delivered, on the date of delivery, (ii) if by facsimile
transmission, upon receipt, (iii) if mailed, three days after deposit in the
United States mail, registered or certified, return receipt requested, postage
prepaid, and addressed as provided below, or (iv) if by a courier delivery
service providing overnight or "next-day" delivery, on the next business day
after deposit with such service addressed as follows:
(1) If to Employer:
2401 West First Street
Tempe, Arizona 85281
Attention: Fred W. Wagenhals
Phone: (602) 517-3710
Fax: (602) 967-1403
with a copy given in the manner
prescribed above, to:
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
One East Camelback Road
Phoenix, Arizona 85012
Attention: Robert S. Kant, Esq.
Phone: (602) 263-2606
Fax: (602) 263-2900
4
<PAGE>
(2) If to Employee:
Unit 407
First Turn Condominiums
Harrisburg, North Carolina 28075
Phone: (704) 455-3954
with a copy given in the manner
prescribed above, to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
Attention: Stokley G. Caldwell, Jr., Esq.
Phone: (704) 377-8332
Fax: (704) 378-4000
Either party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section 6 for the giving of notice.
(b) Indulgences; Waivers. Neither any failure nor any
delay on the part of either party to exercise any right, remedy, power, or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power, or privilege preclude
any other or further exercise of the same or of any other right, remedy, power,
or privilege, nor shall any waiver of any right, remedy, power, or privilege
with respect to any occurrence be construed as a waiver of such right, remedy,
power, or privilege with respect to any other occurrence. No waiver shall be
binding unless executed in writing by the party making the waiver.
(c) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement, shall be
governed by and construed in accordance with the laws of the state of Arizona,
notwithstanding any Arizona or other conflict-of-interest provisions to the
contrary.
(d) Binding Nature of Agreement. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors, and assigns, except that
no party may assign or transfer such party's rights or obligations under this
Agreement without the prior written consent of the other party.
(e) Execution in Counterparts. This 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 together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of the parties reflected hereon as the
signatories.
(f) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or unenforceable
in whole or in part.
(g) Entire Agreement. This Agreement contains the
entire understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, inducements and conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
5
<PAGE>
(h) Paragraph Headings. The paragraph headings in
this Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
7. Successors And Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the parties hereto;
provided that because the obligations of Employee hereunder involve the
performance of personal services, such obligations shall not be delegated by
Employee. For purposes of this Agreement, successors and assigns shall include,
but not be limited to, any individual, corporation, trust, partnership, or other
entity that acquires a majority of the stock or assets of Employer by sale,
merger, consolidation, liquidation, or other form of transfer. Employer will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of Employer to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that Employer would be required to
perform it if no such succession had taken place. Without limiting the
foregoing, unless the context otherwise requires, the term "Employer" includes
all subsidiaries of Employer including SII.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ACTION PERFORMANCE COMPANIES, INC.
By:___________________________________________
Its:__________________________________________
----------------------------------------------
Kenneth R. Barbee
6
- --------------------------------------------------------------------------------
CONSULTING AGREEMENT
DATED AS OF JANUARY 1, 1997
BETWEEN
ACTION PERFORMANCE COMPANIES, INC.
AND
JOHN BICKFORD
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
1. Engagement.......................................................... 1
(a) The Engagement............................................. 1
(b) Duties of Consultant....................................... 1
2. Extent of Duties.................................................... 1
3. Compensation........................................................ 1
(a) Fixed Compensation......................................... 1
(b) Reimbursement.............................................. 1
4. Term of Engagement.................................................. 1
(a) Engagement Term............................................ 1
(b) Termination Under Certain Circumstances.................... 1
5. Competition and Confidential Information............................ 2
(a) Interests to be Protected.................................. 2
(b) Non-Competition............................................ 2
(c) Non-Solicitation of Employees.............................. 3
(d) Confidential Information................................... 3
(e) Return of Books and Papers................................. 3
(f) Equitable Relief........................................... 3
(g) Restrictions Separable..................................... 3
6. Miscellaneous....................................................... 3
(a) Notices.................................................... 3
(b) Indulgences................................................ 4
(c) Controlling Law............................................ 4
(d) Binding Nature of Agreement................................ 4
(e) Execution in Counterparts.................................. 5
(f) Provisions Separable....................................... 5
(g) Entire Agreement........................................... 5
(h) Paragraph Headings......................................... 5
7. Successors And Assigns.............................................. 5
i
<PAGE>
CONSULTING AGREEMENT
AGREEMENT made as of the 1st day of January, 1997, by and between
ACTION PERFORMANCE COMPANIES, INC., an Arizona corporation (hereinafter called
"Company") and JOHN BICKFORD (hereinafter called "Consultant").
W I T N E S S E T H:
Company desires to engage Consultant and Consultant desires to accept
such engagement, all on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth in this Agreement, the parties hereto agree as follows:
1. Engagement.
(a) The Engagement. Company hereby engages Consultant and
Consultant hereby accepts such engagement as an independent contractor to
perform the duties set forth in this Agreement.
(b) Duties of Consultant. During Consultant's engagement by
Company pursuant to this Agreement, Consultant shall render such advice and
recommendations to Company as Company may reasonably request with respect to
representing Company in the motorsports community, creating new marketing and
promotional campaigns, and advising Company with respect to the motorsports
industry.
2. Extent of Duties. Consultant shall devote such of Consultant's
business time, attention and efforts as are reasonably necessary to the
performance of Consultant's duties under this Agreement, shall perform such
duties faithfully and diligently, and shall not engage in same or similar
activities for himself or any other person, firm, or entity while engaged by
Company.
3. Compensation.
(a) Fixed Compensation. Company shall pay to Consultant as
full compensation for the duties performed by Consultant during Consultant's
engagement under this Agreement, a fee at a rate of $100,000 per annum to be
paid in equal monthly installments, or in such other periodic installments upon
which Company and Consultant shall mutually agree.
(b) Reimbursement. Company shall reimburse Consultant for all
travel and entertainment expenses and other ordinary and necessary business
expenses incurred by Consultant in connection with the business of Company and
Consultant's duties under this Agreement; provided, however, that Consultant
shall not incur such expenses in an amount in excess of $1,000 during any month
without written authorization from Company. The term "business expenses" shall
not include any item not deductible by Company for federal income tax purposes.
To obtain reimbursement, Consultant shall submit to Company receipts, bills or
sales slips for the expenses incurred. Reimbursements shall be made by Company
monthly within 30 days of presentation by Consultant of evidence of the expenses
incurred.
4. Term of Engagement.
(a) Engagement Term. The term of Consultant's engagement
hereunder shall commence on January 1, 1997 and shall continue until December
31, 2000, and from year to year thereafter, unless and until terminated by
either party giving written notice to the other not less than 60 days prior to
the end of the then current term.
(b) Termination Under Certain Circumstances. Notwithstanding
anything to the contrary herein contained:
<PAGE>
(i) Consultant's engagement shall be automatically
terminated, without notice, effective upon the date of Consultant's death;
(ii) If Consultant shall fail, for a period of more
than 30 consecutive days, or for 30 days within any 60 day period, to perform
any of Consultant's duties under this Agreement as the result of illness or
other incapacity, Company, at its option, upon notice to Consultant, may
terminate Consultant's engagement effective on the date of that notice;
(iii) If Consultant shall breach or violate any of
the provisions of this Agreement, or fail to perform in a manner reasonably
satisfactory to Company any of the duties required of Consultant and such
breach, violation or failure shall continue for a period of 30 days after
Company shall have given Consultant written notice specifying the nature thereof
in reasonable detail, Company, at its option, upon notice to Consultant, may
terminate Consultant's engagement effective on the date of that notice.
5. Competition and Confidential Information.
(a) Interests to be Protected. The parties acknowledge that
Consultant will perform essential services for Company, its employees, and its
shareholders during the term of Consultant's engagement with Company. Consultant
will be exposed to, have access to, and work with, a considerable amount of
Confidential Information (as defined below). The parties also expressly
recognize and acknowledge that the personnel of Company have been trained by,
and are valuable to, Company and that Company will incur substantial recruiting
and training expenses if Company must hire new personnel or retrain existing
personnel to fill vacancies. The parties expressly recognize that it could
seriously impair the goodwill and diminish the value of Company's business
should Consultant compete with Company in any manner whatsoever. The parties
acknowledge that this covenant has an extended duration; however, they agree
that this covenant is reasonable and it is necessary for the protection of
Company, its stockholders, and employees. For these and other reasons, and the
fact that there are many other engagement opportunities available to Consultant
if he should terminate his engagement, the parties are in full and complete
agreement that the following restrictive covenants are fair and reasonable and
are entered into freely, voluntarily, and knowingly. Furthermore, each party was
given the opportunity to consult with independent legal counsel before entering
into this Agreement.
(b) Non-Competition. During the later of (i) 12 months of the
date of this Agreement or (ii) the term of Consultant's engagement with Company
and for the period ending six months after the termination of Consultant's
engagement with Company (voluntarily by Company or with cause by Consultant),
Consultant shall not (whether directly or indirectly, as owner, principal,
agent, stockholder, director, officer, manager, employee, partner, participant,
or in any other capacity) engage or become financially interested in any
competitive business conducted within the Restricted Territory (as defined
below) or otherwise circumvent any license agreement of Company relating to the
business of Company. As used herein, the term "competitive business" shall mean
(i) the design and manufacture of collectible die-cast and pewter miniature
replicas of motorsports vehicles and the design and manufacture of licensed
apparel, souvenirs, and other motorsports consumer items, including t-shirts,
hats, jackets, mugs, key chains, and drink bottles, in each case to be
distributed and sold through collector and fan clubs, wholesale distribution,
authorized retail dealers, trackside events, and promotional programs for
corporate sponsors; (ii) the development of marketing and product promotional
programs for corporate sponsors of motorsports, featuring Company's die-cast
replicas or other products as premium awards, intended to increase brand
awareness of the products or services of the corporate sponsors; and (iii) the
design, manufacture, and sale of motorsports- related products (consisting of
die cast miniature replicas of motorsports vehicles and motorsports-related
apparel and souvenirs) specifically designed for the mass-merchandise market;
and the term "Restricted Territory" shall mean any state in which Company or its
subsidiaries sells products or provides services during Consultant's engagement
hereunder. Company acknowledges that Consultant's ownership or operation of
Chase Raceway, L.L.C., Racing for Kids, L.L.C., Motorsports by Mail, Inc., Race
World, L.L.C., American Motorsports Marketing, Inc., and any other company
authorized in writing by Company, as such enterprises currently are conducted,
shall not be deemed "competitive businesses."
2
<PAGE>
(c) Non-Solicitation of Employees. During the term of
Consultant's engagement and for a period of 12 months after the termination of
Consultant's engagement with Company, regardless of the reason therefor,
Consultant shall not directly or indirectly, for himself, or on behalf of, or in
conjunction with, any other person, company, partnership, corporation, or
governmental entity, seek to hire or hire any of Company's or its subsidiaries'
personnel or employees for the purpose of having any such employee engage in
services that are the same as or similar or related to the services that such
employee provided for Company or its subsidiaries.
(d) Confidential Information. Consultant shall maintain in
strict secrecy all confidential or trade secret information, whether patentable
or not, relating to the business of Company and its subsidiaries (the
"Confidential Information") obtained by Consultant in the course of Consultant's
engagement, and Consultant shall not, unless first authorized in writing by
Company, disclose to, or use for Consultant's benefit or for the benefit of any
person, firm, or entity at any time either during or subsequent to the term of
Consultant's engagement, any Confidential Information, except as required in the
performance of Consultant's duties on behalf of Company and its subsidiaries.
For purposes hereof, Confidential Information shall include without limitation
any engineering drawings, or other reproductions or materials of any kind; any
trade secrets, knowledge or information with respect to processes, inventions,
formulae, machinery, manufacturing techniques and know-how and to the
management, operational, marketing, licensing, and distribution policies and
practices of Employer and its subsidiaries; any business methods or forms; any
names or addresses of customers or data on customers or suppliers; and any
business policies or other information relating to or dealing with the
purchasing, production, sales, or distribution policies or practices of Company
or its subsidiaries or relating to or dealing with the management, operational,
or investment policies or practices of Company or its subsidiaries.
(e) Return of Books and Papers. Upon the termination of
Consultant's engagement with Company for any reason, Consultant shall deliver
promptly to Company all samples or demonstration models, catalogues, files,
lists, books, records, manuals, memoranda, drawings, and specifications; all
cost, pricing, and other financial data; all customer, licensee, and supplier
information; all other written or printed materials that are the property of
Company or its subsidiaries (and any copies of them); and all other materials
that may contain Confidential Information relating to the business of Company or
its subsidiaries, which Consultant may then have in his possession, whether
prepared by Consultant or not.
(f) Equitable Relief. In the event a violation of any of the
restrictions contained in this Section is established, Company shall be entitled
to preliminary and permanent injunctive relief as well as damages and an
equitable accounting of all earnings, profits and other benefits arising from
such violation, which right shall be cumulative and in addition to any other
rights or remedies to which Company may be entitled. In the event of a violation
of any provision of subsections (b), (c), (f), or (g) of this Section, the
period for which those provisions would remain in effect shall be extended for a
period of time equal to that period beginning when such violation commenced and
ending when the activities constituting such violation shall have been finally
terminated in good faith.
(g) Restrictions Separable. If the scope of any provision of
this Agreement (whether in this Section 5 or otherwise) is found by a Court to
be too broad to permit enforcement to its full extent, then such provision shall
be enforced to the maximum extent permitted by law. The parties agree that the
scope of any provision of this Agreement may be modified by a judge in any
proceeding to enforce this Agreement, so that such provision can be enforced to
the maximum extent permitted by law. Each and every restriction set forth in
this Section 5 is independent and severable from the others, and no such
restriction shall be rendered unenforceable by virtue of the fact that, for any
reason, any other or others of them may be unenforceable in whole or in part.
6. Miscellaneous.
(a) Notices. All notices, requests, demands, and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made, and received (i) if
personally delivered, on the date of delivery, (ii) if by facsimile
transmission, upon receipt, (iii) if mailed, three days after deposit in the
United States mail, registered or certified, return receipt requested, postage
prepaid, and
3
<PAGE>
addressed as provided below, or (iv) if by a courier delivery service providing
overnight or "next-day" delivery, on the next business day after deposit with
such service addressed as follows:
(1) If to Company:
2401 West First Street
Tempe, Arizona 85281
Attention: Fred W. Wagenhals
Phone: (602) 517-3710
Fax: (602) 967-1403
with a copy given in the manner
prescribed above, to:
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
One East Camelback Road
Phoenix, Arizona 85012
Attention: Robert S. Kant, Esq.
Phone: (602) 263-2606
Fax: (602) 263-2900
(2) If to Consultant:
1094 Berkley Place
Concord, North Carolina 28027
with a copy given in the manner
prescribed above, to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
Attention: Stokley G. Caldwell, Jr., Esq.
Phone: (704) 377-8332
Fax: (704) 378-4000
Either party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section 6 for the giving of notice.
(b) Indulgences; Waivers. Neither any failure nor any delay on
the part of either party to exercise any right, remedy, power, or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power, or privilege preclude any other or
further exercise of the same or of any other right, remedy, power, or privilege,
nor shall any waiver of any right, remedy, power, or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power, or
privilege with respect to any other occurrence. No waiver shall be binding
unless executed in writing by the party making the waiver.
(c) Controlling Law. This Agreement and all questions relating
to its validity, interpretation, performance and enforcement, shall be governed
by and construed in accordance with the laws of the state of Arizona,
notwithstanding any Arizona or other conflict-of-interest provisions to the
contrary.
(d) Binding Nature of Agreement. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns except that
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no party may assign or transfer such party's rights or obligations under this
Agreement without the prior written consent of the other party.
(e) Execution in Counterparts. This 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
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of the parties reflected hereon as the signatories.
(f) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
(g) Entire Agreement. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements and conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
(h) Paragraph Headings. The paragraph headings in this
Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
7. Successors And Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the parties hereto; provided
that because the obligations of Consultant hereunder involve the performance of
personal services, such obligations shall not be delegated by Consultant. For
purposes of this Agreement successors and assigns shall include, but not be
limited to, any individual, corporation, trust, partnership, or other entity
that acquires a majority of the stock or assets of Company by sale, merger,
consolidation, liquidation, or other form of transfer. Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or assets of Company
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that Company would be required to perform it if no such
succession had taken place. Without limiting the foregoing, unless the context
otherwise requires, the term "Company" includes all subsidiaries of Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ACTION PERFORMANCE COMPANIES, INC.
By:______________________________________________
Its:_____________________________________________
-------------------------------------------------
John Bickford
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