UNITED STATES
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): JUNE 20, 1996
(JULY 5, 1996)
Commission file number 0-26374
PLAY BY PLAY TOYS & NOVELTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Texas 74-2623760
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4400 Tejasco
SAN ANTONIO, TEXAS 78218-0267
(Address of principal executive offices and zip code)
(210) 829-4666
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As previously reported, on May 1, 1996, Play By Play Toys & Novelties,
Inc. ("the Company", which term shall be deemed to include its subsidiaries,
unless the context indicates otherwise) entered into an Asset Purchase Agreement
(the "Agreement") with Ace Novelty Co., Inc., Specialty Manufacturing Ltd., ACME
Acquisition Corp., Benjamin H. Mayers, Lois E. Mayers, Ronald S. Mayers, Karen
Gamoran and Beth Weisfield (collectively "Ace") to acquire, through the
Company's wholly owned subsidiary, Ace Novelty Acquisition Co., Inc., ("ANAC")
certain of the assets and assume certain of the liabilities of Ace (the
"Acquisition"). On June 20, 1996, the Company completed the Acquisition. Under
the terms of the Agreement, the Company acquired substantially all of the
operating assets, business operations and facilities of Ace, including four
warehouse and distribution centers located in Bellevue, Washington; Los Angeles,
California; Chicago, Illinois; and Burnaby, British Columbia, Canada for
approximately $46.2 million, consisting of approximately $39.6 million in cash,
$2.9 million in subordinated debt and the assumption of approximately $3.7
million of certain liabilities of Ace, primarily trade payables and accrued
liabilities. The Company or ANAC have entered into employment agreements with
Ronald S. Mayers and James A. Weisfield, former executive officers of Ace
Novelty Co., Inc. and Saul Gamoran, a former consultant to Ace. In connection
with the acquisition, certain principals and selling stockholders executed
non-compete agreements in favor of the Company. In addition, the Company issued
a Warrant to Purchase Common Stock entitling Ace to purchase up to 35,000 shares
of the Company's common stock at a price per share equal to $14.90 exercisable
after one year from the acquisition closing date, or earlier in the event the
Company effects certain registration of the Company's common stock, if any.
Pursuant to the Agreement, the Company acquired substantially all of Ace's
accounts receivable, inventory, property, equipment, real estate, intellectual
property and certain other assets. The real estate acquired by the Company in
connection with the Acquisition includes the land and building comprising Ace's
warehouse and distribution center in Chicago, Illinois, and an undivided 51%
interest in the land and building comprising Ace's warehouse and distribution
center in Los Angeles, California. The Company has leased the remaining
undivided 49% interest in the Los Angeles facility as well as the Bellevue,
Washington warehouse and distribution center from affiliates of Ace. Pursuant to
the Agreement, the Burnaby, British Columbia, Canada warehouse and distribution
center, as well as certain other properties situated throughout the United
States previously operated by Ace, were assigned to and assumed by the Company
in connection with the Acquisition. The Company intends to use such facilities
and equipment substantially in the same manner as they were used by Ace. The
intellectual property acquired from Ace consists principally of the trademarks
and logos of "Ace" and "Acme." As a condition of closing, Ace was required to
obtain consents to assignment from Warner Bros. relative to Looney Tunes
licenses for the mass market, amusement industry and the Space Jam animated/live
action motion picture starring basketball superstar Michael Jordan and the
Looney Tunes characters. In addition, Ace agreed to use reasonable best efforts
to obtain consents to assignment covering the remaining licenses and other
contracts acquired from Ace in connection with the Acquisition.
The debt incurred by the Company in connection with the acquisition
consisted of (i) approximately $34.0 million in revolving credit and term loans
under a credit agreement dated June 20, 1996 (the "Credit Agreement") among
Chemical Bank (the "Bank") as agent, Heller Financial, Inc. and Texas Commerce
Bank N.A. (the "Lenders"), and the Company, ANAC and Newco Novelty, Inc., a
wholly owned subsidiary of ANAC, as borrowers, (ii) a $3.0 million subordinated
loan from the Company's Chairman of the Board and Chief Executive Officer,
Arturo G. Torres, and (iii) a $2.9 million subordinated loan from Ace. The
Credit Agreement provides for a revolving credit, term loan and letter of credit
facility (the "Credit Facility") with a maximum aggregate commitment of $65.0
million. The Credit Facility replaced the Company's $10.0 million Revolving
Credit and Term Loan Agreement with letter of credit facility with NationsBank
of Texas, N.A. The Credit Facility provides for a $53.0 million revolving line
of credit commitment, subject to availability under a borrowing base calculated
by reference to the level of eligible accounts receivable and inventory, and
includes a $15.0 million sublimit for the issuance of letters of credit. The
revolving credit facility matures on June 20, 1998. The Credit Facility also
includes a $12.0 million acquisition term loan which requires sixty equal
monthly principal payments of $200,000 plus accrued interest beginning August 1,
1996, with the entire unpaid balance being due and payable on June 20, 2001.
Interest on borrowings outstanding under the revolving line of credit is
payable monthly at an annual rate equal to, or at the Company's option, (i) the
Bank's Alternate Base Rate (as defined below) plus 0.50% or (ii) the LIBOR rate
plus 2.50%. For amounts outstanding under the term loans, interest is payable
monthly in arrears at an annual rate equal to, at the Company's option, (i) the
Bank's Alternate Base Rate (as defined below) plus 0.75% or (ii) the LIBOR rate
plus 2.75%. The Bank's "Alternate Base Rate", means, as of any day of
determination thereof, a rate per annum equal to the sum of (a) the greater of
(i) the Prime Rate (as defined in the Credit Facility) in effect on a such day,
(ii) the Federal Funds Effective Rate (as defined in the Credit Facility) in
effect for such a day plus 1/2 of 1.0%, and (iii) the Base CD Rate (as defined
in the Credit Facility) in effect for such a day plus 1.0%. In connection with
the Credit Facility, the Company paid a structuring fee of $585,000 to the Bank
and the Lenders. Further, the Company agreed to pay a quarterly fee of 0.50% of
the unused portion of the revolving credit commitment, a fee of 2.0% of the face
amount of letters of credit when issued and an annual administrative fee equal
to $100,000.
The Credit Facility is secured by a first lien on substantially all of the
Company's assets, including 65% of the issued and outstanding stock of its
foreign subsidiaries. The Credit Facility excludes the assets of the Company's
foreign subsidiaries, but requires the Company to maintain certain financial
ratios, including tangible net worth, leverage and debt coverage ratios.
Negative covenants include restrictions on new indebtedness, sale or transfer of
assets, advances to third parties and advances to foreign subsidiaries in excess
of $650,000 per fiscal year during the term of the Credit Facility. The
Company's ability to pay dividends is restricted by the aforementioned
covenants. In addition, the Credit Facility prohibits Mr. Torres from
significantly reducing his ownership in the Company below specified levels,
which levels are reduced in the event of a secondary public offering of the
Company's common stock.
To partially finance the Acquisition, Mr. Torres provided a $3.0 million
unsecured demand loan. Interest on this loan is payable monthly at the Bank's
Alternate Base Rate and repayment of the note is subordinated to payment of the
Credit Facility pursuant to the terms of a Subordination Agreement dated June
20, 1996 by and among Mr. Torres, the Company and the Bank. Outstanding and
unpaid principal and interest on the Torres loan is payable no later than June
21, 1998, however, earlier repayment of the note is permissible contingent upon
the Company's attainment of certain financial ratios and upon the receipt and
acceptance by the Bank of the Company's monthly unaudited financial statements
for the month ending November 30, 1996.
As part of the consideration for the Acquisition, Ace received a $2.9
million note from the Company. The first installment on the Ace note in the
amount of $600,000 is due and payable two business days following the
determination of the final balance sheet of Ace and accrues interest at 8.0% per
annum. The second installment on the Ace note in the amount of $1.0 million is
due and payable on December 20, 1996, of which $500,000 is subject to offset
against any claims by the Company against Ace. The third installment on the Ace
note in the amount of $500,000 is due June 20, 1997 and is also subject to
offset against any claims by the Company against Ace. The fourth installment on
the Ace note in the amount of $800,000 is due and payable on June 21, 1998 and
is also subject to offset against any claims by the Company against Ace.
Interest on the Ace note, other than with respect to the first installment of
$600,000, is payable monthly in arrears at a rate of 12.0% per annum during the
first six months and 10.0% per annum thereafter, except with respect to the
$800,000 payment due June 21, 1998, which will continue to bear interest at
12.0% per annum. Payment of all obligations under the Ace note is subordinate to
payment of the Credit Facility. The note is secured by a security interest in
certain assets of the Company which is also subordinate to those securing the
Credit Facility.
ITEM 7. FINANCIAL STATEMENTS, FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired It is impractical to
include the required financial statements, such financial information
will be filed in an amendment to this Form 8-K as soon as
practicable, but no later than September 3, 1996.
(b) Pro Forma Financial Information
It is impractical to include the required financial statements, such
financial information will be filed in an amendment to this Form 8-K
as soon as practicable, but no later than September 3, 1996.
(c) Exhibits
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
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2.1 Asset Purchase Agreement dated May 1, 1996 by and among Ace
Novelty Acquisition Co., Inc. a Texas corporation ("Buyer"),
Play By Play Toys & Novelties, Inc., a Texas corporation and
the parent corporation of Buyer ("PBYP"), Ace Novelty Co.,
Inc., a Washington corporation ("ACE"), Specialty
Manufacturing Ltd., a British Columbia, Canada corporation
("Specialty"), ACME Acquisition Corp., a Washington
corporation ("ACME"), and Benjamin H. Mayers and Lois E.
Mayers, husband and wife, Ronald S. Mayers, a married
individual, Karen Gamoran, a married individual, and Beth
Weisfield, a married individual (collectively,
"Stockholders").
2.2 Amendment No. 1 to Asset Purchase Agreement dated June 20,
1996 by and Among Buyer, PBYP, ACE, Specialty, ACME and
Stockholders.
4 Play By Play Toys & Novelties, Inc. Warrant to Purchase Common
Stock.
10.1 Credit Agreement dated June 20, 1996, by and among Play By
Play Toys & Novelties, Inc., Ace Novelty Acquisition Co.,
Inc., Newco Novelty, Inc. and Chemical Bank, a New York
banking corporation as agent for the lenders.
10.2 Promissory Note dated June 20, 1996, of Play By Play Toys &
Novelties, Inc. payable to the order of Arturo G. Torres in
the principal sum of $3,000,000.
10.3 Subordination Agreement dated June 20, 1996, by and among
Arturo Torres , Play By Play Toys & Novelties, Inc. and
Chemical Bank.
10.4 Loan Agreement dated June 20, 1996 by and between Arturo G.
Torres and Play By Play Toys & Novelties, Inc.
10.5 Promissory Note dated June 20, 1996, of Ace Novelty
Acquisition Co., Inc. payable to the order of Ace Novelty Co.,
Inc. in the principal sum of $2,900,000.
99.1 (1) Financial Statements of business acquired.
99.2 (1) Pro forma financial information.
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(1) To be filed as soon as practicable, but no later than September 3, 1996.
SIGNATURE
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.
PLAY BY PLAY TOYS & NOVELTIES, INC.
By: /s/
Joe M. Guerra
CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY
Dated: July 5, 1996
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE
- ----------- ------------------- ----
2.1 Asset Purchase Agreement dated May 1, 1996 by and among Ace Novelty
Acquisition Co., Inc. a Texas corporation ("Buyer"), Play By Play Toys
& Novelties, Inc., a Texas corporation and the parent corporation of
Buyer ("PBYP"), Ace Novelty Co., Inc., a Washington corporation
("ACE"), Specialty Manufacturing Ltd., a British Columbia, Canada
corporation ("Specialty"), ACME Acquisition Corp., a Washington
corporation ("ACME"), and Benjamin H. Mayers and Lois E. Mayers,
husband and wife, Ronald S. Mayers, a married individual, Karen
Gamoran, a married individual, and Beth Weisfield, a married
individual (collectively, "Stockholders").
2.2 Amendment No. 1 to Asset Purchase Agreement dated June 20, 1996 by and
Among Buyer, PBYP, ACE, Specialty, ACME and Stockholders.
4 Play By Play Toys & Novelties, Inc. Warrant to Purchase Common Stock.
10.1 Credit Agreement dated June 20, 1996, by and among Play By Play Toys &
Novelties, Inc., Ace Novelty Acquisition Co., Inc., Newco Novelty,
Inc. and Chemical Bank, a New York banking corporation as agent for
the lenders.
10.2 Promissory Note dated June 20, 1996, of Play By Play Toys & Novelties,
Inc. payable to the order of Arturo G. Torres in the principal sum of
$3,000,000.
10.3 Subordination Agreement dated June 20, 1996, by and among Arturo
Torres , Play By Play Toys & Novelties, Inc. and Chemical Bank.
10.4 Loan Agreement dated June 20, 1996 by and between Arturo G. Torres and
Play By Play Toys & Novelties, Inc.
10.5 Promissory Note dated June 20, 1996, of Ace Novelty Acquisition Co.,
Inc. payable to the order of Ace Novelty Co., Inc. in the principal
sum of $2,900,000.
99.1(1) Financial Statements of business acquired.
99.2(1) Pro forma financial information.
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(1) To be filed as soon as practicable, but no later than September 3, 1996.
Exhibit 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of
this 1st day of May, 1996, by and among ACE NOVELTY ACQUISITION CO., INC., a
Texas corporation ("Buyer"), PLAY BY PLAY TOYS & NOVELTIES, INC., a Texas
corporation and the parent corporation of Buyer ("PBYP"), ACE NOVELTY CO., INC.,
a Washington corporation ("ACE"), SPECIALTY MANUFACTURING LTD., a British
Columbia, Canada corporation ("Specialty"), ACME ACQUISITION CORP., a Washington
corporation ("ACME"), and BENJAMIN H. MAYERS and LOIS E. MAYERS, husband and
wife, RONALD S. MAYERS, a married individual, KAREN GAMORAN, a married
individual, and BETH WEISFIELD, a married individual, who are owners of all of
the issued and outstanding capital stock of ACE (collectively "Stockholders").
ACE, ACME and Specialty are collectively referred to herein as "Sellers."
W I T N E S E T H:
WHEREAS, ACE is engaged in the business of supplying stuffed toys and
novelty products to the amusement industry ("Business"), and has its principal
offices at 13434 N.E. 16th Street, Bellevue, Washington 98005;
WHEREAS, Specialty and ACME are each wholly owned subsidiaries of ACE;
WHEREAS, Sellers own and/or lease, as the case may be, all of the tangible
and intangible assets, including, INTER ALIA, all of the accounts receivable,
inventories, lands and buildings, machinery and equipment, fixtures and other
operating assets used in the business of Sellers;
WHEREAS, Buyer desires to acquire substantially all of the tangible and
intangible assets of Sellers and to assume only those certain debts, liabilities
and obligations of Sellers as specified herein, all in accordance with the terms
and conditions hereof; and
WHEREAS, Sellers desire to sell substantially all of their tangible and
intangible assets and to transfer only those certain debts, liabilities and
obligations of Sellers as specified herein, all in accordance with the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE OF ASSETS
1.01 ASSETS TO BE ACQUIRED. Subject to and upon the terms and conditions
of this Agreement, Sellers shall transfer, sell, convey, assign and deliver to
Buyer and Buyer shall purchase, accept, assume and acquire on the date referred
to in Section 3.01 hereof, all of Sellers' right, title and interest in and to
the following businesses and assets of Sellers (other than any Excluded Assets,
as hereinafter defined) free and clear of all liens and encumbrances except as
specifically provided in this Agreement:
A) (i) The leasehold interests, in and to the parcels of real estate,
improvements, buildings and fixtures comprising the offices,
distribution centers, warehouses and manufacturing facilities of
Sellers in Burnaby, B.C., Canada; Mississauga, Ontario, Canada; San
Antonio, Texas; Del Rio, Texas; and Los Angeles, California; and a
newly created leasehold interest (pursuant to the Sublease under
Section 7.35) with respect to a portion of the facilities of Sellers
in Bellevue, Washington, as described in Schedule 1.01(A) hereto,
together with all rights and appurtenances thereto; (ii) Benjamin
Mayers' and Lois Mayers' ownership in the parcels of real estate,
improvements, buildings and fixtures comprising the offices,
distribution centers, warehouses and manufacturing facilities of
Sellers in Chicago, Illinois, the legal descriptions for which are
set forth in Schedule 1.01(A), subject only to the title exceptions
referred to in said Schedule 1.01(A); and (iii) fifty-one percent
(51%) of Stockholders' ownership interest in and to the parcels of
real estate, improvements, buildings and fixtures comprising the
offices, distribution centers, warehouses and manufacturing
facilities of Sellers located at 1855 Industrial Street, Los
Angeles, California 90021, the legal descriptions for which are set
forth in Schedule 1.01(A), together with all rights and
appurtenances thereto, subject only to the title exceptions referred
to in Schedule 1.01(A) (singularly an "ACE Facility" and
collectively the "ACE Facilities");
B) The machinery, equipment, office equipment, vehicles, furniture,
computers, software, fixtures, tools, prototypes, samples and other
personal property, whether located at the ACE Facilities or
otherwise (including all such properties and assets that have been
fully depreciated or expended), whether or not any of the foregoing
are or were recorded as assets of Sellers on the books of Sellers,
including, without limitation, those listed or described in Schedule
1.01(B) hereto, it being understood that only a fifty-one percent
(51%) interest in the fixtures in the Los Angeles real estate are
being sold to Buyer;
C) All inventories of raw materials, work in process, finished goods,
supplies, and shipping and packaging materials, as of the Closing
Date (as hereinafter defined, whether located in or about the ACE
Facilities or otherwise, provided that title has not passed to a
customer of Sellers, other than those listed or described in
Schedule 1.01(C);
D) All accounts and notes receivable, barter credits, the note
receivable due from Sellers' Chicago Vice President of Sales, and
additional receivables due from employees of Sellers who become
employees of Buyer (provided that such additional receivables due
from employees shall not exceed Fifty Thousand Dollars ($50,000.00)
in the case of employees who are not officers of Sellers), as of the
Closing Date arising out of the business of Sellers, other than the
accounts and notes receivable described in Section 1.02(E) below,
including all trade accounts receivable, notes receivable and barter
credits arising from services rendered or goods shipped prior to
Closing (as hereinafter defined), even if the related invoices have
not yet been issued, and all claims of Sellers against third parties
relating to the Purchased Assets (as hereinafter defined) or Assumed
Liabilities (as hereinafter defined) arising out of the business of
Sellers, as of the Closing Date, other than any Excluded Assets;
E) All trademarks, service marks, trade names and applications relating
thereto, including the corporate names "ACE NOVELTY CO., INC.,"
"SPECIALTY MANUFACTURING LTD." (but not the name Specialty
Manufacturing, Inc., which ACE previously sold to Laser Friendly,
Inc. pursuant to the sale of ACE's pull tab division) and "ACME
ACQUISITION CORP." (which names Sellers shall cease to use after the
Closing Date and change to names which are in no way similar to "ACE
NOVELTY CO., INC.," "SPECIALTY MANUFACTURING LTD." or "ACME
ACQUISITION CORP." within two (2) business days after the Closing
Date; provided, however, for a period of two (2) years following the
Closing Date, Sellers may refer to their former corporate name (ACE)
to the extent reasonably required in conducting their affairs); the
trade name "ACME PREMIUM SUPPLY CORP.," common law and registered
copyright applications, patents, patent applications, discoveries,
improvements and all other licenses, processes, formulae, trade
secrets, customer lists, mailing lists, blueprints, specifications,
equipment plans, drawings, sketches, storyboards, models,
engineering drawings, know-how, marketing and production information
and inventions, whether patentable or unpatentable, owned or held by
Sellers, as well as all of Sellers' books and records relating to
the foregoing and to the business, assets and properties of Sellers
whether the same are in the possession of Sellers or others;
F) The leases of personal property as listed and described in Schedule
1.01(F) hereto;
G) All agreements or contracts with licensors (including, specifically,
Sellers' files related to such licenses and files relating to
expired licenses, whether the same are in the possession of Sellers
or others), suppliers, customers, sales representatives,
distributors and other third parties relating to the business of
Sellers, including, without limitation, all open purchase orders to
vendors and suppliers or from customers of Sellers and including all
of those agreements and contracts and bids and quotations set forth
in Schedule 1.01(G) hereto, to the extent such agreements and
contracts are assignable by Sellers;
H) All items carried as prepaid expenses (other than prepaid insurance)
and deferred charges of Sellers, deposits with suppliers, travel
advances and all other deposits and advances made in connection with
Sellers' operations;
I) All governmental approvals, authorizations, consents, licenses,
orders, franchises and other permits of all governmental agencies,
whether foreign, federal, state or local, owned, held or utilized by
Sellers in connection with their business and operations set forth
in Schedule 1.01(I) to the extent, if any, they are assignable by
Sellers;
J) All assets included in the Financial Statements (as hereinafter
defined) and similar assets of Sellers acquired in the ordinary
course of business from and after the dates of said Financial
Statements that are owned by Sellers as of the Closing Date, other
than any Excluded Assets;
K) The exclusive right of Buyer to represent itself as carrying on the
business of Sellers in continuation thereof, except as contemplated
by the Puyallup Agreement described in Section 7.16 and the matter
described in Section 4.11; and
L) All other property, assets and rights of Sellers directly or
indirectly relating to the conduct of the business of Sellers,
whether tangible or intangible, owned or held by Sellers, to the
extent they are assignable by Sellers, including, without
limitation, the full benefit of all third-party representations,
warranties, guarantees, indemnities, undertakings, certificates,
covenants, agreements and the like and all security therefor
received by Sellers for the purchase or other acquisition of any
part of the Purchased Assets, except to the extent such property,
assets and rights relate to an Excluded Asset.
The assets, properties and rights which are described in Sections 1.01(A)
through 1.01(L) above, which are to be transferred, sold, conveyed and assigned
by Sellers to Buyer hereunder, are collectively referred to as the "Purchased
Assets."
1.02 EXCLUDED ASSETS. Anything contained in Section 1.01 hereof or in this
Agreement to the contrary notwithstanding, there are expressly excluded from the
Purchased Assets the following:
A) The corporate minute books and stock records of Sellers;
B) Books and records (tax, business and accounting) relating to ACE's
"Puyallup Division" described in Section 1.02(G), to the extent the
same do not evidence the Purchased Assets or the Assumed Liabilities
or business relationships or agreements with a utility, vendee,
customer, trade creditor, trade debtor, vendor or supplier which
Buyer can reasonably be expected to have a business dealing with
following the Closing Date;
C) The shares of capital stock of Sellers and their subsidiaries;
D) All assets held in trust or otherwise in connection with any profit
sharing or retirement plan maintained and established by Sellers or
otherwise held by Sellers in any similar fiduciary capacity together
with all business records related thereto;
E) All accounts receivable and notes receivable owed to Sellers by (i)
any officer, director or employee of Sellers, who does not become an
employee of Buyer as of the Closing Date and, in the case of
accounts receivable and notes receivable owed by employees who are
not officers of Sellers and who do become employees of Buyer as of
the Closing Date, the amount by which the same shall exceed Fifty
Thousand Dollars ($50,000.00) as of the Closing Date, and (ii) those
individuals or entities listed in Schedule 1.02(E), and all security
and records relating to the foregoing;
F) Prepaid insurance;
G) All fixed assets related to ACE's "Puyallup Division," which serves
as the food and souvenir concessionaire for the Western Washington
Fair held in Puyallup, Washington, such assets being listed in
Schedule 1.02(G) hereto, and all contracts, agreements, licenses,
permits and governmental authorizations related to ACE's Puyallup
Division; provided, however, that up to Three Hundred Seventy-Five
Thousand Dollars ($375,000.00) of the book value of such assets
shall be included in the aggregate book value of the assets included
in the Purchased Assets for purposes of calculating the Purchase
Price for the Purchased Assets;
H) Those additional "personal" assets listed in Schedule 1.02(H)
hereto; provided, however, the book value of such assets shall be
included in the aggregate book value of the assets included in the
Purchased Assets for purposes of calculating the Purchase Price for
the Purchased Assets;
I) All accounts receivable, notes receivable, equipment, inventory,
contracts, licenses, permits, authorizations, records and all other
assets of any nature whatsoever of Sellers related to ACE's former
pull tab division known as Specialty Manufacturing, including the
corporate name and trade name "Specialty Manufacturing, Inc.";
J) All federal, state and foreign income tax refunds due Sellers and
deferred tax assets;
K) The Agreement for Sale of Ace Novelty International, Limited;
L) The PMS Distribution Agreement; provided, however, the parties have
made special provisions related thereto in Section 4.11;
M) The amount of inventory which is subject to certain litigation
matters described in Schedule 5.21 and involving claims of
infringement with respect to Fable Toy "Gonzo," Dr. Seuss, "Cat in
the Hat," and Conversation Concepts, "Finger Puppets"
("collectively, "Special Inventory") to the extent the value of the
Special Inventory exceeds Fifty-Three Thousand Dollars ($53,000.00),
as further described in Section 4.12 hereof; and
N) The other assets listed in Schedule 1.02(N).
The assets, properties and rights which are described in Sections 1.02(A)
through 1.02(N) above which are not to be transferred, conveyed or assigned by
Sellers to Buyer are hereinafter collectively referred to as the "Excluded
Assets."
1.03 INSTRUMENTS OF CONVEYANCE AND TRANSFER. At the Closing, Sellers shall
deliver, and shall cause Sellers' Affiliates (as hereinafter defined) to
deliver, to Buyer such warranty deeds, leases, bills of sale and other good and
sufficient instruments of assignment, conveyance and transfer as shall be
effective to vest in Buyer ownership of the Purchased Assets being transferred,
conveyed and assigned hereunder. Simultaneously therewith, Sellers shall take,
and shall cause Sellers' Affiliates to take, all reasonable steps as may be
required to put Buyer in possession and operating control of all the Purchased
Assets.
1.04 ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any contract, license, commitment, sales order, purchase
order or any claim or right of any benefit arising thereunder or resulting
therefrom if an attempted assignment thereof, without the consent of a third
party thereto, would constitute a breach thereof or in any way affect the rights
of Buyer or Sellers thereunder. Sellers shall obtain the third-party consents
required, if any, to assign to Buyer the contracts and agreements set forth in
Schedule 1.04. Sellers shall use their reasonable best efforts to obtain any
third-party consents necessary to assign any other contracts or agreements to
Buyer, but Sellers shall not be obligated to obtain such consents. Buyer shall
assume all of Sellers' obligations under all contracts, licenses and agreements
for which such third-party consents are obtained.
If any third party consent necessary to assign any license of Sellers to
Buyer is not obtained within ninety (90) days following the Closing Date, then
Sellers shall retain the license and all rights and obligations thereunder
including without limitation any royalty guaranties to the licensor. Buyer shall
pay a fee to Sellers in an amount equal to the royalty amount payable by Sellers
to the licensor with respect to the sale of the merchandise by Sellers to Buyer.
Such fee shall be calculated based on the purchase price paid by Buyer to
Sellers for such merchandise. If the licensor enjoins Buyer's resale of such
merchandise (including, without limitation, Saban Power Rangers) after
reasonable best efforts by Buyer and PBYP to defend against such injunction (at
Sellers' and Stockholders' cost provided they are allowed to designate counsel
and control the defense of the claim), then Buyer shall have the right to
require Sellers to purchase Buyer's remaining inventory of such merchandise then
on hand, at a price equal to the price originally paid by Buyer to Sellers for
the remaining inventory of such merchandise. In that event, notwithstanding any
other provisions of this Agreement. Sellers shall be free to resell or otherwise
dispose of such merchandise in any manner whatsoever so long as the value of the
merchandise is less than $50,000 or if the value of such merchandise exceeds
$50,000 in any manner mutually agreed to by Sellers and Buyer.
1.05 ACCESS BY SELLERS AND STOCKHOLDERS. Buyer and PBYP shall, for a
period of three (3) years after the Closing or such longer period that such
records are required to be maintained by law or as may be required for the
purpose of defending a claim against Sellers or Stockholders or for tax
purposes, give to Sellers and Stockholders and their authorized representatives
such access, during normal business hours, to the books and records being
transferred, conveyed and assigned to Buyer hereunder as may be reasonably
required by Sellers and Stockholders. Sellers and Stockholders shall be
entitled, at their own expense, to make extracts and copies of all such books
and records. Anything contained herein to the contrary notwithstanding, neither
Buyer nor PBYP shall be obligated to give Sellers and Stockholders or any such
authorized representatives access to any proprietary information relating to any
period subsequent to the Closing or developed by Buyer or PBYP at their expense
or for their benefit, including, without limitation, tax returns for such
subsequent periods, any appraisal of the Purchased Assets and/or any information
or material developed by or for Buyer or PBYP prior to or after the Closing.
Buyer and PBYP agree that they will not, during such three (3) year period or
such longer period that such records are required to be maintained by law or as
may be required for the purpose of defending a claim against Sellers or
Stockholders or for tax purposes, destroy or cause to be destroyed any books or
records without first advising Sellers and Stockholders and giving Sellers and
Stockholders reasonable opportunity to obtain copies prior to such destruction
of those materials to which Sellers and Stockholders are entitled pursuant to
this Section 1.05 at Sellers' and/or Stockholders' cost and expense.
1.06 INSTRUMENTS GIVING CERTAIN ADDITIONAL POWERS AND RIGHTS; FURTHER
ASSURANCES. At the Closing, Sellers shall constitute and appoint Buyer, its
successors and assigns, the true and lawful attorneys of Sellers with full power
of substitution, in the name of Buyer or the name of Sellers, on behalf of and
for the benefit of Buyer, to collect all accounts receivable included with the
Purchased Assets and other items being transferred, conveyed and assigned to
Buyer as provided herein, to endorse, without recourse, checks, notes and other
instruments included with the Purchased Assets in the name of Sellers for the
purpose of collection, to institute and prosecute, in the name of Sellers or
otherwise, all proceedings which Buyer may deem proper in order to collect,
assert or enforce any claim, right or title of any kind in or to the Purchased
Assets being transferred, conveyed and assigned as provided herein and, subject
to ARTICLE VIII, to defend and compromise any and all actions, suits or
proceedings in respect of any of such Purchased Assets and Assumed Liabilities
and to do all such acts and things in relation thereto as Buyer may deem
advisable. Sellers acknowledge and agree that the foregoing powers are coupled
with an interest and shall be irrevocable. Sellers further agree that Buyer
shall retain for its own account any amounts collected pursuant to the foregoing
powers, and Sellers shall pay to Buyer, if and when received, any amounts which
shall be received by Sellers after the Closing in respect of the Purchased
Assets to be transferred, conveyed and assigned to Buyer as provided herein; and
Buyer shall pay to Sellers, if and when received, any amounts which shall be
received by Buyer after the Closing in respect of the Excluded Assets that are
retained by Sellers or Stockholders as provided herein. Sellers further agree
that, at any reasonable time and from time to time after the Closing, Sellers
shall, upon the request of Buyer, do, execute, acknowledge and deliver or will
cause to be done, executed, acknowledged and delivered, all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney or assurances as
may be reasonably required for the better transferring, assigning, conveying,
granting, assuring and confirming to Buyer, or for aiding and assisting in the
conveyance of or reducing to possession by Buyer, the Purchased Assets, or to
vest in Buyer good, indefeasible and marketable title to the Purchased Assets,
subject to the Permitted Exceptions (as hereinafter defined). Buyer and Sellers
shall each pay fifty percent (50%) of all costs and expenses associated with the
immediately preceding sentence.
ARTICLE II.
ASSUMPTION OF LIABILITIES
2.01 ASSUMED LIABILITIES. Simultaneously with the transfer, conveyance and
assignment to Buyer of the Purchased Assets, Buyer shall assume and agree to pay
and perform only the debts, liabilities and obligations of Sellers (i)
specifically described in Schedule 2.01 attached hereto which shall be updated
to include all liabilities on the Final Balance Sheet (as hereinafter defined)
and shall become the final Schedule 2.01 referred to herein and (ii) as
otherwise specifically provided for in this Agreement. The liabilities and
obligations of Sellers described in this Section 2.01 which are being assumed by
Buyer are hereinafter collectively referred to as the "Assumed Liabilities."
2.02 EXCLUDED LIABILITIES. Buyer shall not be obligated with respect to
any Assumed Liability except to the extent that it constitutes a valid and
legally enforceable claim against Sellers. Except for the Assumed Liabilities
specifically assumed by Buyer as aforesaid and as otherwise specifically
provided for in this Agreement, Buyer is not assuming any other debts,
liabilities or obligations of Sellers or Stockholders, including, without
limitation, the following:
A) All trade, vendor and other accounts payable and accrued expenses in
excess of amounts set forth in Schedule 2.01;
B) All debts, liabilities and obligations of Sellers payable to the
lenders and other third parties listed in Schedule 2.02(B), other
than those specifically included as Assumed Liabilities;
C) All liabilities and obligations of Sellers for foreign, federal,
state and local taxes in excess of amounts thereof reflected in
Schedule 2.01, including, without limitation, interest and penalties
relating thereto, relating to the operation of the business of
Sellers prior to the Closing or related to the transfer, conveyance
and assignment of the Purchased Assets contemplated by this
Agreement, including, without limitation, sales, use, property,
franchise, gross receipts, excise and income taxes, except to the
extent otherwise provided for in this Agreement; provided, however,
Buyer shall be responsible for all state sales taxes and other state
transfer-related taxes (other than state or federal income taxes)
related to the transfer, conveyance and assignment of the personal
property constituting part of the Purchased Assets; D) Liabilities
and obligations to Sellers' customers with respect to shortages and
defects in goods delivered to customers or in transit to customers
prior to the Closing seeking return, replacement and/or repair of
products pursuant either to product warranties extended by Sellers
prior to the Closing or product warranties or obligations implied or
provided by law in excess of $25,000 in the aggregate;
E) All liabilities and obligations of Sellers and/or Stockholders under
this Agreement or arising out of the transactions contemplated
hereby, except as otherwise provided for in this Agreement or any
Exhibit or Schedule hereto;
F) All liabilities and obligations (other than the Assumed
Liabilities), including damages, fines and penalties, with respect
to pending or threatened litigation, suits, claims, demands or
governmental proceedings to the extent they relate to occurrences
prior to the Closing Date in excess of amounts thereof reflected in
Schedule 2.01;
G) Any obligation or liability imposed by law or arising out of or
resulting from Sellers' noncompliance with any federal, state, local
or foreign law, regulation, order or administrative or judicial
determination, including, without limitation, those relating to the
environment, employment practices or the health and safety standards
applicable to employees of Sellers, which arise out of or relate to
an occurrence, condition, fact or circumstance existing prior to the
Closing Date (other than the Assumed Liabilities);
H) All claims, demands, liabilities or obligations of any nature
whatsoever which arise out of or which are based on events occurring
or conditions existing on or before the Closing Date which relate to
products sold or services performed by Sellers on or before the
Closing Date whether founded upon negligence, breach of warranty,
strict liability in tort and/or other legal theory, seeking
compensation or recovery for or relating to injury to persons or
damage to property, notwithstanding that the date on which the
injury, claim, demand, liability or obligation was or is either
before or after the Closing Date, except to the extent such claim,
demand, liability or obligation is covered by insurance;
I) Except to the extent provided for in Section 4.06, all claims,
demands, obligations or liabilities, including the cost and expense
of defense or whether arising out of, based upon or related to
workers' compensation or employer's liability claims, negligence,
strict liability in tort and/or other legal theory seeking
compensation and/or recovery and arising out of injuries and
occupational diseases identifiably sustained by employees of Sellers
on or before the Closing Date;
J) All liabilities and obligations arising from the breach or default
of Sellers, prior to the Closing Date, of any lease, contract,
engagement or commitment, including, without limitation, those
referred to in Sections 1.01(F) or 1.01(G), except to the extent
included in Schedule 2.01;
K) All liabilities and obligations of Sellers and Stockholders in
connection with the conduct of any business of Sellers and
Stockholders (other than the Assumed Liabilities) or in connection
with the conduct of any business by Sellers or Stockholders
subsequent to the Closing Date, including the business presently
being conducted by ACE's "Puyallup Division";
L) Except to the extent provided in Section 4.06, liabilities for
compensation (including salaries, wages and benefits) and claims for
severance and for payments in lieu of notice of termination made by
employees of Sellers who are not employed by Buyer as of the Closing
Date, including, without limitation, terminated employees of ACE's
former gaming division, or by reason of Sellers' failure to comply
with the Worker Adjustment and Retraining Notification Act ("WARN")
with respect to employees of ACE's former gaming division;
M) All liabilities, debts and obligations relating to any employee
profit sharing plans and savings and stock ownership plans and
pension or retirement plans, health, and other employee plans,
including, without limitation, Sellers' Defined Benefit Pension Plan
and 401(k) Plan, and except as otherwise provided in Section 4.06;
N) All liabilities and obligations of Sellers and Stockholders in
connection with the PMS Distribution Agreement, other than as set
forth in Section 4.11;
O) All liabilities and obligations of Sellers and Stockholders in
connection with the acquisition of Acme Premium Supply Corp. (other
than the Assumed Liabilities), including without limitation, the
Forbearance Agreement and the Commission and Sales Agreement
executed in connection therewith); and
P) Any agreement, understanding or commitment between or among Sellers
and any Stockholder or any Affiliate of Sellers that relates to any
aspect of the business of Sellers, including, without limitation,
any contract, agreement or other arrangement (i) providing for the
furnishing of services by, (ii) providing for lease, management,
rental or purchase of real or personal property (other than the real
property leases described in Section 7.35) to or from, or (iii)
otherwise requiring payments to any such person, any member of the
family of any such person or any corporation, partnership, limited
liability company, limited liability partnership, trust or other
entity in which any such person has an interest or is an officer,
director, member, trustee, partner or consultant to, including,
without limitation, all accounts payable and notes payable owed by
Sellers to any of the persons or entities listed in Schedule
1.02(E), which are presently estimated to be approximately One
Million Seven Hundred Thirteen Thousand Three Hundred Nine Dollars
($1,713,309.00) as of March 31, 1996. The debts, liabilities and
obligations of Sellers referred to in Sections 2.02(A) through
2.02(P) which are not being assumed by Buyer as aforesaid are
hereinafter collectively referred to as the "Excluded Liabilities."
ARTICLE III.
CLOSING DATE
3.01 CLOSING DATE. The closing of the transactions contemplated herein
(the "Closing") shall be held on the earlier to occur of (i) the date of
completion of the conditions to Closing referred to in ARTICLE VII hereof or
(ii) May 31, 1996 or such later date as may be mutually agreed to by the parties
(the "Closing Date"); and shall be effective as of the close of business on the
Closing Date. In the event that there is no Closing as of such date, then this
Agreement shall automatically terminate without liability or further obligation
of any party to another; provided, however, that if this Agreement is terminated
because of the breach of this Agreement by the other party, then the
nonbreaching party will retain the right to pursue all legal remedies with
respect to such termination. The Closing shall be held at the offices of LANE
POWELL SPEARS LUBERSKY, 1420 Fifth Avenue, Seattle, Washington, at 10:00 o'clock
a.m. on the Closing Date.
ARTICLE IV.
PURCHASE PRICE AND CERTAIN AGREEMENTS
4.01 PURCHASE PRICE. The aggregate purchase price for the Purchased Assets
as of the Closing Date shall be (i) Three Million One Hundred Twenty-Five
Thousand Dollars ($3,125,000.00), subject to the Estimated Adjustment as
provided in Section 4.03(A) hereof plus the amount of the liabilities and
payments set forth in Schedule 2.02(B) (being the "Cash Purchase Price"), plus
(ii) the issuance by PBYP to Sellers of a Promissory Note in the face amount of
Two Million Nine Hundred Thousand Dollars ($2,900,000.00) in the form attached
hereto as Exhibit "A" (the "Promissory Note") plus (iii) the assumption by Buyer
of the Assumed Liabilities (collectively, (i) through (iii)) after making the
Adjustment as provided in Section 4.03 (the "Purchase Price").
4.02 PAYMENT OF CASH PURCHASE PRICE AND PROMISSORY NOTE. At the Closing,
contemporaneously with delivery of those documents and instruments in the manner
provided in ARTICLE VII hereof, Buyer shall pay the Cash Purchase Price and
deliver the Promissory Note to or for the benefit of Sellers as follows:
A) An amount equal to the liabilities and payments set forth in
Schedule 2.02(B), which shall be updated by Sellers as of the
Closing Date, shall be paid to or for the benefit of Sellers in the
manner set forth in Section 4.04 hereof;
B) An amount equal to Three Million One Hundred Twenty-Five Thousand
Dollars ($3,125,000.00) less the Estimated Adjustment determined by
Sellers pursuant to Section 4.03(A) shall be paid to or for the
benefit of Sellers in the manner set forth in Section 4.04 hereof;
and
C) Buyer shall deliver to Sellers the Promissory Note, which Promissory
Note shall provide, without limitation, that (i) Six Hundred
Thousand Dollars ($600,000.00) of principal thereof, subject to the
adjustment ("Adjustment") as set forth in Section 4.03(H), together
with interest thereon at the rate of eight percent (8%) per annum,
shall be due and payable within two (2) business days following the
determination of the Final Balance Sheet, (ii) One Million Dollars
($1,000,000.00) of principal thereof shall be due and payable six
(6) months from the Closing Date, of which Five Hundred Thousand
Dollars ($500,000.00) shall be subject to offset for any claims by
Buyer against Seller and Stockholders pursuant to the terms of the
Promissory Note ("Offset"), (iii) Five Hundred Thousand Dollars
($500,000.00) of principal thereof (the "Escrow Amount") shall be
delivered by Buyer to Texas Commerce Bank, National Association, as
escrow agent (the "Escrow Agent") pursuant to the terms of the
Escrow Agreement attached hereto as Exhibit "B," six (6) months from
the Closing Date to be held by the Escrow Agent, subject to Offset,
for an additional period of six (6) months pursuant to the terms of
the Escrow Agreement, (iv) Eight Hundred Thousand Dollars
($800,000.00) of principal thereof, subject to Offset, shall be due
and payable three (3) years from the Closing Date, and (v) interest
on the unpaid principal, other than with respect to the Six Hundred
Thousand Dollars ($600,000.00) referred to in (i) above, shall
accrue at the rate of twelve percent (12%) per annum during the
first six months that the Promissory Note shall remain outstanding
and at the rate of ten percent (10%) per annum thereafter, with
interest being paid monthly in arrears. Unless prohibited by the
Banks (as hereinafter defined), the Promissory Note shall be secured
by a security interest in and lien on all of the assets of Buyer and
PBYP including, without limitation, on all real property of Buyer
and PBYP (the "Collateral") which security interest and lien shall
be subordinate only to the security interests and liens of Chemical
Bank and Texas Commerce Bank, National Association (collectively the
"Banks") granted by Buyer and PBYP in connection with Buyer's and
PBYP's financing of the transaction contemplated by this Agreement.
Buyer and PBYP shall execute at Closing a security agreement,
mortgages or deeds of trust in a form reasonably satisfactory to
Sellers and Stockholders (the "Security Agreements"). Sellers and
Stockholders shall subordinate their security interests and liens on
the Collateral to the liens and security interests of the Banks and
any other financial institutions providing loans to Buyer or PBYP
from time to time. Buyer and PBYP shall use their best efforts and
shall provide Sellers and Stockholders with evidence thereof, to
cause the Banks to consent to the security interests and liens on
the Collateral in favor of Sellers and Stockholders as described
herein.
4.03 ADJUSTMENT TO PURCHASE PRICE. The Adjustment will be determined as
follows:
A) ESTIMATED ADJUSTMENT. Prior to Closing, Sellers (using their
reasonable discretion) shall provide to Buyer an estimate of the
Adjustment (the "Estimated Adjustment") to be calculated pursuant to
this Section 4.03, and, if the Estimated Adjustment is a negative
number, such amount shall be deducted from the Cash Purchase Price
payable in the manner set forth in Section 4.02.
B) PROPOSED BALANCE SHEET. Within twenty (20) days after the Closing,
Sellers, at their cost, will deliver to Buyer a proposed final
balance sheet prepared in accordance with the accounting principles
described in Section 4.03(D) (the "Proposed Balance Sheet") stating
the aggregate book value of assets included in the Purchased Assets
and the aggregate book value of balance sheet liabilities included
in the Assumed Liabilities as of the Closing.
C) FINAL BALANCE SHEET. Within forty-five (45) days after the delivery
of the Proposed Balance Sheet, Buyer, at its cost, will cause
Coopers & Lybrand LLP or, in the event Coopers & Lybrand LLP
declines, another "Big 6" accounting firm selected by Buyer (the
"Auditors") to complete an audit of the Proposed Balance Sheet
conducted in accordance with Generally Accepted Auditing Standards
as modified by the Supplemental Accounting Principles described in
Section 4.03(D) (the "Audit"). Upon completion of the Audit, all
proposed audit adjustments resulting from the Audit ("Proposed Audit
Adjustments") will be provided to Buyer and Sellers, which shall
have fifteen (15) days to review such Proposed Audit Adjustments
("Review Period"). The aggregate book value of the Purchased Assets
and the aggregate book value of the Assumed Liabilities not impacted
by the Proposed Audit Adjustments will be deemed to be as set forth
in the Proposed Balance Sheet. At or before the end of the Review
Period, each of Buyer and Sellers will either (i) accept the
Proposed Audit Adjustments in their entirety, in which case the
Proposed Balance Sheet will be adjusted to include the Proposed
Audit Adjustments. Accordingly, the Proposed Balance Sheet, as
adjusted for the accepted Proposed Audit Adjustments, will then
become the "Final Balance Sheet," or (ii) deliver to the other party
written notice and a detailed written explanation of those Proposed
Audit Adjustments which such party disputes. Within a further period
of fifteen (15) days from the end of the Review Period, the parties
will attempt to resolve in good faith any disputed items. Failing
such resolution, the unresolved Proposed Audit Adjustments will be
referred to final binding resolution to a nationally recognized firm
of certified public accountants mutually acceptable to Sellers and
Buyer. Upon resolution by the independent accounting firm of such
remaining Proposed Audit Adjustments, based on the accounting
principles described in Section 4.03(D), the Proposed Balance Sheet
will be adjusted for the previously agreed upon Proposed Audit
Adjustments plus the adjustments determined by the independent
accounting firm and shall become the "Final Balance Sheet."
D) ACCOUNTING PRINCIPLES. The aggregate book value of the Purchased
Assets (including those provided in Sections 1.02(G) and 1.02(H))
and the aggregate book value of the Assumed Liabilities will be
determined in accordance with Generally Accepted Accounting
Principles applied consistent with ACE's December 31, 1995 audited
financial statements including the notes thereto, as modified by the
Supplemental Accounting Principles described in Schedule 4.03(D)
hereto, for purposes of determining the Closing Net Book Value (as
hereinafter defined).
E) BASE-LINE NET BOOK VALUE. The Base-Line Net Book Value will be an
amount equal to a negative One Hundred Ninety-Four Thousand, Seven
Hundred Eighty-Nine Dollars ($194,789.00) plus the amount of the
liabilities set forth on Schedule 2.02(B), if the Closing Date
occurs on or before April 30, 1996. Should the Closing Date occur
between May 1, 1996 and May 31, 1996, the aforementioned Base-Line
Net Book Value will be adjusted by a positive Six Thousand Three
Hundred Eleven Dollars ($6,311.00) per day through the Closing Date.
F) DETERMINATION OF CLOSING NET BOOK VALUE. The Closing Net Book Value
will be an amount equal to the aggregate book value of Purchased
Assets included in the Final Balance Sheet minus the aggregate book
value of the Assumed Liabilities included in the Final Balance Sheet
as of the Closing, both as determined pursuant to Sections 4.03(B)
through 4.03(D).
G) AMOUNT OF ADJUSTMENT. If the Closing Net Book Value is equal to the
Base-Line Net Book Value, then the amount of the Adjustment will
equal zero. If the Closing Net Book Value is less than the Base-Line
Net Book Value, then the amount of the Adjustment will be a negative
number equal to the amount by which the Closing Net Book Value is
less than the Base-Line Net Book Value. If the Closing Net Book
Value is greater than the Base-Line Net Book Value, then the amount
of the Adjustment will be a positive number equal to the amount by
which the Closing Net Book Value is greater than the Base-Line Net
Book Value.
H) SETTLEMENT OF ADJUSTMENT. If the Adjustment is a negative number and
exceeds the Estimated Adjustment, Buyer shall be entitled to offset
against the Promissory Note an amount equal to the difference
between the Adjustment and the Estimated Adjustment from the first
Six Hundred Thousand Dollars ($600,000.00) of principal due and
owing under the Promissory Note pursuant to the terms of the
Promissory Note, and, if the amount of the offset exceeds Six
Hundred Thousand Dollars ($600,000.00), Sellers shall pay to Buyer
an amount equal to such excess within five (5) business days
following the determination of the Adjustment. If the Adjustment is
negative and is less than the Estimated Adjustment, Buyer shall pay
to Sellers an amount equal to such difference within five (5)
business days following the determination of the Adjustment. If the
Adjustment is a positive number, Buyer shall pay to Sellers within
five (5) business days following the determination of the Adjustment
an amount equal to the Adjustment plus the Estimated Adjustment if
said Estimated Adjustment was initially a negative adjustment.
4.04 METHOD OF PAYMENT. All payments of the Cash Purchase Price,
including, without limitation, payments made by Buyer for the benefit of Sellers
to those persons and entities listed on Schedule 2.02(B), or any portion
thereof, and all payments remitted under this Agreement shall be made in the
following manner:
A) Upon the prior written request of the party entitled to receive such
payments, by depositing, by bank wire transfer, the required amount
(in immediately available funds) in an account of such party
designated in writing by such party for such purpose on the date
such payment is due; or
B) By delivery to the party entitled to receive such payment of one or
more bank checks (in immediately available funds) payable to the
order of such party.
4.05 ALLOCATION OF PURCHASE PRICE. Buyer, Sellers and Stockholders
covenant and agree with each other that the Purchase Price shall be allocated
among the Purchased Assets as will be determined by Buyer upon determination of
the Final Balance Sheet. Buyer and Sellers covenant to file all tax returns on a
basis consistent with such allocation. Sellers and Buyer shall agree to the
allocations required under Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code") and Sellers and Buyer will each file Internal Revenue
Service Form 8594 reflecting the final agreed upon Purchase Price allocation.
4.06 EMPLOYEE MATTERS. Notwithstanding anything to the contrary contained
herein, the following shall apply with respect to employment matters:
A) HIRED AND TERMINATED EMPLOYEES. Sellers will provide Buyer with a
list of all of Sellers' employees as of the Closing Date. Sellers
shall terminate all their employees as of the Closing Date. Set
forth in Schedule 4.06 is a list of employees that Buyer will not
employ as of the Closing (the "Terminated Employees"). Except with
respect to the Terminated Employees, Buyer shall immediately as of
the Closing employ all other employees of Sellers (the "Hired
Employees") at a salary or wage comparable or better than currently
paid by Sellers (except with respect to Ronald S. Mayers and James
A. Weisfield, whose compensation shall be governed by the Employment
Agreements in the forms of Exhibits "E" and "F" hereto), and shall
provide benefits to the Hired Employees that are comparable to those
currently offered by Buyer to its employees based upon job
responsibility, to the extent the Hired Employees currently have
those benefits. Sellers shall be responsible for compensation,
wages, salary and severance pay (including without limitation any
liability under the WARN Act) and benefits to its employees prior to
the Closing Date, and Buyer shall be responsible for all
compensation, wages, salary and severance pay (including without
limitation any liability under the WARN Act) and benefits for the
Hired Employees beginning on or after the Closing Date. Buyer shall
also be responsible for any liability incurred by Sellers under the
WARN Act with respect to the Terminated Employees if such liability
arises from actions of Buyer or PBYP on or after the Closing Date.
Accrued compensation, wages and vacation pay for the period ended as
of the Closing Date with respect to Hired Employees shall be an
Assumed Liability, as set forth on Schedule 2.01. B) TERMINATION OF
SELLERS' EMPLOYEE WELFARE BENEFIT PLANS. As of the Closing Date, all
Hired Employees shall cease to be covered by any employee welfare
benefit plans maintained by Sellers, including, without limitation,
plans, programs, policies and arrangements which provide medical and
dental coverage, life and accident insurance, disability coverage,
and vacation and severance pay (collectively, "Welfare Plans"). With
respect to claims under Sellers' Welfare Plans, Sellers shall retain
responsibility for all Welfare Plan claims, whenever made, by
employees of Sellers (i) under any medical, dental or health plan
with respect to an injury or occupational disease identifiably
sustained prior to the Closing Date, and (ii) incurred under any
life insurance plans with respect to deaths occurring prior to the
Closing Date. Buyer shall be responsible for any claims which
occurred on or after the Closing Date with respect to the Hired
Employees arising under any welfare plan established or maintained
by Buyer.
C) WORKERS' COMPENSATION. With respect to claims under workers'
compensation coverage, Sellers will be responsible for injuries and
occupational diseases identifiably sustained by Sellers' employees
prior to the Closing Date, and Buyer will be responsible for
injuries and occupational diseases identifiably sustained by the
Hired Employees on and after the Closing Date. Buyer shall be
responsible for payment of long and short-term disability
occurrences after the Closing with respect to Hired Employees.
D) CHICAGO LABOR UNION CONTRACT. Except as set forth in Schedule 5.24,
prior to the Closing, Sellers shall not enter into any new
collective bargaining agreement or renew any existing collective
bargaining agreement without the prior consent of Buyer.
4.07 FRANCHISE AGREEMENTS. As of the Closing Date, Sellers shall assign to
Buyer and Buyer shall assume from Sellers, all of Sellers' right, title and
interest in and to Sellers' franchise agreements listed in Schedule 1.01(G) in
accordance with the terms of such franchise agreements. Sellers shall be
responsible for any liability with respect to noncompliance with applicable
franchise laws prior to the Closing Date, and Buyer acknowledges that Sellers
have not maintained a current offering document with respect to the sale of
franchises. Buyer shall be responsible for any liability with respect to
noncompliance with applicable franchise laws beginning on or after the Closing
Date. Buyer agrees to comply with all applicable franchise laws on and after the
Closing Date. Buyer shall also be responsible for any liability incurred by
Sellers under applicable franchise laws if such liability arises from actions of
Buyer or PBYP on or after the Closing Date.
4.08 GUARANTY. PBYP hereby unconditionally guarantees the due and punctual
payment and performance of all of Buyer's obligations hereunder or otherwise
related thereto.
4.09 ENVIRONMENTAL REMEDIATION. Notwithstanding anything to the contrary
in this Agreement, except as expressly provided in this Section 4.09, Sellers
and Stockholders shall have no liability or obligations to Buyer or PBYP under
this Agreement with regard to the remediation of Hazardous Substances present on
the ACE Facility on the Closing Date, by reason of a breach of Seller's
representations and warranties in Section 5.28 or otherwise; provided, however,
this limitation shall not limit Sellers' and Stockholders' liability under
Section 5.28 with respect to claims other than for the remediation of Hazardous
Substances. Sellers and Stockholders shall be responsible for completing the
remedial action recommended by EPS Environmental Services, Inc. in their
asbestos survey/assessment contained in Section V.E of the Phase II
environmental assessment dated February 2, 1994, delivered to Buyer with respect
to asbestos remediation at the Chicago ACE Facility, which remedial action has
been completed by Sellers and Stockholders except for removal of 810 linear feet
of TSI which will be completed prior to the Closing Date. Sellers and
Stockholders shall also be liable to Buyer and PBYP for the direct,
out-of-pocket costs and expenses of Buyer related to the remediation of the
Hazardous Substances present at the ACE Facilities on the Closing Date, arising
from a breach of a representation or warranty in Section 5.28, but only to the
extent such remediation is now, or in the future, required by a local, state, or
federal agency; provided, however, Sellers shall not be obligated for such
remediation costs under this Section 4.09 if such required remediation results
from (i) a change in the use or operation of the ACE Facilities or an addition
to or modification of any improvements situated on the ACE Facilities subsequent
to the Closing Date, or (ii) any addition to or modification of any applicable
Environmental Laws (as hereinafter defined) subsequent to the Closing Date.
Sellers shall have the sole and exclusive control over the actual conduct of
such remediation and may use the least expensive remediation method available so
long as all such remediation is conducted in accordance with applicable
Environmental Laws. Sellers' and Stockholders' obligations under this Section
4.09 shall be subject to the indemnification procedures and limitations set
forth in Article VIII.
4.10 AMERICANS WITH DISABILITIES ACT. Notwithstanding anything to the
contrary in this Agreement, Sellers and Stockholders shall have no liability or
obligation under this Agreement with respect to any breach of any
representation, warranty or covenant or pursuant to the indemnity in Article
VIII or otherwise with respect to any claim related to noncompliance with the
Americans With Disabilities Act ("ADA") except to the extent such claim results
from actions required by a local, state, or federal agency for noncompliance
existing on or prior to the Closing Date; provided, however, Sellers shall have
no liability or obligation to Buyer under this Agreement if such claim results
from (i) a change in the use or operation of the ACE Facilities or an addition
to or modification of any improvements situated on the ACE Facilities subsequent
to the Closing Date, or (ii) any amendment, addition or modification to the ADA
subsequent to the Closing Date. Sellers shall have the sole and exclusive
control over the actual conduct of any remediation required to comply with the
governmental action and may use the least expensive means of remedying and
mitigating the claim so long as all such action by Sellers is conducted in
accordance with the ADA.
4.11 EUROPEAN DISTRIBUTION. The parties acknowledge that, pursuant to
Section 1.01, Sellers have conveyed to Buyer trademarks and copyrights with
respect to certain proprietary designs and styles developed by Sellers (E.G.,
designs which have not been licensed from third-party licensors) ("Proprietary
Styles"). The parties further acknowledge that Sellers may be required to sell
or license such Proprietary Styles to PMS International Group PLC ("PMS") or
allow PMS to otherwise use such Proprietary Styles pursuant to that certain
Distribution Agreement between ACE and PMS dated as of March 4, 1995 (the "PMS
Agreement"). To facilitate Sellers' compliance with any such requirement, Buyer
shall grant to Sellers at Closing an exclusive right to sell or license such
Proprietary Styles to PMS or otherwise allow PMS to use the Proprietary Styles,
but not any other third party, for distribution in the Territory (as defined in
the PMS Agreement), during the remaining current term of the PMS Agreement.
Buyer and its Affiliates shall not, during the remaining term of the PMS
Agreement, sell, license or otherwise use or allow any other party to use any
Proprietary Styles for distribution within the Territory as defined in the PMS
Agreement. Sellers shall pay to Buyer any royalty payments paid by PMS to
Sellers after the Closing pursuant to the PMS Agreement less any costs or
expenses (including reasonable attorneys' fees) incurred by Sellers in
connection with the PMS Agreement. Buyer and its Affiliates further agree that
they shall not use the name "Ace Novelty International Limited" in the Territory
covered by the PMS Agreement and shall not use the name "Ace Novelty" in the
Territory during the term of the PMS Agreement.
4.12 LITIGATION. The parties acknowledge that all litigation matters prior
to the Closing Date, including, without limitation, the litigation matters set
forth in Schedule 5.21, constitute Excluded Liabilities and are not being
assumed by Buyer under this Agreement. Notwithstanding the foregoing, Buyer
shall reimburse Sellers for fifty percent (50%) of all costs and expenses
incurred by Sellers subsequent to the Closing Date with respect to such
litigation matters, up to a maximum payment of Twenty-Five Thousand Dollars
($25,000.00). The parties further acknowledge that in the event the amount of
the Special Inventory is in excess of Fifty-Three Thousand Dollars ($53,000.00),
the excess of such Special Inventory shall be deemed an Excluded Asset, and the
excess of the Special Inventory shall be delivered to Sellers and not included
in the Purchased Assets in the Final Balance Sheet. Buyer and PBYP shall not
produce and sell any additional Special Inventory beyond the quantities of
Special Inventory purchased from Sellers at Closing.
4.13 BANK COMMITMENT. Buyer and PBYP shall use their best efforts and
shall provide Sellers and Stockholders with evidence thereof, to obtain the
financing for the transaction contemplated herein from Chemical Bank and Texas
Commerce Bank, National Association in accordance with the financing commitment
letter, a copy of which is attached as Exhibit "C" or on terms more favorable to
Buyer and PBYP.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF
SELLERS AND STOCKHOLDERS
Sellers and Stockholders hereby, jointly and severally, represent and
warrant to Buyer and PBYP as follows:
5.01 ORGANIZATION AND QUALIFICATION. Each of Sellers is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite corporate power and authority
to own, lease and operate its property, and to carry on its business as it is
now being conducted, and is duly qualified and in good standing to do business
in every jurisdiction where failure to qualify would have a material adverse
effect on the business conducted by Sellers.
5.02 EQUITY INVESTMENTS. Except as set forth in Schedule 5.02, there are
no corporations, partnerships, joint ventures or other entities in which Sellers
have directly, or indirectly, any equity or other ownership interest.
5.03 ARTICLES OF INCORPORATION, BYLAWS, CORPORATE MINUTES AND PERMITS.
Sellers have delivered to Buyer copies of the Articles of Incorporation, as
amended, of each of Sellers (certified as of a recent date by their respective
jurisdictions of incorporation), and the Bylaws, as amended, of each of Sellers
(certified as of the date hereof by its Secretary), all of which copies are true
and correct. Sellers have furnished to Buyer for review, true and complete
copies of the corporate minutes of Sellers which contain a complete and accurate
record of all formal actions taken by the Stockholders and directors of Sellers
and all predecessor stockholders and directors of Sellers and which authorized
any corporate change, such as amendments to the charter, merger, liquidation or
dissolution. All corporate changes respecting Sellers have been duly and
formally authorized by appropriate corporate action and the board of directors
and Stockholders have ratified all prior actions taken by the boards of
directors of Sellers. Except as set forth on Schedule 5.03, to the best of
Sellers' knowledge, Sellers possess all governmental licenses, permits and other
authorizations necessary on the Closing Date for the continued conduct of
Sellers' business substantially as now conducted without interference or
interruption.
5.04 FINANCIAL STATEMENTS. Sellers and Stockholders have delivered or will
deliver to Buyer copies of the consolidated audited Balance Sheets of Sellers as
of December 31, 1993, 1994 and 1995, and the related Statements of Operations,
Stockholders' Equity and Cash Flows, including the notes thereto, for each of
the three years in the period ended December 31, 1995, each of which is true,
accurate and complete and presents fairly the financial position of Sellers as
of the dates stated and the results of operations for the periods stated in all
material respects in accordance with generally accepted accounting principles,
consistently applied (hereinafter collectively referred to as the "Financial
Statements").
5.05 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since December 31, 1995,
except as disclosed in Schedule 5.05 hereto, there have not been:
A) Any changes in the affairs, business, prospects, condition
(financial or otherwise or, to the best of Sellers' knowledge,
arising as a result of any legislative or regulatory change),
operations, liabilities, earnings or business of Sellers which has
or will have, individually or in the aggregate, a material adverse
effect on the business of Sellers;
B) Any material damage, destruction or casualty loss (whether or not
covered by insurance) adversely affecting the business, operations,
properties, assets or condition (financial or otherwise) of Sellers;
C) Any changes in the Articles of Incorporation or Bylaws of Sellers;
D) Any increase in the compensation payable or to become payable by
Sellers to any officers, employees, consultants or agents of Sellers
other than routine increases made in the ordinary course of business
consistent with the past practice of Sellers, or any bonus,
incentive compensation, service award or other like benefit,
granted, made or accrued, contingently or otherwise, to or to the
credit of, any of such officers, employees, consultants or agents
other than in the ordinary course of business, or any employee
welfare, pension, retirement or similar payment or arrangement made
or agreed to by Sellers with respect to any such officer, employee,
consultants or agent other than in the ordinary course of business;
E) Any pending or threatened labor trouble, controversies or
unsettled grievances between Sellers and any of their employees or a
collective bargaining organization representing or seeking to
represent such employees, or any entrance into any collective
bargaining agreement by Sellers with respect to any such employees;
F) Any sale, assignment or transfer of any asset, property or right of
Sellers or any conducting of the business of Sellers other than in
the ordinary course of business;
G) Any material cancellation of any debts owed to, or claims of,
Sellers (except to the extent that such debts or claims constitute
Excluded Assets);
H) Any borrowing of money by Sellers, any increase in any existing
indebtedness of Sellers or the incurrence of any obligation or
liability in the aggregate (whether absolute or contingent) in
excess of Ten Thousand Dollars ($10,000.00) other than in the
ordinary course of Sellers' business;
I) Any occurrence of any losses or knowing waiver of any rights of
value by Sellers in connection with any aspect of their business
whether or not in the ordinary course of Sellers' business which
could materially and adversely affect the business of Sellers;
J) Any cancellation, termination or material amendment of any material
contract, agreement, license or other instrument to which Sellers
are a party or any waiver of any material rights of value to the
business of Sellers;
K) Any material failure on the part of Sellers to use all reasonable
efforts to operate their business in the ordinary course so as to
preserve their business organizations intact, including the services
of their present officers and employees and the goodwill of Sellers'
suppliers, licensors, customers and others having business relations
with Sellers; or
L) Any agreement by, or commitment of, Sellers to do any of the
foregoing.
5.06 REAL PROPERTY - OWNED/LEASED. Except as set forth in Schedule
1.01(A), Sellers or their Affiliates will as of the Closing own good, marketable
and indefeasible fee simple title to the ACE Facility located in Chicago,
Illinois; and Affiliates of Sellers own good, marketable and indefeasible fee
simple title to a one hundred percent (100%) interest in the ACE Facility
located at 1855 Industrial Street, Los Angeles, California. Sellers lease the
Bellevue, Washington ACE Facility under a valid and subsisting lease from a
partnership controlled by Stockholders. Except as set forth in Schedule 5.06
hereto, (i) the ACE Facilities are in compliance with all applicable federal,
state and local laws and regulations (including, without limitation, those
relating to environmental protection, conservation, and occupational safety and
health), with all applicable zoning ordinances and building codes, and with the
ADA except for such noncompliance as would have not more than a Twenty-Five
Thousand Dollar ($25,000) adverse effect on Sellers' business; provided,
however, that Sellers' liability with respect to any noncompliance with the ADA
shall be limited as provided for in Section 4.10, (ii) there are no pending or
threatened legal proceedings affecting the ACE Facilities other than those
disclosed elsewhere herein or in the Schedules attached hereto, (iii) except as
set forth in Schedule 1.01(A) for current taxes which are not yet due or
payable, there are no public assessments or similar charges on the ACE
Facilities, (iv) there are no pending or threatened eminent domain proceedings
which could affect the ACE Facilities, nor, to the best of Sellers' and
Stockholders' knowledge, are there any facts which might give rise to such a
proceeding, (v) to the best of Sellers' and Stockholders' knowledge, there are
no plans or studies to alter any street or highway contiguous to the ACE
Facilities or to remove, eliminate or modify any railroad spur line and access
rights to same, (vi) the ACE Facilities have all utilities necessary for the
proper and continued operation of the ACE Facilities in the manner currently
operated by Sellers, (vii) all necessary permits and licenses for the
construction of improvements at the ACE Facilities and for the operation, use
and occupancy thereof by Sellers have been obtained and are in full force and
effect, (viii) except as set forth in Schedule 1.01(A), there is no written or
oral agreement of Sellers affecting the Chicago and Los Angeles ACE Facilities
with any governmental agency or private person, (ix) there are no leases,
subleases, occupancies or tenancies in effect pertaining to the ACE Facilities,
except as set forth in Schedule 5.06, and (x) upon payment of the currently
outstanding indebtedness owed to U.S. Bank of Washington, N.A., Mercantile Bank
of St. Louis, N.A. and Seattle-First National Bank, which hold liens on or
security interests in the Chicago ACE Facility and the Los Angeles ACE Facility
located at 1855 Industrial Street, the Chicago and Los Angeles ACE Facilities
will at the Closing be free and clear of all escrows, claims, options, rights of
first refusal, indentures, licenses, sales contracts, mortgages, easements,
restrictions, liens, pledges, charges, security interests, options and
encumbrances of every kind and character, except those set forth in Schedule
1.01(A) ("Permitted Exceptions").
5.07 PERSONAL PROPERTY - OWNED. Except as set forth in Schedule 5.07
hereto, all personal property included within the Purchased Assets conforms in
all material respects to all applicable foreign, federal, state and local laws
and regulations (including, without limitation, those relating to environmental
protection, conservation and occupational safety and health). Except as set
forth in Schedule 5.07 hereto, to the best of Sellers' and Stockholders'
knowledge after review of the same, all personal property included with the
Purchased Assets, including, without limitation, the personal property
identified in Schedule 1.01(B) hereto and all buildings and improvements
included within the real property to be conveyed hereunder are structurally
sound, without more than Twenty-Five Thousand Dollars ($25,000) in the aggregate
of defects and are in good operating condition and repair for the purposes
presently used, and there does not exist any condition that interferes with the
economic value thereof as presently used.
5.08 PERSONAL PROPERTY - LEASED OR NOT OWNED. There are no leases or other
agreements under which Sellers are lessee of or hold or operate any items of
machinery, equipment, vehicles, office furniture or fixtures, except as shown in
Schedule 1.01(F) hereto.
5.09 TRADE ACCOUNTS RECEIVABLES. Schedule 5.09 hereto contains a true aged
list of unpaid trade accounts receivable and notes receivable constituting part
of the Purchased Assets (including names and Sellers' list of addresses) owing
to Sellers from unrelated third parties as of the dates referenced therein,
which shall be updated as of the Closing Date within twenty (20) days after the
Closing Date. Except as set forth in Schedule 5.09 hereto, all of the foregoing
constitute and will constitute only valid claims and arose in the ordinary
course of business; and, except as specifically identified in Schedule 5.09
hereto, as of such respective dates, there was and will be (i) no trade account
or trade debtor who has refused or threatened to refuse to pay its obligations
for any reason, (ii) no trade account or trade debtor who is known to be
insolvent or in bankruptcy, and (iii) no trade account pledged to any third
party; provided, however, Sellers do not guarantee the collectibility of such
accounts receivable and notes receivable.
5.10 TITLE TO ASSETS. Sellers will, at Closing, have good, marketable and
indefeasible title to all of the Purchased Assets with the exception of those
properties and assets reflected as leased, licensed or pledged by Sellers in the
Schedules hereto. Except as set forth in Schedule 5.10, with the exception of
(i) liens for taxes accrued but not yet payable, and (ii) liens arising as a
matter of law in the ordinary course of business as to which there is no known
default, none of the Purchased Assets as of the Closing will be subject to any
lease, lien, security interest, mortgage, charge, easement or encumbrance.
Except as set forth herein, none of the assets, buildings, structures and
appurtenances of Sellers or the operation or maintenance thereof as now operated
and maintained, contravenes any applicable zoning ordinance or other
administrative regulation or violates any restrictive covenant or any provision
of law, the enforcement of which could in any material respect interfere with
the continued operation of the businesses of Sellers in substantially the manner
in which such business is presently being conducted or could materially affect
the value of properties and assets of Sellers.
5.11 INVENTORIES. Except as set forth in Schedule 5.11, Sellers hold no
materials or inventories on consignment, and except for goods in transit in the
ordinary course, no materials or inventories are in the possession of others.
5.12 SUPPLIERS AND CUSTOMERS. Except as disclosed in Schedule 5.12, to the
best of Sellers' knowledge, the relationship of Sellers with its licensors,
suppliers, customers and creditors is good and there is no indication of any
intention to terminate or materially modify any of such relationships.
5.13 OTHER AGREEMENTS. Except as disclosed in Schedule 5.13 hereto, as of
the Closing Date, Sellers are not a party to or bound by (whether written or
oral): (i) any employment contracts or agreements, consulting or other similar
formal agreements or any collective bargaining or labor agreements or any other
agreements or arrangements with any officer, employee, sales representative,
distributor, agent, manufacturer's representative or consultant or person
serving in a similar capacity, with respect to compensation; (ii) any contract
for the purchase of any materials, supplies, equipment or inventory, or for sale
of any inventory (whether formal or informal, written or oral), except contracts
entered into in the ordinary course of business; (iii) any lease or license to
use any real or personal property (whether formal or informal, written or oral);
(iv) any license to use, manufacture, distribute or produce toy, novelty and
other items distributed by Sellers (whether formal or informal, written or
oral); or (v) any contract, agreement or other commitment (except those entered
into in the ordinary course of business, or other than those listed in Schedule
5.13 hereto), requiring a payment by Sellers after the date hereof (whether
formal or informal, written or oral). Except as disclosed in Schedule 5.13
hereto, Sellers are not a party to or bound by any notes, loan agreements,
capitalized leases, letters of credit, commitments, guarantees, agreements or
other arrangements relating to any indebtedness. Except as described in Schedule
5.13, there are no breaches or defaults nor, to the best of Sellers' knowledge,
any basis therefor by any of the parties to the agreements described in Schedule
5.13 hereto.
5.14 CONFLICT OF INTEREST. Except as disclosed in Schedule 5.14 hereto,
neither Stockholders nor any officer or director of Sellers nor any person
controlling, controlled by or under common control with Sellers ("Affiliate")
will immediately after the Closing Date have any direct or indirect interest,
whether through ownership of securities or otherwise, in (i) any entity which
does business with Sellers or is competitive with its business, or (ii) any
property, asset or right which is used by Sellers in the conduct of such
business, except for the Excluded Assets and interests not exceeding one percent
(1%) of any company which files periodic reports under Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended.
5.15 ADEQUATE FACILITIES AND RIGHTS. Except for the matters described in
Sections 1.02(G), 4.11, 5.21, and 7.16 and the Schedules thereto and the matters
involving the Special Inventory, Buyer will, on the Closing Date, have all of
the means and rights to sell the same items and perform the same services as
presently are being sold or performed by Sellers in all material respects and
without incurring license fees or royalties beyond those presently being
incurred by Sellers, or, to the best of Sellers' knowledge, any claim of any
infringement of patent or trademark rights.
5.16 PATENTS AND TRADEMARKS. Except as disclosed in Schedule 5.16 hereto,
there are no (i) licenses held by Sellers, or (ii) patents, trademarks, trade
names, service marks, assumed names, or copyrights presently held by Sellers.
Except as disclosed in Schedule 5.16 hereto, Sellers pay no royalty to anyone
under any patent or license; and, to the best of Sellers' knowledge after review
of its products, no product manufactured, marketed or sold by Sellers violates
any license or infringes any patent, trademark, service mark, know-how,
proprietary process, formulae, assumed name, trade name, license or copyright of
another. There is no pending or, to the best of Sellers' knowledge, threatened
claim or litigation against Sellers or, to the best of Sellers' knowledge, any
basis therefor contesting the right to use or the validity of any of the items
contemplated in this Section 5.16 or set forth in Schedule 5.16 hereto.
5.17 AUTHORIZATION. Sellers have the full corporate power to enter into
this Agreement and to carry out their obligations hereunder. The execution,
delivery and performance of this Agreement by Sellers have been duly and
effectively authorized and approved by all requisite corporate action of Sellers
(certified copies of which actions have been or prior to the Closing will have
been delivered to Buyer) and no other corporate acts or proceedings on the part
of Stockholders or Sellers are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement constitutes a valid and legally
binding obligation of Sellers and Stockholders except as enforceability may be
affected by bankruptcy, insolvency, moratorium or other laws governing the
enforcement of creditors' rights. Neither Sellers nor Stockholders has any legal
obligation, absolute or contingent, to any person or firm to sell any of
Sellers' assets (other than in the ordinary course of business) or to effect any
merger, consolidation or other reorganization of Sellers or to enter into any
agreement with respect thereto. Except as disclosed herein or in any Schedule
hereto, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by Sellers
or Stockholders with any of the provisions hereof will (i) violate, or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Sellers under any of the
terms, conditions or provisions of the Articles of Incorporation or Bylaws of
Sellers or any note, bond, mortgage, indenture, deed of trust, lease, license,
agreement (whether oral or written) or other instrument or obligation to which
Sellers or Stockholders are bound, or by which Sellers or Stockholders or any of
their properties or the Purchased Assets may be bound, or (ii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Stockholders, Sellers or any of their properties or the Purchased Assets. No
consent or approval by, notice to or registration with any governmental
authority, is required on the part of Stockholders or Sellers in connection with
the execution and delivery of this Agreement or the consummation by Stockholders
or Sellers of the transactions contemplated hereby.
5.18 LOSS CONTRACTS. Except as disclosed in Schedule 5.18 hereto, Sellers
are not a party to any contract, bid or offer to sell products or to provide
services to parties other than in the ordinary course of business and at rates
which are not economically prudent.
5.19 PURCHASE COMMITMENTS. Except as disclosed in Schedule 5.19 hereto, to
the best of Sellers' knowledge, all purchase commitments for products,
materials, supplies, raw materials or other items to which Sellers are a party
are not in excess of the customary requirements of their business or at a price
in excess of current market prices for similar items deliverable at the same
time. Schedule 5.19 shall be updated by Sellers within twenty (20) days
following the Closing Date.
5.20 NO BREACH OF STATUTE, DECREE OR ORDER. Except as disclosed herein or
in any Schedule hereto, Sellers are not in default under, or in violation in any
respect of any applicable statute, law, ordinance, decree, order, rule or
regulation of any governmental body which default or violation would have a
material and adverse effect on Sellers' business, and the consummation of this
Agreement and the transactions contemplated hereby will not constitute or result
in any such default, breach or violation. Without limiting the generality of the
foregoing, Sellers are in compliance with the provisions of the Federal
Hazardous Substances Act and the Federal Consumer Product Safety Act, except for
such noncompliance as would not have a material adverse effect on Sellers'
business.
5.21 LITIGATION. Except as set forth in Schedule 5.21, there is no suit,
claim, action, proceeding or governmental investigation now pending, or to the
best of Sellers' knowledge, threatened, nor is there, to the best of Sellers'
knowledge, any condition or set of facts which will or could give rise to any
litigation against Sellers before any court, administrative or regulatory body
or any governmental agency (i) arising out of or relating to any aspect of the
business, or any part of the properties or Purchased Assets, of Sellers, or
(ii) concerning the transactions contemplated by this Agreement, nor is there
any basis for any such litigation. There are no decrees, injunctions or orders
of any court or governmental department or agency outstanding against Sellers
relating to any aspect of their business or any part of their properties.
Sellers are not a party to any litigation that has created any lien or
encumbrance upon the Purchased Assets.
5.22 EMPLOYEE BENEFIT PLANS. Except as disclosed in Schedule 5.22, neither
Sellers nor any trade or business, whether or not incorporated (an "ERISA
Affiliate"), which together with Sellers would be deemed a "single employer"
within the meaning of Section 4001 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), has any other written or oral incentive
compensation, deferred compensation, profit sharing, stock option, stock bonus,
bonus plan, stock purchase, savings, retirement, pension or other "fringe
benefit" plan, policy, agreement or arrangement with or for the benefit of any
Affiliate, officer, director, employee, agent or other person ("Plans"). A copy
of each Plan listed in Schedule 5.22 as currently in effect has been delivered
to Buyer. None of the Plans is a "multiemployer plan," as such term is defined
in Section (3)(37) of ERISA; each of the Plans that are subject to ERISA is in
compliance with ERISA; each of the Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified; no Plan has an
accumulated or waived funding deficiency within the meaning of Section 412 of
the Code, except for Sellers' Defined Benefit Pension Plan; neither Sellers nor
an ERISA Affiliate has incurred, directly or indirectly, any liability
(including any contingent liability) to or on account of a Plan pursuant to
Title IV of ERISA; no proceedings have been instituted to terminate any Plan
that is subject to Title IV of ERISA; no "reportable event," as such term is
defined in Section 4043(b) of ERISA, has occurred with respect to any Plan; and
no condition exists that presents a material risk to Sellers or an ERISA
Affiliate of incurring a liability to or on account of a Plan pursuant to Title
IV of ERISA. Except for Sellers' Defined Benefit Plan, the current value of the
assets of each of the Plans that are subject to Title IV of ERISA exceeds the
present value of the accrued benefits under each such Plan, taking into account
projected salary increases and based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared for such Plans;
and all contributions or other amounts payable by Sellers as of the Closing Date
with respect to each Plan in respect of current or prior plan years have been or
will be paid when due. There are no pending, or to the best of Sellers'
knowledge, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trust related
thereto. Except for the Plans described in Schedule 5.22 hereto (which include
plans providing post-retirement, death, medical and retirement income benefits)
heretofore administered by Sellers, no other Plan maintained by Sellers provides
benefits with respect to current or former employees for periods extending
beyond their retirement or other termination of service.
5.23 DISCRIMINATION, OCCUPATIONAL SAFETY AND OTHER STATUTES AND
REGULATIONS. Except as disclosed in Schedule 5.23 hereto, no person, party or
labor organization (including, without limitation, governmental agencies of any
kind) has any claim, action or proceeding or, to the best of Sellers' knowledge,
basis for any such claim, action or proceeding against Sellers arising out of
any statute, ordinance or regulation relating to the payment of wages or
benefits, discrimination in employment or employment practices, or occupational
safety and health standards (including, without limitation, any applicable state
statute, the Fair Labor Standards Act, as amended, the National Labor Relations
Act, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination in Employment Act of 1967, as amended, or the Family and Medical
Leave Act). Sellers have no employees who are on leave of absence for active
duty in the uniformed services within the meaning of the Uniformed Services
Employment and Reemployment Rights Act of 1994.
5.24 LABOR RELATIONS; EMPLOYEES. Except as set forth in Schedule 5.24, (i)
Sellers have paid in full or (subject to the provisions of Section 4.06) will
have provided for the payment of same that may properly accrue as of the date of
Closing, all wages, salaries, commissions, bonuses, vacations, holiday pay and
other direct and indirect compensation for all services performed by Sellers'
employees to the Closing Date, (ii) none of Sellers' employment contracts
provide for severance benefits in excess of thirty (30) days' severance pay, and
upon termination of the employment of the Terminated Employees as described in
Section 4.06, Sellers will not by any reason or anything done prior to or
simultaneously with the Closing be liable to any of the Terminated Employees for
so-called "severance pay" or any other payments, except as contemplated by
Section 4.06 as long as Buyer hires the Hired Employees as provided in Section
4.06 at comparable levels of compensation and benefits, (iii) Sellers are in
compliance with all applicable foreign, federal, state and local laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours, except for noncompliance that would not have
a material adverse effect on Sellers' business, (iv) there is no unfair labor
practice complaint against Sellers pending before the National Labor Relations
Board, (v) there is no labor strike, known or suspected dispute, slowdown,
stoppage or organizational attempt pending or known or, to the best of Sellers'
and Stockholders' knowledge, suspected, threatened against or involving Sellers,
(vi) no representation question or petitions for election of representatives
exists respecting the employees of Sellers, (vii) no grievance which might have
an adverse effect on Sellers or the conduct of their business nor any
arbitration proceeding arising out of or under any collective bargaining
agreement is pending, and no claim therefor has been asserted, and (viii) no
collective bargaining agreement is currently being negotiated by Sellers.
5.25 INSURANCE POLICIES. Set forth in Schedule 5.25 hereto is a list of
all insurance policies and bonds owned or held by Sellers in force covering
Sellers or their properties, operations and personnel. Each of said policies,
together with all records and documents relating to insured losses and claims
(other than under any health or major medical insurance policy) paid or made
during the past two (2) years will be furnished or otherwise will be made
available to Buyer for its review. Except as set forth in Schedule 5.25, no
notice has been received from any insurance carrier that Sellers now are, or
will prior to the Closing Date be, liable for any retroactive premium
adjustments, except with respect to medical insurance policies and workers'
compensation insurance. Except as disclosed in Schedule 5.25 hereto, all
policies are valid and enforceable and in full force and effect and neither
Sellers nor Stockholders has, since December 31, 1995, received any notice of
premium increases or cancellations with respect to any of their insurance
policies and bonds, but Sellers are currently negotiating new insurance
policies. Neither Sellers nor Stockholders has any reason to believe or suspect
that any underwriters of any insurance policies and bonds currently or
previously issued to Sellers are unable to make required payments under such
policies or bonds.
5.26 PRODUCT WARRANTIES, PRODUCT RETURN POLICIES AND SERVICE WARRANTIES.
Except as listed in Schedule 5.26 hereto, Sellers do not utilize any product
warranties, guarantees, product return policies, service warranties or service
policies. Schedule 5.26 hereto also describes all pending and suspected claims
or demands and, to the best of Sellers' knowledge, threatened claims or demands,
seeking return, replacement and/or repair of products pursuant to warranties
extended by Sellers prior to the Closing.
5.27 POST OFFICE BOXES. Set forth in Schedule 5.27 hereto is a list of all
post office boxes and lock box arrangements maintained by Sellers for the
purpose of account receivable collection together with the names of all
authorized signatories on each such arrangement or account.
5.28 ENVIRONMENTAL. Except as disclosed in Schedule 5.28:
A) There are no pending or threatened notices of violation of any
foreign, federal, state or local environmental statutes, ordinances,
regulations or guidelines ("Environmental Laws") with respect to the
ACE facilities;
B) To the best of Sellers' and Stockholders' actual knowledge and
belief, there has been no release or discharge of any Hazardous
Substances on, in, from or onto, nor are there any Hazardous
Substances present on or in, the ACE Facilities in violation of
applicable Environmental Laws;
C) Sellers have not generated, manufactured, refined, transported,
stored, handled or disposed of any Hazardous Substances on the ACE
Facilities nor, to the best of Sellers' and Stockholders' actual
knowledge and belief, have Sellers permitted the foregoing in
violation of applicable Environmental Laws;
D) Sellers have obtained all approvals and caused all notifications to
be made as required by all applicable Environmental Laws;
E) There are no storage tanks on the ACE Facilities that are used or
were previously used for the storage of any Hazardous Substance
above or below ground; and
F) Sellers have not and will not release or waive the liability of any
previous owner, lessee or operator of the ACE Facilities or any
party who may be potentially responsible for the presence or removal
of Hazardous Substances on or about the ACE Facilities and Sellers
have not made any promises of indemnification regarding Hazardous
Substances to any party with respect thereto.
"Hazardous Substances" for purposes of this Agreement shall include, without
limitation: (i) hazardous substances or hazardous wastes, as those terms are
defined by the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Subsection 9601, ET SEQ.; the Resource Conservation and Recovery
Act, 42 U.S.C. Subsection 6901, ET SEQ., and/or any other applicable foreign,
federal, state or local law, regulation, ordinance or requirement, all as
amended or hereafter amended; (ii) petroleum, including, without limitation,
crude oil or any fraction thereof; (iii) asbestos in any form or condition; and
(iv) any radioactive material, including, without limitation, any source,
special nuclear or by-product material as defined at 42 U.S.C. Subsection 2011,
ET SEQ., as amended or hereafter amended.
Notwithstanding anything to the contrary in this Agreement, Sellers' and
Stockholders' liability for any costs of remediation of Hazardous Substances on
the ACE Facilities arising from a breach of any representation or warranty in
this Section 5.28 shall be limited as set forth in Section 4.09.
5.29 COMPLIANCE WITH LAWS. Except as set forth in Schedule 5.29, to the
best of Sellers' knowledge and belief (i) Sellers have complied with and
currently are in compliance with all applicable statutes, regulations, orders,
ordinances and other laws of the United States (including, by way of
illustration and not limitation, the Foreign Corrupt Practices Act) and all
foreign, state and local governments, and agencies of any of the foregoing to
which any aspect of their business or any part of their properties are subject;
(ii) the hours worked by, and payment made to, employees of Sellers have not
been in violation of the Fair Labor Standards Act or any applicable state,
foreign or local laws dealing with such matters; (iii) there is not presently
pending any proceeding, or suspected investigation with respect to the adoption
by any state, county or municipality where the ACE Facilities are located, of
amendments or modifications to existing local or municipal laws, ordinances,
regulations or restrictions with respect to such matters which, if adopted,
could adversely affect the present business and operations of Sellers; and (iv)
except as disclosed in Schedule 5.29 hereto, Sellers have not violated any
rules, regulations or other similar standards of the Occupational Safety and
Health Administration.
5.30 GOVERNMENTAL APPROVALS. Except as may be expressly permitted by the
terms hereof or otherwise disclosed in this Agreement or any Schedule hereto (i)
the business of Sellers as presently conducted does not require any approval of
any governmental body, whether federal, state, local or foreign, which has not
been obtained or which has not been expressly waived by another provision of
this Agreement and which would have a material adverse effect on Sellers'
business and (ii) the business of Sellers as presently conducted in any
jurisdiction meets all known applicable legal requirements of such jurisdiction
and all known requisite governmental approvals have been duly obtained and are
in full force and effect, and there is no known basis for any governmental body
to deny or rescind any approval for the conduct of the business of Sellers or
the contemplated conduct of Buyer. Except as disclosed in Schedules 5.21 and
5.29, there is no known action or proceeding by any governmental body,
including, without limitation, safety or environmental investigations, pending
or, to the best of Sellers' knowledge, threatened against Sellers relating to
the conduct of their business, and, to the best of Sellers' knowledge, there is
no basis for any such action or proceeding.
5.31 TRADE ACCOUNTS PAYABLE. Schedule 5.31 hereto contains a true and
complete list as of February 29, 1996, and which shall be updated by Sellers
within twenty (20) days after the Closing to add all trade accounts payable
generated in the ordinary course of business on a consistent basis to reflect
the trade accounts payable included in the Final Balance Sheet, of all trade
creditors and suppliers of Sellers, all of whom are unrelated third parties. As
of such date, Sellers are not the payor of any note payable to a trade creditor.
To the best of Sellers' knowledge, Sellers enjoy a satisfactory ongoing
relationship with all such creditors and suppliers and Sellers are unaware of
any fact or event that might result in a material disruption of any such
relationship, except as disclosed in any Schedule hereto.
5.32 POWERS OF ATTORNEY AND GUARANTEES. Except as set forth in Schedule
5.32, there are no persons, firms, associations, corporations, limited liability
companies, partnerships, limited liability partnerships or other business
organizations holding general or special powers of attorney or guarantees from
Sellers.
5.33 ACCURACY OF BOOKS AND RECORDS. The books and records, financial and
otherwise, of Sellers accurately set out and disclose the financial position of
Sellers in all material respects and all transactions of Sellers relating to the
Purchased Assets and Assumed Liabilities have been accurately recorded in such
books and records.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF BUYER AND PBYP
Buyer and PBYP hereby, jointly and severally, represent and warrant to
Sellers and Stockholders as follows:
6.01 ORGANIZATION AND GOOD STANDING. Buyer and PBYP are corporations, duly
organized, validly existing and in good standing under the laws of the State of
Texas and have the corporate power to own their respective properties and to
carry on their businesses as now conducted. Buyer, as of Closing, will be duly
qualified and licensed to do business in and in good standing in the State of
Washington.
6.02 AUTHORIZATION. Buyer and PBYP have the full corporate power to enter
into this Agreement, the Escrow Agreement, the Promissory Note, the Security
Agreements and the Warrant and to carry out their obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement, the
Escrow Agreement, the Promissory Note, the Security Agreements and the Warrant
by Buyer and PBYP have been duly and effectively authorized and approved by all
requisite corporate action of Buyer and PBYP and no other corporate acts or
proceedings on the part of Buyer or PBYP are necessary to authorize this
Agreement, the Escrow Agreement, the Promissory Note, the Security Agreements,
and the Warrant or the transactions contemplated hereby or thereby. This
Agreement, the Escrow Agreement, the Promissory Note, the Security Agreements,
and the Warrant constitute valid and legally binding obligations of Buyer and
PBYP. No consent or approval by notice to or registrations with any governmental
authorities is required on the part of Buyer or PBYP in connection with the
execution and delivery of this Agreement, the Escrow Agreement, the Promissory
Note, the Security Agreements and the Warrant or the consummation by Buyer or
PBYP of the transactions contemplated by this Agreement, the Escrow Agreement,
the Promissory Note, the Security Agreements and the Warrant. Except as
disclosed herein, neither the execution and delivery of this Agreement, the
Escrow Agreement, the Promissory Note, the Security Agreements and the Warrant
nor the consummation of the transactions contemplated hereby or thereby nor
compliance by Buyer or PBYP with any of the provisions hereof or thereof will,
(i) result in the creation of any lien, security interest, charge or encumbrance
upon the portion of the Escrow Amount to be placed in escrow pursuant to Section
4.02 hereof, the Promissory Note, the Collateral (except for liens in favor of
the Banks) or the Warrant, under any of the terms, conditions or provisions of
the Articles of Incorporation or Bylaws of Buyer or any note, bond, mortgage,
indenture, deed of trust, lease, license, agreement (whether oral or written) or
other instrument or obligation to which Buyer is bound, or by which Buyer or any
of its properties may be bound, or (ii) violates any order, writ, injunction,
decree, statute, rule or regulation applicable to Buyer or any of its
properties.
ARTICLE VII.
CONDITIONS TO AND EVENTS AT CLOSING
The obligations of Buyer, PBYP, Sellers and Stockholders to consummate
this Agreement and to effect the transactions contemplated hereby shall be
subject to fulfillment on the Closing Date of each of the following express
respective conditions precedent hereinafter stated in Sections 7.01 through
7.40:
AS TO BUYER AND PBYP:
7.01 FINANCING COMMITMENT. Chemical Bank and Texas Commerce Bank, National
Association shall have honored the terms and conditions of its financing
commitment letter, a copy of which is attached hereto as Exhibit "C."
7.02 POST OFFICE BOXES. Contemporaneous with the Closing, such authorized
persons as shall be designated by Buyer, with respect to all post office boxes
maintained by Sellers, if any, used for the purpose of account receivable
collection as reflected in Schedule 5.27 hereto, shall be added or removed by
Sellers as authorized persons or new post office boxes will be opened by Sellers
as directed by Buyer.
7.03 CONTINUED TRUTH OF WARRANTIES. The representations and warranties of
Stockholders and Sellers herein contained shall be true and complete in all
material respects on and as of the Closing Date.
7.04 PERFORMANCE OF COVENANTS. Stockholders and Sellers shall have
performed all covenants and obligations and complied with all conditions
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date.
7.05 CERTIFICATE. The president of ACE, in his corporate capacity, shall
have executed and delivered to Buyer a certificate dated the Closing Date,
certifying, to the best of his knowledge, that the conditions set forth in
Sections 7.03 and 7.04 of this Agreement have been fulfilled.
7.06 PERMITS. Any and all permits and consents from any regulatory
authority having jurisdiction required for the lawful consummation of the
transactions contemplated hereby shall have been obtained.
7.07 LEGAL OPINIONS. Buyer and PBYP shall have received the favorable
opinion of Lane Powell Spears Lubersky, counsel for Stockholders and Sellers,
dated as of the Closing Date, in the form of Exhibit "D" hereto and an opinion
of Canadian counsel with respect to good standing and authority of Specialty in
form and substance reasonably satisfactory to counsel for Buyer.
7.08 REGULATORY AGENCY APPROVAL. The parties hereto shall have secured all
appropriate orders, consents, approvals and clearances, in form and substance
reasonably satisfactory to Buyer, by and from all regulatory agencies and other
governmental authorities and agencies whose order, consent, approval or
clearance is required by law for the consummation of the transactions herein
contemplated.
7.09 EMPLOYMENT AGREEMENTS. Ronald S. Mayers and James A. Weisfield shall
have executed and delivered those certain Employment Agreements in the forms of
Exhibits "E" and "F" hereto.
7.10 BILL OF SALE AND ASSIGNMENTS. Sellers shall have executed and
delivered a bill of sale, substantially in the form of Exhibit "G" hereto and
such assignments and other instruments of transfer with respect to the personal
property, real and personal property leases, motor vehicles, bids, quotes,
contracts and commitments included within the Purchased Assets, and with respect
to ACE's rights concerning Mexican customs duties, in the form previously agreed
to by the parties.
7.11 RESOLUTIONS. Sellers and Stockholders shall have delivered to Buyer
certified copies of resolutions of the board of directors and stockholders of
Sellers authorizing the transactions contemplated herein.
7.12 WARRANTY DEED/TITLE POLICIES/LEASES. Affiliates of Sellers shall have
executed and delivered to Buyer warranty deeds relating to the ACE Facility
located in Chicago, substantially in the form of Exhibit "H" hereto, and to an
undivided fifty-one percent (51%) interest in the Los Angeles ACE Facility
substantially in the form of Exhibit "I" hereto, and shall have delivered to
Buyer, at Sellers' cost, an Owner's Policy of title insurance written by a title
insurance company acceptable to Buyer on ALTA Form (10-17-92), which title
insurance policies shall contain ALTA zoning endorsements, access endorsements
and an endorsement eliminating any exceptions in the policy pertaining to
matters that would be disclosed by a survey. Sellers and/or Stockholders and/or
their Affiliates shall have also executed and delivered to Buyer a lease with
respect to the Los Angeles ACE Facility in the form of Exhibit "J" attached
hereto and a lease with respect to the Bellevue ACE Facility in the form of
Exhibit "K" hereto. Seller's Affiliates shall have executed and delivered such
documents as may be reasonably requested by Chemical Bank and Texas Commerce
Bank, National Association, to subject Sellers' Affiliates undivided forty-nine
percent (49%) interest in the Los Angeles ACE Facility to a Deed of Trust to
support Buyer's financing of this transaction.
7.13 SURVEYS. Sellers shall have delivered to Buyer, at Sellers' cost,
surveys with respect to the Los Angeles and Chicago ACE Facilities prepared by a
registered land surveyor licensed in the states of California and Illinois,
complying with the Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys (Urban) (1992) including items 1-4, 6, 7(a), 7(c), 8-11 (less
underground), and 13 of Table A thereof. Buyer acknowledges receipt of the
foregoing survey for the Los Angeles ACE Facility and the full satisfaction of
this condition as to the Los Angeles ACE Facility survey.
7.14 ENVIRONMENTAL SURVEYS. Sellers shall have delivered to Buyer, at
Sellers' cost, Phase I and Phase II environmental assessments with respect to
the Chicago, Illinois ACE Facility and a Phase I environmental assessment with
respect to the ACE Facility located at 1855 Industrial Street, Los Angeles,
California. Buyer acknowledges receipt of the foregoing environmental
assessments and the full satisfaction of this condition.
7.15 ESTOPPEL CERTIFICATES. Sellers shall have delivered to Buyer, at
Sellers' cost, estoppel certificates from the lessor of the Bellevue, Washington
ACE Facility, in a form satisfactory to Buyer and its counsel.
7.16 PUYALLUP AGREEMENT. ACE shall have executed and delivered to Buyer
that certain Puyallup Agreement in the form of Exhibit "L" hereto, whereby ACE,
Buyer and PBYP will agree to the terms and conditions of the purchases to be
made by ACE from Buyer and/or PBYP subsequent to the Closing with respect to
ACE's Puyallup Division.
7.17 ESCROW AGREEMENT. Sellers and Stockholders shall have executed and
delivered to Buyer that certain Escrow Agreement in the form of Exhibit "B"
hereto, relative to the disposition of the Escrow Amount described in Section
4.02 hereto.
7.18 RESTRICTIVE COVENANTS. Sellers, Stockholders, James A. Weisfield and
Saul Gamoran shall have executed and delivered to Buyer and PBYP those certain
Restrictive Covenants Agreements in the form of Exhibit "M" hereto, whereby
Sellers, Stockholders, James A. Weisfield and Saul Gamoran will agree that they
will not compete with Buyer or PBYP for a period of five (5) years in accordance
with the terms set forth therein.
7.19 DELIVERY OF CERTAIN CONSENTS. Sellers shall have delivered consents
with respect to the contracts and agreements listed in Schedule 1.04, in
substantially the form of or having the same effect as Exhibit "S" hereto.
7.20 ESCROW AGREEMENT AMENDMENT. Sellers shall have caused Renaissance
Strategies, Ltd. and The Commerce Bank of Washington, N.A. to have executed and
delivered to PBYP the amendment to the Escrow Agreement among PBYP, Renaissance
Strategies, Ltd. and The Commerce Bank of Washington, N.A. dated March 11, 1996,
in the form of Exhibit "N" attached hereto.
7.21 AUDITED STATEMENTS. Sellers shall have delivered to Buyer audits by
Coopers & Lybrand LLP for the years ended December 31, 1993, 1994 and 1995 of
the financial statements of ACE and its subsidiaries, and, if such financial
statements, including the footnotes, differ from the drafts heretofore delivered
to Buyer by Sellers, such differences shall not describe a material adverse
condition that is unacceptable to Buyer. If Buyer does not notify Seller in
writing of any such unacceptable condition within five (5) business days after
delivery to Buyer by Seller of the above-described financial statements then
this condition 7.21 shall be deemed satisfied.
7.21A LETTER OF CREDIT. Sellers shall not have posted and shall not be in
breach of the $1.9 million letter of credit provisions of the Warner Bros.
license agreement with ACE related to Space Jam so as not to cause a cash
impediment to the financing of this transaction.
7.22 CO-TENANCY AGREEMENT. Affiliates of Sellers shall have executed and
delivered to Buyer a Co-Tenancy Agreement in the form of Exhibit "P" attached
hereto.
AS TO SELLERS AND STOCKHOLDERS:
7.23 CONTINUED TRUTH OF WARRANTIES. The representations and warranties of
Buyer and PBYP herein contained shall be true and complete in all material
respects on and as of the Closing Date.
7.24 PERFORMANCE OF COVENANTS. Buyer and PBYP shall have performed all
covenants and obligations and complied with all conditions required by this
Agreement to be performed or complied with by them prior to the Closing Date.
7.25 CERTIFICATE. The President of Buyer and PBYP, in his corporate
capacity, shall have delivered to Sellers a certificate executed by him, dated
the Closing Date, certifying that, to the best of his knowledge, the conditions
set forth in Sections 7.23 and 7.24 hereto have been fulfilled.
7.26 DELIVERY OF PURCHASE PRICE. Buyer shall have paid to or on behalf of
Sellers and the Escrow Agent the Purchase Price as provided in Section 4.02
hereof.
7.27 PERMITS. Any and all permits and consents from any regulatory
authority having jurisdiction required for the lawful consummation of the
transactions contemplated hereby shall have been obtained.
7.28 LEGAL OPINIONS. Sellers and Stockholders shall have received the
favorable opinion of Klenda, Mitchell, Austerman & Zuercher, L.L.C., counsel for
Buyer and PBYP, dated as of the Closing Date, in the form of Exhibit "O" hereto.
7.29 REGULATORY AGENCY APPROVAL. The parties hereto shall have secured all
appropriate orders, consents, approvals and clearances, in form and substance
reasonably satisfactory to Sellers, by and from all regulatory agencies and
other governmental authorities and agencies whose order, consent, approval or
clearance is required by law for the consummation of the transactions herein
contemplated.
7.30 EMPLOYMENT AGREEMENTS. Buyer shall have executed and delivered those
certain Employment Agreements with Ronald S. Mayers and James A. Weisfield in
the forms of Exhibits "E" and "F" hereto.
7.31 RESOLUTIONS. Buyer and PBYP shall have delivered to Sellers certified
copies of resolutions of the board of directors of Buyer and PBYP authorizing
the transactions contemplated herein.
7.32 PUYALLUP AGREEMENT. Buyer shall have executed and delivered to ACE
that certain Puyallup Agreement in the form of Exhibit "L" hereto, whereby ACE
and Buyer will agree to the terms and conditions of the purchases to be made by
ACE from Buyer and PBYP subsequent to the Closing with respect to ACE's Puyallup
Division.
7.33 ESCROW AGREEMENT. Buyer and PBYP shall have executed and delivered to
Sellers and Stockholders that certain Escrow Agreement in the form of Exhibit
"B" hereto, relative to the disposition of the Escrow Amount described in
Section 4.02 hereto.
7.34 DELIVERY OF CERTAIN CONSENTS. Except to the extent waived by Buyer,
Sellers shall have delivered consents with respect to the contracts and
agreements listed in Schedule 1.04 in substantially the form of or having the
same effect as Exhibit "S" hereto.
7.35 REAL PROPERTY LEASES. Buyer shall have executed and delivered to
Sellers and/or Stockholders a lease with respect to the Los Angeles ACE Facility
in the form of Exhibit "J" attached hereto and a sublease with respect to the
Bellevue ACE Facility in the form of Exhibit "K" attached hereto.
7.36 CO-TENANCY AGREEMENT. Buyer shall have executed and delivered to
Sellers and Stockholders a Co-Tenancy Agreement in the form of Exhibit "P"
attached hereto.
7.37 PROMISSORY NOTE. PBYP shall have executed and delivered to Sellers
the Promissory Note in the form of Exhibit "A" attached hereto.
7.38 ASSIGNMENT AND ASSUMPTION AGREEMENT. Buyer and PBYP shall have
executed and delivered to Sellers the Assignment and Assumption Agreement in the
form of Exhibit "Q" attached hereto.
7.39 WARRANTS. PBYP shall have executed and delivered to Sellers the
Warrant to Purchase Common Stock in the form of Exhibit "R" attached hereto.
7.40 FINANCING COMMITMENT. Buyer and PBYP shall have used their best
efforts to obtain the financing necessary to consummate this transaction from
Chemical Bank and Texas Commerce Bank, National Association.
ARTICLE VIII.
INDEMNIFICATION BY SELLERS AND STOCKHOLDERS
8.01 GENERAL INDEMNIFICATION. Subject to the provisions of this ARTICLE
VIII (including the limitations hereinafter set forth), by adoption of this
Agreement, Sellers and Stockholders, jointly and severally, agree to defend,
indemnify and hold harmless Buyer, its officers, directors, employees,
representatives, subsidiaries, affiliates and parent corporations
("Indemnitees") against and in respect of:
A) Any and all loss, liability, cost, expense and damage arising in
connection with, relating to or resulting from (i) any
misrepresentation, breach, nonperformance or inaccuracy of any
representation, indemnity or warranty, including any warranty
contained in ARTICLE V, by
Sellers or Stockholders, in this Agreement or the schedules hereto
(but excluding any Exhibits), (ii) any Excluded Liability other than
the Excluded Liability described in Section 2.02(N) or any Excluded
Liability described in Section 9.01(A)(iii), (iii) breach by Sellers
or Stockholders of any covenant by Sellers or Stockholders made or
contained in this Agreement or the Schedules hereto (but excluding
any exhibits), (iv) matters relating to or resulting from claims
seeking return, replacement and/or repair of products pursuant to
any warranties, express or implied, and which involve
misrepresentation, fraud or similar wrongful acts of Sellers or
Stockholders, (v) the failure of Sellers' Chicago Vice President of
Sales to pay in a timely manner his note to Sellers, and (vi) the
sale of Sellers' Specialty Manufacturing pull tab division; and
B) Any and all damages, costs, expenses (including settlement payments
made as provided in this Agreement and all reasonable legal and
accounting fees, other professional expenses and all filing fees,
and collection costs incident thereto), actions, suits, proceedings,
claims, demands, assessments, judgments, incident to or arising in
connection with, relating to or resulting from any breach,
misrepresentation, nonperformance or inaccuracy described in
Subparagraph (A) of this Section 8.01.
Notwithstanding anything to the contrary in this Agreement, including with
respect to the joint and several liability otherwise provided herein, each of
Karen Gamoran and Beth Weisfield shall have liability under this Agreement only
to the extent of (i) the amount determined by multiplying their respective
ownership percentages of the issued and outstanding stock of ACE by the sum of
the Cash Purchase Price plus the amount of any payments made by PBYP under the
Promissory Note less the amount of the liabilities set forth in Schedule
2.02(B); plus (ii) the value of any gifts in excess of Ten Thousand Dollars
($10,000.00) received, directly or indirectly, from their parents for a period
of two (2) years from and after the Closing Date.
8.02 LIMITATION. Indemnitees shall be entitled to indemnification pursuant
to this Article VIII only if written notice of a claim of indemnification is
given to the Sellers and Stockholders within five (5) years from the Closing
Date for claims with respect to environmental matters, "product liability"
claims and liabilities for Sellers' taxes arising prior to the Closing Date, and
within two years from the Closing Date with respect to all other claims. All
rights and remedies, including the right of indemnification under this Article
VIII of Buyer as set forth in this Agreement, shall survive the Closing for the
period set forth in Section 10.01.
8.03 INDEMNIFICATION NOTICE. No claim, demand, suit or cause of action
shall be brought against Sellers or Stockholders hereunder unless Buyer shall
have given Sellers or Stockholders prior written notice of the existence of any
such claim, demand, suit or cause of action or commencement of any environmental
corrective actions or other corrective actions related to Sellers'
noncompliance, if any, with applicable laws; provided, however, that upon the
giving of such notice, Buyer, Stockholders, and Sellers or any of them, shall
have the right to commence legal proceedings for the enforcement of their
respective rights as contained herein; and, provided, further, that the failure
of Buyer to provide such notice promptly shall not relieve Sellers or
Stockholders of their respective obligations hereunder, except to the extent
that such failure actually prejudices Sellers or Stockholders. Upon receipt of
such notice, Sellers and Stockholders shall have the right, at their expense, to
resolve, settle or defend against any such third-party claims, demands, suits,
causes of action or corrective actions. Buyer shall not have the right to seek
payment from Sellers or Stockholders unless they have failed to resolve, settle,
bond, defend against or pay such third-party claims in a timely manner.
If a third party commences any action or proceeding against an Indemnitee
relating to any of the matters subject to indemnification under this Agreement,
the Indemnitee shall notify the Sellers and Stockholders of this action or
proceeding, the amount claimed, and the basis for the claim within ten (10) days
after the Indemnitee receives written notice of the commencement of the action
or the proceeding or otherwise becomes aware of it. Sellers and Stockholders and
their designated counsel shall be informed of and consulted in connection with
all material developments related to the prosecution or defense of the claim.
The parties hereto shall cooperate in the defense of the claim and shall furnish
all records, information, and testimony and attend all conferences, discovery
proceedings, hearings, trials, and appeals as may be requested in connection
therewith. An Indemnitee shall make no settlement of any claim or litigation
which would give rise to liability on the part of Sellers and Stockholders
without the written consent of Sellers and Stockholders, which consent shall not
be unreasonably withheld or delayed. If a firm offer is made to settle a claim
or litigation and Sellers and Stockholders desire to accept and agree to it, but
the Indemnitee elects not to accept or agree to the settlement, the Indemnitee
may continue to contest or defend the claim or litigation; provided, however,
the total maximum liability of Sellers and Stockholders to indemnify or
otherwise reimburse the Indemnitee in accordance with this Agreement with
respect to the claim or litigation shall be limited to and shall not exceed the
amount of the settlement offer rejected by such Indemnitee, plus reasonable
out-of-pocket costs and expenses, including reasonable attorneys' fees, to the
date of notice that Sellers and Stockholders desire to accept the settlement.
In the event of any claim by Buyer against Sellers or Stockholders for a
matter not relating to a third party, Sellers and Stockholders shall be given
the opportunity to correct, repair or remedy the misrepresentation, breach,
nonperformance or inaccuracy before being required to indemnify Buyer as set
forth herein.
Notwithstanding anything in this Agreement to the contrary, except with
respect to the matters described in Section 8.01(A)(v) and 8.01(A)(vi), Buyer
shall have no claim or demand against Sellers or Stockholders under or in
connection with this Agreement, including, without limitation, for
indemnification under this ARTICLE VIII, unless and until the aggregate amount
of such claims and demands (excluding any claims with respect to matters
described in Section 8.01(A)(v) and 8.01(A)(vi)) shall exceed Three Hundred
Twenty-Five Thousand Dollars ($325,000.00), and, then, only to the extent of
such excess; provided, however, that the Three Hundred Twenty-Five Thousand
Dollar ($325,000.00) threshold shall be reduced by the amount of any
indemnification payment made by Buyer to Sellers or Stockholders pursuant to
Section 9.01(A)(iii).
Notwithstanding anything to the contrary in this Agreement, if a claim or
demand is subject to indemnification threshold set forth in the immediately
preceding paragraph of this Section 8.01 or Buyer's Seventy-Five Thousand Dollar
($75,000.00) indemnification requirement pursuant to Section 9.01(A)(iii),
Sellers and Stockholders shall designate to Buyer which of those sections shall
apply to the claims or demand.
8.04 REMEDIES CUMULATIVE. Subject to the penultimate paragraph of Section
8.03, the remedies provided herein shall be cumulative and shall not preclude
assertion by any party hereto of any other rights or the seeking of any other
remedies against any other party hereto.
8.05 COOPERATIVE DEFENSE. Buyer and PBYP shall allow Sellers and
Stockholders to pursue, at their expense, all affirmative claims, defenses and
actions against third parties and to utilize (i) all insurance coverage and (ii)
tax benefits in excess of One Hundred Thousand Dollars ($100,000.00), which may
exist and then be available with respect to any action, claim or demand which
may give rise to a claim for indemnification under this ARTICLE VIII. At the
written request of Sellers or Stockholders, Buyer and PBYP will commence and
pursue at the sole expense of Sellers and Stockholders, litigation or other
action against any insurer of Buyer or PBYP or against any third party against
which Buyer or PBYP has a right of contribution or indemnification, with respect
to any claims arising out of or relating to the matters provided for in this
ARTICLE VIII. Buyer and PBYP shall also use their best efforts and reasonably
cooperate with the Sellers and Stockholders, at their expense, after the Closing
in the investigation and defense of any claim or action against Sellers or
Stockholders predicated in whole or in part upon any matter provided for in this
ARTICLE VIII and shall, to the greatest extent possible, mitigate any damages
including, without limitation, remediation of environmental matters and sale of
unlicensed products. If Sellers' Chicago Vice President of Sales fails to timely
pay his note, and Sellers and Stockholders are required to indemnify Buyer under
Section 8.01(A)(v) by reason thereof, then Buyer and PBYP shall reassign without
recourse that note to Sellers. Neither Buyer nor PBYP, nor any assignee of Buyer
or PBYP shall amend, modify or extend such note without the prior written
consent of ACE.
ARTICLE IX.
INDEMNIFICATION BY BUYER AND PBYP
9.01 GENERAL PROVISIONS. By adoption of this Agreement, Buyer and PBYP,
jointly and severally, agree to defend and indemnify Stockholders and Sellers,
and their officers, directors, employees, representatives, subsidiaries,
affiliates and parent corporations, and hold them harmless against and in
respect of:
A) Any and all loss, liability, cost, expense or damage resulting from
(i) any misrepresentation, breach, nonperformance or inaccuracy of
any representation, indemnity, warranty, or any covenant by Buyer or
PBYP made or contained in this Agreement or the Schedules hereto
(but excluding any Exhibits hereto), (ii) any Assumed Liabilities,
(iii) any Excluded Liabilities to the extent any claim or liability
with respect to such Excluded Liabilities is made against Sellers or
Stockholders, up to a maximum of Seventy-Five Thousand Dollars
($75,000.00) in the aggregate and (iv) Buyer's or PBYP's use,
ownership or operation of the Purchased Assets or the conduct of the
Business after the Closing Date, including, without limitation,
liabilities which relate to products sold or services performed by
Buyer or PBYP after the Closing Date; and
B) Any and all damages, costs, expenses (including settlement payments
made as provided in this Agreement and all legal and accounting
fees, other professional expenses and all filing fees, and
collection costs incident thereto), actions, suits, proceedings,
claims, demands, assessments and judgments, incident to or arising
as a result of any breach, misrepresentation, nonperformance or
inaccuracy described in Subparagraph (A) of this Section 9.01.
Any amounts paid by Buyer or PBYP to Sellers or Stockholders pursuant to
Section 9.01(A)(iii), shall reduce the aggregate claim threshold amount in the
penultimate paragraph of Section 8.03 as provided therein.
9.02 INDEMNIFICATION NOTICE. No claim, demand, suit or cause of action
shall be brought against Buyer or PBYP hereunder unless the Sellers or
Stockholders shall have given Buyer or PBYP prior written notice of the
existence of any such claim, demand, suit or cause of action or commencement of
any environmental corrective actions, other than corrective actions related to
Buyer's noncompliance, if any, with applicable laws; provided, however, that
upon the giving of such notice, Buyer, Stockholders and Sellers or any of them,
shall have the right to commence legal proceedings for the enforcement of their
respective rights as contained herein; and, provided, further, that the failure
of Sellers or Stockholders to provide such notice promptly shall not relieve
Buyer or PBYP of its obligations hereunder, except to the extent that such
failure actually prejudices Buyer.
9.03 DEFENSE OF THIRD-PARTY LITIGATION. In the event that a claim for
potential indemnity for damages against Buyer or PBYP hereunder pertains to an
action involving a third party, Sellers or Stockholders shall give Buyer and
PBYP prompt written notice thereof and such claim shall not be paid or settled
by Sellers or Stockholders if Buyer or PBYP undertakes in good faith the defense
thereof as hereinafter provided, unless (i) such claim has matured by court
judgment or decree, and no appeal has been taken therefrom and no proper appeal
bond is posted by Buyer or PBYP, or (ii) failure by Sellers or Stockholders to
make payment would result in the foreclosure of a lien upon any of the
properties or assets then held by Sellers or Stockholders, or an order enjoining
or restraining Sellers or Stockholders, temporarily or permanently, from the
operation of their respective businesses in the normal course, or would
constitute a default in a lease, loan agreement or other contract of any nature
whatsoever except a contract which is the subject of the dispute. If Buyer or
PBYP assumes the responsibility for defending any contested action involving a
third party in accordance with the terms of this Section, Sellers or
Stockholders shall each cooperate fully to make available to Buyer or PBYP all
pertinent information under their control. Buyer, PBYP, Stockholders and Sellers
shall cooperate with each other in resolving or attempting to resolve any such
actions, and shall permit each other access to their books and records, during
normal business hours and at the place where the same are normally kept, with
full right to make copies thereof or extracts therefrom.
9.04 REMEDIES CUMULATIVE. The remedies provided herein shall be cumulative
and shall not preclude assertion by any party hereto of any other rights or the
seeking of any other remedies against any other party hereto.
ARTICLE X.
MISCELLANEOUS
10.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer, PBYP, Stockholders and Sellers contained in Articles V and
VI of this Agreement or contained in any agreement, certificate or other
document delivered to or given pursuant to this Agreement (other than the
indemnity obligations set forth in Articles VIII and IX) shall survive until the
second anniversary of the Closing Date, except for representations and
warranties with regard to environmental matters, "product liability" claims and
liabilities for Sellers' taxes arising prior to the Closing Date which shall
survive until the fifth anniversary of the Closing Date, and thereafter no such
representation or warranty with respect to any such matter shall any longer be
of any force or effect and, notwithstanding any investigation (including any
environmental report) made by or on behalf of Buyer, PBYP, Stockholders or
Sellers, as the case may be. Notwithstanding anything in this Agreement to the
contrary, in no event shall Sellers' and Stockholders' indemnity obligations as
set forth in ARTICLE VIII or any other obligations under this Agreement extend
to any claim brought by Buyer or PBYP against Sellers or Stockholders, at any
time after the fifth anniversary of the Closing Date for environmental matters,
"product liability" claims and liabilities for Sellers' taxes arising prior to
the Closing Date; and at any time after the second anniversary of the Closing
Date for any other claims arising out of this Agreement.
10.02 ACCESS TO RECORDS. From and after the Closing and subject to Section
1.02(B), Buyer and PBYP agree that they will retain accounting and tax records
of Sellers, relating to fiscal years prior to Closing, for a period which shall
be for no less than the period then required by law. In turn, Sellers and
Stockholders shall retain those records constituting "Excluded Assets," as
provided in Section 1.02(B), for a period which shall be no less than the period
required by law. Upon the written request of any party to this Agreement, Buyer,
PBYP, Sellers, and/or Stockholders, as the case may be, shall permit the
requesting party or their agents to inspect and make copies of such records, at
the requesting party's expense and during normal business hours, for the
purposes of tax return preparation, financial statement closing, response to tax
audit inquiries of the IRS and any state and local tax authorities and other
proper business purposes. The parties will each also furnish reasonable
assistance of their respective personnel in connection therewith. If any party
so requests, within sixty (60) days prior to the time of proposed destruction of
any records according to the respective records retention policy of any other
party, the party holding same will turn over such records to the requesting
party.
<PAGE>
10.03 COVENANT TO MAINTAIN INSURANCE. Sellers shall at their cost obtain
and maintain in effect a tail insurance policy insuring against product
liability and the other Excluded Liabilities set forth in Sections 2.02 (G) and
(H) for three years following the Closing Date or such longer period as may be
mutually agreed upon by the parties hereto. Certificates and executed copies of
such insurance shall be submitted to Buyer at the Closing. The certificates
shall certify that no alteration, modification or termination of such coverage
shall be effective without at least thirty (30) days' prior notice to Buyer.
Notwithstanding Sellers' obligation to obtain tail insurance, Buyer shall, upon
demand, reimburse Sellers for fifty percent (50%) of the premiums for such
insurance up to a maximum of Forty Thousand Dollars ($40,000.00).
10.04 BROKER FOR SELLERS AND STOCKHOLDERS. Sellers and Stockholders
represent and warrant that other than fees to Barrington Associates, which are
the responsibility and shall be paid by Sellers and Stockholders, no person,
firm or corporation has acted in the capacity of broker or finder on their
behalf to bring about the negotiation or consummation of this Agreement, and
Sellers and Stockholders agree to indemnify and hold harmless Buyer against any
claims or liabilities asserted against them by any person acting or claiming to
act as a broker or finder on behalf of Sellers or Stockholders.
10.05 BROKER FOR BUYER. Buyer and PBYP represent and warrant that no
person, firm or corporation has acted in the capacity of broker or finder on its
behalf to bring about the negotiation or consummation of this Agreement, and
agree to indemnify and hold Sellers or Stockholders harmless against any claims
or liabilities asserted against them by any person acting or claiming to act as
a broker or finder on behalf of Buyer or PBYP.
10.06 NOTICES. Any notices or other communications required or permitted
to be given hereunder (including, by way of illustration and not limitation, any
notice permitted or required under ARTICLES VIII and IX hereof) to Buyer, PBYP,
Stockholders or Sellers shall be sufficient if in writing and deemed to have
been duly given and received (i) if delivered by hand or telecopy on the date of
such delivery; (ii) if by overnight courier on the day of such scheduled
arrival, and (iii) if mailed by registered or certified mail with postage
prepaid three business days following deposit in the United States mail,
addressed as follows:
If to Buyer or PBYP: PLAY BY PLAY TOYS & NOVELTIES, INC.
4400 Tejasco
San Antonio, TX 78218
ATTN: Mark A. Gawlik, President
With a copy to: KLENDA, MITCHELL, AUSTERMAN
& ZUERCHER, L.L.C.
1600 Epic Center
301 North Main Street
Wichita, KS 67202-4888
ATTN: L. D. Klenda, Esq.
If to Sellers: ACE NOVELTY CO., INC.
13434 N.E. 16th Street
Bellevue, WA 98005
ATTN: Ronald S. Mayers, President
If to Stockholders: Benjamin and Lois Mayers
3019 60th Ave. SE
Mercer Island, WA 98040
Ronald S. Mayers
4210 134th N.E.
Bellevue, WA 98005
Karen Gamoran
8100 Evergreen Lane
Mercer Island, WA 98040
Beth Weisfield
6021 SE 22nd Street
Mercer Island, WA 98040
With a copy if to LANE POWELL SPEARS LUBERSKY
Sellers or Stockholders to: 1420 Fifth Ave., Suite 4100
Seattle, WA 98101-2338
ATTN: Michael E. Morgan, Esq.
or such substituted address as any party shall have given notice to the other in
writing.
10.07 AMENDMENT. This Agreement may be amended or modified in whole or in
part only by an agreement in writing executed in the same manner as this
Agreement and making specific reference thereto.
10.08 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument and
this Agreement may be executed by facsimile.
10.09 BINDING ON SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by and against, the parties
hereto and their respective heirs, personal representatives, successors and
assigns; provided, however, that nothing contained in this Agreement shall
confer upon any other person not a party to this Agreement any rights or
remedies hereunder. This is not a third-party beneficiary contract. In
particular, without limitation, it is not the intention of the parties that this
Agreement be a contract of which any governmental entity is a third-party
beneficiary. No one shall be entitled to enforce any provision of this Agreement
except the parties hereto, their successors and assigns.
10.10 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions of this Agreement and any other application thereof shall
not in any way be affected or impaired thereby; provided, however, that to the
extent permitted by applicable law, any invalid, illegal, or unenforceable
provision may be considered for the purpose of determining the intent of the
parties in connection with the other provisions of this Agreement.
10.11 WAIVERS. The parties may, by written agreement, (i) extend the time
for the performance of any of the obligations or other acts of the parties
hereof, (ii) waive any inaccuracies in the representations contained in this
Agreement, (iii) waive compliance with, or modify, any of the covenants or
conditions contained in this Agreement, and (iv) waive or modify performance of
any of the obligations of any of the parties hereto; provided, that no such
waivers or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall operate as a waiver of, or an estoppel
with, respect to, any subsequent or other failure.
10.12 HEADINGS AND DEFINITIONS. The headings in the sections of this
Agreement are inserted for convenience only and in no way alter, amend, modify,
limit or restrict the contractual obligation of the parties.
10.13 SCHEDULES AND EXHIBITS. The Schedules and Exhibits hereto form an
integral part of this Agreement and are incorporated herein by reference and
expressly made a part hereof.
10.14 EXPENSES. Each of the parties shall be responsible for their own
legal, accounting and other professional fees and expenses incurred by them in
connection with the negotiation, execution or performance of this Agreement.
10.15 ENTIRE AGREEMENT; LAW GOVERNING. All prior negotiations and
agreements between the parties hereto are superseded by this Agreement, and
there are no representations, warranties, understandings or agreements other
than those expressly set forth herein or in any Schedule or Exhibit delivered
pursuant hereto, except as modified in writing concurrently herewith or
subsequent hereto. This Agreement shall be governed and construed and
interpreted according the laws of the State of Colorado, except as otherwise
expressly provided in this Agreement or in a Schedule or Exhibit hereto. Venue
of any action arising out of this Agreement shall be had first in the Federal
District Court for the District of Colorado, and absent jurisdiction in that
Court, in the State District Court, Second District, Denver County, Colorado.
The parties consent to the jurisdiction of such Courts, agree not to commence
suit in any other jurisdiction, unless it is for the purpose of obtaining
injunctive relief for the purposes of prohibiting or limiting any activity or
actions which a party has covenanted not to conduct or condone, and agree that
if suit be brought in any other jurisdiction, the same shall be removed promptly
to either such Court, as the case may be.
IN WITNESS WHEREOF, this Agreement has been duly executed by Buyer, PBYP,
Sellers and Stockholders as of and on the date first above written.
ACE NOVELTY ACQUISITION CO., INC.
By /s/ MARK A. GAWLIK
Mark A. Gawlik, President
"Buyer"
PLAY BY PLAY TOYS & NOVELTIES, INC.
By /s/ MARK A. GAWLIK
Mark A. Gawlik, President
"PBYP"
ACE NOVELTY CO., INC.
By /s/ RONALD S. MAYERS
Ronald S. Mayers, President
SPECIALTY MANUFACTURING LTD.
By /s/ BENJAMIN H. MAYERS
Benjamin H. Mayers, President
ACME ACQUISITION CORP.
By /s/ RONALD S. MAYERS
Ronald S. Mayers, President
"Sellers"
/s/ BENJAMIN H. MAYERS /s/ LOIS E. MAYERS
/s/ RONALD S. MAYERS /s/ KAREN GAMORAN
/s/ BETH WEISFIELD "Stockholders"
ACE/PBYP
EXHIBIT LIST
Exhibit A Promissory Note
Exhibit B Escrow Agreement
Exhibit C Chemical Bank Commitment
Exhibit D LPSL Opinion
Exhibit E Employment Agreement (Mayers)
Exhibit F Employment Agreement (Weisfield)
Exhibit G Bill of Sale
Exhibit H Chicago Warranty Deed
Exhibit I LA Warranty Deed
Exhibit J LA Lease
Exhibit K Bellevue Sublease
Exhibit L Puyallup Agreement
Exhibit M Restrictive Covenants Agreements
Exhibit N Amendment to Commerce Bank Escrow Agreement
Exhibit O Klenda Mitchell Opinion
Exhibit P Co-Tenancy Agreement
Exhibit Q Assignment and Assumption Agreement
Exhibit R Stock Warrant
Exhibit S License Consent
Exhibit 2.2
AMENDMENT NO. 1
TO
ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 to ASSET PURCHASE AGREEMENT is made and entered into
as of this day of June 20, 1996, by and among ACE NOVELTY ACQUISITION CO., INC.,
a Texas corporation ("Buyer"), PLAY BY PLAY TOYS & NOVELTIES, INC., a Texas
corporation and the parent corporation of Buyer ("PBYP"), ACE NOVELTY CO., INC.,
a Washington corporation ("ACE"), SPECIALTY MANUFACTURING LTD., a British
Columbia, Canada corporation ("Specialty"), ACME ACQUISITION CORP., a Washington
corporation ("ACME"), and BENJAMIN H. MAYERS and LOIS E. MAYERS, husband and
wife, RONALD S. MAYERS, a married individual, KAREN GAMORAN, a married
individual, and BETH WEISFIELD, a married individual, who are owners of all of
the issued and outstanding capital stock of ACE (collectively "Stockholders").
ACE, ACME and Specialty are collectively referred to herein as "Sellers."
WHEREAS, Buyer, PBYP, Sellers and Stockholders entered into an Asset
Purchase Agreement dated as of May 1, 1996 (the "Asset Purchase Agreement"), and
WHEREAS, the parties desire to amend certain provisions of the Asset
Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1 SECTION 3.01 "CLOSING DATE." In "(ii)" of Section 3.01, the date "May
31, 1996" shall be deleted and in its stead the date "June 21, 1996" shall be
inserted.
2 SECTION 4.06 "EMPLOYEE MATTERS." There shall be added as an additional
sentence at the end of subparagraph "(A)" of Section 4.06 the following
sentence: "Sellers shall keep in force through June 30, 1996 the health
insurance applicable to Hired Employees and shall receive as a positive
adjustment to the Purchase Price the cost of such health insurance allocable to
the period from the Closing Date to June 30, 1996."
3 SECTION 4.09 "ENVIRONMENTAL REMEDIATION." Section 4.09 is hereby amended
in its entirety to read as follows:
<PAGE>
4.09 ENVIRONMENTAL REMEDIATION. Notwithstanding anything to the
contrary in this Agreement, except as expressly provided in this Section
4.09, Sellers and Stockholders shall have no liability or obligations to
Buyer or PBYP under this Agreement with regard to the remediation of
Hazardous Substances present on the ACE Facilities on the Closing Date, by
reason of a breach of Seller's representations and warranties in Section
5.28 or otherwise; provided, however, this limitation shall not limit
Sellers' and Stockholders' liability under Section 5.28 with respect to
claims other than for the remediation of Hazardous Substances. Sellers and
Stockholders shall be responsible for completing the remedial action
recommended by EPS Environmental Services, Inc. in its asbestos
survey/assessment contained in Section V.E of the Phase II environmental
assessment dated February 2, 1994, delivered to Buyer with respect to
asbestos remediation at the Chicago ACE Facility, which remedial action
Sellers represent has been completed by Sellers and Stockholders except
for removal of 810 linear feet of TSI which will be completed within 60
days after the Closing Date. Sellers have delivered to Buyer an
environmental phase I and phase II assessment with respect to the Chicago
Ace Facility ("First Assessment"). Buyer may, at its sole cost and
expense, within 120 days of the Closing Date, obtain a phase I
environmental assessment and, if desired, a phase II environmental
assessment of the Chicago Ace Facility and such other assessments as such
environmental assessments shall indicate or recommend ("Second
Assessment"). Sellers and Stockholders shall also be responsible for
completing any remedial action and shall also be liable to Buyer and PBYP
for the direct, out-of-pocket costs and expenses of Buyer related to (i)
the remediation of the Hazardous Substances present at the ACE Facilities
on the Closing Date, arising from a breach of a representation or warranty
in Section 5.28, but only to the extent such remediation is now, or in the
future, required by a local, state, or federal agency; and (ii) the
remediation of any Hazardous Substances disclosed in the Second Assessment
that are not disclosed in the First Assessment but only to the extent the
Second Assessment states that a local, state or federal agency would
require such remediation based upon the regulatory cleanup objectives
applicable to the property as of the Closing Date; provided, however,
Sellers shall not be obligated for such remediation costs under this
Section 4.09 if such required remediation results from (y) a change in the
use or operation of the ACE Facilities or an addition to or modification
of any improvements situated on the ACE Facilities subsequent to the
Closing Date, or (z) any addition to or modification of any applicable
Environmental Laws (as hereinafter defined) subsequent to the Closing
Date. Sellers shall have the sole and exclusive control over the actual
conduct of such remediation and may use the least expensive remediation
method available so long as all such remediation is conducted in
accordance with applicable Environmental Laws. Sellers' and Stockholders'
obligations under this Section 4.09, with the exception of remedial action
arising out of the Second Assessment to
2
the extent provided in (ii) above, shall be subject to the indemnification
procedures and limitations set forth in Article VIII.
4 SECTION 4.02 "PAYMENT OF CASH, PURCHASE PRICE AND PROMISSORY NOTE."
Section 4.02(C)(iii) and (iv) are hereby amended in their entirety to read as
follows:
(iii) Five Hundred Thousand Dollars ($500,000.00) of principal
thereof, subject to Offset, shall be due and payable twelve (12) months
from the Closing Date,
(iv) Eight Hundred Thousand Dollars ($800,000.00) of principal
thereof, subject to Offset, shall be due and payable twenty four (24)
months and one day from the Closing Date, and
5 SECTION 7.21(A) "LETTER OF CREDIT." Buyer and PBYP hereby agree and
acknowledge that the condition to closing set forth in Section 7.21(A) has been
waived in its entirety by Buyer and PBYP.
6 SECTION 8.03 "INDEMNIFICATION NOTICE". The second to the last paragraph
of Section 8.03 is hereby amended in its entirety to read as follows:
Notwithstanding anything in this Agreement to the contrary, except with
respect to the matters described in Section 8.01(A)(v) and 8.01(A)(vi) and
with respect to completion of the removal of 810 linear feet of TSI and
remedial action arising out of the Second Assessment to the extent
provided in Section 4.09, Buyer shall have no claim or demand against
Sellers or Stockholders under or in connection with this Agreement,
including, without limitation, for indemnification under this ARTICLE
VIII, unless and until the aggregate amount of such claims and demands
(excluding any claims with respect to matters described in Section
8.01(A)(v) and 8.01(A)(vi) and with respect to completion of the removal
of 810 linear feet of TSI and remedial action arising out of the Second
Assessment to the extent provided in Section 4.09) shall exceed Three
Hundred Twenty-Five Thousand Dollars ($325,000.00), and, then, only to the
extent of such excess; provided, however, that the Three Hundred
Twenty-Five Thousand Dollar ($325,000.00) threshold shall be reduced by
the amount of any indemnification payment made by Buyer to Sellers or
Stockholders pursuant to Section 9.01(A)(iii).
7 SECTION 10.03 "COVENANT TO MAINTAIN INSURANCE." The last sentence of
Section 10.03 is hereby amended in its entirety to read as follows:
Notwithstanding Sellers' obligation to obtain tail insurance, Buyer shall,
immediately upon demand by Sellers, pay to Sellers the sum of One Hundred
Five Thousand Dollars ($100,000.00) to reimburse Sellers for the cost of
such insurance.
3
8 SCHEDULES TO AGREEMENT. The cover sheet to the Schedules is hereby
amended in its entirety to read as attached hereto. Schedules 1.01(A), 1.01(F),
1.01(G), 1.01(I), 1.02(G), 1.02(N), 2.01 (Attachment 3), 2.02(B), 5.05, 5.06,
5.11, 5.16, 5.21, 5.22, 5.23 and 5.24 to the Agreement are each hereby amended
in their entirety to read in the form attached hereto. Schedule 4.06 is hereby
supplemented to include the additional information attached hereto.
9 EXHIBIT A "PROMISSORY NOTE." Exhibit A to the Agreement is hereby
amended in its entirety to the form attached hereto.
10 EXHIBIT B "ESCROW AGREEMENT". Exhibit B to the Agreement is hereby
amended in its entirety to the form attached hereto.
Except to the extent amended or modified by this Amendment No. 1 to Asset
Purchase Agreement, the Agreement and all the Schedules and Exhibits thereto
remain in full force and effect.
4
IN WITNESS WHEREOF, this Agreement has been duly executed by Buyer, PBYP,
Sellers and Stockholders as of and on the date first above written.
ACE NOVELTY ACQUISITION CO., INC.
By
Mark A. Gawlik, President
"Buyer"
PLAY BY PLAY TOYS & NOVELTIES,
INC.
By
Mark A. Gawlik, President
"PBYP"
ACE NOVELTY CO., INC.
By
Ronald S. Mayers, President
SPECIALTY MANUFACTURING LTD.
By
Benjamin H. Mayers, President
ACME ACQUISITION CORP.
By
Ronald S. Mayers, President
"Sellers"
BENJAMIN H. MAYERS LOIS E. MAYERS
RONALD S. MAYERS KAREN GAMORAN
BETH WEISFIELD "Stockholders"
5
Exhibit 4
WARRANT TO PURCHASE
COMMON STOCK
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED, OR IF THE COMPANY IS OTHERWISE SATISFIED THAT A
SALE, TRANSFER OR ASSIGNMENT OF SUCH SECURITIES MAY BE MADE WITHOUT REGISTRATION
AND WITHOUT COMPLIANCE WITH ANY RESTRICTION SUCH AS UNDER RULE 144 OF SUCH ACT.
PLAY BY PLAY TOYS & NOVELTIES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS
THIS CERTIFIES THAT, for value received, Ace Novelty Co., Inc. ("Ace") is
entitled to purchase, on the terms hereof, up to 35,000 shares of Common Stock
(the "Common Stock") of Play By Play Toys & Novelties, Inc., a Texas corporation
(the "Company"), at a per share purchase price of $14.90, subject to adjustment
as provided herein.
This Warrant is issued pursuant to the provisions of that certain Asset
Purchase Agreement dated as of May 1, 1996 entered into by and among the
Company, Ace and certain affiliated parties (the "Agreement") and shall be
subject to all the terms, conditions and provisions of the Agreement.
Additionally, the following terms shall apply to this Warrant:
1. EXERCISE OF WARRANT.
The terms and conditions upon which this Warrant may be exercised, and the
Common Stock covered hereby (the "Warrant Stock") may be purchased, are as
follows:
1 VOLUNTARY EXERCISE. This Warrant may be exercised in full or in
part at any time and from time to time after one year from the date hereof, or
earlier in connection with an exercise of the holder's rights under Section 6
below, but in no case may this Warrant be exercised later than five years from
the date hereof (the "Termination Date").
2 NUMBER OF SHARES. The number of shares of Common Stock for which
this Warrant is initially exercisable is 35,000 shares, which number is subject
to adjustment pursuant to Section 2 of this Warrant.
3 PURCHASE PRICE. The per share purchase price for the shares of
Common Stock to be issued upon exercise of this Warrant shall be $14.90, subject
to adjustment as provided herein. The purchase price of this Warrant is Three
Hundred Fifty Dollars ($350.00), the receipt and sufficiency of which are hereby
acknowledged.
4 METHOD OF EXERCISE. The exercise of the purchase rights by this
Warrant shall be effected by (a) the surrender of this Warrant, together with a
duly executed copy of the form of a subscription attached hereto, to the Company
at its principal offices, and (b) the delivery of the purchase price by
certified or cashier's check payable to the Company's order or by wire transfer
to the Company's account for the number of shares for which the purchase rights
hereunder are being exercised or any other form of consideration approved by the
Company's Board of Directors.
5 ISSUANCE OF SHARES. Upon the exercise of the purchase rights
evidenced by this Warrant, a certificate or certificates for the purchased
shares of Common Stock shall be issued to Ace as soon as practicable. The
certificate shall contain appropriate legends regarding restrictions upon
transfer of the shares and compliance with applicable securities laws.
2. CERTAIN ADJUSTMENTS.
1 COMMON STOCK DIVIDENDS. If the Company at any time prior to the
expiration of this Warrant shall pay a dividend with respect to Common Stock
payable in shares of Common Stock, or make any other distribution with respect
to Common Stock, then an appropriate adjustment shall be made to the purchase
price per share and the number of shares of Warrant Stock in proportion to such
dividend.
2 MERGERS, CONSOLIDATIONS OR SALE OF ASSETS. If at any time there
shall be a capital reorganization (other than a combination or subdivision of
Warrant Stock otherwise provided for herein), or a merger or consolidation of
the Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation or sale, lawful
provision shall be made so that Ace shall thereafter be entitled to receive upon
exercise of this Warrant, during the period specified in this Warrant and upon
payment of the purchase price, the number of shares of stock or other securities
or property of the Company or the successor corporation resulting from such
reorganization, merger, consolidation or sale, to which a holder of the Common
Stock deliverable upon exercise of this Warrant would have been entitled under
the provisions of the agreement in such reorganization, merger, consolidation or
sale if this Warrant had been exercised immediately before that reorganization,
merger, consolidation or sale. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant with respect to the rights and
interests of Ace after the reorganization, merger, consolidation or sale to the
end that the provisions of this Warrant (including adjustment of the purchase
price then in effect and the number of shares of Warrant Stock) shall be
applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise of this
Warrant.
3 SPLITS AND SUBDIVISIONS. In the event the Company should at any
time or from time to time fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
the holders of Common Stock entitled to receive a distribution payable in
additional shares of Common Stock or other securities or rights convertible
into, or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock other than a dividend as provided in
subsection 2.1 above (hereinafter referred to as the "Common Stock Equivalents")
without payment of any consideration by such holder for the additional shares of
Common Stock or Common Stock Equivalents (including the additional shares of
Common Stock issuable upon conversion or exercise thereof), then, as of such
record date (or the date of such distribution, split or subdivision if no record
date is fixed), if appropriate, the per share purchase price shall be
appropriately decreased and the number of shares of Warrant Stock shall be
appropriately increased in proportion to such increase of outstanding shares.
4 COMBINATION OF SHARES. If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, if appropriate, the per share purchase
price shall be appropriately increased and the number of shares of Warrant Stock
shall be appropriately decreased in proportion to such decrease in outstanding
shares.
5 ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the event the Company
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options or rights not referred to in Subsection 2.3, then, in each
such case for the purpose of this Subsection 2.5, upon exercise of this Warrant
the holder hereof shall be entitled to a proportionate share of any such
distribution as though such holder was the holder of the number of shares of
Common Stock of the Company into which this Warrant may be exercised as of the
record date fixed for the determination of the holders of Common Stock of the
Company entitled to receive such distribution.
6 CERTIFICATE AS TO ADJUSTMENTS. In the case of each adjustment or
readjustment of the purchase price pursuant to this Section 2, the Company will
promptly compute such adjustment or readjustment in accordance with the terms
hereof and cause a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based
to be delivered to the holder of this Warrant. The Company will, upon the
written request at any time of the holder of this Warrant, furnish or cause to
be furnished to such holder a certificate setting forth:
(a) Such adjustments and readjustments;
(b) The purchase price at the time in effect; and
(c) The number of shares of Warrant Stock and the amount, if
any, of other property at the time receivable upon the exercise of the Warrant.
7 NOTICES OF RECORD DATE, ETC. In the event of:
(a) Any taking by the Company of a record of the holders of
any class of securities of the Company for the purpose of determining the
holders thereof who are entitled to receive any dividend (other than a cash
dividend payable out of earned surplus) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right; or
(b) Any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of assets of the Company to any other
person or any consolidation or merger involving the Company; or
(c) Any voluntary or involuntary dissolution, liquidation or
winding-up of the Company:
(i) the Company will mail to the holder of this Warrant at
least three (3) days prior to the earliest date specified therein, a
notice specifying:
(A) The date on which any such record is to be taken for
the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right; and
(B) The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is expected to become effective and the
record date for determining shareholders entitled to vote thereon.
3. RESERVATION OF COMMON STOCK. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the exercise of this Warrant such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
exercise of this Warrant; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the exercise
of the entire Warrant in addition to such other remedies as shall be available
to the holder of this Warrant, the Company will use its reasonable best efforts
to take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes.
4. PRIVILEGE OF STOCK OWNERSHIP. Prior to the exercise of this Warrant,
Ace shall not be entitled, by virtue of holding this Warrant, to any rights of a
shareholder of the Company, including (without limitation) the right to vote,
receive dividends or other distributions, exercise preemptive rights or be
notified of shareholders' meetings, and such holder shall not be entitled to any
notice or other communication concerning the business or affairs of the Company.
Nothing in this Section 4, however, shall limit the right of Ace to be provided
the notices described in Section 2 hereof or to participate in distributions
described in Section 2 hereof as if Ace ultimately exercised this Warrant.
5. LIMITATION OF LIABILITY. Except as otherwise provided herein, in the
absence of affirmative action by the holder hereof to purchase the Warrant
Stock, no mere enumeration herein of the rights or privileges of the holder
hereof shall give rise to any liability of such holder for the purchase price or
as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
6. REGISTRATION RIGHTS.
1 DEFINITIONS. As used in this Section 6, the following terms shall
have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act.
(b) "Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(c) "Transfer" shall mean any disposition of the Warrant Stock
which would constitute a sale thereof within the meaning of the Act.
(d) "Securities" shall mean the Warrant Stock or any
securities issued (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued) as a dividend or other distribution
with respect to, in exchange for, or in replacement of, such Warrant Stock,
provided the obligation hereunder shall have not terminated with respect thereto
under Section 6 hereof and provided further that the Company's obligations to
register Securities as set forth in this Section 6, shall be limited to an
obligation to register shares of Common Stock.
2 "PIGGYBACK" REGISTRATIONS. If at any time within the five-year period
from the date of this Warrant the Company proposes to register any of its
securities under the Act (except with respect to Registration Statements filed
on Form S-4 or S-8 or such other similar form then in effect under the Act), it
will each such time give written notice to the holder or holders of this Warrant
of its intention so to do and, upon the written request of the holder or holders
hereof given within five days after the Company's giving of such notice (which
request shall state the intended method of disposition of such securities), the
Company will use its best efforts to cause all or a portion of the shares of
Warrant Stock to be included in the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent requisite to
permit their sale or other disposition. The right of any holder hereof to
include some or all of its Warrant Stock in any such offering shall,
individually and in the aggregate, be pro rata with any other outstanding rights
of any other shareholder of the Company to include any such shares in any such
offering. Notwithstanding any other respective provision of this Subsection 6.2,
if the managing underwriter(s) determine(s) that the marketing factors require a
limitation of the number of shares to be underwritten, the Company shall only be
required to include in the offering and the registration so many of the shares
of the Warrant Stock as the underwriter believes in good faith would not
adversely affect the offering. In the event that any registration pursuant to
this Subsection 6.2 shall be, in whole or in part, a firm commitment
underwritten offering of securities of the Company, any request by any holder
pursuant to this Subsection 6.2 to register Securities will be subject to a
requirement that such shares are to be included in the underwriting on the same
terms and conditions as the shares of securities otherwise being sold through
underwriters under such registration. Notwithstanding the foregoing, the rights
of the holder to participate in an offering of the securities of the Company
under this Section 6 shall immediately terminate if an offering under an
applicable registration statement is completed and the holder was given the
opportunity to participate (and at the time were entitled hereunder to
participate) in such offering without having the number of shares of Common
Stock such holder desired to include therein reduced.
3 REGISTRATION PROCEDURES AND EXPENSES. If and whenever the Company is
required by the provisions of this Section 6 to use its best efforts to effect
the registration of any of the shares of Warrant Stock under the Act, the holder
will:
(a) furnish the Company all material information requested by
the Company concerning the holder and any relevant affiliate of the holder and
the proposed method of sale or other disposition of the Common Stock and such
other information and undertakings as shall be reasonably required in connection
with the preparation and filing of any such registration statement covering all
or part of the Common Stock and in order to ensure full compliance with the Act
and the rules and regulations of the Commission promulgated thereunder;
(b) enter into an underwriting agreement in customary form
with the same underwriter or underwriters who are parties to an underwriting
agreement with the Company, provided that the sales of Common Stock by the
holder and the Company thereunder are at the same price and upon the same terms
and conditions;
(c) cooperate in good faith with the Company and its
underwriters in connection with such registration, including, without
limitation, placing the shares of Common Stock to be included in such
registration statement in escrow or custody to facilitate the sale and
distribution thereof; and
(d) if requested by the managing underwriter of an applicable
offering on the grounds that sales of Common Stock would adversely affect the
public offering of Common Stock in such offering, agree not to sell or otherwise
dispose of the shares of Common Stock to be included in the registration
statement not exceeding the shortest period of time after the effective date of
such registration statement during which any other person or entity whose
securities are included in such registration statement has agreed not to sell or
otherwise dispose of shares of common stock of the Company; provided that the
Company agrees to use its best efforts to cause such managing underwriter to not
make such a request of any holder.
The Company will:
(e) furnish to the holder such number of prospectuses and
preliminary prospectuses in conformity with the requirements of the Act and such
other documents as the holder may reasonably request in order to facilitate the
public sale or other disposition of its Securities; and
(f) use its best efforts to register or qualify the Warrant
Stock covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as the holder shall reasonably request and do any
and all other acts and things which may be necessary or desirable to enable such
seller to consummate the public sale or other disposition in such jurisdiction
of the Warrant Stock owned by the holder.
All expenses incurred by the Company in complying with Subsections 6.2 and
6.3 hereof, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses and the expense of any special audits incident to or required
by any registrations (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company) are herein called
"Registration Expenses;" and all underwriting discounts and selling commissions
applicable to the sales are herein called "Selling Expenses." The Company will
pay all Registration Expenses, except that the holder shall pay for the
applicable federal and state registration and filing fees with respect to the
securities of the holder. All Selling Expenses in connection with each
registration pursuant to Subsection 6.2 shall be borne by the Company and the
selling shareholders pro rata in proportion to the securities covered thereby
being sold by them. All fees and disbursements of the holders' counsel, if any,
shall be borne and paid by the holders.
4 INDEMNIFICATION AND CONTRIBUTION
In the event of a registration of any securities under the Act pursuant to
this Section 6, the Company will hold harmless the holder of such Securities
against any losses, claims, damages or liabilities (any such losses, claims,
damages or liabilities, or actions in respect thereof are referred to in this
Section as "Losses") to which the holder may become subject under the Act or
otherwise, insofar as such Losses are caused by any untrue statement or alleged
untrue statement of any material fact made by the Company contained, on the
effective date thereof, in any registration statement under which the Securities
were registered under the Act, any prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission of the Company to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
extent that any such Losses arise out of or are based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by the holder or underwriter in writing
specifically for use in the preparation thereof; and will reimburse any legal or
other expenses reasonably incurred by the holder in connection with
investigating or defining any such Losses. Each holder will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the registration statement, the underwriter and each person, if any, who
controls the Company, within the meaning of the Act, against any Losses to which
the Company, or any such director, officer, underwriter or controlling person
may become subject under the Act or otherwise, insofar as such Losses are caused
by any untrue statement or alleged untrue statement of any material fact made by
the holder contained, on the effective date thereof, in any registration
statement under which the Securities were registered under the Act, any
prospectus contained therein, or any amendment or amendments or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
of the holder to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the holder will not be liable in any case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was so made in reliance upon and in conformity with information
furnished to the holder in writing by the Company for use in the preparation
thereof; and will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, underwriter or controlling person in
connection with investigating or defining any such Losses.
7. TRANSFERS AND EXCHANGES.
1 Subject to compliance with applicable federal and state securities
laws, this Warrant and all rights hereunder are transferable in whole or in part
by Ace to any of its executive officers, directors or stockholders or any lineal
descendants or spouses of stockholders; provided, that this Warrant may not be
transferable in part in an amount less than 250 shares issuable upon exercise
hereunder, as adjusted for stock splits, dividends and other recapitalizations,
and in any event shall not be transferable to more than twenty holders without
the Company's consent. Ace will provide written notice of such transfer to the
Company at least ten days in advance of the intended transfer, and if no written
objection is received by Ace within seven (7) business days after the date the
notice is received by the Company, then such transfer shall be deemed accepted.
The transfer shall be recorded on the books of the Company upon the surrender of
this Warrant, properly endorsed, to the Company at its principal offices and the
payment to the Company of all transfer taxes and other governmental charges
imposed on such transfer. In the event of a partial transfer, the Company shall
issue to the several holders one or more appropriate new warrants. Holder agrees
not to make any sale or other disposition of either the Warrant, the Warrant
Stock, the Common Stock or the Common Stock Equivalents except pursuant to a
registration statement which has become effective under the Act, setting forth
the terms of such offering, the underwriting discount and the commissions and
any other pertinent data with respect thereto, unless the holder has provided
the Company with an opinion of counsel acceptable to the Company that such
registration is not required.
2 In the event of a partial exercise of this Warrant, the Company
shall issue an appropriate new warrant to Ace for the balance of the portion of
the Warrant not exercised.
3 All new warrants issued in connection with permitted transfers,
exchanges or partial exercises shall be identical in form and provision to this
Warrant except as to the number of shares.
8. NOTICES. All notices, requests, demands and other communications which
are required to be or may be given under this Warrant shall be in writing and
shall be deemed to have been duly given when delivered in person or transmitted
by facsimile or on receipt after dispatch by certified or registered first class
mail, postage prepaid, return receipt requested, to the party to whom the same
is so given or made.
If to the Company, to:
PLAY BY PLAY TOYS & NOVELTIES, INC.
4400 Tejasco
San Antonio, Texas 78218
Attn: Mark A. Gawlick, President
With a copy to:
KLENDA, MITCHELL, AUSTERMAN & ZUERCHER, L.L.C.
1600 Epic Center
301 North Main Street
Wichita, Kansas 67202-4888
Attn: L. D. Klenda
if to the holder, to the address set forth below such holder's
signature block
With a copy to:
ACE NOVELTY CO., INC.
13434 Northeast 16th Street
Bellevue, Washington 98005
Attn: Ronald S. Mayers, President
and
LANE POWELL SPEARS LUBERSKY
1420 Fifth Avenue, Suite 4100
Seattle, Washington 98101-2338
Attn: Michael E. Morgan
or to such other address as any party may designate by giving notice to the
other parties hereto.
9. GOVERNING LAW. This Warrant shall be construed as to both validity and
performance and enforced in accordance with and governed by the laws of the
state of Texas.
10. SUCCESSORS AND ASSIGNS. The terms and provisions of this Warrant shall
be binding upon the Company and Ace and their respective successors and assigns,
subject at all times to the restrictions set forth in the Agreement.
11. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new warrant of like tenor and dated as of such
original issuance date in lieu of this Warrant.
12. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised, except as to the purchase
price, on the next succeeding day not a Saturday, Sunday or legal holiday.
13. AMENDMENTS AND WAIVERS. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders who hold a majority of the shares
issuable upon exercise of unexercised warrants issued pursuant to the Agreement.
Any such amendment or waiver shall be binding on each holder. In the event that
such amendment or waiver treats the holder of a warrant issued pursuant to the
Agreement in a manner materially different from that of other holders of
warrants issued pursuant to the Agreement, the consent or waiver of the holder
that is treated differently shall also be required to be binding upon such
holder.
PLAY BY PLAY TOYS & NOVELTIES,
INC.
By __________________________
Its _______________________
Dated: June __, 1996
SUBSCRIPTION
PLAY BY PLAY TOYS & NOVELTIES, INC.
4400 Tejasco
San Antonio, Texas 78218
Attn: Mark A. Gawlick, President
Sir/Madam:
The undersigned, , hereby elects to purchase, pursuant to the provisions
of the Warrant to Purchase Common Stock dated May 1, 1996 (the "Warrant") held
by the undersigned, shares of the Common Stock of Play By Play Toys & Novelties,
Inc, a Texas corporation.
The undersigned hereby represents and warrants that it is acquiring the
Warrant Stock (as defined in the Warrant) for its own account and not with a
view to, or for resale in connection with, the sale or distribution thereof, or
the granting of any participation therein, and it has no present intention of
distributing or reselling to others any of the Warrant Stock or granting any
participation therein, except in compliance with all applicable federal and
state securities laws.
The undersigned hereby represents and warrants that it is an Accredited
Investor within the meaning of Rule 501(a) of Regulation D under the Act (as
defined in the Warrant). The undersigned is experienced in evaluating a company
such as the Company and has such knowledge, sophistication and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the investment in the Company. The undersigned has had an opportunity
to discuss the Company's business, management and financial affairs and any
other matters with the Company's management and has received answers to its
questions posed to management.
The undersigned hereby represents and warrants that it understands that
each certificate representing the Warrant Stock shall be endorsed with a legend
as deemed appropriate by the Company restricting transferability pursuant to the
Act and compliance with applicable securities laws.
Dated: ________, 199__.
----------------------------
By _________________________
Address: ___________________
----------------------------
----------------------------
Exhibit 10.1
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (together with all amendments, modifications and
supplements hereto and restatements hereof, this "AGREEMENT") is made and
entered into as of June 20, 1996, by and among PLAY BY PLAY TOYS & NOVELTIES,
INC. ("PLAY BY PLAY"), a Texas corporation, ACE NOVELTY ACQUISITION CO., INC.
("ACE"), a Texas corporation, and NEWCO NOVELTY, INC. ("NEWCO"), a Texas
corporation (Play By Play, Ace and Newco each being individually referred to
herein as a "BORROWER" and collectively the "BORROWERS"), EACH OF THE FINANCIAL
INSTITUTIONS WHICH IS A SIGNATORY HERETO OR WHICH MAY FROM TIME TO TIME BECOME A
PARTY HERETO (individually, a "LENDER" and collectively, the "LENDERS") and
CHEMICAL BANK ("CHEMICAL"), a New York banking corporation, as agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"AGENT").
WITNESSETH:
THAT, in consideration of the mutual covenants, agreements and
undertakings herein contained, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 CERTAIN DEFINED TERMS. Unless a particular word or phrase is
otherwise defined or the context otherwise requires, capitalized words and
phrases used in the Loan Documents have the meanings provided below.
ACQUISITION shall mean the purchase by Ace and Newco of substantially
all of the tangible and intangible assets of Ace Novelty Co., Inc., a Washington
corporation, Specialty Manufacturing Ltd., a British Columbia, Canada
corporation, and Acme Acquisition Corp., a Washington corporation, pursuant to
the terms of the Acquisition Agreement.
ACQUISITION AGREEMENT shall mean the Asset Purchase Agreement dated
effective as of May 1, 1996, by and between the Borrowers, Ace Novelty Co.,
Inc., a Washington corporation, Speciality Manufacturing Ltd., a British
Columbia, Canada corporation, Acme Acquisition Corp., a Washington corporation,
Benjamin H. Mayers, Lois E.
Mayers, Ronald S. Mayers, Karen Gamoran and Beth Weisfield.
ACQUISITION DOCUMENTS shall mean the Acquisition Agreement and all
agreements, documents and instruments executed and delivered pursuant thereto or
in connection therewith, in each case as in effect on the Closing Date.
ADJUSTED LIBOR RATE shall mean, with respect to any LIBOR Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the sum of (a) the product of (i) the LIBOR
Rate in effect for such Interest Period and (ii) Statutory Reserves and (b) the
Applicable Margin.
<PAGE>
AFFILIATE of any Person shall mean any other Person which controls or
is controlled by or under common control with such Person and, without limiting
the generality of the foregoing, includes (a) any Person which beneficially owns
or holds ten percent (10%) or more of any class of voting securities of such
Person or ten percent (10%) of the equity interest in such Person, (b) any
Person of which such Person beneficially owns or holds ten percent (10%) or more
of any class of voting securities or in which such Person beneficially owns or
holds ten percent (10%) or more of the equity interest in such Person, and (c)
any director or executive officer of such Person. For purposes of this
definition, "control" (including "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of securities, partnership or other ownership interests,
by contract or otherwise.
AGENT shall have the meaning assigned to such term in the preamble to
this Agreement.
ALTERNATE BASE RATE shall mean, for any day, a rate per annum (rounded
upwards to the nearest 1/16 of 1%) equal to the sum of (a) the greater of (i)
the Prime Rate (computed on the basis of the actual number of days elapsed over
a year of 360 days, as the case may be) in effect on such day, (ii) the Federal
Funds Effective Rate (computed on the basis of the actual number of days elapsed
over a 360-day year) in effect for such day plus 1/2 of 1%, and (iii) the Base
CD Rate in effect for such day plus 1% and (b) the Applicable Margin. For
purposes of this Agreement, any change in the Alternate Base Rate due to a
change in the Prime Rate, Federal Funds Effective Rate or the Three-Month
Secondary CD Rate shall be effective on the effective date of such change in the
Prime Rate, Federal Funds Effective Rate or the Three-Month Secondary CD Rate,
respectively. If for any reason the Agent shall have determined (which
determination shall be conclusive and binding, absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate or Base CD Rate, or both,
for any reason, including the inability or failure of the Agent to obtain
sufficient quotations in accordance with the terms hereof, the Alternate Base
Rate shall be determined without regard to clause (a) or (b), or both, as
appropriate, until the circumstances giving rise to such inability no longer
exist.
ALTERNATE BASE RATE BORROWING shall mean, as of any date, that portion
of the principal balance of the Loans bearing interest at a rate determined by
reference to the Alternate Base Rate as of such date.
ANNUAL AUDITED FINANCIAL STATEMENTS shall mean the annual financial
statements of a Person, including all notes thereto, which statements shall
include a balance sheet as of the end of such fiscal year and an income
statement, a retained earnings statement and a statement of cash flows for such
fiscal year, all setting forth in comparative form the corresponding figures
from the previous fiscal year, all accompanied by a report and opinion of
independent certified public accountants with a "Big 6" accounting firm or other
accounting firm of similar national standing and reputation, which report shall
not contain any qualification except with respect to new accounting principles
mandated by the Financial Accounting Standards Board and shall state that such
financial statements, in the opinion of such accountants, present fairly,
2
in all material respects, the financial position of such Person as of the date
thereof and the results of its operations and cash flows for the period covered
thereby in conformity with GAAP. The Annual Audited Financial Statements for the
Borrowers and their Subsidiaries shall be prepared on both a Consolidated and a
consolidating basis (with such consolidating statements to be unaudited,
management prepared statements) in accordance with GAAP, subject only to normal
and customary adjustments.
APPLICABLE LENDING OFFICE shall mean, with respect to each Lender, such
Lender's Domestic Lending Office in the case of an Alternate Base Rate Borrowing
and such Lender's LIBOR Lending Office in the case of a LIBOR Borrowing.
APPLICABLE MARGIN shall mean with respect to each type of Loan as
follows:
Per Annum Per Annum
Type Of Loan Percentage Percentage
For Libor For Alternate
Borrowings Base Rate Borrowings
Revolving Loans 2.50% 0.50%
Term Loans 2.75% 0.75%
If the Debt Capacity Ratio for the Borrowers and their Subsidiaries, on a
Consolidated basis, for the four most recent consecutive fiscal quarters of the
Borrowers ending on or prior to the applicable date of determination is ever
less than 4.0 to 1.0 as of the end of any fiscal quarter of the Borrowers
(commencing with the fiscal year ending July 31, 1997), and if no Default or
Event of Default then exists, each of the respective amounts of the Applicable
Margin shown in the schedule above shall then be reduced by an amount equal to
one-quarter of one percent (.25%), but only for as long as the Borrowers and
their Subsidiaries, on a Consolidated Basis, maintain a Debt Capacity Ratio of
less than 4.0 to 1.0 as of the end of each subsequent fiscal quarter (as tested
for the four most recent consecutive fiscal quarters of the Borrowers, including
the fiscal quarter then ending). Such compliance with the Debt Capacity Ratio
will be tested quarterly as of the end of each fiscal quarter by the Agent for
the four most recent consecutive fiscal quarters of the Borrowers ending on or
immediately prior to the applicable date of determination, based on the Agent's
review of the Borrowers' most recent Monthly Unaudited Financial Statements or
Annual Audited Financial Statements, as applicable, which are delivered to and
received by the Agent for the immediately preceding four fiscal quarters of the
Borrowers in accordance with SECTIONS 6.3(A) and (B) hereof. In the event that
the Debt Capacity Ratio for the Borrowers and their Subsidiaries, on a
Consolidated basis, for the four most recent consecutive fiscal quarters of the
Borrowers ending on or prior to the date of determination is equal to or greater
than 4.0 to 1.0 as of the end of any applicable fiscal quarter or year, the
above-described reduction in the respective amounts of the Applicable Margin
shall automatically cease and the Applicable Margin for purposes hereof shall
automatically revert to the amounts shown in the schedule above until the Debt
Capacity Ratio for the Borrowers and their Subsidiaries, on a Consolidated
basis, for the four most recent consecutive fiscal quarters of the Borrowers
ending on or prior to the date of determination subsequently falls below 4.0 to
1.0 as of the end of the
3
applicable fiscal quarter or year or until such Default or Event of Default is
cured to the reasonable satisfaction of the Agent or is waived in writing by the
Required Lenders, as applicable. For purposes hereof, any such adjustment in the
respective amounts of the Applicable Margin, whether upward or downward, shall
be effective ten (10) Business Days after the applicable Annual Audited
Financial Statements or Monthly Unaudited Financial Statements of the Borrowers
have been delivered to and received by the Agent in accordance with the terms of
SECTIONS 6.3(A) and (B) hereof. Notwithstanding the foregoing, if at any time
after the Closing Date Play by Play shall have completed an Approved Secondary
Public Offering, then the above-described reduction in the respective amounts of
the Applicable Margin shall automatically, immediately and irrevocably occur.
APPLICATIONS shall mean all applications and agreements for Letters of
Credit, or similar instruments or agreements, in Proper Form, now or hereafter
executed by any Person in connection with any Letter of Credit now or hereafter
issued or to be issued under the terms hereof at the request of any Person.
APPROVED SECONDARY PUBLIC OFFERING shall mean a secondary public
offering of capital stock of Play By Play if (a) such secondary public offering
has proceeds in excess of $10,000,000, (b) the aggregate outstanding principal
amount of all Term Loans shall have been reduced to an amount that does not
exceed the lesser of (i) $5,000,000 or (ii) fifty percent (50%) of the sum of
the fair market value at such time of all real estate included in the Collateral
PLUS the orderly liquidation value at such time of all machinery and other
equipment owned by Play By Play and its Subsidiaries, (c) the Subordinated
Indebtedness of the Borrowers to Ace Novelty Co., Inc. incurred in connection
with the Acquisition shall have been paid in full and (d) no Default or Event of
Default shall have occurred and be continuing after such secondary public
offering has been completed. The above-described valuations of said real
property, improvements, machinery and equipment for purposes of this paragraph
shall be determined by current, up-to-date appraisals of such assets which are
prepared by appraisers reasonably satisfactory to Agent and which utilize the
same methodology employed by the applicable appraisals of such assets originally
prepared for and reviewed by Agent in connection with the origination of the
Loans; provided, however, for purposes of determining the aggregate appraised
value of such assets in accordance with this paragraph, only those assets of the
type described in this paragraph which are subject to a first priority Lien
(except for those Liens permitted by the other terms of this Agreement) in favor
of Agent for the ratable benefit of Lenders shall be included for purposes of
determining compliance with the requirements of this paragraph.
ASSESSMENT RATE shall mean the annual assessment rate (net of refunds
and rounded upwards, if necessary, to the next 1/16 of 1%) estimated by the
Agent (in good faith, but in no event in excess of statutory or regulatory
maximums) to be payable by the Agent to the Federal Deposit Insurance
Corporation (or any successor) for insurance by such Corporation (or such
successor) of time deposits made in dollars at the Agent's domestic offices
during the current calendar year.
ASSIGNMENT AND ACCEPTANCE shall have the meaning ascribed to such item
in SECTION 10.12(C) hereof.
4
ASSUMPTION AGREEMENT shall mean any agreement, in Proper Form, executed
by any Subsidiary of any of the Borrowers or any other Subsidiary from time to
time in accordance with SECTION 6.10 hereof, pursuant to which such Subsidiary
assumes, jointly and severally with all other Borrowers, all of the obligations
of the Borrowers hereunder and joins in the execution and delivery of the
Contribution Agreement.
AVAILABILITY shall mean at any time (a) the lesser at such time of (i)
the Total Revolving Credit Commitment (as such amount may be reduced in
accordance with the provisions of this Agreement) and (ii) the Borrowing Base,
LESS (b) the sum of (i) the aggregate amount of each Lender's Current Sum at
such time, (ii) the aggregate amount of accrued interest and fees outstanding
under the Revolving Loans at such time and (iii) the aggregate amount of the
Royalty Payment Reserve at such time.
BASE CD RATE shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment
Rate.
BORROWER or BORROWERS shall have the meaning assigned to such terms in
the preamble of this Agreement.
BORROWING BASE shall mean, as of any date, the amount of the then most
recent computation of the Borrowing Base, determined by calculating the amount
equal to:
(a) 80% of the Net Amount of Eligible Receivables at such
date, PLUS
(b) the lesser of (i) the Inventory Cap and (ii) the sum of
(1) the product of the Inventory Advance Rate TIMES the sum of (x) the
amount of Eligible Inventory at said date, calculated at the lower of
cost (determined on a weighted average basis) or market, (y) the
aggregate amount then remaining to be drawn at such date under all
outstanding documentary Letters of Credit issued by the Agent hereunder
for the account of any Borrower to one or more of the inventory
suppliers of any Borrower in connection with one or more inventory
purchase orders submitted by any Borrower to any of such inventory
suppliers, (z) the aggregate amount then remaining to be drawn at such
date under all outstanding Indemnified Letters of Credit, (2) the
lesser of (x) $1,521,000 or (y) 40% of the close-out inventory at said
date of Ace Novelty Co., Inc. and its Subsidiaries acquired by Ace
Acquisition (said close-out inventory to be a component of the
Borrowing Base only through the end of the seventh calendar month
following the Closing Date), and (3) the lesser of (x) $750,000.00 or
(y) inventory acquired by Ace Acquisition (other than close-out
inventory discussed in clause (2) (y) of this definition) which is in
transit and for which title has been transferred to Ace Acquisition
pursuant to proper documents supporting such transfer of title (said
in-transit inventory to be a component of the Borrowing Base for only
120 days following the Closing Date).
Notwithstanding anything to the contrary set forth in the immediately preceding
sentence, the Agent reserves the right to adjust downward to a level acceptable
to the Agent in its reasonable discretion the eighty percent (80%) advance rate
set forth above for the Net Amount of Eligible Receivables IF the Borrowers'
average dilution percentage for all Receivables exceeds ten percent (10%). The
Borrowing Base will be
5
computed on a daily basis (based on all information reasonably available to the
Agent, including without limitation, the periodic reports and listings delivered
to the Agent in accordance with SECTIONS 6.3(F) and (G) hereof), and a Borrowing
Base Compliance Certificate from a Responsible Officer of each Borrower
presenting the Borrowers' computation of the Borrowing Base will be periodically
delivered to the Agent in accordance with SECTION 6.3(H) hereof.
BUSINESS DAY shall mean a day when the principal office in New York
City of the Agent is open for business and Lenders in New York City are
generally open for business.
BUSINESS ENTITY shall mean corporations, partnerships, joint ventures,
joint stock associations, business trusts and other business entities.
CAPITAL EXPENDITURES shall mean, for any period for which Capital
Expenditures is calculated, all capital expenditures of the Borrowers and their
Subsidiaries on a Consolidated basis for such period (including, without
limitation, payments for such period under Capital Lease Obligations, other than
payments of imputed interest), determined in accordance with GAAP, consistently
applied.
CAPITAL LEASE OBLIGATIONS shall mean the obligations of a Person to pay
rent or other amounts under a lease of (or other agreement conveying the right
to use) real and/or personal Property which obligations are required to be
classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP (including Statement of Financial Accounting Standards No. 13
of the Financial Accounting Standards Board, as amended) and, for purposes of
this Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP (including such Statement No. 13).
CHANGE OF CONTROL shall mean any of the following: (a) any Person or
Group (other than the Arturo Torres Family), shall acquire and Beneficially Own
Voting Stock of Play By Play representing thirty-five percent (35%) or more of
the aggregate voting power of all classes of Voting Stock of Play By Play; (b)
the Arturo Torres Family shall sell or transfer in the aggregate, in one or more
transactions after the date hereof, but prior to the consummation of an Approved
Secondary Public Offering, Voting Stock of Play By Play representing greater
than sixteen and two-thirds percent (16-2/3%) of the aggregate voting power of
all classes of Voting Stock of Play By Play which is Beneficially Owned by the
Arturo Torres Family as of the date hereof; or (c) the Arturo Torres Family
shall sell or transfer in the aggregate, including all sales or transfers
permitted by the preceding clause (b) and any and all sales or transfers
contemporaneously with or subsequent to the consummation of an Approved
Secondary Public Offering by Play By Play, Voting Stock of Play By Play
representing greater than fifty percent (50%) of the aggregate voting power of
all classes of Voting Stock of Play By Play which is Beneficially Owned. As used
herein, (a) "BENEFICIALLY OWN" shall mean "beneficially own" as defined in Rule
13d-3 of the Securities and Exchange Act of 1934, as amended (the "34 ACT"), or
in any successor provision thereto; (b) "ARTURO TORRES FAMILY" shall mean Arturo
Torres and any of Arturo Torres' immediate family members; (c) "GROUP" shall
mean "group" as defined in Section 13(d)(3) or (14)(d)(2) of the 34 Act or in
any successor provision thereof; and (d) "VOTING STOCK" shall mean as
6
to any Person, the Stock of such Person which ordinarily has voting power for
the election of directors (or persons performing similar functions) of such
Person, whether at all times or only so long as no senior class of securities
has such voting power by reason of any contingency.
CLOSING DATE shall mean the earlier to occur of (a) the date of the
first Loan under this Agreement or (b) June 20, 1996.
CODE shall mean the Internal Revenue Code of 1986, as amended, as now
or hereafter in effect, together with all regulations, rulings and
interpretations thereof or thereunder by the Internal Revenue Service.
COLLATERAL shall mean all collateral and security as described in the
Security Documents.
COMMITMENT shall mean, as to any Lender, the sum of the Revolving
Credit Commitment of such Lender and the Term Loan Commitment of such Lender, as
each may be adjusted from time to time pursuant to other provisions of this
Agreement.
COMMITMENT FEE, with respect to any Lender, shall have the meaning
assigned to it in SECTION 2.3(A).
COMMITMENT LETTER shall mean that certain Commitment Letter of the
Agent to Play By Play, dated May 30, 1996 and accepted by Play By Play as of
June 4, 1996.
CONSEQUENTIAL LOSS shall mean, with respect to (a) the Borrowers'
payment of principal of a LIBOR Borrowing on a day other than the last day of
the applicable Interest Period, (b) the Borrowers' failure to borrow a LIBOR
Borrowing on the date specified by any Borrower for any reason, or (c) any
cessation of the Adjusted LIBOR Rate to apply to the Loans or any part thereof
pursuant to SECTION 2.9 hereof, in each case whether voluntary or involuntary,
any loss, expense, penalty, premium or liability incurred by any of the Lenders
or the Agent as a result thereof, including without limitation, any interest
paid by any of the Lenders to lenders of funds borrowed by it to make or carry
the Loans and any other costs and expenses sustained or incurred in liquidating
or employing deposits from third parties acquired to effect or maintain the
Loans.
CONSOLIDATED shall mean, for any Person, as applied to any financial or
accounting term, such term determined on a consolidated basis in accordance with
GAAP (except as otherwise required herein) for such Person and all Subsidiaries
thereof.
CONTINGENT OBLIGATION shall mean, as to any Person, any obligation of
such Person guaranteeing or intended to guarantee the payment or performance of
any Indebtedness, leases, dividends or other obligations (collectively "primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including without limitation, any obligation of the
Person for whom Contingent Obligations is being determined, whether or not
contingent, (a) to purchase any such primary obligation or other property
constituting direct or indirect security
7
therefor, (b) assume or contingently agree to become or be secondarily liable in
respect of any such primary obligation, (c) to advance or supply funds (i) for
the purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital for the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (d) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (e) otherwise to assure or hold harmless
the owner of such primary obligation against loss in respect thereof; PROVIDED,
HOWEVER, that the term "Contingent Obligation" shall not include endorsements of
checks or other negotiable instruments in the ordinary course of business.
CONTRIBUTION AGREEMENT shall mean that certain Contribution Agreement
of even date herewith, by and among the Borrowers, as the same may be amended,
modified, supplemented, restated and joined in pursuant to a Joinder Agreement,
from time to time.
CURRENT SUM shall mean on any day, as to a particular Lender, the sum
of (a) the outstanding principal balance of such Lender's Revolving Credit Note
on such day PLUS (b) the product of (i) such Lender's Revolving Credit
Commitment Percentage TIMES (ii) the Letter of Credit Exposure Amount on such
day.
DEBT CAPACITY RATIO shall mean, with respect to any Person as of any
date, the ratio of (a) Funded Indebtedness as of such date TO (b) Funds Flow
from Operations for the applicable period less Capital Expenditures for the
applicable period. For purposes of calculating the Debt Capacity Ratio for the
Borrowers and their Subsidiaries for any period prior to July 31, 1997, the
Funds Flow from Operations and Capital Expenditure components shall be
determined on a cumulative basis using information from August 1, 1996 forward.
Commencing with July 31, 1997 and at all times thereafter, the Funds Flow from
Operations and the Capital Expenditures components shall be determined for the
four most recent consecutive fiscal quarters of the Borrowers ending on or
immediately prior to the date of determination.
DEBT COVERAGE RATIO shall mean, with respect to any Person for any
period, the ratio of (a) Funds Flow from Operations less Capital Expenditures TO
(b) Debt Service Expense. For purposes of calculating the Debt Coverage Ratio
for the Borrowers and their Subsidiaries for any period prior to July 31, 1997,
the components of the Debt Coverage Ratio shall be determined on a cumulative
basis using information from August 1, 1996 forward. Commencing with July 31,
1997 and at all times thereafter, the components of the Debt Coverage Ratio
shall be determined for the four most recent consecutive fiscal quarters of the
Borrowers ending on or immediately prior to the date of determination.
DEBT SERVICE EXPENSE shall mean, with respect to any Person for any
period, the aggregate of regularly scheduled principal payments of all Funded
Indebtedness (including, without limitation, regularly scheduled principal
payments of Subordinated Indebtedness, but excluding principal payments of
Revolving Loans), made or to be made by such Person during such period on a
Consolidated basis in accordance with GAAP, consistently applied.
8
DISCONTINUED OPERATIONS shall mean, as of any day, operations of the
Borrowers or its Subsidiaries which have been discontinued, and which, as of
such day, have been fully terminated, disposed of or liquidated.
DOMESTIC LENDING OFFICE shall mean, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite its
name on the signature pages hereof, or such other office of such Lender as such
Lender may from time to time specify to the Borrowers and the Agent.
DORMANT SUBSIDIARIES shall mean each of the Subsidiaries of any
Borrower or any of its Subsidiaries which is listed as a Dormant Subsidiary on
SCHEDULE 5.8 attached hereto.
EBITDA shall mean with respect to any Person for any period the sum of
(i) Net Income, (ii) Interest Expense, (iii) depreciation and amortization of
assets, and (iv) federal, state and local income taxes, in each case of such
Person for such period, computed and calculated in accordance with GAAP
consistently applied.
ELIGIBLE ASSIGNEE shall mean a commercial Lender, a finance company,
insurance company, other financial institution or fund, reasonably acceptable to
the Agent and the Borrowers.
ELIGIBLE INVENTORY shall mean finished goods inventory of any Borrower
(but only to the extent that such finished goods inventory is Collateral
hereunder and is subject to a first priority perfected Lien in favor of the
Agent for the ratable benefit of the Lenders), including otherwise completed,
but unstuffed or unfilled "skin" components of inventory, which does and at all
times shall continue to satisfy in all material respects the standards of
eligibility applicable thereto as established by the Agent in accordance with
the terms hereof. Standards of eligibility for finished goods inventory may be
fixed and revised from time to time solely by the Agent in the Agent's
reasonable, exclusive judgement; PROVIDED that the Agent shall give the Borrower
notice within a reasonable time after any change in such standards of
eligibility. In general, without limiting the foregoing, inventory shall in no
event be considered as Eligible Inventory without complying with the following
requirements: (a) such inventory shall be valued in accordance with GAAP and
consist of finished goods (including unfilled or unstuffed "skin" components of
inventory as discussed above) which have been purchased or produced by the
applicable Borrower; (b) such inventory is in good condition, meets all
standards imposed by any applicable License Agreement and any Governmental
Authority having regulatory authority over it, is not obsolete and is currently
usable or saleable in the normal course of business of such Borrower; (c) such
inventory must not be considered "slow moving" (i.e.: inventory which has not
been sold within 12 months or that portion of inventory in excess of a 12-month
supply as calculated on a trailing 12-month basis); (d) such inventory is not in
the possession of or control of any warehouseman, bailee, or any agent or
processor for or customer of such Borrower, unless such warehouseman, bailee,
agent, processor, or customer has subordinated any Lien it may claim therein
pursuant to a written subordination agreement reasonably acceptable to Agent;
(e) such inventory must not be in transit and must be housed or stored in the
United States or Canada at a location owned or leased by any Borrower, or if
such inventory is housed or stored in the United States
9
or Canada at a location owned or leased by any Borrower, such inventory must not
have been shipped to any Borrower under the terms of any Letter of Credit or
Indemnified Letter of Credit for which the payment of such inventory has not yet
been made under the applicable Letter of Credit or Indemnified Letter of Credit;
(f) if such inventory is housed or stored at a location which is leased, and not
owned by any Borrower, the owner of such leased facility shall have subordinated
any Lien it may claim against such inventory, whether contractual or statutory,
to the Lien which the Agent holds against such inventory for the ratable benefit
of the Lenders pursuant to a written subordination agreement reasonably
acceptable to the Agent in all respects; (g) such inventory must be adequately
insured to the reasonable satisfaction of the Agent pursuant to insurance
coverage required by SECTION 6.7 hereof; and (h) the Agent has not deemed such
inventory ineligible because the Agent reasonably considers the value thereof to
be impaired or its ability to realize such value to be insecure.
ELIGIBLE RECEIVABLES shall mean, as at any date of determination
thereof, Receivables created by the Borrowers (but only to the extent that such
Receivables are Collateral hereunder and are subject to a first priority
perfected Lien in favor of the Agent for the ratable benefit of the Lenders) in
the ordinary course of business arising out of the sale of goods or rendering of
services by such Borrowers, which do and at all times shall continue to satisfy
in all material respects the standards of eligibility applicable thereto as
established by the Agent in accordance with the terms hereof. Standards of
eligibility for Receivables may be fixed and revised from time to time solely by
the Agent in the Agent's reasonable, exclusive judgment; PROVIDED that the Agent
shall give the Borrowers notice within a reasonable time after any change in
such standards of eligibility. In general, without limiting the foregoing, an
Eligible Receivable must comply with all of the following requirements: (a) all
payments due on the Receivable have been billed and invoiced in a timely fashion
and in the normal course of business; (b) no payment is outstanding on the
Receivable for more than 60 days from the due date thereof or 120 days after the
date of invoice; (c) the payments due on 50% or more of all Receivables of the
applicable account debtor are less than 120 days past the date of invoice and 60
days from the due date thereof; (d) the total Receivables owing to all of the
Borrowers by the applicable account debtor constitute 10% or less of the
aggregate Receivables owing to all of the Borrowers, or if the total Receivables
of the applicable account debtor exceed 10% of the aggregate of all Receivables
owing to the Borrowers by all account debtors, the Receivables of the applicable
account debtor exceeding such 10% limit are backed or secured by credit
insurance reasonably satisfactory to the Agent in all respects and such credit
insurance has been assigned to the Agent upon terms reasonably acceptable to the
Agent in its discretion; (e) the Receivable is free and clear of all security
interests, liens, charges and encumbrances of any nature whatsoever (except for
the Lien in favor of the Agent); (f) the Receivable arose from a completed,
outright and lawful sale of goods, to which title has passed to the applicable
account debtor on an absolute sales basis (excluding COD billing arrangements),
or from the rendering of services by or on behalf of such Borrower; (g) the
Receivable constitutes an "account" within the meaning of the Uniform Commercial
Code of the state in which such Borrower's principal offices are located; (h)
such Borrower is not aware that the Receivable arises out of a bill and hold,
consignment or progress billing arrangement or is subject to any setoff, contra,
offset, deduction, dispute, chargeback, credit, counterclaim or other defense
arising out of the transactions represented by the Receivable or independently
thereof; (i) the applicable
10
account debtor has finally accepted the goods or services from the sale out of
which the Receivable arose and has not objected to such account debtor's
liability thereon or returned, rejected or repossessed any of such goods, except
for complaints made or goods returned in the ordinary course of business for
which, in the case of goods returned, goods of equal or greater value have been
shipped in return; (j) the applicable account debtor is not any Governmental
Authority, unless there has been compliance satisfactory to the Agent in all
respects with the Assignment of Claims Act or similar state statutes; (k) the
applicable account debtor is not an Affiliate of such Borrower; (l) the account
debtor must be located in the United States or Canada, except for Receivables
insured or backed by credit insurance or a letter of credit in form and
substance reasonably acceptable to the Agent in all respects; (m) the Receivable
complies with all material Legal Requirements (including without limitation, all
usury laws, fair credit reporting and billing laws, fair debt collection
practices and rules, and regulations relating to truth in lending and other
similar matters); (n) the Receivable is in full force and effect and constitutes
a legal, valid and binding obligation of the applicable account debtor
enforceable in accordance with the terms thereof, except as such enforceability
may be limited by applicable bankruptcy laws or other laws affecting creditors
rights generally and by general principles of equity; (o) the Receivable is
denominated in and provides for payment by the applicable account debtor in U.S.
dollars or Canadian dollars (converted by the Agent to U.S. dollars for purposes
hereof); (p) the Receivable has not been and is not required to be charged or
written off as uncollectible in accordance with GAAP; (q) if the Receivable is
owing by an account debtor for which the applicable Borrower must have filed a
"Notice of Business Activities Report" or similar report in a state or states
where failure to comply with such filing of notice precludes bringing suit
against the applicable account debtor, Borrower must have filed such requisite
activities report or other similar report and otherwise be in full compliance
with such Legal Requirement; and (r) the Agent is reasonably satisfied in its
discretion with the credit standing of the applicable account debtor in relation
to the amount of credit extended.
ENVIRONMENTAL CLAIM shall mean any third party (including any
Governmental Authority) action, lawsuit, claim or proceeding (including claims
or proceedings at common law) which seeks to impose or alleges any material
liability for (i) preservation, protection, conservation, pollution,
contamination of, or releases or threatened releases of, Hazardous Substances
into the air, surface water, ground water or land or the clean-up, abatement,
removal, remediation or monitoring of such pollution, contamination or Hazardous
Substances; (ii) generation, recycling, reclamation, handling, treatment,
storage, disposal or transportation of Hazardous Substances (as defined under
the Resource Conservation and Recovery Act and its regulations, as amended from
time to time); (iii) exposure to Hazardous Substances; (iv) the safety or health
of employees or other Persons in connection with any of the activities specified
in any other subclause of this definition; or (v) the manufacture, processing,
distribution in commerce, presence or use of Hazardous Substances. An
"ENVIRONMENTAL CLAIM" includes a common law action, as well as a proceeding to
modify or terminate an Environmental Permit, to the extent that such a
proceeding attempts to redress violations of the applicable permit, license, or
regulation as alleged by any Governmental Authority.
ENVIRONMENTAL LIABILITIES shall mean all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
11
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including: remedial, removal,
response, abatement, restoration (including natural resources), investigative,
or monitoring liabilities, personal injury and damage to property, natural
resources or injuries to persons, and any other related costs, expenses, losses,
damages, penalties, fines, liabilities and obligations, and all costs and
expenses necessary to cause the issuance, reissuance or renewal of any
Environmental Permit including attorney's fees and court costs.
ENVIRONMENTAL LIABILITY shall mean any one of them.
ENVIRONMENTAL PERMIT shall mean any permit, license, approval or other
authorization under any applicable law, regulation and other requirement of the
United States or of any state, municipality or other subdivision thereof
relating to pollution or protection of health or the environment, including
laws, regulations or other requirements relating to emissions, discharges,
releases or threatened releases of Hazardous Substances into ambient air,
surface water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, recycling, presence, use, treatment, storage,
disposal, transport, or handling of Hazardous Substances.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the Department of
Labor thereunder.
ERISA AFFILIATE shall mean any trade or business (whether or not
incorporated) which together with any of the Borrowers or any Subsidiary of any
Borrower would be treated as a single employer under the provisions of Title I
or Title IV of ERISA.
EVENT OF DEFAULT shall mean any of the events specified in SECTION 8.1
hereof or otherwise specified as a Default in any other Loan Document, PROVIDED
there has been satisfied any requirement in connection with any such event for
the giving of notice or the lapse of time, or both, and DEFAULT shall mean any
of such events, whether or not any such requirement for the giving of notice, or
the lapse of time, or both, has been satisfied.
EXCESS CASH FLOW shall mean with respect to any Person for any period,
the amount, if any by which EBITDA exceeds the sum of (a) Debt Service Expense,
(b) Interest Expense, (c) Capital Expenditures and (d) federal, state and local
income taxes actually paid. All components of Excess Cash Flow shall be
determined in accordance with GAAP, consistently applied.
EXCESS INTEREST AMOUNT shall have the meaning attributed to such term
in SECTION 2.13 hereof.
FEDERAL FUNDS EFFECTIVE RATE shall mean, for any day, a rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
12
FINANCIAL OFFICER shall mean, with respect to any Person, the chief
financial officer of such Person.
FUNDED INDEBTEDNESS shall mean, without duplication, (a) all
Indebtedness and other Obligations of the Borrowers and the Guarantors under
this Agreement, the Notes and all other Loan Documents, (b) all Capital Lease
Obligations of any of the Borrowers or any of their Subsidiaries, (c)
Subordinated Indebtedness of any of the Borrowers or any Guarantors and (d) all
other Indebtedness of any of the Borrowers, any of the Guarantors or any of
their respective Subsidiaries, in each case including all payments in respect
thereof that are due within one year from the applicable date of calculation of
Funded Indebtedness. Funded Indebtedness shall be determined in accordance with
GAAP, consistently applied.
FUNDS FLOW FROM OPERATIONS shall mean, with respect to any Person for
any period, Net Income, PLUS depreciation and amortization of Property
(calculated after excluding any depreciation and amortization applicable to
Discontinued Operations as of such day), LESS (a) Investment in Foreign
Operations for such period and (b) deferred taxes for such period. All
components of Funds Flow from Operations shall be determined in accordance with
GAAP, consistently applied.
GAAP shall mean, as to a particular Person, those principles and
practices (a) which are recognized as such by the Financial Accounting Standards
Board or successor organization, (b) which are applied for all periods after the
date hereof in a manner consistent with the manner in which such principles and
practices were applied to the most recent audited financial statements of the
relevant Person furnished to the Agent and the Lenders, and (c) which are
consistently applied for all periods after the date hereof so as to reflect
properly the financial condition, and results of operations and changes in
financial position, of such Person; PROVIDED, however, that any accounting
principle or practice which the Securities and Exchange Commission ("SEC")
requires Play By Play to utilize in satisfying its reporting requirements to the
SEC and which are not recognized as generally accepted accounting principles by
the Financial Accounting Standards Board or its successor organization may be
utilized by the Borrowers and shall be deemed to be in compliance with GAAP for
purposes hereof, so long as such differing accounting principles or practices
mandated by the SEC are consistently applied by Play By Play for all periods
after the date implemented by the SEC. In the event of any implementation by the
SEC of any such differing accounting principle or practice after the Closing
Date, Borrowers agree to promptly provide the Agent and the Lenders with
financial projections reflecting how such changed reporting requirement shall
affect the financial projections previously provided to the Agent and the
Lenders by the Borrowers in determining the parameters of the financial
covenants of Borrowers set forth herein, and if such change in accounting
principle or practice materially alters the projected figures and models with
respect to Borrowers' compliance with the financial covenants of this Agreement,
Borrowers will in good faith negotiate changes with the Agent in the applicable
financial covenants hereof, subject to approval by the Required Lenders, in
order to counteract and adjust for any projected changes, whether upward or
downward, with respect to Borrowers' compliance with such financial covenants
contained herein.
13
GOVERNMENTAL AUTHORITY shall mean any foreign governmental authority,
the United States of America, any state of the United States and any political
subdivision of any of the foregoing, and any agency, instrumentality,
department, commission, board, bureau, central bank, authority, court or other
tribunal, in each case whether executive, legislative, judicial, regulatory or
administrative, having jurisdiction over the Agent, any of the Lenders, any of
the Borrowers, any Subsidiary of any Borrower, or their respective Property.
GRANTOR shall mean any Grantor, Assignor, Pledgor or Debtor, as such
terms are defined in any of the Security Documents.
GUARANTORS shall mean each and every Person executing a Guaranty from
time to time. As of the Closing Date, there are no Guarantors.
GUARANTY shall mean each and every guaranty of the Obligations from
time to time executed and delivered to the Agent by any Guarantors, as amended,
supplemented, modified, joined in pursuant to a Joinder Agreement and restated
from time to time.
HAZARDOUS SUBSTANCE shall mean any hazardous or toxic waste, substance
or product or material defined or regulated from time to time by any applicable
law, rule, regulation or order described in the definition of "Requirements of
Environmental Law," including solid waste (as defined under RCRA or its
regulations, as amended from time to time), petroleum and any fraction thereof,
any radioactive materials and waste.
HIGHEST LAWFUL RATE shall mean, with respect to the Agent or any
Lender, the maximum nonusurious rate of interest permitted to be charged by, as
applicable, the Agent or such Lender under applicable laws (if any) of the
United States or any state from time to time in effect.
INDEBTEDNESS shall mean, as to any Person, without duplication: (a) all
indebtedness (including principal, interest, fees and charges) of such Person
for borrowed money; (b) any other indebtedness which is evidenced by a bond,
debenture or similar instrument; (c) all Capital Lease Obligations of such
Person; (d) all obligations of such Person for the deferred purchase price of
Property or services (except trade accounts payable arising in the ordinary
course of business); (e) all obligations of such Person in respect of
outstanding letters of credit, acceptances and similar obligations created for
the account of such Person; (f) all indebtedness, liabilities, and obligations
secured by any Lien on any Property owned by such Person even though such Person
has not assumed or has not otherwise become liable for the payment of any such
indebtedness, liabilities or obligations secured by such Lien; and (g) net
liabilities of such Person under interest rate cap agreements, interest rate
swap agreements, foreign currency exchange agreements and other hedging
agreements or arrangements (calculated on a basis reasonably satisfactory to the
Agent and in accordance with accepted practice); PROVIDED, that such term shall
not mean or include any Indebtedness in respect of which monies sufficient to
pay and discharge the same in full (either on the expressed date of maturity
thereof or on such earlier date as such Indebtedness may be duly called for
redemption and payment) shall be deposited with
14
a depository, agency or trustee reasonably acceptable to the Agent in trust for
the payment thereof.
INDEMNIFIED LETTERS OF CREDIT shall mean all documentary and standby
letters of credit issued prior to the Closing Date (as the same may be amended
from time to time after the Closing Date, PROVIDED that no such amendment shall
increase the amount of any such letter of credit or extend the expiration date
thereof) by financial institutions other than the Agent for the account of any
Borrower to one or more of the inventory suppliers of any Borrower in connection
with one or more purchase orders submitted by any Borrower to any of such
inventory suppliers, but only to the extent that the Agent has indemnified the
issuers of such letters of credit at the request of the Borrowers in accordance
with the applicable provisions of SECTION 2.10 hereof.
INTEREST COVERAGE RATIO shall mean, with respect to any Person for any
period, the ratio of (a) EBITDA less Capital Expenditures TO (b) cash Interest
Expense. For purposes of calculating the Interest Coverage Ratio for the
Borrowers and their Subsidiaries for any period prior to July 31, 1996, the
components of the Interest Coverage Ratio shall be determined on a cumulative
basis using information from the Closing Date forward. For purposes of
calculating the Interest Coverage Ratio for the Borrowers and their Subsidiaries
for any period after July 31, 1996, the components of the Interest Coverage
Ratio shall be determined on a cumulative basis using information from and
including August 1, 1996 forward. Commencing with July 31, 1997 and at all times
thereafter, the Interest Coverage Ratio shall be determined for the four most
recent consecutive fiscal quarters of the Borrowers ending on or prior to the
date of determination. All components of the Interest Coverage Ratio shall be
determined in accordance with GAAP, consistently applied.
INTEREST EXPENSE shall mean, with respect to any Person for any period,
the interest expense of such Person during such period determined in accordance
with GAAP, consistently applied, and shall in any event include, without
limitation, (a) the amortization of debt discounts, (b) the amortization of all
fees payable in connection with the incurrence of Indebtedness to the extent
included in interest expense, (c) the portion of any Capital Lease Obligation
allocable to interest expense, (d) all fixed and calculable dividend payments on
preferred stock, and (e) payments of interest expense in kind.
INTEREST OPTION shall have the meaning given to such term in SECTION
2.8(A) hereof.
INTEREST PAYMENT DATES shall mean (a) FOR ALL TERM LOANS, (i) the first
Business Day of each calendar month prior to the Maturity Date, commencing on
July 1, 1996, and (ii) the Maturity Date; and (b) FOR ALL REVOLVING LOANS, (i)
the first Business Day of each calendar month prior to the Revolving Credit
Termination Date, commencing on July 1, 1996, and (ii) the Revolving Credit
Termination Date. In addition to the Interest Payment Dates described in the
preceding sentence, an Interest Payment Date FOR ALL LIBOR BORROWINGS
(regardless of whether the same constitute Term Loans or Revolving Loans) shall
be the last day of the Interest Period applicable thereto.
15
INTEREST PERIOD shall mean, as to any LIBOR Borrowing, the period
commencing on the date of such LIBOR Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is one (1), two (2), three (3) or six (6) months
thereafter, as the Borrowers may elect in accordance herewith; PROVIDED,
HOWEVER, that (a) if an Interest Period would end on a day that is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, with respect to LIBOR Borrowings, such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, (b) no Interest Period
shall end later than (i) the Revolving Credit Termination Date for any Revolving
Credit LIBOR Borrowing or (ii) the Maturity Date for any Term LIBOR Borrowing,
(c) interest shall accrue from and including the first day of an Interest Period
to but excluding the last day of such Interest Period, and (d) no Interest
Period shall exceed one (1) month if selected during the earlier to occur of (i)
the initial 180 days after the Closing Date or (ii) until such time that
$48,750,000 of the Total Commitment has been assigned through syndication by the
Agent to Lenders other than TCB and the Agent itself, acting in its capacity as
a Lender hereunder.
INVENTORY ADVANCE RATE shall mean the respective percentages set forth
below for the periods indicated:
PERIOD PERCENTAGE
------ ----------
Closing Date through July 31, 1996 55%
August 1, 1996 through August 31, 1996 54%
September 1, 1996 through September 30, 1996 53%
October 1, 1996 through October 31, 1996 52%
November 1, 1996 through November 30, 1996 51%
December 1, 1996 through Revolving
Credit Maturity Date 50%
INVENTORY CAP shall mean the lesser of (a) $27,000,000 at all times
through and including December 31, 1996, and $32,000,000 at all times after
December 31, 1996, and (b) for a consecutive three (3) month period during each
period from September 15 through January 15 of each fiscal year of Borrowers,
twenty-five percent (25%) of the total gross U.S. and Canadian inventory of
Borrowers and their U.S. and Canadian Subsidiaries (as periodically determined
during such period) which is subject to a first priority perfected Lien in favor
of the Agent for the ratable benefit of the Lenders. For purposes of designating
or selecting the applicable three (3) month period described in the preceding
sentence, unless the Borrowers have provided written notice to the Agent on or
before September 15 of the applicable year designating that such consecutive
three (3) month period shall commence prior to October 16 of the applicable
year, such consecutive three (3) month period shall be deemed to commence on
October 16 of such year.
INVESTMENT shall mean the purchase or other acquisition of any
securities or Indebtedness of, or the making of any loan, advance, transfer of
Property or capital contribution to, or the incurring of any liability,
contingently or otherwise, in respect of the Indebtedness of, any Person.
16
INVESTMENT IN FOREIGN OPERATIONS shall mean, with respect to any Person
at any time, the sum of (a) all capital investments and other payments or
contributions of equity by such Person to any of such Person's foreign
Subsidiaries or other foreign Affiliates, and (b) all loans and other non-equity
advances or distributions of funds by such Person to any of such Person's
foreign Subsidiaries or other foreign Affiliates.
JOINDER AGREEMENT shall mean any agreement, in Proper Form, executed by
a Subsidiary of any of the Borrowers or any other Subsidiary from time to time
in accordance with SECTION 6.10 hereof, pursuant to which such Subsidiary joins
in the execution and delivery of a Guaranty and the Contribution Agreement.
LEGAL REQUIREMENT shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority.
LENDER or LENDERS shall have the meaning assigned to such terms in the
preamble of this Agreement.
LETTERS OF CREDIT shall mean all standby letters of credit and
documentary sight letters of credit issued by the Agent for the account of one
or more of the Borrowers pursuant to the terms set forth in this Agreement.
LETTER OF CREDIT ADVANCES shall mean all sums which may from time to
time be paid by any and all of the Lenders pursuant to the Letters of Credit and
the indemnification of issuers of the Indemnified Letters of Credit, together
with all other sums, fees, reimbursements or other obligations which may be due
to the Agent or any of the Lenders pursuant to any of the Letters of Credit or
any indemnification of an issuer of any Indemnified Letter of Credit.
LETTER OF CREDIT EXPOSURE AMOUNT shall mean at any time the sum of (i)
the aggregate undrawn amount of all Letters of Credit and all Indemnified
Letters of Credit outstanding at such time PLUS (ii) the aggregate amount of all
Letter of Credit Advances for which the Lenders have not been reimbursed and
which remain unpaid at such time.
LIBOR BORROWING shall mean, as of any date, that portion of the
principal balance of the Loans bearing interest at the Adjusted LIBOR Rate as of
such date.
LIBOR LENDING OFFICE shall mean, with respect to any Lender, the office
of such Lender specified as its "LIBOR Lending Office" opposite or below its
name on the signature pages hereof, or (if no such office is specified, its
Domestic Lending Office), or such other office of such Lender as such Lender may
from time to time specify in writing to the Borrowers and the Agent.
LIBOR RATE shall mean, with respect to any LIBOR Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the rate at which dollar deposits approximately
equal in principal amount to the Agent's portion of such LIBOR Borrowing and for
a maturity equal to the applicable Interest Period are offered in immediately
available funds to the London
17
branch of the Agent by leading lenders in the London interbank market for
Eurodollars at approximately 11:00 a.m., London time, two (2) Business Days
prior to the first day of such Interest Period.
LICENSE AGREEMENTS shall mean each and every license agreement which is
now or hereafter entered into by and between the applicable licensor thereunder
and any Borrower or any of its Subsidiaries in order to allow for the lawful
purchase, manufacture or production of any inventory by such Borrower or such
Subsidiary which is protected under applicable copyright or trademark laws. The
License Agreements which are in effect as of the Closing Date are described in
SCHEDULE 5.10 attached hereto.
LICENSOR CONSENT LETTERS shall mean each and every consent letter
executed and delivered to the Agent by a licensor under the applicable License
Agreement(s) substantially in the form attached hereto as EXHIBIT H.
LIEN shall mean, with respect to any asset of any Person, (a) any
mortgage, pledge, charge, encumbrance, security interest, collateral assignment
or other lien or restriction of any kind on such asset, whether based on common
law, constitutional provision, statute or contract, (b) the interest of any
vendor or a lessor under any conditional sale agreement, title retention
agreement or capital lease relating to such asset, (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities, or (d) any other right of or arrangement with any
creditor to have such creditor's claim satisfied out of such assets, or the
proceeds therefrom, prior to the general creditors of such Person owning such
assets.
LOAN DOCUMENTS shall mean this Agreement, the Notes, the Applications,
the Security Documents, the Guaranties, the Contribution Agreement, the Joinder
Agreements, the Letters of Credit, all instruments, certificates and agreements
now or hereafter executed or delivered to the Agent and/or the Lenders pursuant
to any of the foregoing, and all amendments, modifications, renewals,
extensions, increases and rearrangements of, and substitutions for, any of the
foregoing.
LOANS shall mean the Term Loans and the Revolving Loans. LOAN shall
mean any one of the Term Loans or Revolving Loans.
LOCKBOX AGREEMENT shall collectively mean one or more lockbox
agreements, in Proper Form, to be executed and delivered to the Agent or TCB by
each Borrower and each of its Subsidiaries required by the Agent, together with
all modifications and/or replacements thereof which are approved in writing by
the Agent.
MATERIAL ADVERSE EFFECT shall mean a material adverse effect on (a) the
business, assets, operations or financial condition of the Borrowers and their
Subsidiaries, taken as a whole, (b) the ability of the Borrowers and the
Guarantors, taken as a whole, to perform or pay the Obligations in accordance
with the terms hereof or of any other Loan Document, or (c) the Agent's Lien on
any material portion of the Collateral or the priority of such Lien.
18
MATERIAL LICENSE AGREEMENT shall mean any License Agreement for which
domestic and Canadian sales by the Borrowers and their Subsidiaries of goods
manufactured, produced and/or distributed under such License Agreement, during
the twelve (12) month period immediately preceding the date of determination
thereof, exceeded five percent (5%) of the gross domestic and Canadian sales of
the Borrowers and their Subsidiaries taken as a whole during such period.
MATURITY DATE shall mean the earlier of (a) June 20, 2001, and (b) any
date the Maturity Date is accelerated by the Agent pursuant to SECTION 8.1
hereof.
MONTHLY UNAUDITED FINANCIAL STATEMENTS shall mean the financial
statements of a Person, which statements shall include (a) a balance sheet as of
the end of the respective calendar month or fiscal quarter, as applicable, (b)
an income statement for such respective calendar month or fiscal quarter, as
applicable, and for the fiscal year to date, subject to normal year-end
adjustments, all setting forth in comparative form the corresponding figures for
the corresponding period of the preceding fiscal year, and (c) as of the end of
each fiscal quarter, a statement of cash flows for the fiscal year to date,
subject to normal year-end adjustments, setting forth in comparative form the
corresponding figures in the corresponding period of the preceding fiscal year,
all certified as true and correct by a Responsible Officer of each Borrower. The
Monthly Unaudited Financial Statements for the Borrowers and their Subsidiaries
shall be (a) prepared on a Consolidated basis in accordance with GAAP, subject
to normal and customary adjustments, and (b) accompanied by those supporting
schedules customarily prepared and utilized by Borrowers in preparing such
Monthly Unaudited Financial Statements. Additionally, the Monthly Unaudited
Financial Statements for the end of any applicable fiscal quarter of the
Borrowers and their Subsidiaries shall also be prepared on a consolidating basis
in accordance with GAAP, subject to normal and customary adjustments.
MORTGAGES shall have the meaning assigned to such term in SECTION
3.1(B) hereof.
NET AMOUNT OF ELIGIBLE RECEIVABLES shall mean and include at any time,
without duplication, the gross amount of Eligible Receivables at such time LESS
(a) unpaid sales, excise or similar taxes owed any Borrower or Guarantor, (b)
returns, discounts, claims, credits and allowances of any nature at any time
issued, owing, granted, outstanding or claimed and (c) unpaid service charges
owed by any Borrower or Guarantor.
NET INCOME shall mean gross revenues and other proper income credits
for such Person, less all proper expenses and other income charges for such
Person, including taxes on income, all determined in accordance with GAAP;
PROVIDED, that there shall not be included in such revenues any extraordinary or
nonrecurring items, as determined in accordance with GAAP.
NOTES shall mean the Term Notes and the Revolving Credit Notes,
collectively. NOTE shall mean any one of them.
OBLIGATIONS shall mean, without duplication, all obligations,
liabilities and Indebtedness of the Borrowers and the Guarantors with respect to
the Security Documents and other Loan Documents, including without limitation,
(a) the principal
19
of and interest on the Loans and (b) the payment or performance of all other
obligations, liabilities and Indebtedness of the Borrowers or the Guarantors to
the Agent and the Lenders hereunder, under the Notes, under the Letters of
Credit, under the Applications or under any one or more of the other Loan
Documents, including all fees, costs, expenses and indemnity obligations
hereunder and thereunder.
OFFICER'S CERTIFICATE shall mean a certificate substantially in the
form of EXHIBIT C attached hereto.
ORGANIZATIONAL DOCUMENTS shall mean, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the joint
venture agreement establishing such joint venture, and with respect to a trust,
the instrument establishing such trust; in each case including any and all
modifications thereof as of the date of the Loan Document referring to such
Organizational Document and any and all future modifications thereof which are
consented to by the Agent.
PARTIES shall mean all Persons other than the Agent or any Lender
executing any Loan Document.
PAST DUE RATE shall mean for the Agent and each Lender, on any day, the
lesser of (a) the sum of (i) the Alternate Base Rate, PLUS (ii) two percent
(2%), and (b) the Highest Lawful Rate, if any, applicable to the Agent or such
Lender on such day.
PBGC shall mean the Pension Benefit Guaranty Corporation.
PERMITTED INVESTMENT SECURITIES shall mean: (a) at any time prior to
the consummation of an Approved Secondary Public Offering, (1) readily
marketable direct obligations of the United States of America or any agency or
wholly owned corporation thereof which are backed by the full faith and credit
of the United States, (2) certificates of deposit or other short-term direct
obligations of (i) the Agent, (ii) TCB or (iii) any other financial institution
having capital and surplus in excess of $5,000,000,000, and (3) other
Investments mutually agreed to in writing by Borrowers and the Agent; and (b) at
any time contemporaneously with or subsequent to the consummation of an Approved
Secondary Public Offering, (1) all Investments of the type described in clause
(a) of this definition, (2) commercial paper issued by corporations organized
under the laws of the United States of America or any state thereof, each of
which conducts a substantial part of its business in the United States of
America, maturing within 180 days from the date of the original issue thereof,
and rated "P-1" or better by Moody's Investors Service or "A-1" or better by
Standard and Poor's Corporation, (3) repurchase agreements which are entered
into with any bank meeting the requirements of clause (a)(2) of this definition
and which relate to readily marketable direct obligations of the United States
of America or any agency thereof, and (4) investments in money market mutual
funds, all the assets of which consist of other obligations of the types
described in clauses (a)(1), (a)(2), (b)(2) and (b)(3) of this definition;
PROVIDED, that in each case described in clauses (a)(1), (a)(2), (b)(2) and
(b)(3) of this definition, such obligation shall mature not more than one (1)
year from the acquisition thereof.
20
PERSON shall mean any individual, corporation, business trust,
unincorporated organization or association, partnership, joint venture,
Governmental Authority or any other form of entity.
PLAN shall mean any plan subject to Title IV of ERISA and maintained
for employees of the Borrowers or of any member of a "controlled group of
corporations", as such term is defined in the Code, of which any Borrower, any
of its Subsidiaries or any ERISA Affiliate it may acquire from time to time is a
part, or any such plan to which any Borrower, any of its Subsidiaries or any
ERISA Affiliate is required to contribute on behalf of its employees.
PRIME RATE shall mean the rate of interest per annum publicly announced
from time to time by Chemical Bank, or its successor financial institution, at
its principal office in New York City as it prime rate in effect at such time.
Without notice to the Borrowers or any other Person, the Prime Rate shall change
automatically from time to time as and in the amount by which said prime rate
shall fluctuate, with each such change to be effective as of the date of each
change in such prime rate. THE PRIME RATE IS A REFERENCE RATE AND DOES NOT
NECESSARILY REPRESENT THE LOWEST OR BEST RATE ACTUALLY CHARGED BY CHEMICAL BANK
OR SUCH SUCCESSOR FINANCIAL INSTITUTION TO ANY OF ITS CUSTOMERS. CHEMICAL BANK
OR SUCH SUCCESSOR FINANCIAL INSTITUTION MAY MAKE COMMERCIAL LOANS OR OTHER LOANS
AT RATES OF INTEREST AT, ABOVE AND BELOW THE PRIME RATE.
PRINCIPAL OFFICE shall mean the principal office in New York City of
the Agent, or at such other place as the Agent may from time to time by notice
to the Borrowers designate.
PROPER FORM shall mean in form and substance satisfactory to the Agent.
PROPERTY shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
RATE SELECTION DATE shall mean that Business Day which is (a) in the
case of the Alternate Base Rate Borrowings, the date of such borrowing, or (b)
in the case of LIBOR Borrowings, the date three (3) Business Days preceding the
first day of any proposed Interest Period.
RATE SELECTION NOTICE shall have the meaning ascribed to such term in
SECTION 2.8(B)(1) hereof.
RECEIVABLES shall mean and include all of the accounts, instruments,
documents, chattel paper and general intangibles of any Borrower or any of its
Subsidiaries, whether secured or unsecured, whether now existing or hereafter
created or arising, and whether or not specifically assigned to the Agent for
the ratable benefit of the Lenders.
REGULATION D shall mean Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect and shall include any
successor or other
21
regulation relating to reserve requirements applicable to member Lenders of the
Federal Reserve System.
REGULATORY CHANGE shall mean, with respect to any Lender, any change on
or after the date of this Agreement in any Legal Requirement (including
Regulation D) or the adoption or making on or after such date of any
interpretation, directive or request applying to a class of Lenders including
such Lender under any Legal Requirement (whether or not having the force of law)
by any Governmental Authority charged with the interpretation or administration
thereof.
REPORTABLE EVENT shall mean a Reportable Event as defined in Section
4043(b) of ERISA.
REQUEST FOR EXTENSION OF CREDIT shall mean a written request for
extension of credit substantially in the form of EXHIBIT D attached hereto.
REQUIRED LENDERS shall mean Lenders having 70% or greater of the Total
Commitment.
REQUIREMENTS OF ENVIRONMENTAL LAW shall mean all requirements imposed
by any law (including The Resource Conservation and Recovery Act, The
Comprehensive Environmental Response, Compensation, and Liability Act, the Clean
Water Act, the Clean Air Act, and any state analogues of any of the foregoing),
rule, regulation, or order of any Governmental Authority now or hereafter in
effect which relate to (i) pollution, protection or clean-up of the air, surface
water, ground water or land; (ii) Hazard Substance generation, recycling,
reclamation, release, threatened release, treatment, storage, disposal or
transportation; (iii) exposure of Persons or property to Hazardous Substances;
(iv) the safety or health of employees or other Persons; or (v) the manufacture,
presence, processing, distribution in commerce, use, discharge, releases,
threatened releases, emissions or storage of Hazardous Substances into the
environment. REQUIREMENT OF ENVIRONMENTAL LAW shall mean any one of them.
RESPONSIBLE OFFICER shall mean, with respect to any Person, any
president or vice president, or the chief financial officer or controller of
such Person.
REVOLVING CREDIT ALTERNATE BASE RATE BORROWING shall mean, as of any
date, that portion of the principal balance of the Revolving Loans bearing
interest at a rate determined by reference to the Alternate Base Rate as of such
date.
REVOLVING CREDIT COMMITMENT shall mean, as to any Lender, the
obligation of such Lender to make Revolving Loans and incur liability for the
Letters of Credit Exposure Amount in an aggregate principal amount at any one
time outstanding up to, but not exceeding, the amount set forth as such Lender's
Revolving Credit Commitment in SCHEDULE 1.1 attached hereto (as the same may be
reduced from time to time pursuant to SECTION 2.4 hereof).
REVOLVING CREDIT COMMITMENT PERCENTAGE shall mean, with respect to any
Lender, the ratio, expressed as a percentage, of such Lender's Revolving Credit
Commitment to the Total Revolving Credit Commitment.
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REVOLVING CREDIT LIBOR BORROWING shall mean, as of any date, that
portion of the principal balance of the Revolving Loans bearing interest at the
Adjusted LIBOR Rate as of such date.
REVOLVING CREDIT NOTES shall mean the promissory notes, each
substantially in the form of EXHIBIT A attached hereto, of the Borrowers
evidencing the Revolving Loans, payable to the order of the respective Lenders
in the amount of said Lender's Revolving Credit Commitment, and all renewals,
extensions, modifications, rearrangements and replacements thereof and
substitutions therefor. REVOLVING CREDIT NOTE shall mean any of such promissory
notes.
REVOLVING CREDIT TERMINATION DATE shall mean the earlier of (a) June
20, 1998, (b) any date the Total Revolving Credit Commitment is terminated in
full by the Borrowers pursuant to SECTION 2.4 hereof and (c) any date the
Maturity Date is accelerated or the Total Revolving Credit Commitment is
terminated in full by the Agent pursuant to SECTION 8.1 hereof.
REVOLVING LOANS shall mean the Revolving Loans made pursuant to SECTION
2.1(B) hereof. REVOLVING LOAN shall mean one of such Revolving Loans.
ROYALTY PAYMENT RESERVE shall mean the product of (a) the total
aggregate domestic and Canadian sales by the Borrowers and their Subsidiaries of
all inventory produced, manufactured and/or distributed under any and all of the
License Agreements (other than those License Agreements for which the Agent has
received a Licensor Consent Letter from the applicable licensors thereunder) for
the preceding calendar month TIMES (b) fifteen percent (15%). The Royalty
Payment Reserve will be initially determined by the Borrowers and such amount
shall be set out in each Officer's Certificate to be delivered to the Agent for
the preceding calendar month in accordance with SECTION 6.3(D) hereof. The Agent
shall have the right at any time to review the Borrowers' determination of the
Royalty Payment Reserve based upon all information available to the Agent, and
if the Agent discovers any error in the Borrowers' determination of such amount,
the Royalty Payment Reserve for the applicable calendar month shall be adjusted
accordingly. Notwithstanding anything to the contrary contained in this
paragraph, the Agent reserves the right to increase the above-described
percentage amount utilized in calculating the Royalty Payment Reserve if any
inspection or field report by the Agent reasonably demonstrates that the
aggregate royalty percentages paid by the Borrowers and their Subsidiaries under
the License Agreements has increased over the approximate ten percent (10%)
level for such item as of the Closing Date.
SECURITY AGREEMENTS shall mean (a) the Security Agreement (Personal
Property) of even effective date herewith, between the Borrowers and the Agent,
for the ratable benefit of the Lenders, covering all Receivables, inventory,
equipment and all other tangible and intangible personal Property of the
Borrowers more particularly described therein, (b) the Trademark Security
Agreement of even effective date herewith, between the Borrowers and the Agent,
for the ratable benefit of the Lenders, covering and effecting the trademarks of
the Borrowers more particularly described therein, (c) the Pledge Agreement of
even effective date herewith, between Play By Play and the Agent, for the
ratable benefit of the Lenders, covering (i) all of the issued and outstanding
23
Stock in Ace more particularly described therein and (ii) sixty-five percent
(65%) of the issued and outstanding Stock in Play By Play Toys & Novelties
Europe, S.A. and Play By Play Far East Limited, (d) the Pledge Agreement of even
date effective date herewith, between Ace and the Agent, for the ratable benefit
of the Lenders, covering all of the issued and outstanding stock in Newco, (e)
any and all other security agreements, pledge agreements, collateral assignments
or other similar documents now or hereafter executed in favor of the Agent, for
the ratable benefit of the Lenders as security for the payment or performance of
any and or all of the Obligations, and (f) any amendment, modification,
restatement or supplement of all or any of the above-described agreements and
assignments.
SECURITY DOCUMENTS shall mean the Security Agreements, the Mortgages,
all related financing statements and any and all other agreements, mortgages,
deeds of trust, chattel mortgages, security agreements, pledges, guaranties,
assignments of income, assignments of contract rights, assignments or pledges of
stock or partnership interests, standby agreements, subordination agreements,
undertakings and other instruments and financing statements now or hereafter
executed and delivered in connection with, or as security for, the payment and
performance of the Obligations, as any of them may from time to time be amended,
modified, restated or supplemented.
STATUTORY RESERVES shall mean (a) WITH RESPECT TO THE ADJUSTED LIBOR
RATE, a fraction (expressed as a decimal), the numerator of which is the number
one and the denominator of which is the number one minus the aggregate of the
maximum reserve percentage (including without limitation, any marginal, special,
emergency or supplemental reserves) expressed as a decimal, established by the
Board of Governors of the Federal Reserve System of the United States and any
other banking authority to which any Lender is subject with respect to the
Adjusted LIBOR Rate for Eurocurrency Liabilities (as defined in Regulation D),
including without limitation, those reserve percentages imposed under Regulation
D, and (b) WITH RESPECT TO THE BASE CD RATE, a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentage
(including, without limitation, any marginal, special, emergency or supplemental
reserves) expressed as a decimal, established by the Board of Governors of the
Federal Reserve System of the United States or any banking authority to which
any Lender is subject with respect to the Base CD Rate for new negotiable
nonpersonal time deposits in U.S. dollars of over $100,000 with maturities
approximately equal to three months. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any applicable
reserve percentage. For purposes hereof, LIBOR Borrowings shall be deemed to
constitute Eurocurrency Liabilities (as defined in Regulation D) and as such,
shall be deemed to be subject to such reserve requirements of Regulation D
without benefit of or credit for proration, exceptions or offsets which may be
available from time to time to any Lender under Regulation D.
STOCK shall mean as to a Business Entity, all capital stock or other
indicia of equity rights issued by such Business Entity from time to time.
SUBORDINATED INDEBTEDNESS shall mean, with respect to any Borrower or
Guarantor, Indebtedness subordinated in right of payment to such Borrower's or
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Guarantor's monetary Obligations on terms satisfactory to and approved in
writing by the Agent.
SUBSIDIARY shall mean, as to a particular parent Business Entity, any
Business Entity of which MORE THAN fifty percent (50%) of the capital stock or
other indicia of equity rights issued by such Business Entity is at the time
directly or indirectly owned by such parent Business Entity.
TANGIBLE NET WORTH shall mean, as to any Person at any time, (a) the
sum of such Person's capital stock, capital in excess of par or stated value of
shares of its capital stock, retained earnings and any other account which, in
accordance with GAAP, constitutes stockholders' equity, LESS (b) treasury stock,
LESS (c) the amount of any write-up subsequent to the effective date of this
Agreement in the value of any asset above the cost or depreciated costs thereof
to such Person, LESS (d) the book value of all assets which would be treated as
intangibles under GAAP, including without limitation, good will, trademarks,
trade names, patents, copyrights and licenses.
TCB shall mean Texas Commerce Bank National Association, a national
banking association.
TERM ALTERNATE BASE RATE BORROWING shall mean, as of any date, that
portion of the principal balance of the Term Loans bearing interest at a rate
determined by reference to the Alternate Base Rate as of such date.
TERM LIBOR BORROWING shall mean, as of any date, that portion of the
principal balance of the Term Loans bearing interest at the Adjusted LIBOR Rate
as of such date.
TERM LOAN COMMITMENT shall mean, as to any Lender, the obligation of
such Lender to make a Term Loan in a principal amount up to, but not exceeding,
the amount set forth as such Lender's Term Loan Commitment in SCHEDULE 1.1
attached hereto (as the same may be reduced from time to time pursuant to
SECTION 2.4 hereof).
TERM LOAN COMMITMENT PERCENTAGE shall mean, with respect to any Lender,
the ratio, expressed as a percentage, of such Lender's Term Loan Commitment to
the Total Term Loan Commitment.
TERM LOANS shall mean the Term Loans made pursuant to SECTION 2.1(A)
hereof. TERM LOAN shall mean any one of such Term Loans.
TERM NOTES shall mean the promissory notes, each substantially in the
form of EXHIBIT B attached hereto, of the Borrowers evidencing the Term Loans,
payable to the order of the respective Lenders in the amount of each of said
Lender's Term Loan Commitment, and all renewals, extensions, modifications,
rearrangements and replacements thereof, and substitutions therefor. TERM NOTE
shall mean any one of such promissory notes.
THREE-MONTH SECONDARY CD RATE shall mean, for any day, the secondary
market rate for three-month certificates of deposit as being in effect on such
day (or, if such
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day shall not be a Business Day, the next preceding Business Day) by the Board
of Governors of the Federal Reserve System of the United States through the
public information telephone line of the Federal Reserve Bank of New York (which
rate will, under the current practices of such Board of Governors, be published
in Federal Reserve Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m. on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by the Agent from three New
York City negotiable certificate of deposit dealers of recognized standing
selected by the Agent.
TOTAL COMMITMENT shall mean, on any day, the aggregate of all of the
Commitments of the Lenders on such day.
TOTAL REVOLVING CREDIT COMMITMENT shall mean, on any day, the aggregate
of the Lenders' Revolving Credit Commitments on such day (as the same may be
reduced from time to time pursuant to SECTION 2.4 hereof).
TOTAL TERM LOAN COMMITMENT shall mean, on any day, the aggregate of all
of the Lenders' Term Loan Commitments on such day (as the same may be reduced
from time to time pursuant to SECTION 2.4 hereof).
TOTAL UNSUBORDINATED LIABILITIES shall mean, with respect to any
Person, the total of all items which would properly be included as liabilities
on a balance sheet of such Person, determined in accordance with GAAP,
consistently applied, but specifically excluding Subordinated Indebtedness,
capital stock, additional paid in capital, capital surplus, retained earnings,
minority interests and contingency reserves.
TRANSACTIONS shall mean the transactions contemplated to occur under or
in connection with the Acquisition Documents.
UNUSED REVOLVING CREDIT COMMITMENT shall mean, as to a particular
Lender, the daily difference of such Lender's Revolving Credit Commitment on
such day less the Current Sum applicable to such Lender on such day.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. Except where
specifically otherwise provided:
(a) The symbol "$" and the word "dollars" shall mean lawful
money of the United States of America.
(b) Any accounting term not otherwise defined shall have the
meaning ascribed to it under GAAP.
(c) Unless otherwise expressly provided, any accounting
concept and all financial covenants shall be determined on a Consolidated basis,
and financial measurements shall be computed without duplication.
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(d) Wherever the term "including" or any of its correlatives
appears in the Loan Documents, it shall be read as if it were written "including
(by way of example and without limiting the generality of the subject or concept
referred to)".
(e) Wherever the word "herein" or "hereof" is used in any
Loan Document, it is a reference to that entire Loan Document and not just to
the subdivision of it in which the word is used.
(f) References in any Loan Document to Section numbers are
references to the Sections of such Loan Document.
(g) References in any Loan Document to Exhibits, Schedules,
Annexes and Appendices are to the Exhibits, Schedules, Annexes and Appendices to
such Loan Document, and they shall be deemed incorporated into such Loan
Document by reference.
(h) Any term defined in the Loan Documents which refers to a
particular agreement, instrument or document shall also mean, refer to and
include all modifications, amendments, supplements, restatements, renewals,
extensions and substitutions of the same; PROVIDED that nothing in this
subsection shall be construed to authorize any such modification, amendment,
supplement, restatement, renewal, extension or substitution except as may be
permitted by other provisions of the Loan Documents.
(i) All times of day used in the Loan Documents mean local
time in New York City.
(j) Defined terms may be used in the singular or plural, as the context
requires.
2. LOANS; LETTERS OF CREDIT; NOTES; PAYMENTS; PREPAYMENTS; INTEREST RATES.
2.1 TERM LOAN COMMITMENTS AND REVOLVING CREDIT COMMITMENTS.
(a) Subject to the terms and conditions hereof, each Lender,
severally and not jointly, agrees to make a Term Loan to the Borrowers on the
Closing Date, in a principal amount not to exceed the amount of such Lender's
Term Loan Commitment.
(b) Subject to the terms and conditions hereof, each Lender,
severally and not jointly, agrees to make Revolving Loans to any Borrower from
time to time on and after the Closing Date until, but not including, the
Revolving Credit Termination Date, in an aggregate principal amount at any one
time outstanding (including such Lender's Revolving Credit Commitment Percentage
of the Letter of Credit Exposure Amount at such time) up to, but not exceeding
such Lender's Revolving Credit Commitment. Notwithstanding the foregoing, the
aggregate principal amount of Revolving Loans outstanding at any time shall not
exceed (a) the lesser of (i) the Total Revolving Credit Commitment and (ii) the
applicable Borrowing Base at such time LESS (b) the Letter of Credit Exposure
Amount at such time. Subject to the conditions herein, any such Revolving Loan
repaid prior to the Revolving Credit Termination Date
27
may be reborrowed as an additional Revolving Loan by any Borrower pursuant to
the terms of this Agreement.
2.2 LOANS.
(a) Subject to SECTIONS 4.1 and 4.2 hereof, (i) all Loans
shall be advanced and made ratably by the Lenders in accordance with the
Lenders' respective Term Loan Commitments or Revolving Credit Commitments, as
applicable; (ii) the Term Loans shall be made by the Lenders on the Closing Date
against delivery of the Term Notes; and (iii) the initial Revolving Loans shall
be made on the Closing Date by the Lenders against delivery of the Revolving
Credit Notes.
(b) When requesting a Loan hereunder, the Borrower shall give
the Agent notice of a request for a Loan in accordance with SECTION 4.1(A)
hereof. Except as otherwise provided in SECTION 2.2(F) hereof, the Agent shall
promptly advise the Lenders of any notice of a request for a Loan given pursuant
to SECTION 4.1(A) and of each Lender's portion of a requested borrowing (based
on such Lender's Revolving Credit Commitment Percentage or Term Loan Commitment
Percentage, as applicable).
(c) Except as otherwise provided or specified in SECTION
2.2(F) below, each Lender shall make its Term Loan and Revolving Loans available
on the proposed dates thereof by causing its Applicable Lending Office to pay
the amount required to the Agent at the Principal Office in immediately
available funds not later than 12:00 noon, and the Agent shall as soon as
practicable, but in no event later than 5:00 p.m. on such date, credit the
amount so received to a general deposit account designated and maintained by the
Borrowers with the Agent at the Principal Office. If a requested Loan shall not
occur on the Closing Date or any date specified by the Borrowers as set forth in
the applicable Request for Extension of Credit, as the case may be, because all
of the conditions for such Loan set forth herein or in any of the other Loan
Documents shall not have been met, the Agent shall return the amounts so
received from the Lenders in respect of such requested Loan to the applicable
Lenders as soon as practicable.
(d) The obligations of the Lenders hereunder are several and
not joint; therefore, notwithstanding anything herein to the contrary: (i) no
Lender shall be required to make a Term Loan in excess of such Lender's Term
Loan Commitment; (ii) no Lender shall be required to make Revolving Loans at any
one time outstanding in excess of such Lender's Revolving Credit Commitment;
(iii) if a Lender fails to make its Term Loan as or when required hereunder and
the Borrowers subsequently make a repayment on the Term Loans, such repayment
shall split among the non-defaulting Lenders in accordance with their respective
Term Loan Commitment Percentages until each Lender has its Term Loan Commitment
Percentage of all of the outstanding Term Loans, then the balance of such
repayment shall be divided among all of the Lenders in accordance with their
respective Term Loan Commitments; (iv) if a Lender fails to make a Revolving
Loan as and when required hereunder and the Borrowers subsequently makes a
repayment on the Revolving Loans, such repayment shall be split among the
non-defaulting Lenders in accordance with their respective Revolving Credit
Commitment Percentages until each Lender has its Revolving Credit Commitment
Percentage of all of the outstanding Revolving Loans, after which the balance of
such
28
repayment shall be divided among all of the Lenders in accordance with their
respective Revolving Credit Commitments; and (v) the failure of any Lender to
make any Loan shall not in itself relieve any other Lender of its obligation to
lend hereunder (PROVIDED, that no Lender shall be responsible for the failure of
any other Lender to make a Loan such other Lender is obligated to make
hereunder).
(e) The Revolving Loans made by the Lenders on any date shall
be in integral multiples of $1.00; PROVIDED, HOWEVER, that the LIBOR Borrowings
made on any date (whether the same be Revolving Credit LIBOR Borrowings or Term
LIBOR Borrowings) shall be in a minimum aggregate principal amount of
$2,500,000, with any increases over such minimal amount being in integral
aggregate multiples of $100,000.
(f) So long as the procedures set forth in SECTION 6.15
hereof remain in effect, the arrangements between the Agent and the Lenders with
respect to making and advancing the Revolving Loans and making payments under
Letters of Credit and under indemnities of issuers of Indemnified Letters of
Credit shall be handled on the following basis: no less than once a week, the
Agent will provide each Lender with a statement showing, for the period of time
since the date of the most recent of such statements previously provided, the
aggregate principal amount of new Revolving Loans made to the Borrowers, the
aggregate amount of new Letter of Credit Advances which have not been
reimbursed, the aggregate face amount of new Letters of Credit issued for the
account of any Borrower, the amount of remittances and payments actually
collected and applied by the Agent to reduce the outstanding principal balance
of the Revolving Loans and to reimburse Letter of Credit Advances during such
period and the outstanding principal balances of the Revolving Loans and the
aggregate Letter of Credit Exposure Amount outstanding at the end of such
period. If a Lender's pro-rata share (based on such Lender's Revolving Credit
Commitment Percentage) of the Revolving Loans and the unreimbursed Letter of
Credit Advances made during such period exceeds such Lender's pro-rata share of
remittances and payments applied to reduce the Revolving Loans and reimburse
Letter of Credit Advances during such period, the difference will be paid and
made available in same day funds by such Lender to the Agent, and if such
Lender's pro-rata share (based on such Lender's Revolving Credit Commitment
Percentage) of remittances and payments applied to reduce the Revolving Loans
and reimburse Letter of Credit Advances during such period exceeds such Lender's
pro-rata share (based on such Lender's Revolving Credit Commitment Percentage)
of the Revolving Loans and the unreimbursed Letter of Credit Advances made
during such period, the difference will be paid and made available in same day
funds by the Agent to such Lender.
(g) The Agent shall render to the Borrowers each month a
statement of the Borrowers' account of all transactions of the type described in
SECTION 2.2(F) hereof, which shall be deemed to be correct and accepted by and
be binding upon the Borrowers unless the Agent receives a written statement of
the Borrowers' exceptions to such account statement within thirty (30) days
after such statement was rendered to the Borrowers.
2.3 COMMITMENT AND OTHER FEES.
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(a) In consideration of each Lender's Revolving Credit
Commitment, the Borrowers jointly and severally agree to pay to the Agent for
the account of each Lender a commitment fee (each a "COMMITMENT FEE") (computed
on the basis of the actual number of days elapsed in a year composed of 360
days, subject to the terms of SECTION 10.6 hereof) in an amount equal to the
product of (A) one-half of one percent (.50%) TIMES (B) such Lender's Unused
Revolving Credit Commitment. The Commitment Fee shall be due and payable in
arrears (i) on the first Business Day of each November, February, May and August
prior to the Revolving Credit Termination Date, commencing November 1, 1996, and
(ii) on the Revolving Credit Termination Date, with each Commitment Fee to
commence as of the date hereof and to be effective as to any reduction in the
Total Revolving Credit Commitment as of the date of any such decrease, and each
Commitment Fee shall cease to accrue (except with respect to interest at the
Past Due Rate on any unpaid portion thereof) on the Revolving Credit Termination
Date. All past due Commitment Fees shall bear interest at the Past Due Rate and
shall be payable upon demand by the Agent.
(b) The Borrowers hereby agree to jointly and severally pay
to the Agent, for its sole benefit (and not for the benefit of each of the
Lenders), an administration fee in the amount of $100,000 per annum, payable in
advance, commencing on the Closing Date, and thereafter annually on the first
Business Day of each subsequent June.
2.4 TERMINATION AND REDUCTIONS OF COMMITMENTS.
(a) Upon at least five (5) Business Days' prior irrevocable
written notice to the Agent, the Borrowers may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Total Revolving
Credit Commitment ratably among the Lenders in accordance with the amounts of
their Revolving Credit Commitments; PROVIDED, HOWEVER, that the Total Revolving
Credit Commitment shall not be reduced at any time to an amount not less than
the aggregate of each Lender's Current Sum outstanding at such time. Each
partial reduction of the Total Revolving Credit Commitment shall be in a minimum
of $2,000,000 or an integral multiple of $500,000 in excess thereof.
(b) Simultaneously with any termination or reduction of the
Total Revolving Credit Commitment pursuant to SECTION 2.4(A) above, the
Borrowers hereby jointly and severally agree to pay to each Lender, through the
Agent, the Commitment Fee due and owing through and including the date of such
termination or reduction on the amount of the Revolving Credit Commitment of
such Lender so terminated or reduced.
(c) The Total Term Loan Commitment shall be permanently
reduced by the amount of any payment or prepayment of the outstanding principal
amount of the Term Loans on the date of any such payment or prepayment.
(d) To effect the payment of any and all Commitment Fees and
all other Obligations outstanding and owing hereunder or under any other Loan
Documents, subject to the provisions of SECTIONS 2.1 AND 4.1 hereof, the Agent
shall cause the Lenders to make a Revolving Loan if (i) such Revolving Loan is
to be made prior to the
30
Revolving Credit Termination Date, (ii) the Availability would be equal to or
greater than zero after giving effect to such Revolving Loan, and (iii) no
Default or Event of Default shall have occurred which is then continuing. The
inability of the Agent to cause payment of any such Commitment Fees or other
Obligations in accordance with the preceding sentence shall not in any way
whatsoever affect the Borrowers' joint and several obligations to otherwise pay
such amounts in accordance with the applicable terms hereof or of any other Loan
Documents.
2.5 MANDATORY AND VOLUNTARY PREPAYMENTS.
(a) If the Current Sum applicable to a Lender at any time
exceeds such Lender's Revolving Credit Commitment, the Agent shall notify the
Borrowers of the deficiency (such notice being permitted to be given orally and
need not be in writing) and the Borrowers shall immediately make a prepayment on
such Lender's Revolving Credit Note or otherwise reimburse such Lender for
Letter of Credit Advances or cause one or more Letters of Credit to be cancelled
and surrendered in an amount sufficient to reduce such Lender's Current Sum to
an amount no greater than such Lender's Revolving Credit Commitment. Any
prepayments required by this subparagraph (a) shall be applied to outstanding
Revolving Credit Alternate Base Rate Borrowings up to the full amount thereof
before such prepayments are applied to outstanding Revolving Credit LIBOR
Borrowings (together with any Consequential Loss resulting from such
prepayment); PROVIDED, HOWEVER, that the Borrowers shall not be required to make
any prepayment of any LIBOR Borrowings pursuant to this subparagraph (a) until
the last day of the Interest Period with respect thereto SO LONG AS an amount
equal to such prepayment is deposited by the Borrowers in a non-interest bearing
cash collateral account with the Agent to be held in such account on terms
satisfactory to the Agent, with the amount held in such cash collateral account
to be applied by the Agent against the applicable LIBOR Borrowings as of the
last day of the Interest Period with respect thereto.
(b) The Borrowers shall make prepayments of the Revolving
Loans from time to time so that the Availability equals or exceeds zero at all
times. Specifically, if the Availability at any time is less than zero, the
Agent shall notify the Borrowers of the deficiency (such notice being permitted
to be given orally and need not be in writing) and the Borrowers shall
immediately make a prepayment on the Revolving Credit Notes or otherwise
reimburse the Agent for Letter of Credit Advances or cause one or more Letters
of Credit to be cancelled and surrendered in an amount sufficient to cause the
Availability to be at least equal to zero. Any prepayments required by this
subparagraph (b) shall be applied to outstanding Revolving Credit Alternate Base
Rate Borrowings up to the full amount thereof before such prepayments are
applied to outstanding Revolving Credit LIBOR Borrowings (together with any
Consequential Loss resulting from such prepayment); PROVIDED, HOWEVER, that the
Borrowers shall not be required to make any prepayment of any LIBOR Borrowings
pursuant to this subparagraph (b) until the last day of the Interest Period with
respect thereto SO LONG AS an amount equal to such prepayment is deposited by
the Borrowers in a non-interest bearing cash collateral account with the Agent
to be held in such account on terms reasonably satisfactory to the Agent, with
the amount held in such cash collateral account to be applied by the Agent
against the applicable LIBOR Borrowings as of the last day of the Interest
Period with respect thereto.
31
(c) The Borrowers shall make a prepayment of the Term Loans
in an amount equal to seventy-five percent (75%) of Excess Cash Flow, if any, of
the Borrowers and their Subsidiaries, on a Consolidated basis, for each fiscal
year of the Borrowers (commencing with the fiscal year ending July 31, 1997).
For purposes hereof, the Excess Cash Flow for each fiscal year of the Borrowers,
as well as the amount of the prepayment required by this subparagraph (c), will
be initially computed by the Borrowers and such amounts shall be set out in the
Officer's Certificate accompanying the Borrowers' Annual Audited Financial
Statements for the applicable fiscal year in accordance with the terms of
SECTION 6.3 hereof. Contemporaneously with the delivery of such Officer's
Certificate to the Agent, the Borrowers shall make such requisite prepayment to
the Agent. The Agent shall have the right at any time to review the Borrowers'
calculations of the amount of Excess Cash Flow and such prepayment amount in
order to confirm the accuracy and completeness of such calculations, and if the
Agent confirms that additional amounts are owing by the Borrowers due to an
error or omission in such calculations, such additional amounts owing shall be
due and payable by the Borrowers to the Agent on demand. Any prepayments
required by this subparagraph (c) shall be applied to outstanding Term Alternate
Base Rate Borrowings in inverse order of maturity up to the full amount thereof
before they are applied to outstanding Term LIBOR Borrowings in inverse order of
maturity (together with any Consequential Loss resulting from such prepayment);
PROVIDED, HOWEVER, that the Borrowers shall not be required to make any
prepayment of any LIBOR Borrowings pursuant to this subparagraph (c) until the
last day of the Interest Period with respect thereto SO LONG AS an amount equal
to such prepayment is deposited by the Borrowers in a non-interest bearing cash
collateral account with the Agent to be held in such account on terms reasonably
satisfactory to the Agent, with all amounts in such cash collateral account to
be automatically applied by the Agent against the applicable Term LIBOR
Borrowings on the last day of the Interest Period with respect thereto. Any
amount of the Term Loans prepaid in accordance with the provisions of this
subparagraph (c) may not be reborrowed.
(d) Contemporaneously with the consummation of the sale of
any assets of the Borrowers described in SECTIONS 7.4(F)(4) AND (5) hereof, the
Borrower shall (i) make a prepayment of the Term Loans in an amount equal to one
hundred percent (100%) of the cash proceeds received by any and all of the
Borrowers from such sale (net of taxes due as a result of such sale and any and
all reasonable costs and expenses of such sale) and (ii) pledge as additional
Collateral for the Obligations, all non-cash proceeds received by any and all of
the Borrowers from such sale (any such pledge of additional Collateral to be
pursuant to Security Documents and upon other terms and conditions reasonably
acceptable in all respects to the Agent, so as to create in the Agent's favor,
for the ratable benefit of the Lenders, a first priority Lien on such additional
Collateral). Any prepayments required by this subparagraph (d) shall be applied
to outstanding Term Alternate Base Rate Borrowings in inverse order of maturity
up to the full amount thereof before they are applied to outstanding Term LIBOR
Borrowings in inverse order of maturity (together with any Consequential Loss
resulting from such prepayment); PROVIDED, HOWEVER, that the Borrowers shall not
be required to make any prepayment of any LIBOR Borrowings pursuant to this
subparagraph (d) until the last day of the Interest Period with respect thereto
SO LONG AS an amount equal to such prepayment is deposited by the Borrowers in a
non-interest bearing cash collateral account with the Agent to be held in such
account on terms
32
reasonably satisfactory to the Agent, with all amounts in such cash collateral
account to be automatically applied by the Agent against the applicable Term
LIBOR Borrowings on the last day of the Interest Period with respect thereto.
Any amount of the Term Loans prepaid in accordance with the provisions of this
subparagraph (d) may not be reborrowed.
(e) In addition to the mandatory prepayments required by
SECTIONS 2.5(A) through (D) above, the Borrowers shall have the right, at their
option and subject to the requirements of SECTION 2.4, to prepay any of the
Loans in whole at any time or in part from time to time, without premium or
penalty, except as otherwise provided in SECTION 2.4, this SECTION 2.5 or
subsections (a), (b) or (c) of SECTION 2.9 hereof. Each partial prepayment of
Term Loans under this subsection shall be in a minimum amount of $500,000 and in
higher integral multiples of $100,000, with partial prepayments of Revolving
Loans under this Subsection having no minimum amount. Each prepayment under this
subsection shall be applied to the prepayment of the aggregate unpaid principal
amount of the Term Notes or the Revolving Credit Notes, as applicable.
Prepayments under this subparagraph (d) shall be subject to the following
additional conditions:
(1) In giving notice of prepayment as hereinafter
provided, the Borrowers shall specify, for the purpose of paragraphs
(2) and (3) immediately following, the manner of application of such
prepayment as between (i) any outstanding Term Loans and Revolving
Loans and (ii) Alternate Base Rate Borrowings and LIBOR Borrowings;
PROVIDED, that in no event shall any LIBOR Borrowing be partially
prepaid.
(2) Prepayments applied to any LIBOR Rate Borrowing
may be made on any Business Day, PROVIDED, that (i) the Borrowers shall
have given the Agent at least five (5) Business Days' prior irrevocable
written or telecopied notice of such prepayment, specifying the
principal amount of the LIBOR Borrowing to be prepaid, the particular
LIBOR Borrowing to which such prepayment is to be applied and the
prepayment date; and (ii) if such prepayment is made on any day other
than the last day of the Interest Period corresponding to the LIBOR
Borrowing to be prepaid, the Borrowers shall pay directly to the Agent
for the account of the Lenders, on the last day of such Interest
Period, the Consequential Loss as a result of such prepayment.
(3) Prepayments applied to any Alternate Base Rate
Borrowing may be made on any Business Day, PROVIDED that the Borrowers
shall have given the Agent prior irrevocable written notice or notice
by telephone (which is to be promptly confirmed in writing) of such
prepayment on the Business Day of such prepayment, specifying the
principal amount of the Alternate Base Rate Borrowing to be prepaid.
(f) Notice of any prepayment having been given, the principal
amount specified in such notice, together with (in the case of any prepayment of
a LIBOR Borrowing) interest thereon to the date of prepayment, shall be due and
payable on such prepayment date.
33
(g) With respect to any and all of the cash collateral
accounts into which any prepayment amounts are deposited by the Borrowers with
the Agent in accordance with the terms of SECTIONS 2.5(A) through (D) above, the
Borrowers hereby irrevocably pledge and collaterally assign to the Agent, for
the ratable benefit of the Lenders, all such funds so deposited with the Agent
as additional security for payment of the Loans and all other Obligations now or
hereafter outstanding.
2.6 NOTES; PAYMENTS.
(a) Subject to the provisions of SECTION 10.12 hereof
relating to replacement and substitution of the Notes, (i) the Term Loan made by
a Lender shall be evidenced by a single Term Note dated as of the Closing Date,
payable to such Lender in a principal amount equal to such Lender's Term Loan
Commitment, and (ii) all Revolving Credit Loans made by a Lender to the
Borrowers shall be evidenced by a single Revolving Credit Note dated as of the
Closing Date, delivered and payable to such Lender in a principal amount equal
to such Lender's Revolving Credit Commitment as of the Closing Date.
(b) The outstanding principal balance of each and every
Revolving Loan, as evidenced by the Revolving Credit Notes, shall mature and be
fully due and payable on the Revolving Credit Termination Date. If not earlier
prepaid in full, the aggregate principal balance of the Term Loans, as evidenced
by the Term Notes, shall be due and payable in equal consecutive monthly
installments of $200,000 each, with the first of such installments being due and
payable on August 1, 1996 and subsequent installments being due and payable on
the first Business Day of each subsequent calendar month thereafter prior to the
Maturity Date. To the extent not previously paid, the outstanding principal
balance of the Term Loans shall be finally due and payable on the Maturity Date.
(c) Subject to SECTION 10.6 hereof, the Borrowers hereby
jointly and severally agree to pay accrued interest on the unpaid principal
balance of the Loans on the Interest Payment Dates, commencing with the first of
such dates to occur after the date hereof. After the Revolving Credit
Termination Date, accrued and unpaid interest on the Revolving Loans shall be
payable on demand. After the Maturity Date, accrued and unpaid interest on the
Term Loans shall be payable on demand.
(d) To effect payment of accrued interest owing on the Loans
as of the Interest Payment Dates and/or payment of the amount of principal owing
and payable under the Term Loans as of the respective due date thereof, subject
to the provisions of SECTIONS 2.1 AND 4.1 hereof, the Agent shall cause the
Lenders to make a Revolving Loan to pay in full the amount of accrued interest
owing and payable on the Loans as of the respective Interest Payment Date and/or
the amount of principal owing and payable under the Term Loans as of the
respective due date thereof if (i) such Revolving Loan is to be made prior to
the Revolving Credit Termination Date, (ii) the Availability would be equal to
or greater than zero after giving effect to such Revolving Loan, and (iii) no
Default or Event of Default shall have occurred which is then continuing. The
inability of the Agent to cause a payment of any accrued interest owing on the
Loans on any Interest Payment Date and/or payment of the amount of principal
owing and payable under the Term Loans as of the respective due date thereof
34
in accordance with the preceding sentence shall not in any way whatsoever effect
the Borrowers' joint and several obligations to otherwise pay such amounts in
accordance with the applicable terms hereof or any other Loan Documents.
2.7 APPLICATION OF PAYMENTS AND PREPAYMENTS.
(a) Except as otherwise provided in SECTION 2.5(C) hereof,
prepayments on the Term Loans shall be applied to payment of the aggregate
unpaid principal amounts of the Term Notes in the inverse order of maturity,
with the balance of any such prepayments, if any, being applied to accrued
interest. Payments of accrued interest on each Term Note in accordance with
SECTION 2.6(C) hereof shall be applied to the aggregate accrued interest then
outstanding under the Term Notes. Payments of regularly scheduled installments
of principal on each Term Note in accordance with SECTION 2.6(B) hereof shall be
applied to the aggregate principal amount outstanding under the Term Notes in
direct order of maturity, while payment by the Borrowers of the aggregate
principal amount outstanding under the Term Notes on the Maturity Date shall be
applied to principal.
(b) Except as otherwise provided in SECTIONS 2.5(A) and (B)
hereof, pre- payments on the Revolving Credit Notes shall be applied to payment
of the aggregate unpaid principal amounts of the Revolving Credit Notes, with
the balance of any such prepayments, if any, being applied to accrued interest.
Payments of accrued interest on each Revolving Credit Note in accordance with
SECTION 2.6(C) hereof shall be applied to the aggregate accrued interest then
outstanding under the Revolving Credit Notes, while payment by the Borrowers of
the aggregate principal amount outstanding under the Revolving Credit Notes on
the Revolving Credit Termination Date shall be applied to principal.
(c) Except as otherwise provided or specified in SECTION
2.2(F) hereof, each payment or prepayment received by the Agent hereunder or
under any Note for the account of a Lender shall be paid promptly to such
Lender, in immediately available funds. If the Agent fails to send to any Lender
the product of such Lender's Term Loan Commitment Percentage or Revolving Credit
Commitment Percentage, whichever is applicable, times the aggregate amount of
any such payment or prepayment received by the Agent for the account of all the
Lenders by the close of business on the date such payment was deemed received by
the Agent in accordance with SECTION 2.7(D) below, the Agent shall pay to such
Lender interest on such Lender's pro-rata portion of such payment timely
received by the Agent from such date of receipt by the Agent to the date that
such Lender receives its pro-rata portion of such payment, such interest to
accrue at the Federal Funds Effective Rate and to be payable upon written
request from such Lender.
(d) All sums payable by the Borrowers to the Agent hereunder
or pursuant to the Notes for its own account or the account of the Lenders shall
be payable in United States dollars in immediately available funds not later
than 12:00 noon on the date such payment or prepayment is due and shall be made
without set-off, counterclaim or deduction of any kind. Any such payment or
prepayment received and accepted by the Agent after 12:00 noon shall be
considered for all purposes (including the payment of interest, to the extent
permitted by law) as having been made
35
on the next succeeding Business Day. All such payments or prepayments shall be
made at the Principal Office. If any payment or prepayment becomes due and
payable on a day which is not a Business Day, then the date for the payment
thereof shall be extended to the next succeeding Business Day and interest shall
be payable thereon at the then applicable rate per annum during such extension.
2.8 INTEREST RATES FOR LOANS.
(a) Subject to SECTION 10.6 hereof, the Notes shall bear
interest on their respective outstanding principal balances at the Alternate
Base Rate; PROVIDED, that (1) all past due principal and interest shall bear
interest at the Past Due Rate, which shall be payable on demand, and (2) subject
to the provisions hereof, the Borrowers shall have the option of having all or
any portion of the principal balances from time to time outstanding under the
Notes bear interest until their respective maturities at a rate per annum equal
to the Adjusted LIBOR Rate (together with the Alternate Base Rate, individually
herein called an "INTEREST OPTION" and collectively called "INTEREST OPTIONS").
The records of the Agent with respect to Interest Options, Interest Periods and
the amounts of Loans to which they are applicable shall be binding and
conclusive, absent manifest error. Interest on the Loans shall be calculated at
the Alternate Base Rate, except where it is expressly provided pursuant to this
Agreement that the Adjusted LIBOR Rate is to apply.
(b) The Borrowers shall have the right to designate or
convert its Interest Options in accordance with the provisions hereof. PROVIDED
no Default or Event of Default has occurred and is continuing and subject to the
provisions of the last sentence of SUBSECTION 2.8(A) hereinabove and of SECTION
2.9 hereof, the Borrowers may elect to have the Adjusted LIBOR Rate apply or
continue to apply to all or any portion of the principal balances of the Notes
at any time after the earlier to occur of (1) thirty (30) days after the Closing
Date or (2) the time at which $48,750,000 of the Total Commitment is assigned
through syndication to Lenders other than TCB or the Agent, acting in its
capacity as a Lender hereunder. Each change in Interest Options shall be a
conversion of the rate of interest applicable to the specified portion of the
Loans, but such conversion alone shall not change the outstanding principal
balance of the Notes and such conversion alone shall not be construed to make
this Agreement a revolving credit facility. The Interest Options shall be
designated or converted in the manner provided below:
(1) The Borrowers shall give the Agent notice by
telephone, promptly confirmed by written notice (the "RATE SELECTION
NOTICE") substantially in the form of EXHIBIT E hereto. Each such
telephone and written notice shall specify the amount and type of
borrowings which are the subject of the designation, if any; the amount
and type of borrowings into which such borrowings are to be converted
or for which an Interest Option is designated; the proposed date for
the designation or conversion (which, in the case of conversion of
LIBOR Borrowings, shall be the last day of the Interest Period
applicable thereto) and the Interest Period or Periods, if any,
selected by the Borrowers. Such notice by telephone shall be
irrevocable and shall be given to the Agent no later than the
applicable Rate Selection Date. If (a) a new Revolving Loan is to be a
LIBOR Borrowing, (b) an existing LIBOR Borrowing is maturing at the
36
time that a new Revolving Loan is being requested and the Borrowers are
electing to have such existing portion of the outstanding principal
balance of the Revolving Notes going forward bear interest at the same
Interest Option and for the same Interest Period as the new Revolving
Loan, or (c) a portion of an Alternate Rate Borrowing is to be
converted so as to bear interest at the same Interest Option and for
the same Interest Period as the new Revolving Loan, THEN the Rate
Selection Notice shall be included in the Request for Extension of
Credit applicable to the new Revolving Loan, which shall be given to
the Agent no later than the applicable Rate Selection Date.
(2) No more than four (4) Term LIBOR Borrowings and
corresponding Interest Periods shall be outstanding at any one time,
and no more than four (4) Revolving Credit LIBOR Borrowings and
corresponding Interest Periods shall be outstanding at any one time.
Each LIBOR Borrowing shall be in a minimum aggregate principal amount
of at least $2,500,000, with any increases over such minimum amount
being in integral aggregate multiples of $100,000.
(3) Principal included in any borrowing shall not be
included in any other borrowing which exists at the same time.
(4) Each designation or conversion shall occur on a
Business Day.
(5) Except as provided in SECTION 2.9 hereof, no LIBOR
Borrowing shall be converted on any day other than the last day of the
applicable Interest Period.
(6) The Agent shall promptly advise the Lenders of any
Rate Selection Notice given pursuant to this SECTION 2.8 and of each
Lender's pro-rata portion of such designation or conversion hereunder.
(c) All interest and fees (including the Commitment
Fee) will be computed on the basis of a year of 360 days and actual
days elapsed (including the first day but excluding the last day)
occurring in the period for which payable, unless the effect of so
computing shall be to cause the rate of interest to exceed the Highest
Lawful Rate.
2.9 SPECIAL PROVISIONS APPLICABLE TO LIBOR BORROWINGS.
(a) If, after the date of this Agreement, the adoption of any
applicable Legal Requirement or any change in any applicable Legal Requirement
or in the interpretation or administration thereof by any Governmental Authority
or compliance by the Agent or any Lender with any request or directive (whether
or not having the force of law) of any Governmental Authority shall at any time
make it unlawful or impossible for any Lender to permit the establishment of or
to maintain any LIBOR Borrowing, the commitment of the Lenders to establish or
maintain the Adjusted LIBOR Rate affected by such adoption or change shall
forthwith be canceled and the Borrowers shall forthwith, upon demand by the
Agent to the Borrowers, (1) convert the
37
Adjusted LIBOR Rate with respect to which such demand was made to the Alternate
Base Rate; (2) pay all accrued and unpaid interest to date on the amount so
converted; and (3) pay any amounts required to compensate the Agent and the
Lenders for any additional cost or expense which the Agent or any Lender may
incur as a result of such adoption of or change in such Legal Requirement or in
the interpretation or administration thereof and any Consequential Loss which
the Agent or any Lender may incur as a result of such conversion to the
Alternate Base Rate. If, when the Agent so notifies the Borrowers, the Borrowers
have given a Rate Selection Notice specifying one or more borrowings of the type
with respect to which such demand was made but the selected Interest Period or
Interest Periods has not yet begun, such Rate Selection Notice shall be deemed
to be of no force and effect, as if never made, and the balance of the Loans
specified in such Rate Selection Notice shall bear interest at the Alternate
Base Rate until a different available Interest Option shall be designated in
accordance herewith.
(b) If the adoption of any applicable Legal Requirement or
any change in any applicable Legal Requirement or in the interpretation or
administration thereof by any Governmental Authority or compliance by the Agent
or any Lender with any request or directive (whether or not having the force of
law) from any Governmental Authority shall at any time as a result of any
portion of the principal balance of the Notes being maintained on the basis of
the Adjusted LIBOR Rate:
(1) subject any Lender (or make it apparent that any
Lender is subject) to any tax (including any United States interest
equalization tax), levy, impost, duty, charge, fee (collectively,
"TAXES"), or any deduction or withholding for any Taxes on or from the
payment due under any LIBOR Borrowing or other amounts due hereunder,
other than income and franchise taxes or taxes on gross receipts of the
United States and its political subdivisions; or
(2) change the basis of taxation of payments due from
the Borrowers to the Agent or any Lender under any LIBOR Borrowing
(otherwise than by a change in the rate of taxation of the overall net
income or gross receipts of the Agent or any Lender); or
(3) impose, modify, increase or deem applicable any
reserve requirement (excluding that portion of any reserve requirement
included in the calculation of the Statutory Reserves, special deposit
requirement or similar requirement (including state law requirements
and Regulation D) imposed, modified, increased or deemed applicable by
any Governmental Authority against assets held by the Agent or any
Lender, or against deposits or accounts in or for the account of the
Agent or any Lender, or against loans made by the Agent or any Lender,
or against any other funds, obligations or other Property owned or held
by the Agent or any Lender; or
(4) impose on the Agent or any Lender any other
condition regarding any LIBOR Borrowing;
and the result of any of the foregoing is to increase the cost to any Lender of
agreeing to make or of making, renewing or maintaining such borrowing on the
basis of the
38
Adjusted LIBOR Rate, or reduce the amount of principal or interest received by
any Lender, then, upon demand by the Agent, the Borrowers shall pay to the
Agent, from time to time as specified by the Agent, additional amounts which
shall compensate such Lender for such increased cost or reduced amount. The
Agent will promptly notify the Borrowers in writing of any event, upon becoming
actually aware of it, which will entitle any Lender to additional amounts
pursuant to this paragraph. The Agent's determination of the amount of any such
increased cost, increased reserve requirement or reduced amount shall be
conclusive and binding, absent manifest error, provided that the calculation
thereof is set forth in reasonable detail in such notice.
The Borrowers shall have the right, if they receive from the Agent any
notice referred to in the preceding paragraph, upon three (3) Business Days'
notice to the Agent, either (i) to repay in full (but not in part) any borrowing
with respect to which such notice was given, together with any accrued interest
thereon, or (ii) to convert the Adjusted LIBOR Rate in effect with respect to
such borrowing to the Alternate Base Rate; PROVIDED, that any such repayment or
conversion shall be accompanied by payment of (x) the amount required to
compensate the appropriate Lender or Lenders for the increased cost or reduced
amount referred to in the preceding paragraph; (y) all accrued and unpaid
interest to date on the amount so repaid or converted, and (z) any Consequential
Loss which may be incurred as a result of such repayment or conversion.
(c) If for any reason with respect to any Interest Period the
Agent shall have determined (which determination shall be conclusive and binding
upon the Borrowers) that: (1) the Agent is unable through its customary general
practices to determine a rate at which the Agent is offered deposits in United
States dollars by prime banks in the London interbank market, in the appropriate
amount for the appropriate period, or by reason of circumstances affecting the
London interbank market, generally, the Agent is not being offered deposits for
the applicable Interest Period and in an amount equal to the amount of the
Agent's pro-rata portion of any LIBOR Borrowing requested by the Borrowers, or
(2) the Adjusted LIBOR Rate will not adequately and fairly reflect the cost to
any Lender of making and maintaining any LIBOR Borrowing hereunder for any
proposed Interest Period, then the Agent shall give the Borrowers notice thereof
and thereupon, (A) any Rate Selection Notice previously given by the Borrowers
designating an Adjusted LIBOR Rate which has not commenced as of the date of
such notice from the Agent shall be deemed for all purposes hereof to be of no
force and effect, as if never given, and (B) until the Agent shall notify the
Borrowers that the circumstances giving rise to such notice from the Agent no
longer exist, each Rate Selection Notice requesting an Adjusted LIBOR Rate shall
be deemed a request for an Alternate Base Rate Borrowing, and each outstanding
LIBOR Borrowing then in effect shall be converted, without any notice to or from
the Borrowers, upon the termination of the Interest Period then in effect, to an
Alternate Base Rate Borrowing.
(d) THE BORROWERS HEREBY AGREE TO INDEMNIFY JOINTLY AND
SEVERALLY THE AGENT AND EACH OF THE LENDERS AGAINST AND HOLD EACH OF THEM
HARMLESS FROM ANY LOSS OR EXPENSE WHICH IT MAY INCUR OR SUSTAIN AS A CONSEQUENCE
OF ANY UNTIMELY PAYMENT (MANDATORY OR OPTIONAL) OR DEFAULT BY THE BORROWERS IN
THE PAYMENT OF ANY PRINCIPAL AMOUNT OF OR INTEREST ON EACH NOTE, OR ANY FAILURE
BY THE BORROWERS TO CONVERT OR TO BORROW ANY LIBOR BORROWING ON THE DATE
SPECIFIED BY THE BORROWERS, IN EACH CASE
39
INCLUDING ANY INTEREST PAYABLE BY ANY LENDER TO THE LENDERS OF THE FUNDS
OBTAINED BY IT IN ORDER TO MAKE OR MAINTAIN ANY LIBOR BORROWING (OR ANY PORTION
THEREOF), AND, TO THE EXTENT NOT COVERED ABOVE, ANY CONSEQUENTIAL LOSS. THIS
AGREEMENT SHALL SURVIVE THE PAYMENT OF EACH NOTE. A CERTIFICATE AS TO ANY
ADDITIONAL AMOUNTS PAYABLE TO THE AGENT OR ANY LENDER PURSUANT TO THIS PARAGRAPH
SUBMITTED BY THE AGENT OR SUCH LENDER TO THE BORROWERS SHALL BE CONCLUSIVE AND
BINDING UPON THE BORROWERS, ABSENT MANIFEST ERROR, PROVIDED THE CALCULATION
THEREOF IS SET FORTH IN REASONABLE DETAIL IN SUCH NOTICE.
(e) If the Borrowers request quotes of the Adjusted LIBOR
Rate for different Interest Periods being considered for election by the
Borrowers, the Agent will use reasonable efforts to provide such quotes to the
Borrowers promptly. However, all such quotes provided shall be representative
only and shall not be binding on the Agent or any Lender, nor shall they be
determinative, directly or indirectly, of any Adjusted LIBOR Rate or any
component of any such rate, nor will the Borrowers' failure to receive or the
Agent's failure to provide any requested quote or quotes either (1) excuse or
extend the time for performance of any obligation of the Borrowers or for the
exercise of any right, option or election of the Borrowers or (2) impose any
duty or liability on the Agent or any Lender. If the Borrowers request a list of
the Business Days in any calendar month, the Agent will use reasonable efforts
to provide such list promptly. However, any such list provided shall be
understood to identify only those days which the Agent believes in good faith at
the time such list is prepared will be the Business Days for such month. The
Agent shall not have any liability for any failure to provide, delay in
providing, error or mistake in or omission from, any such quote or list.
(f) With respect to any Lender having a LIBOR Lending Office
which differs from its Domestic Lending Office, all Loans advanced by such
Lender's LIBOR Lending Office shall be deemed to have been made by such Lender
and the obligation of the Borrowers to repay such Loans shall nevertheless be to
such Lender and shall be deemed held by such Lender, to the extent of such
portions of the Loan, for the account of such Lender's LIBOR Lending Office.
(g) Notwithstanding any provision of this Agreement to the
contrary, each Lender shall be entitled to fund and maintain its funding of all
or any part of the Loans hereunder in any manner it sees fit, it being
understood, however, that for the purposes of this Agreement, all determinations
hereunder shall be made as if such Lender had actually funded and maintained its
portion of each LIBOR Borrowing during each Interest Period for the Loans
through the purchase of deposits having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the LIBOR Rate for such
Interest Period.
(h) The Borrowers' obligation to pay increased costs and
Consequential Loss with regard to each LIBOR Borrowing as specified in this
SECTION 2.9 hereof shall survive termination of this Agreement.
(i) If any Lender requests compensation from the Borrowers
under SECTIONS 2.9(A) OR 2.9(B) hereof, the Borrowers shall have the right to
seek and obtain for themselves one or more substitute lenders with the approval
of the Agent (which
40
approval shall not be unreasonably withheld) to replace such Lender hereunder in
compliance with all relevant provisions of SECTION 10.12 hereof, and upon the
replacement of such Lender hereunder with one or more such substitute lenders,
the Borrowers may prepay in full the Loans owed to such Lender, together with
all accrued, unpaid interest thereon and any Consequential Loss owing by the
Borrowers to such Lender as a result of such prepayment.
2.10 LETTERS OF CREDIT.
(a) Subject to the terms and conditions contained herein, the
Borrowers shall have the right to utilize a portion of the Total Revolving
Credit Commitment from time to time prior to the Revolving Credit Termination
Date to obtain from the Agent (i) one or more Letters of Credit for the account
of any of the Borrowers in such amounts and in favor of such beneficiaries as
the Borrowers from time to time shall request, and (ii) indemnifications by the
Agent of each issuer of the Indemnified Letters of Credit in order to allow the
Indemnified Letters of Credit to remain outstanding until the same are fully
drawn upon, replaced by the Agent's issuance of a replacement Letter of Credit
or returned to the Borrowers by the issuer thereof; PROVIDED, that in no event
shall the Agent have any obligation to issue any Letter of Credit or indemnify
the issuer of any Indemnified Letter of Credit if (i) the face amount of such
Letter of Credit or the amount remaining to be drawn under such Indemnified
Letter of Credit, as applicable, PLUS the Letter of Credit Exposure Amount at
such time would exceed $15,000,000, (ii) the face amount of such Letter of
Credit or the amount remaining to be drawn under such Indemnified Letter of
Credit, as applicable, PLUS the aggregate of each Lender's Current Sum at such
time, would exceed the lesser of (1) the Total Revolving Credit Commitment or
(2) the Availability, (iii) such Letter of Credit would have an expiry date
beyond the earlier to occur of (1) one month prior to the scheduled Revolving
Credit Termination Date, (2) 120 days after the issuance date of such Letter of
Credit if such Letter of Credit is a documentary sight Letter of Credit or (3)
360 days after the issuance date of such Letter of Credit if such Letter of
Credit is a standby Letter of Credit, (iv) such Letter of Credit or such
Indemnified Letter of Credit, as applicable, together with such indemnification
contract relating to such Indemnified Letter of Credit, if applicable, are not
in a form and do not contain terms satisfactory to the Agent in its sole and
absolute discretion, (v) the Borrowers have not executed and delivered such
Applications and other instruments and agreements relating to such Letter of
Credit or such Indemnified Letter of Credit and such indemnification contract,
whichever is applicable, as the Agent shall have requested, (vi) an event has
occurred and is continuing which constitutes a Default or Event of Default or
(vii) such Letter of Credit or such Indemnified Letter of Credit, as applicable,
is not being issued or has not been issued in connection with transactions
occurring in the ordinary course of business of any of the Borrowers.
(b) If requesting the issuance of any Letter of Credit, the
Borrowers shall give at least three (3) Business Days' prior written notice to
the Agent, at its Domestic Lending Office, which written notice shall be the
requisite Application for a Letter of Credit on the Agent's customary form. With
respect to any indemnification by the Agent of the issuer of any Indemnified
Letter of Credit, the Borrower shall have requested the same prior to or on the
Closing Date. In accordance with the provisions of SECTION 2.2(F) hereof, the
Agent shall periodically notify each Lender that a Letter
41
of Credit has been requested in the amount reflected in such Application and
inform such Lender of the amount of its pro-rata portion of such proposed Letter
of Credit (based upon such Lender's Revolving Credit Commitment Percentage).
(c) Simultaneously with the Agent's issuance and delivery of
any Letter of Credit or delivery of any indemnity to the issuer of any
Indemnified Letter of Credit, the Agent shall be deemed, without further action,
to have sold to each other Lender, and such other Lender shall be deemed,
without further action by any party hereto, to have purchased from the Agent, a
participation interest (which participation shall be nonrecourse to the Agent)
equal to such other Lender's Revolving Credit Commitment Percentage at such time
in such Letter of Credit or such indemnification obligations (whichever is
applicable) and all of the Letter of Credit Exposure Amount related to such
Letter of Credit or such Indemnified Letter of Credit; PROVIDED, that no such
Lender shall be obligated to participate in a particular Letter of Credit or a
particular indemnification of any issuer of an Indemnified Letter of Credit if
such Letter of Credit or such indemnification, as applicable, was issued or
honored solely as a result of the Agent's gross negligence or wilful misconduct.
Each Lender acknowledges and agrees that its obligation to acquire
participations in each Letter of Credit and in each such indemnification issued
by the Agent, as well as its obligation to make the payments specified in this
SECTION 2.10 and the right of the Agent to receive the same in the manner
specified herein, are absolute and unconditional and shall not be effected by
any circumstance whatsoever, including without limitation, the occurrence and
continuance of a Default or Event of Default hereunder, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.
(d) The Borrowers jointly and severally promise to pay to the
order of the Agent the amount of all Letter of Credit Advances. Each Letter of
Credit Advance shall be considered for all purposes as a demand obligation owing
by the Borrowers to the Agent, and each Letter of Credit Advance shall bear
interest from the date thereof at the Past Due Rate, without notice of
presentment, demand, protest or other formalities of any kind (said past due
interest on such Letter of Credit Advance being payable on demand). To effect
repayment of any such Letter of Credit Advance, the Lenders shall automatically
satisfy such Letter of Credit Advance (subject to the terms and conditions of
SECTIONS 2.1 AND 4.1 hereof) by causing the Lenders to make a Revolving Loan if
(i) such Letter of Credit Advance is (and such Revolving Loan is to be) made
prior to the Revolving Credit Termination Date, (ii) the Availability would be
equal to or greater than zero after giving effect to such Revolving Loan and
(iii) no Default or Event of Default shall have occurred which is then
continuing. Except as otherwise provided in SECTION 2.2(F), the Agent will pay
to each Lender such Lender's Revolving Credit Commitment Percentage of all
amounts received from the Borrowers by the Agent, if any, for application, in
whole or in part, against the Letter of Credit Advances in respect to any Letter
of Credit or any Indemnified Letter of Credit, but only to the extent such
Lender has made its full pro-rata payment of each drawing under the Letter of
Credit or each payment under the indemnity of the issuer under the Indemnified
Letter of Credit to which such Letter of Credit Advance relates. All rights,
powers, benefits and privileges of this Agreement with respect to the Revolving
Credit Notes, all security therefor (including the Collateral) and guaranties
thereof (including the Guaranties) and all restrictions, provisions for
repayment or acceleration and all other covenants, warranties, representations
and agreements of the Borrowers
42
contained in this Agreement with respect to the Revolving Credit Notes shall
apply to such Letter of Credit Advances.
(e) In consideration of the issuance of each Letter of Credit
pursuant to the provisions of this SECTION 2.10, the Borrowers jointly and
severally agree to pay (subject to SECTION 10.6 hereof) to the Agent for the
ratable benefit of the Lenders a letter of credit fee (computed on the basis of
the actual number of days elapsed in a year composed of 360 days) in an amount
equal to the product of (a) one and one-half of one percent (1.50%) TIMES (b)
the undrawn upon amount of the applicable Letter of Credit, with each letter of
credit fee to commence to accrue as of the date of issuance of such Letter of
Credit and to be effective as to any reductions in the undrawn amount of such
Letter of Credit as of the date of any such reduction (whether resulting from
payments thereunder by the Agent, by agreement of the beneficiary thereunder or
automatically by the terms of such Letter of Credit), and each letter of credit
fee shall cease to accrue (except with respect to interest at the Past Due Rate
on any unpaid portion thereof) on the date that such Letter of Credit expires,
is returned to the Agent undrafted upon by the beneficiary thereof or is fully
paid by the Agent. Said letter of credit fees shall be payable in arrears to the
Agent at its Principal Office in immediately available funds (i) on the first
Business Day of each calendar month that such Letter of Credit remains open, and
(ii) on the date that such Letter of Credit expires, is returned to the Agent
undrafted upon by the beneficiary thereof or is fully paid by the Agent. All
past due letter of credit fees shall bear interest at the Past Due Rate and
shall be payable upon demand by the Agent. The Agent will pay to each Lender, as
soon as practicable after receiving any payment of letter of credit fees
described in the preceding sentence, an amount equal to the product of (A) such
Lender's Revolving Credit Commitment Percentage TIMES (B) the amount of such
fees received. If the Agent fails to send to any Lender such Lender's pro-rata
portion of any payment of such letter of credit fees timely received by the
Agent by the close of business on the Business Day such payment was received by
the Agent, the Agent shall pay to such Lender interest on such Lender's pro-rata
portion of such letter of credit fees timely received by the Agent from such
date of receipt by the Agent to the date that such Lender receives its pro-rata
portion of such payment, such interest to accrue at the Federal Funds Effective
Rate and to be payable upon written request from such Lender.
(f) The obligations of the Borrowers under this Agreement in
respect of the Letters of Credit, the indemnifications of the issuers of
Indemnified Letters of Credit and all Letter of Credit Advances are joint and
several, shall be absolute, unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, under all circumstances
whatsoever, including the following circumstances:
(1) any lack of validity or enforceability of this
Agreement, any Letter of Credit, any Indemnified Letter of Credit or
any Loan Document;
(2) any amendment or waiver of default under or any
consent to departure from the terms of this Agreement, any Letter of
Credit or any Indemnified Letter of Credit without the express prior
written consent of the Agent;
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(3) the existence of any claim, set-off, defense or
other right which any beneficiary or any transferee of any Letter of
Credit or any Indemnified Letter of Credit (or any entities for whom
any such beneficiary or any such transferee may be acting), or any
Person (other than the Agent or the Lenders) may have, whether in
connection with this Agreement, the Letters of Credit, the Indemnified
Letters of Credit, the transactions contemplated hereby or any
unrelated transaction;
(4) any statement, draft, certificate, or any other
document presented under any Letter of Credit or any Indemnified Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect whatsoever; PROVIDED that the Agent will examine each document
presented under each Letter of Credit and under each indemnity of an
issuer of an Indemnified Letter of Credit to ascertain that such
document appears on its face to comply with the terms thereof;
(5) any negligence or wilful misconduct of any issuer
of any Indemnified Letter of Credit; and
(6) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
In the event that any restriction or limitation is imposed upon or
determined or held to be applicable to the Agent, any Lender or the
Borrowers by, under or pursuant to any Legal Requirement now or
hereafter in effect or by reason of any interpretation thereof by any
Governmental Authority, which in the respective sole judgment of the
Agent or any Lender would prevent any Lender from legally incurring
liability under a Letter of Credit or any indemnification of an issuer
of any Indemnified Letter of Credit issued or proposed to be issued
hereunder, then the Agent shall give prompt written notice thereof to
the Borrowers, whereupon the Agent shall have no obligation to issue
any additional Letters of Credit or any indemnifications of any issuers
of any Indemnified Letters of Credit then or at any time thereafter. In
addition, if as a result of any Regulatory Change which imposes,
modifies or deems applicable (x) any tax, reserve, special deposit or
similar requirement against indemnity obligations with respect to any
Indemnified Letters of Credit or against any Letters of Credit issued
or participated to by any Lender; (y) any fee, expense or assessment
against such indemnity obligations or the Letters of Credit issued by
the Agent or any Lender for deposit insurance, or (z) any other charge,
expense or condition which increases the actual cost to the Agent or
any Lender of issuing or maintaining such indemnity obligations or the
Letters of Credit, or reduces any amount receivable by the Agent or any
Lender hereunder in respect of any Letter of Credit, any indemnity
obligations with respect to any Indemnified Letters of Credit or any
participation therein (which increase in cost, or reduction in amount
receivable, shall be the result of the Agent's or such Lender's
reasonable allocation of the aggregate of such increases or reductions
resulting from such event), then the Borrowers (subject to SECTION 10.6
hereof) shall pay to the Agent or such Lender, upon demand and from
time to time, amounts sufficient to compensate such Person for each
such increase from the
44
effective date of such increase to the date of demand therefor. Each
such demand shall be accompanied by a certificate setting forth in
reasonable detail the calculation of the amount then being demanded in
accordance with the preceding sentence and each such certificate shall
be conclusive absent manifest error.
(g) THE BORROWERS HEREBY INDEMNIFY AND HOLD HARMLESS EACH
LENDER AND THE AGENT FROM AND AGAINST ANY AND ALL CLAIMS AND DAMAGES, LOSSES,
LIABILITIES, COSTS OR EXPENSES WHICH SUCH LENDER OR THE AGENT MAY INCUR (OR
WHICH MAY BE CLAIMED AGAINST SUCH LENDER OR THE AGENT BY ANY PERSON WHATSOEVER)
IN CONNECTION WITH THE EXECUTION AND DELIVERY OR TRANSFER OF OR PAYMENT OR
FAILURE TO PAY UNDER ANY LETTER OF CREDIT OR ANY INDEMNITY OF ANY ISSUER OF ANY
INDEMNIFIED LETTER OF CREDIT, INCLUDING ANY CLAIMS, DAMAGES, LOSSES,
LIABILITIES, COSTS OR EXPENSES WHICH THE AGENT OR SUCH LENDER, AS THE CASE MAY
BE, MAY INCUR (WHETHER INCURRED AS A RESULT OF ITS OWN NEGLIGENCE OR OTHERWISE)
BY REASON OF OR IN CONNECTION WITH THE FAILURE OF ANY OTHER LENDER (WHETHER AS A
RESULT OF ITS OWN NEGLIGENCE OR OTHERWISE) TO FULFILL OR COMPLY WITH ITS
OBLIGATIONS TO THE AGENT OR SUCH LENDER, AS THE CASE MAY BE, HEREUNDER (BUT
NOTHING HEREIN CONTAINED SHALL AFFECT ANY RIGHTS THE BORROWERS MAY HAVE AGAINST
SUCH DEFAULTING LENDER); PROVIDED, THAT THE BORROWERS SHALL NOT BE REQUIRED TO
INDEMNIFY ANY LENDER OR THE AGENT FOR ANY CLAIMS, DAMAGES, LOSSES, LIABILITIES,
COSTS OR EXPENSES TO THE EXTENT, BUT ONLY TO THE EXTENT, CAUSED BY (I) THE
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF THE PARTY SEEKING INDEMNIFICATION OR
(II) SUCH LENDER'S OR THE AGENT'S (AS THE CASE MAY BE) FAILURE TO PAY UNDER ANY
LETTER OF CREDIT OR ANY INDEMNITY OF ANY ISSUER OF ANY INDEMNIFIED LETTER OF
CREDIT AFTER THE PRESENTATION TO IT OF A REQUEST REQUIRED TO BE PAID UNDER
APPLICABLE LAW. NOTHING IN THIS SECTION 2.10(G) IS INTENDED TO LIMIT THE
OBLIGATIONS OF THE BORROWERS UNDER ANY OTHER PROVISION OF THIS AGREEMENT.
(h) The Agent shall review, on behalf of the Lenders, (i)
each draft and any accompanying documents presented under a Letter of Credit and
(ii) each demand for payment and any accompanying documents presented under any
indemnity of any issuer of any Indemnified Letter of Credit. Promptly after it
shall have ascertained that any draft or demand and any accompanying documents
presented under such Letter of Credit or such indemnification contract appear on
their face to be in substantial conformity with the terms and conditions of such
Letter of Credit or such indemnification contract, as applicable, the Agent
shall make the appropriate payment to the beneficiary of such Letter of Credit
or the issuer of the respective Indemnified Letter of Credit, whichever is
applicable. Subject to the provisions of SECTION 2.2(F) hereof, the Agent shall
give telephonic or facsimile notice to the Lenders of the receipt and amount of
any draft or demand presented under any Letter of Credit or any indemnity of an
issuer of any Indemnified Letter of Credit and the date on which payment thereon
will be made, and each of the Lender's shall, by 12:00 noon on the
45
date such payment is to be made under such Letter of Credit or such indemnity,
as applicable, pay in immediately available funds, an amount equal to the
product of (A) such Lender's Revolving Credit Commitment Percentage TIMES (B)
the amount of such payment to be made by the Agent to the beneficiary under such
Letter of Credit or the issuer of the respective Indemnified Letter of Credit,
whichever is applicable. Any Lender failing to timely deliver its requisite
portion of any such payment shall deliver the same to the Agent as soon as
possible thereafter, together with interest on such amount for each day from the
due date for such payment to the date of payment by such Lender to the Agent of
such amount at a rate of interest per annum equal to the Federal Funds Effective
Rate for such period. Each Lender hereby absolutely and unconditionally assumes,
as primary obligor and not as a surety, and agrees to pay and discharge, and to
indemnify and hold the Agent harmless from liability and respect of, such
Lender's pro-rata share (based on such Lender's Revolving Credit Commitment
Percentage) of any amounts owing by such Lender to the Agent in accordance with
the immediately preceding sentence. Nothing herein shall be deemed to require
any Lender to pay to the Agent any amount as reimbursement for any payment made
by the Agent to acquire (discount) for its own account prior to maturity thereof
any acceptance created under a Letter of Credit.
2.11 PRO-RATA TREATMENT.
(a) Except to the extent otherwise provided herein (including
without limitation, as specified in SECTIONS 2.2(F) and 2.11(C) hereof): (a)
each borrowing from the Lenders under SECTION 2.1 hereof shall be made, each
payment of Commitment Fees shall be made and applied for the account of the
Lenders, and each termination or reduction of the Commitments of the Lenders
under SECTION 2.4 hereof shall be applied, PRO RATA, according to each Lender's
Term Loan Commitment Percentage or Revolving Credit Commitment Percentage, as
applicable; (b) each payment or prepayment by the Borrowers of principal of or
interest on Loans shall be made to the Agent for the account of the Lenders PRO
RATA in accordance with the respective unpaid principal amounts of such Loans
held by the Lenders; and (c) the Lenders (other than the Agent) shall purchase
from the Agent participations in the Letters of Credit, to the extent of their
respective Revolving Credit Commitment Percentages upon issuance by the Agent of
each Letter of Credit as otherwise provided for herein.
(b) Except as otherwise provided or specified in SECTION
2.2(F), unless the Agent shall have been notified in writing by any Lender prior
to the date of a proposed Loan that such Lender will not make the amount that
would constitute such Lender's Term Loan Commitment Percentage or Revolving
Credit Commitment Percentage, as applicable, of such Loan on such date available
to the Agent at the Principal Office, the Agent may assume that such Lender has
made such amount available to the Agent on such date, and the Agent may, in
reliance upon such assumption and subject to the terms and conditions of this
Agreement, make such amount available to the Borrowers by depositing the same,
in immediately available funds, in a general deposit account designated and
maintained by the Borrowers with the Agent at the Principal Office. If a
requested Loan shall not occur on any date specified by the Borrowers as set
forth in the applicable Request for Extension of Credit because all of the
conditions for such Loan set forth herein or in any of the other Loan Documents
shall have not been met, the Agent shall return the amounts so received
46
from the Lenders in respect of such requested Loan to the applicable Lenders as
soon as practicable.
(c) Notwithstanding any provision to the contrary contained
in this SECTION 2.11 or in any other provision hereof, each Lender shall only
receive interest upon and a portion of the Commitment Fee paid hereunder based
upon the amount of funds actually advanced by such Lender to Borrowers from time
to time.
2.12 SHARING OF PAYMENTS, ETC. The Borrowers agree that, in addition to
(and without limitation of) any right of set-off, bankers' lien or counterclaim
a Lender may otherwise have, each Lender shall be entitled, at its option, to
offset balances held by it for the account of any of the Borrowers at any of its
offices against any principal of or interest on any of such Lender's Loans to
the Borrowers hereunder, such Lender's Revolving Credit Commitment Percentage of
the Letter of Credit Exposure Amount or any other obligation of the Borrowers
hereunder which is not paid (regardless of whether such balances are then due to
the applicable Borrower), in which case it shall promptly notify the Borrowers
and the Agent thereof, PROVIDED that such Lender's failure to give such notice
shall not affect the validity thereof. If a Lender shall obtain payment of any
principal of or interest on any Loan made by it under this Agreement, any Letter
of Credit Exposure Amount or other obligation then due to such Lender hereunder,
through the exercise of any right of set-off (including, without limitation, any
right of set-off or lien granted under SECTION 10.19 hereof), banker's lien,
counterclaim or similar right, or otherwise, it shall promptly purchase from the
other Lenders participations in the Loans made by, the Letter of Credit Exposure
Amount of, or the other obligations of the Borrowers hereunder of, the other
Lenders in such amounts, and make such other adjustments from time to time as
shall be equitable to the end that all the Lenders shall share the benefit of
such payment (net of any expenses which may be incurred by such Lender in
obtaining or preserving such benefit) PRO-RATA in accordance with their
respective Term Loan Commitment Percentages or Revolving Credit Commitment
Percentages, as applicable. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored. The Borrowers agree,
to the fullest extent they may effectively do so under applicable law, that any
Lender so purchasing a participation in the Loans made by, Letter of Credit
Exposure Amount of, or other obligations hereunder of, the other Lenders may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender were a direct
holder of said Loans, Letter of Credit Exposure Amount or other obligations in
the amount of such participation. Nothing contained herein shall require any
Lender to exercise any such right or shall affect the right of any Lender to
exercise, and retain the benefits of exercising, any such right with respect to
any other indebtedness or obligation of any of the Borrowers.
2.13 RECAPTURE. If on any Interest Payment Date the Agent does not
receive for the account of one or more Lenders payment in full of interest
computed at the Alternate Base Rate and/or the Adjusted LIBOR Rate, as
applicable (computed without regard to any limitation by the Highest Lawful
Rate) because the sum of the Alternate Base Rate and/or the Adjusted LIBOR Rate,
as applicable (so computed) exceeds or has exceeded the Highest Lawful Rate
applicable to such Lenders, the Borrowers shall pay
47
to the Agent for the account of such Lenders, in addition to interest otherwise
required, on each Interest Payment Date thereafter, the Excess Interest Amount
(calculated as of each such subsequent Interest Payment Date); PROVIDED that in
no event shall the Borrowers be required to pay, for any computation period,
interest at a rate exceeding the Highest Lawful Rate applicable to such Lenders
during such period. As used herein, the term "EXCESS INTEREST AMOUNT" shall
mean, on any day, the amount by which (a) the amount of all interest which would
have accrued prior to such day on the outstanding principal of the Notes of the
applicable Lender (had the Alternate Base Rate and/or the Adjusted LIBOR Rate,
as applicable, at all times been in effect without limitation by the Highest
Lawful Rate applicable to such Lender) exceeds (b) the aggregate amount of
interest actually paid to the Agent for the account of such Lender on its Notes
on or prior to such day.
3. COLLATERAL.
3.1 SECURITY DOCUMENTS.
(a) The Loans and all other Obligations shall be secured by
the Collateral described in the Security Documents and are entitled to the
benefits thereof. The Borrowers shall duly execute and deliver the Security
Documents, all consents of third parties necessary to permit the effective
granting of the Liens created thereby (including the consents of applicable
licensors under the License Agreements), financing statements pursuant to the
Uniform Commercial Code and other documents, all in Proper Form, as may be
reasonably required by the Agent to grant to the Agent, for the ratable benefit
of the Lenders, a valid, perfected and enforceable first priority Lien on and
security interest in the Collateral (subject only to the Liens permitted under
SECTION 7.2 hereof).
(b) Without limiting the generality of the foregoing, the
Borrowers shall duly execute and deliver to the Agent such mortgages, deeds of
trust or other applicable real property instruments as may be reasonably
requested by the Agent on or prior to the Closing Date (such mortgages, deeds of
trust or other such instruments, as they may be amended, modified or
supplemented from time to time in accordance with the terms thereof and hereof,
collectively, as to real property owned by the Borrowers, referred to as the
"MORTGAGES") so as to create in the Agent's favor, for the ratable benefit of
the Lenders, upon recordation thereof, a valid, perfected and enforceable first
priority Lien on, all real property and improvements thereon owned by the
Borrowers, all of which is described on SCHEDULE 3.1 attached hereto, such
Mortgages to be in form and substance satisfactory to the Agent in all respects.
The Borrowers shall also cause to be duly executed and delivered to the Agent
any and all reasonably necessary estoppel certificates, nondisturbance
agreements, waivers and consents of third parties to the Mortgages, to the
extent reasonably required by the Agent, each in form and substance satisfactory
to the Agent in all respects, and the Borrower shall cause the Mortgages to be
duly recorded in the appropriate recording office or offices and shall pay all
fees, taxes and other costs payable in connection therewith. The Borrowers shall
further furnish to the Agent for the benefit of the ratable benefit of the
Lenders, at the Borrowers' expense, a policy or policies of mortgagee title
insurance, in form, substance and amount satisfactory to the Agent in all
respects, insuring that each of the Mortgages is a valid and perfected first
priority Lien in favor of the Agent on the
48
interests of the Borrowers in, to and under the real property and improvements
described therein, and that the Borrowers have good and marketable title
thereto, issued by a title insurance company or companies reasonably
satisfactory to the Agent, together with satisfactory evidence that all title
insurance premiums have been fully paid. The Borrowers shall furnish to the
Agent certified surveys of real property and such other certificates and
documents as the Agent may reasonably request and which are customary in
financings of this type.
3.2 FILING AND RECORDING. The Borrowers shall, at their sole cost and
expense, cause all financing statements and other Security Documents pursuant to
this Agreement to be duly recorded and/or filed or otherwise perfected in all
places necessary, in the reasonable opinion of the Agent, and take such other
actions as the Agent may reasonably request, in order to perfect and protect the
Liens of the Agent, for the ratable benefit of the Lenders, in the Collateral.
The Borrowers, to the extent permitted by law, hereby authorize the Agent to
file any financing statement in respect of any Lien created pursuant to the
Security Documents which may at any time be required or which, in the reasonable
opinion of the Agent, may at any time be desirable, although the same may have
been executed only by the Agent or, at the option of the Agent, to sign such
financing statement on behalf of the Borrowers and file the same, and the
Borrowers hereby irrevocably designate the Agent, its agents, representatives
and designees as its agent and attorney-in-fact for this purpose. In the event
that any re-recording or refiling thereof (or the filing of any statements of
continuation or assignment of any financing statement) is required to protect
and preserve such Lien, the Borrowers shall, at the Borrower's cost and expense,
cause the same to be recorded and/or refiled at the time and in the manner
requested by the Agent.
4. CONDITIONS.
4.1 ALL LOANS. The obligation of each Lender to make any Loan and the
obligation of the Agent to issue any Letter of Credit or any indemnification of
the issuer of any Indemnified Letter of Credit is subject to the accuracy of all
representations and warranties of the Borrowers on the date of such Loan or
issuance of such Letter of Credit, to the performance by the Borrowers of their
obligations under the Loan Documents and to the satisfaction of the following
further conditions:
(a) the Agent shall have received the following, all
of which shall be duly executed and in Proper Form: (1) IN THE CASE OF A LOAN,
other than a Revolving Loan for the purposes described in SECTIONS 2.6(D) and
2.10(D),
(i) by no later than 12:00 noon on the
applicable Rate Selection Date, telephonic
notice from the Borrowers of the proposed
date and amount of such Loan, and
(ii) no later than 1:00 p.m. on the applicable
Rate Selection Date, a Request for Extension
of Credit, signed by a Responsible Officer
of each Borrower,
or, IN THE CASE OF ISSUANCE OF A LETTER OF CREDIT, a completed Application (as
may be required by the Agent) signed by a Responsible Officer of a Borrower by
12:00 noon
49
three (3) Business Days prior to the proposed date of issuance of such Letter of
Credit and payment of the first letter of credit fee as and by the time required
in SECTION 2.10 of this Agreement, along with, IN EACH CASE, such financial
information as the Agent may reasonably require to substantiate compliance with
all financial covenants contained herein by the Borrowers; and (2) such other
Applications, certificates and other documents as the Agent may reasonably
require;
(b) Availability must be in excess of or equal to zero, after
giving effect to the requested Revolving Loan(s) or Letter(s) of Credit;
(c) all representations and warranties of the Borrowers and
any other Person set forth in this Agreement and in any other Loan Document
shall be true and correct in all material respects with the same effect as
though made on and as of such date;
(d) each Borrower (and each Guarantor, if applicable) shall
be in compliance with all the terms and provisions contained in this Agreement
or in any other Loan Document which are to be observed or performed by such
Borrower (or such Guarantor, if applicable);
(e) prior to the making of such Loan or the issuance of such
Letter of Credit, there shall have occurred no Material Adverse Effect in the
assets, liabilities, financial condition, business or affairs of any Borrower or
any of its Subsidiaries since the date hereof;
(f) no Default or Event of Default shall have occurred and be
continuing;
(g) if requested by the Agent, it shall have received a
certificate executed by the Financial Officer or other Responsible Officer of
each Borrower as to the compliance with subparagraphs (b) through (f) above;
(h) the making of such Loan or the issuance of such Letter of
Credit, shall not be prohibited by, or subject the Agent or any Lender to, any
penalty or onerous condition under any Legal Requirement; and
(i) the Borrowers shall have paid all legal fees and expenses
of the type described in SECTION 10.9 hereof through the date of such Loan or
the issuance of such Letter of Credit.
4.2 FIRST LOAN. In addition to the matters described in SECTION 4.1
hereof, the obligation of any Lender to make the initial Loan or the obligation
of the Agent to issue the first Letter of Credit or the first indemnity of any
issuer of any Indemnified Letter of Credit is subject to the receipt by the
Agent of each of the following, in Proper Form:
(a) the Notes, executed by the Borrowers;
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(b) the Security Documents, executed by the applicable
Borrower or Borrowers;
(c) a certificate executed by the Secretary or Assistant
Secretary of each Borrower dated as of the date thereof, substantially in the
form attached hereto as EXHIBIT F;
(d) the Contribution Agreement, executed by the Borrowers;
(e) certified copies of the Organizational Documents (other
than bylaws, the copies of which do not need to be certified) of each Borrower;
(f) a certificate from the Secretary of State or other
appropriate public official of the State of Texas as to the continued existence
of each Borrower in the State of Texas;
(g) a certificate from the Office of the Comptroller of the
State of Texas as to the good standing of each Borrower in the State of Texas;
(h) with respect to each Borrower, certificates from the
appropriate public officials of those jurisdictions where the nature of such
Borrower's business makes it necessary or desirable to be qualified to do
business as a foreign corporation, as to the existence, good standing and
qualification as a foreign corporation (as may be appropriate) of such Borrower
in such jurisdictions;
(i) the most recent schedule and aging of Receivables of the
Borrowers (dated within thirty (30) days of the Closing Date);
(j) a copy of the field examination, including a takeover
field examination, of the Borrowers' books and records and the results of such
field examination;
(k) evidence that the Borrowers have $3,500,000 or more of
Availability, after giving effect to the Revolving Loans occurring and the
Letters of Credit issued on the Closing Date, together with sufficient evidence
and schedules to confirm to the Agent's reasonable satisfaction that the
projected Availability for the next twelve (12) months after the Closing Date
will be no less than $3,500,000;
(l) the financial statements described in SECTION 5.2 hereof,
together with the management letter received for such financial statements of
Play By Play;
(m) a legal opinion from counsel for the each of Borrowers
(said counsel to be reasonably acceptable to Agent), dated as of the Closing
Date, addressed to the Agent and acceptable in all respects to the Agent in its
sole and absolute discretion;
(n) certificates of insurance reasonably satisfactory to the
Agent in all respects evidencing the existence of all insurance required to be
maintained by the Borrowers pursuant to the terms of this Agreement and the
Security Documents;
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(o) one copy of each of the Acquisition Documents, including
all amendments and schedules thereto, certified as a true and correct copy by a
Responsible Officer of the Borrower;
(p) evidence that the Acquisition Agreement and all other
Acquisition Documents are in full force and effect, and all material consents,
approvals and filings required by any Governmental Authority in connection with
any and all Acquisition Documents have been obtained and made;
(q) evidence that prior to or simultaneously with the advance
of the Loans and the issuance of the Letters of Credit to be made or issued as
of the Closing Date, the Transactions have been duly and validly consummated
without modification, amendment or waiver of any material provisions of any of
the Acquisition Documents (except for such modifications, amendments or waivers
as shall have been approved in writing by the Required Lenders), all in
accordance with the terms, conditions and provisions of the Acquisition
Documents;
(r) evidence that the actual purchase price paid by the
Borrowers and any of their Affiliates in connection with the Acquisition is less
than or equal to $45,000,000 (including the refinancing of existing Indebtedness
of Ace Novelty Co., Inc. and its Subsidiaries and Affiliates);
(s) a schedule of all transaction fees paid or payable by the
Borrowers in connection with the Acquisition demonstrating that all such fees do
not exceed $1,650,000;
(t) evidence that Play By Play has contributed $4,000,000 or
more of cash equity to Ace in connection with the Transactions;
(u) evidence that the Transactions are in compliance with all
material Legal Requirements;
(v) evidence that all requisite and material third party
consents to the Transactions has been received;
(w) evidence that all legal matters in connection with the
Transactions are satisfactory to the Agent, the Lenders and their respective
counsel in their sole reasonable discretion;
(x) a copy of the final due diligence report prepared by
Coopers & Lybrand L.L.P., as it pertains to the Acquisition;
(y) the Borrowers' projections of the cost savings/synergies
anticipated to be achieved as a result of the Acquisition, as well as a detailed
analysis of the cost savings already attained and/or implemented at Ace Novelty
Co., Inc. and its Subsidiaries prior to the consummation of the Transactions;
(z) copies of all License Agreements, together with, in the
case of License Agreements being transferred from Ace Novelty Co., Inc. or its
Subsidiaries, the
52
written consent from each licensor under each such License Agreement that is
material (such determination of materiality to be in the reasonable discretion
of the Agent) to allow the transfer by Ace Novelty Co., Inc. or its applicable
Subsidiaries to Ace of each of such material License Agreements to which Ace
Novelty Co., Inc. or any of its Subsidiaries was originally the licensee
thereunder;
(aa) the results of appraisals of the Borrowers' real and
personal property conducted by one or more appraisers satisfactory to the Agent;
(bb) the results of one or more Phase I environmental audits
with respect to the Borrowers' Properties and operations conducted by a firm
satisfactory to the Agent;
(cc) the Borrowers and the Agent (or TCB) shall have entered
into the Lockbox Agreements;
(dd) evidence that the Borrowers have implemented cash
management and management information systems satisfactory to the Agent;
(ee) copies of all major customer and supplier contracts with
respect to each Borrower which the Agent shall have reasonably requested;
(ff) copies of all employment agreements, management fee
agreements and tax sharing agreements which the Agent shall have reasonably
requested;
(gg) copies of all lease agreements entered into by any of the
Borrowers or any of their Subsidiaries which the Agent shall have reasonably
requested;
(hh) waivers or subordinations of any and all landlord liens
(whether statutory or contractual) held by any owner of each real Property
leased by any Borrower or any of its Subsidiaries;
(ii) copies of all loan agreements, notes and other
documentation evidencing any Indebtedness of any of the Borrowers or any of
their Subsidiaries which the Agent shall have reasonably requested, including
without limitation, (1) Subordinated Indebtedness of the Borrowers to Ace
Novelty Co., Inc. not to exceed the aggregate principal amount of $2,900,000
(said Subordinated Indebtedness being a portion of the consideration paid in
connection with the Acquisition) and (2) Subordinated Indebtedness of the
Borrowers to Arturo Torres in a minimum aggregate principal amount of
$2,000,000, together with any and all subordination agreements required by the
Agent in its discretion with respect to such Subordinated Indebtedness owing to
Ace Novelty Co., Inc. and Arturo Torres;
(jj) evidence reasonably satisfactory to the Agent that there
has been no material adverse change in the business, assets, operations, or
financial condition of (1) Play By Play and its Subsidiaries, taken as a whole,
since July 31, 1995 or (2) Ace Novelty Co., Inc. and its Subsidiaries, taken as
a whole, since December 31, 1995;
53
(kk) an executed disbursement authorization letter from the
Borrowers to the Agent with respect to the disbursement of the proceeds of the
Loans and the issuance of the Letters of Credit, if any, to be made or issued on
the Closing Date;
(ll) all other Loan Documents and any other instruments or
documents consistent with the terms of this Agreement and relating to the
transactions contemplated hereby as the Agent may reasonably request, executed
by the Borrowers or any other Person required by the Agent, including without
limitation, the Lockbox Agreements;
and subject to the further conditions that, at the time of the initial Loan, (1)
the ownership, corporate structure, solvency and capitalization of each of the
Borrowers and each of their Subsidiaries shall be reasonably satisfactory to the
Lenders in all respects; (2) the Agent and the Lender shall have had the
opportunity, if they elect, to examine the books of account and other records
and files of the Borrowers and their Subsidiaries and to make copies hereof, and
to conduct a preclosing audit which shall include, without limitation,
verification of Eligible Receivables, verification of satisfactory status of
supplier and licensor accounts, payment of payroll taxes and accounts payable
and formulation of an opening Borrowing Base as of the Closing Date (with the
results of such examination and audits to have been satisfactory to the Agent
and the Lenders in all respects); (3) all such actions as the Agent shall
reasonably require to perfect the Liens created pursuant to the Security
Documents shall have been taken, including without limitation, the delivery to
the Agent of all Property with respect to which possession is necessary for the
purpose of perfecting such Liens, with respect to the Collateral covered by the
Mortgages, the filing or recording of the Mortgages with the appropriate
Governmental Authorities, and with respect to Collateral covered by the Security
Agreements, the filing of appropriately completed and duly executed Uniform
Commercial Code financing statements and the recording with the appropriate
Governmental Authorities of the Trademark Security Agreement; (4) the Agent
shall also have received evidence reasonably satisfactory to it that the Liens
created by the Security Documents constitute first priority Liens (except for
any Liens expressly provided for in SECTION 7.2 below), including without
limitation, satisfactory title commitments, Uniform Commercial Code search
reports and executed releases of liens or termination statements with respect to
any existing prior Liens to be released; (5) the Borrowers shall have paid all
fees owed to the Agent and the Lenders by the Borrowers under the Commitment
Letter, the Fee Letter executed by and between Play By Play and the Agent
contemporaneously with the Commitment Letter, or this Agreement, including
without limitation, legal fees and expenses described in SECTION 10.9 or
otherwise; and (6) all other legal matters incident to the transactions herein
contemplated shall be reasonably satisfactory to counsel for the Agent and
respective counsel for each of the Lenders.
5. REPRESENTATIONS AND WARRANTIES.
To induce the Agent and the Lenders to enter into this Agreement, each
of the Borrowers jointly and severally represents and warrants to the Agent and
the Lenders, as of the date hereof and as of the date any Loan is made hereunder
or any Letter of Credit is issued hereunder, as follows:
54
5.1 ORGANIZATION. Each of the Borrowers and its Subsidiaries is duly
organized, validly existing and in good standing under the laws of the state of
its incorporation; has all power and authority to own its Property and assets
and to conduct its business as presently conducted; and is duly qualified (or is
in the process of diligently qualifying) to do business and in good standing in
each and every state in the United States of America where its business requires
such qualification. With respect to any Borrower or any of its Subsidiaries
which is in the process of diligently qualifying to do business in an
appropriate jurisdiction, the Borrowers agree to promptly provide the Agent with
evidence of such qualification after the same has been accomplished.
5.2 FINANCIAL STATEMENTS.
(a) The Consolidated financial statements of Play By Play and
its Subsidiaries delivered to the Agent and the Lenders in connection with this
Agreement, including without limitation, the financial statements of Play By
Play dated as of July 31, 1995 and January 31, 1996, fairly present, in
accordance with GAAP, the Consolidated financial condition and the results of
operations of Play By Play and its Subsidiaries as of the dates and for the
periods indicated. No Material Adverse Effect has occurred since the dates of
such financial statements.
(b) To Borrowers' knowledge, the Consolidated financial
statements of Ace Novelty Co., Inc., a Washington corporation, and its
Subsidiaries delivered to the Agent and the Lenders in connection with this
Agreement, including without limitation, the Consolidated financial statements
of Ace Novelty Co., Inc. and its Subsidiaries dated as of December 31, 1995 and
January 31, 1996, fairly present, in accordance with GAAP, the Consolidated
financial condition and results of operations of Ace Novelty Co., Inc. and its
Subsidiaries as of the dates and for the periods indicated. To Borrowers'
knowledge, no material adverse damage has occurred in the assets, liabilities,
financial condition, business or affairs of Ace Novelty Co., Inc. and its
Subsidiaries, taken as a whole, since the dates of such financial statements.
(c) The Borrowers have heretofore furnished to the Agent, for
each month of the 1996 and 1997 fiscal years of the Borrowers, projected income
statements, balance sheets and cash flows of the Borrowers and their
Subsidiaries, on a Consolidated basis, together with one or more schedules
confirming the ability of the Borrowers to consummate the Transactions and
demonstrating prospective compliance with all financial covenants contained in
this Agreement, such projections disclosing all assumptions made by the
Borrowers in formulating such projections and giving effect to the Transactions.
The projections are based upon estimates and assumptions, all of which the
Borrowers believe to be reasonable in light of the conditions which existed as
of the time the projections were made, have been prepared on the basis of the
assumptions stated therein and reflect as of the Closing Date what the Borrowers
believe to be a reasonable estimate as to the results of operations and other
information projected therein.
(d) The Borrowers have heretofore furnished to the Agent a
Consolidated proforma balance sheet of the Borrowers which is consistent with
the
55
previous balance sheets of Play By Play and which sets forth information both
before and after giving effect to the Transactions.
5.3 ENFORCEABLE OBLIGATIONS; AUTHORIZATION. The Loan Documents are
legal, valid and binding obligations of the Borrowers, enforceable in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency
and other similar laws affecting creditors rights generally and by general
equitable principles. The execution, delivery and performance of the Loan
Documents and the consummation of the Transactions have all been duly authorized
by all necessary corporate, and if necessary shareholder, action; are within the
power and authority of the Borrowers; do not and will not contravene or violate
any material Legal Requirement or the Organizational Documents of the Borrowers;
do not and will not result in the breach of, or constitute a default under, any
material agreement or instrument by which any Borrower or any of its respective
Property may be bound or affected; and do not and will not result in the
creation of any Lien upon any Property of any Borrower except as expressly
contemplated therein. All necessary material approvals of any Governmental
Authority and all other requisite material permits, registrations and consents
for the performance have been obtained for the delivery and performance of the
Loan Documents and the consummation of the Transactions.
5.4 OTHER DEBT. No Borrower or any Subsidiary thereof is in default in
the payment of any other Indebtedness or under any material agreement, mortgage,
deed of trust, security agreement or lease to which it is a party, the result of
which has, would or could reasonably be expected to have a Material Adverse
Effect.
5.5 LITIGATION. Except as set forth on SCHEDULE 5.5 attached hereto,
there is no litigation or administrative proceeding pending or, to the knowledge
of any Borrower, threatened against, nor any outstanding judgment, order or
decree affecting, any Borrower or any Subsidiary of any Borrower before or by
any Governmental Authority or arbitral body (a) which involve or affect any of
the Transactions or (b) which individually or in the aggregate have, or if
adversely determined could reasonably be expected to have, a Material Adverse
Effect. No Borrower or any Subsidiary thereof is in default with respect to any
material judgment, writ, rule, regulation, order or decree of any Governmental
Authority.
5.6 TAXES. Each Borrower and each Subsidiary thereof, other than any
Dormant Subsidiary, has filed all federal, state, local or foreign tax returns
required to have been filed and paid all taxes shown thereon to be due, except
those for which extensions have been obtained and except for those which are
being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained in accordance with GAAP. No
Borrower nor any Subsidiary thereof has, as of the Closing Date, requested or
been granted any extension of time to file any Federal, state, local or foreign
tax return. None of the Borrowers or their Subsidiaries are parties to, or have
any obligation under any tax sharing arrangement.
5.7 NO MATERIAL MISSTATEMENTS. The information, reports, financial
statements, exhibits and schedules prepared or furnished by or on behalf of the
Borrowers to the Agent or any Lender in connection with any of the transactions
or this Agreement or any other Loan Documents, taken as a whole, does not
knowingly
56
contain any material misstatement of fact or knowingly omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not materially misleading.
5.8 SUBSIDIARIES. As of the date hereof, each Borrower has no
Subsidiaries or any other material minority ownership interests in any other
Person other than as listed on SCHEDULE 5.8 attached hereto. Except as expressly
indicated on SCHEDULE 5.8 attached hereto, each of the Subsidiaries and minority
ownership interests in any other Person listed on SCHEDULE 5.8 is wholly owned
by the applicable Borrower(s). Each of the Dormant Subsidiaries listed on
SCHEDULE 5.8 does not currently conduct or maintain any business operation and
does not own assets having an aggregate value in excess of the amount shown for
such Dormant Subsidiary in SCHEDULE 5.8.
5.9 REPRESENTATIONS BY OTHERS. All representations and warranties made
by or on behalf of any Borrower or any Subsidiary thereof in any Loan Document
shall constitute representations and warranties of the Borrowers hereunder.
5.10 PERMITS, LICENSES, ETC. Each Borrower and each Subsidiary thereof
possess all material permits, licenses, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights and copyrights which are
required to conduct its business. To the knowledge of the Borrowers, each of the
License Agreements are legal, valid and binding obligations of the applicable
licensors thereunder, enforceable in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency and other similar laws and by
general equitable principles. All of the License Agreements in effect as of the
Closing Date are described in SCHEDULE 5.10 attached hereto.
5.11 ERISA. None of the following has occurred, or if any or all of the
following have occurred, the occurrence of all such events which have occurred
could not be reasonably expected to have a Material Adverse Effect: (a) a
Reportable Event has occurred with respect to any Plan; (b) any Plan fails to
comply in all material respects with all applicable provisions of ERISA; (c) any
Borrower or any ERISA Affiliate has failed to file all reports required by ERISA
and the Code to be filed with respect to each Plan; (d) any Borrower has any
knowledge of any event which could reasonably be expected to result in a
material liability of any Borrower or any ERISA Affiliate to the PBGC other than
for applicable premiums; (e) any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any Plan; (f) an event has occurred or a condition exists that
could reasonably be expected to constitute grounds for a Plan to be terminated
under circumstances which would cause the Lien provided under Section 4068 of
ERISA to attach to any Property of any Borrower or any ERISA Affiliate; or (g)
an event has occurred or a condition exists that could reasonably be expected to
cause the Lien provided under Section 302 of ERISA or Section 412 of the Code to
attach to any Property of any Borrower or any ERISA Affiliate.
5.12 TITLE TO PROPERTIES; POSSESSION UNDER LEASES.
(a) Each Borrower and each Subsidiary thereof has good and
marketable title to, or a valid leasehold interest in, all of its respective
Property and
57
assets shown on the most recent balance sheets of Play By Play and Ace Novelty
Co., Inc. referred to in SECTION 5.2 hereof and all assets and Property acquired
since the date of such balance sheets, except for such Property as is no longer
used or useful in the conduct of its business or as have been disposed of in the
ordinary course of business, and except for minor defects in title that do not
materially interfere with the ability of any Borrower or any Subsidiary thereof
to conduct its business as now conducted. All such assets and Property are free
and clear of all Liens other than those permitted by SECTION 7.2 hereof.
(b) Each Borrower and each of its Subsidiaries has complied
in all material respects with all obligations under all material leases to which
it is a party and under which it is in occupancy, except where non-compliance
does not effect such Borrower's or such Subsidiary's use or occupancy thereof,
and all such leases are in full force and effect, and each Borrower and each of
its Subsidiaries enjoys peaceful and undisturbed possession under all such
leases. SCHEDULE 5.12 attached hereto sets forth each of such leases of real
Property in existence as of the Closing Date, and the Borrowers have provided
the Agent with complete and correct copies of all of such leases of real
Property in effect as of the Closing Date.
5.13 ASSUMED NAMES. No Borrower or any Subsidiary thereof is currently
conducting its business under any assumed name or names, except as set forth on
SCHEDULE 5.13 attached hereto.
5.14 INVESTMENT COMPANY ACT. No Borrower or any Subsidiary thereof is
an investment company within the meaning of the Investment Company Act of 1940,
as amended, or, directly or indirectly, controlled by or acting on behalf of any
Person which is an investment company, within the meaning of said Act.
5.15 PUBLIC UTILITY HOLDING COMPANY ACT. No Borrower is a "public
utility company," or an "affiliate" or a "subsidiary company" of a "public
utility company," or a "holding company," or a "subsidiary company" of a
"registered holding company," or an "affiliate" of a "registered holding
company" or of a "subsidiary company" of a "registered holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended
("PUHCA"). To Borrowers' knowledge, no Borrower is an "affiliate" or a
"subsidiary company" of an unregistered, non-exempt "holding company" as such
terms are defined in PUHCA.
5.16 AGREEMENTS. SCHEDULE 5.16 attached hereto is a complete and
correct list of (i) all credit agreements for borrowed money, indentures and
capitalized leases and all Property subject to any Lien securing such
Indebtedness or lease obligation, (ii) each letter of credit and guaranty, (iii)
all other material instruments in effect as of the date hereof providing for,
evidencing, securing or otherwise relating to any Indebtedness for borrowed
money of any Borrower or any of its Subsidiaries (other than the Indebtedness
hereunder), and (iv) all obligations of any Borrower or any of its Subsidiaries
to issuers of appeal bonds issued for account of any Borrower or any of its
Subsidiaries. The Borrowers shall, upon request by the Agent, deliver to the
Agent and the Lenders a complete and correct copy of all such credit agreements,
indentures, capitalized leases, letters of credit, guarantees and other
instruments or leases described
58
in SCHEDULE 5.16 or arising after the date hereof, including any modifications
or supplements thereto, as in effect on the date hereof.
5.17 ENVIRONMENTAL MATTERS. To Borrowers' knowledge after reasonable
inquiry and except as is described on SCHEDULE 5.17 attached hereto, no activity
of any Borrower or any of its Subsidiaries requires any Environmental Permit
which has not been obtained and which is not now in full force and effect,
except to the extent failure to have any such Environmental Permit could not
reasonably be expected to have a Material Adverse Effect. To Borrowers'
knowledge after reasonable inquiry and except as described on SCHEDULE 5.17
attached hereto, each Borrower and its Subsidiaries are in compliance with all
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Requirement of
Environmental Law or Environmental Permit, except where failure to be in such
compliance could not reasonably be expected to have a Material Adverse Effect.
To Borrowers' knowledge after reasonable inquiry and except as disclosed on
SCHEDULE 5.17 attached hereto, each Borrower and its Subsidiaries (and, to the
knowledge of each Borrower, each of the prior owners or operators and
predecessors in interest with respect to any of its or its Subsidiaries'
Property) (i) have obtained and maintained in effect all Environmental Permits,
the failure to obtain which could reasonably be expected to have a Material
Adverse Effect, (ii) along with their respective Property have been and are in
compliance with all applicable Requirements of Environmental Law and
Environmental Permits where such failure to comply therewith could reasonably be
expected to have a Material Adverse Effect, (iii) along with their Property are
not subject to any (A) Environmental Claims or (B) Environmental Liabilities, in
either case direct or contingent, and whether known or unknown, arising from or
based upon any act, omission, event, condition or circumstance occurring or
existing on or prior to the date hereof which could reasonably be expected to
have a Material Adverse Effect, and (iv) have not received individually or
collectively any notice of any violation or alleged violation of any
Requirements of Environmental Law or Environmental Permit or any Environmental
Claim in connection with their respective Property which could reasonably be
expected to have a Material Adverse Effect. To Borrowers' knowledge after
reasonable inquiry and except as described on SCHEDULE 5.17 attached hereto, the
present and future liability (including any Environmental Liability and any
other damage to Persons or Property), if any, of any Borrower and with respect
to the Property of any of Borrower or any of its Subsidiaries which is
reasonably expected to arise in connection with Requirements of Environmental
Law, Environmental Permits and other environmental matters will not have a
Material Adverse Effect.
5.18 NO CHANGE IN CREDIT CRITERIA OR COLLECTION POLICIES. There has
been no material adverse change in credit criteria or collection policies
concerning Receivables of any Borrower or any of its Subsidiaries or, to
Borrowers' knowledge, of Ace Novelty Co., Inc. or any of its Subsidiaries, since
March 31, 1996.
5.19 SOLVENCY.
(a) The fair salable value of the assets of each Borrower and
its Subsidiaries is not less than the amount that will be required to be paid on
or in respect of the probable liability on the existing debts and other
liabilities (including
59
contingent liabilities) of such Borrower and its Subsidiaries, as they become
absolute and mature.
(b) The assets of each Borrower and its Subsidiaries do not
constitute unreasonably small capital for such Borrower and its Subsidiaries to
carry out their business as now conducted and as proposed to be conducted
including the capital needs of such Borrower and its Subsidiaries, taking into
account the particular capital requirements of the business conducted by such
Borrower and its Subsidiaries and projected capital requirements and capital
availability thereof.
(c) No Borrower or any Subsidiary thereof intends to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be received by such Borrower and such
Subsidiary, and of amounts to be payable on or in respect of debt of such
Borrower and such Subsidiary). The cash flow of each Borrower and its
Subsidiaries, after taking into account all anticipated uses of the cash of such
Borrower and its Subsidiaries, should at all times be sufficient to pay all such
amounts on or in respect of debt of such Borrower and its Subsidiaries when such
amounts are required to be paid.
(d) No Borrower or any Subsidiary thereof believes that final
judgments against it in actions for money damages presently pending, if any,
will be rendered at a time when, or in an amount such that, it will be unable to
satisfy any such judgments promptly in accordance with their terms (taking into
account the maximum reasonable amount of such judgments in any such actions and
the earliest reasonable time at which such judgments might be rendered). The
cash flow of such Borrower and its Subsidiaries, after taking into account all
other anticipated uses of the cash of such Borrower and its Subsidiaries
(including the payments on or in respect of debt referred to in subparagraph (c)
of this SECTION 5.19), should at all times be sufficient to pay all such
judgments promptly in accordance with their terms.
5.20 ACQUISITION DOCUMENTS. Each of the Acquisition Documents
constitutes the valid and binding obligation of each of the parties thereto in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy laws and other laws affecting creditors' rights generally
and by general principles of equity. Borrowers have no knowledge that any of the
representations and warranties contained in any of the Acquisition Documents
were not true and correct in all material respects on and as of the date given
or, except as disclosed in writing to the Agent prior to the Closing Date, that
any of the material terms thereof have been modified, amended or waived.
5.21 STATUS OF RECEIVABLES AND OTHER COLLATERAL. Each Borrower
represents and warrants that (a) it is and shall be the sole owner, free and
clear of all Liens except in favor of the Agent or otherwise permitted under
SECTION 7.2 hereunder, of and fully authorized to sell, transfer, pledge and/or
grant a security interest in each and every item of said Collateral owned by it;
(b) each Eligible Receivable is and shall be a good and valid account
representing an undisputed bona fide indebtedness incurred or an amount
indisputably owed by the account debtor therein named, for a fixed sum as set
forth in the invoice relating thereto with respect to an absolute sale and
delivery upon the specified terms of goods sold by a Borrower, or work, labor
and/or services
60
theretofore rendered by a Borrower; (c) no Eligible Receivable is or shall be
subject to any defense, offset, counterclaim, discount or allowance (as of the
time of its creation) except as may be stated in the invoice relating thereto or
discounts and allowances as may be customary in such Borrower's business; (d) to
each Borrower's knowledge, none of the transactions underlying or giving rise to
any Eligible Receivable shall violate any applicable state or federal laws or
regulations, and all documents relating to any Receivable shall be legally
sufficient under such laws or regulations and shall be legally enforceable in
accordance with their terms, subject, as to enforceability, to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creators' rights generally; (e) to each Borrower's knowledge, each
account debtor, guarantor or endorser with respect to any Eligible Receivable is
solvent and able to pay all Receivables on which it is obligated in full when
due; (f) all documents and agreements relating to Eligible Receivables shall be
true and correct and in all material respects what they purport to be; (g) to
each Borrower's knowledge, all signatures and endorsements that appear on all
documents and agreements relating to Eligible Receivables shall be genuine and
all signatories and endorsers with respect thereto shall have full capacity to
contract; (h) it shall maintain books and records pertaining to the Collateral
owned by it in reasonable detail, form and scope as the Agent shall reasonably
require; (i) each Borrower will immediately notify the Agent if any Receivables
arise out of contracts with the United States or any department, agency or
instrumentality thereof, and will, upon request from the Agent, execute any
instruments and take any steps required by the Agent in order that all monies
due or to become due under any such contract shall be assigned to the Agent and
notice thereof given under the Federal Assignment of Claims Act; (j) it will,
immediately upon learning thereof, report to the Agent any material loss or
destruction of, or substantial damage to, any of the Collateral, and any other
matters materially and adversely affecting the value, enforceability or
collectability of any of the Collateral; (k) if any amount payable under or in
connection with any Receivable is evidenced by a promissory note or other
instrument, as such terms are defined in the Uniform Commercial Code, such
promissory note or instrument shall be immediately pledged, endorsed, assigned
and delivered to the Agent as additional collateral; (l) it shall not redate any
invoice or sale or make sales on extended dating beyond that customary in the
industry; (m) after the occurrence of an Event of Default which is continuing,
it shall conduct a physical count of its inventory at such intervals as the
Agent may request and promptly supply the Agent with a copy of such counts
accompanied by a report of the value (based on the lower of cost, on a weighted
average basis, or market value) of such inventory; and (n) it shall not be
entitled to pledge the Lenders' credit on any purchases or for any purpose
whatsoever.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees with the Agent and the Lenders that
prior to the termination of this Agreement, it will do, cause each of its
Subsidiaries to do, and if necessary cause to be done, each and all of the
following:
6.1 BUSINESSES AND PROPERTIES. At all times: (a) do or cause to be done
all things necessary to obtain, preserve, renew and keep in full force and
effect the rights, licenses (including licenses now or hereafter evidenced by
any of the License Agreements), permits, franchises, patents, copyrights,
trademarks and trade names
61
material to the conduct of its businesses, except to the extent that the failure
to obtain, preserve, renew or keep in full force and effect any such rights,
licenses, permits, franchises, patents, copyrights, trademarks and trade names
would not have a Material Adverse Effect; (b) maintain and operate such
businesses in the same general manner in which they are presently conducted and
operated; (c) comply with all Legal Requirements applicable to the operation of
such businesses whether now in effect or hereafter enacted (including without
limitation, all Legal Requirements relating to public and employee health and
safety and all Environmental Laws) and with any and all other Legal
Requirements, the lack of compliance with which would have a Material Adverse
Effect; and (d) maintain, preserve and protect all Property material to the
conduct of such businesses and keep such Property in good repair, working order
and condition, and from time to time make, or cause to be made, all needful and
proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times.
6.2 TAXES. Pay and discharge when due all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
in respect of its Property before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might give rise to Liens upon such properties or
any part thereof (except as otherwise permitted by SECTION 7.2 hereof), unless
being diligently contested in good faith by appropriate proceedings and as to
which adequate reserves have been established in accordance with GAAP; PROVIDED,
HOWEVER, that in no event shall the aggregate amount of such reserves be less
than the aggregate amount secured by such Liens.
6.3 FINANCIAL STATEMENTS AND INFORMATION. Furnish to the Agent and each
Lender three (3) copies of each of the following: (a) as soon as available and
in any event within ninety (90) days after the end of each fiscal year of the
Borrowers, Annual Audited Financial Statements of the Borrowers and their
Subsidiaries; (b) as soon as available and in any event within thirty (30) days
after the end of the first and second months of each fiscal quarter of the
Borrowers (except that, until the expiration of six (6) months following the
Closing Date, such financial statements shall be due within forty-five (45) days
after the end of such months) and within forty-five (45) days after the end of
the last month of each fiscal quarter of the Borrowers (excluding the last month
of any fiscal year), Monthly Unaudited Financial Statements of the Borrowers and
their Subsidiaries; (c) promptly after the same become publicly available,
copies of such registration statements, annual, periodic and other reports, and
such proxy statements and other information, if any, as shall be filed by the
Borrowers or any Subsidiaries thereof with the Securities and Exchange
Commission pursuant to the requirements of the Securities Act of 1993 or the
Securities Exchange Act of 1934; (d) concurrently with the financial statements
provided for in SUBSECTIONS 6.3(A) and 6.3(B) hereof, (1) an Officer's
Certificate, signed by a Responsible Officer of each Borrower, and (2) a written
certificate in Proper Form, identifying each Subsidiary which is otherwise
required by the provisions of SECTION 6.10 hereof to become a Borrower or
Guarantor at the request of the Required Lenders, but which has not yet done so
as of the date of such certificate, and providing an explanation of the reasons
why each such Subsidiary is not a Borrower or Guarantor, signed by a Responsible
Officer of each Borrower; (e) as soon as available and in any event within five
(5) days
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after the date of issuance thereof (if any such management letter is ever
issued), a management letter prepared by the independent public accountants who
reported on the financial statements provided for in SUBSECTION 6.3(A) above,
with respect to the internal audit and financial controls of any Borrower and
its Subsidiaries; (f) as soon as available and in any event within fifteen (15)
days after the end of each month, account receivable agings and reconciliations,
inventory designations, accounts payable agings and reconciliations, monthly
sales report and all other schedules, computations and other information, in
reasonable detail, as may be required or requested by the Agent, all certified
by a Responsible Officer of each Borrower; (g) as soon as available and in any
event no later than one (1) Business Day after the most recent Receivables
report has been previously furnished to the Agent, a Receivables report setting
forth the sales, collections and credits for each Borrower for each Business Day
prior to the date of such Receivables report for which no Receivables reporting
has been previously furnished to the Agent; (h) as soon as available and in any
event within fifteen (15) days after the end of each month, a Borrowing Base
Compliance Certificate, signed by a Responsible Officer of each Borrower in the
form attached hereto as EXHIBIT G; (i) as soon as available and in any event
within thirty (30) days prior to the commencement of each fiscal year of the
Borrowers, management-prepared Consolidated financial projections of the
Borrowers and their Subsidiaries for the immediately following two (2) fiscal
years (setting forth such projections on both an annual basis and on a monthly
basis for the upcoming fiscal year and on an annual basis only for the fiscal
year thereafter), such projections to be in such format and detail as the May
10, 1996, financial projections submitted by Borrowers to Agent in connection
with the origination of the credit facility governed hereby; (j) as soon as
practicable, copies of all reports, forms, filings, loan documents and financial
information submitted to the Securities and Exchange Commission and/or any
shareholders of any Borrower or any Subsidiary thereof, including without
limitation, all 10-Q and 10-K Reports; and (k) such other information relating
to the financial condition, operations and business affairs of the Borrowers and
any of their Subsidiaries as from time to time may be reasonably requested by
the Agent.
6.4 INSPECTION. Upon reasonable notice (which may be telephonic
notice), at all reasonable times during normal business hours and as often as
the Agent may request, permit any authorized representative designated by the
Agent, together with any authorized representatives of any Lender desiring to
accompany the Agent, to visit and inspect the Properties and financial records
of the Borrowers and their Subsidiaries and to make extracts from such financial
records at the Agent's expense, and permit any authorized representative
designated by the Agent (together with any accompanying representatives of any
Lender) to discuss the affairs, finances and condition of the Borrowers and
their Subsidiaries with the appropriate Financial Officer and such other
officers as the Borrower shall deem appropriate and the Borrowers' independent
public accountants, as applicable. The Agent agrees that it shall schedule any
meeting with any such independent public accountant through the Borrowers, and a
Responsible Officer of one or more Borrowers shall have the right to be present
at any such meeting. At the Borrowers' joint and several expense, the Agent
shall have the right to examine, as often as it may request (but initially
scheduled for three (3) times in each fiscal year of the Borrowers prior to a
Default or Event of Default) the existence and condition of the Receivables,
inventory, books and records of the Borrowers and their Subsidiaries and to
review their compliance with the terms and
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conditions of this Agreement and the other Loan Documents, subject to
governmental confidentiality requirements. The Agent shall also have the right
to verify with any and all customers of any of the Borrowers the existence and
condition of the Receivables, as often as the Agent may require, without prior
notice to or consent of any Borrower or any of its Subsidiaries.
6.5 FURTHER ASSURANCES. Promptly execute and deliver any and all other
and further instruments which may be requested by the Agent to (a) cure any
defect in the execution and delivery of any Loan Document or more fully to
describe particular aspects of the Borrowers' agreements set forth in the Loan
Documents or so intended to be and (b) grant, preserve, protect and perfect the
first priority Liens created by the Security Documents in the Collateral,
including without limitation, written consents of the applicable licensors under
any License Agreements entered into after the Closing Date (such additional
written consents to be in Proper Form).
6.6 BOOKS AND RECORDS. Maintain financial records and books in
accordance with accepted financial practice and GAAP.
6.7 INSURANCE.
(a) Keep its insurable Properties adequately insured at all
times by financially sound and reputable insurers.
(b) Maintain such other insurance, to such extent and against
such risks, including fire and other risks insured against by extended coverage
and employee liability, as is customary with companies similarly situated and in
the same or similar businesses, PROVIDED, HOWEVER, that such insurance shall
insure the Property of the Borrowers against all risk of physical damage,
including without limitation, loss by fire, explosion, theft, fraud and such
other casualties as may be reasonably satisfactory to the Agent, but in no event
at any time in an amount less than the replacement value of the Collateral.
(c) Maintain in full force and effect worker's compensation
coverage and public liability insurance against claims for personal injury or
death or property damage occurring upon, in, about or in connection with its
operations and with the use of any Properties owned, occupied or controlled by
any Borrower or any of its Subsidiaries, in such amounts as the Agent shall
reasonably deem necessary.
(d) Maintain such other insurance as may be required by law
or as may be reasonably requested by the Agent for purposes of assuring
compliance with this SECTION 6.7. All insurance covering tangible personal or
real Property subject to a Lien in favor of the Agent for the benefit of the
Lenders granted pursuant to the Security Documents shall provide that, in the
case of each separate loss, the full amount of insurance proceeds shall be
payable to the Agent and shall further provide for at least 30 days' prior
written notice to the Agent of the cancellation or substantial modification
thereof.
6.8 ERISA. At all times: (a) make contributions to each Plan in a
timely manner, or within any applicable grace period allowed by the PBGC, and in
an amount
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sufficient to comply with the minimum funding standards requirements of ERISA;
(b) immediately upon acquiring knowledge of (i) any Reportable Event in
connection with any Plan for which no administrative or statutory exemption
exists or (ii) any "prohibited transaction", as such term is defined in Section
4975 of the Code, in connection with any Plan, that could result in the
imposition of material damages or a material excise tax on any Borrower or any
Subsidiary thereof, furnish the Agent a statement executed by a Responsible
Officer of such Borrower or Subsidiary setting forth the details thereof and the
action which such Borrower or any such Subsidiary proposes to take with respect
thereto and, when known, any action taken by the Internal Revenue Service with
respect thereto; (c) notify the Agent promptly upon receipt by any Borrower or
any Subsidiary thereof of any notice of the institution of any proceedings or
other actions which may result in the termination of any Plan by the PBGC and
furnish the Agent with copies of such notice; (d) pay when due, or within any
applicable grace period allowed by the PBGC, all required premium payments to
the PBGC; (e) furnish the Agent with copies of the annual report for each Plan
filed with the Internal Revenue Service not later than ten (10) days after the
Agent requests such report; (f) furnish the Agent with copies of any request for
waiver of the funding standards or extension of the amortization periods
required by Sections 303 and 304 of ERISA or Section 412 of the Code promptly
after the request is submitted to the Secretary of the Treasury, the Department
of Labor or the Internal Revenue Service, as the case may be; and (g) pay when
due, or within any applicable grace period allowed by the applicable
Governmental Authority, all installment contributions required under Section 302
of ERISA or Section 412 of the Code or within 10 days of a failure to make any
such required contributions when due, or within any applicable grace period,
furnish the Agent with written notice of such failure.
6.9 USE OF PROCEEDS. Subject to the terms and conditions contained
herein, use the proceeds of the Loans for (a) refinancing the Borrowers'
existing Indebtedness with financial institutions, (b) partial financing of the
Acquisition (including the refinancing of existing Indebtedness of Ace Novelty
Co., Inc. and its Subsidiaries), (c) financing ongoing working capital needs of
the Borrowers and their Subsidiaries not otherwise prohibited herein and/or (d)
payment of the Indebtedness arising pursuant to the Letters of Credit and the
Indemnified Letters of Credit, as provided in this Agreement; PROVIDED, that no
proceeds of any Loan shall be used (a) for the purpose of purchasing or carrying
directly or indirectly any margin stock as defined in Regulation U ("REG U") of
the Board of Governors of the Federal Reserve System, (b) for the purpose of
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry any such margin stock, (c) for any other purpose which would cause such
Loan to be a "purpose credit" within the meaning of Reg U and (d) for any
purpose which would constitute a violation of Reg U or of Regulations G, T or X
of the Board of Governors of the Federal Reserve System or any successor
regulation of any thereof or of any other rule, statute or regulation governing
margin stock from time to time.
6.10 ADDITIONAL BORROWERS OR GUARANTORS; ASSUMPTION AND JOINDER
AGREEMENTS.
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(a) Promptly inform the Agent of either (i) the commencement
of any material business operations or activities by any Dormant Subsidiary or
(ii) the acquisition by any Dormant Subsidiary of any asset or assets other than
those assets held by such Dormant Subsidiary as of the Closing Date, and in
either of such events, if required by the Required Lenders, promptly cause such
Dormant Subsidiary to either (i) become a Borrower hereunder and comply with all
the terms, conditions, obligations and duties of the Borrowers hereunder and
under all other Loan Documents by execution and delivery to the Agent for the
benefit of the Lenders of an Assumption Agreement and the applicable Security
Documents required by the Required Lenders, together with such related
certificates, legal opinions and documents as the Agent may reasonably require,
or (ii) become a Guarantor by execution and delivery to the Agent for the
ratable benefit of the Lenders of a Guaranty or a Joinder Agreement (if a
Joinder Agreement is requested by the Agent in lieu of a Guaranty) and execute
and deliver to the Agent for the benefit of the Lenders any applicable Security
Documents required by the Required Lenders, together with such related
certificates, legal opinions and documents as the Agent may reasonably require.
(b) Promptly inform the Agent of the creation or acquisition
of any Subsidiary of any Borrower or any other Subsidiary after the Closing Date
which is authorized hereunder and is otherwise in accordance with the other
provisions of this Agreement and, if required by the Required Lenders, promptly
cause any such Subsidiary created after the Closing Date (except as provided for
below) to either (i) become a Borrower hereunder and comply with all of the
terms, conditions, obligations and duties of the Borrowers hereunder and under
all other Loan Documents by execution and delivery to the Agent for the benefit
of the Lenders of an Assumption Agreement and the applicable Security Documents
required by the Required Lenders or (ii) become a Guarantor by execution and
delivery to the Agent for the benefit of the Lenders of a Guaranty or a Joinder
Agreement (if a Joinder Agreement is requested by the Agent in lieu of a
Guaranty) and execute and deliver to the Agent for the benefit of the Lenders
any applicable Security Documents required by the Required Lenders, together
with such related certificates, legal opinions and documents as the Agent may
reasonably require; PROVIDED, however, that any foreign, non-Canadian Subsidiary
shall not be required to become a Borrower or Guarantor hereunder if the Agent
receives, for the ratable benefit of the Lender, a first priority pledge of no
less than sixty-five percent (65%) of all issued and outstanding indicia of
equity rights (including capital stock) in such foreign Subsidiary
contemporaneously with the acquisition or creation by the applicable Borrower or
other Subsidiary of such foreign Subsidiary. With respect to this SECTION 6.10,
whether the applicable Subsidiaries described above become a Borrower or a
Guarantor for purposes of this Agreement shall be at the option of the Required
Lenders and shall not be determined by the Borrowers or the applicable
Subsidiaries described above.
6.11 NOTICE OF EVENTS. Notify the Agent immediately upon acquiring
knowledge of the occurrence of, or if any Borrower or any of its Subsidiaries
causes or intends to cause, as the case may be: (a) the institution of any
lawsuit, administrative proceeding or investigation affecting any Borrower or
any of its Subsidiaries, including without limitation, any audit by the Internal
Revenue Service, the adverse determination under which could reasonably be
expected to have a Material Adverse Effect; (b) any development or change in the
business or affairs of the Borrower or any
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of its Subsidiaries which has had or which is likely to have, in the reasonable
judgment of any Responsible Officer of such Borrower, a Material Adverse Effect;
(c) any Event of Default or any Default, together with a detailed statement by a
Responsible Officer on behalf of the Borrowers of the steps being taken to cure
the effect of such Event of Default or Default; (d) the occurrence of a default
or event of default by any Borrower or any of its Subsidiaries under any
agreement or series of related agreements to which it is a party, which default
or event of default could reasonably be expected to have a Material Adverse
Effect; (e) any violation by, or investigation of, any Borrower or any of its
Subsidiaries in connection with any actual or alleged violation of any Legal
Requirement imposed by the Environmental Protection Agency, the Occupational
Safety Hazard Administration or any other Governmental Authority which has or is
likely to have, in the reasonable judgment of any Responsible Officer of such
Borrower, a Material Adverse Effect; and (f) any change in the accuracy of the
representations and warranties of any Borrower or any of any of its Subsidiaries
in this Agreement or any other Loan Document.
6.12 ENVIRONMENTAL MATTERS. Without limiting the generality of SECTION
6.1(C) hereof, (a) comply in all material respects with all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Requirement of
Environmental Law or Environmental Permit; (b) obtain and maintain in effect all
Environmental Permits, the failure to obtain which could reasonably be expected
to have a Material Adverse Effect; and (c) keep its Property free of any
Environmental Claims or Environmental Liabilities which could reasonably be
expected to have a Material Adverse Effect.
6.13 END OF FISCAL YEAR. Cause each of its fiscal years to end on July
31.
6.14 PAY OBLIGATIONS AND PERFORM OTHER COVENANTS. Make full and timely
payment of the Obligations, whether now existing or hereafter arising, duly
comply with all of the terms and covenants contained in this Agreement and in
each of the other Loan Documents at all times and places and in the manner set
forth therein, and except for the filing of continuation statements and the
making of other filings by the Agent as secured party or assignee, at all times
take all actions necessary to maintain the Liens and security interests provided
for under or pursuant to this Agreement and the Security Documents as valid
perfected first priority Liens on the Collateral intended to be covered thereby
(subject only to other Liens expressly permitted by SECTION 7.2 hereof) and
supply all information to the Agent necessary for such maintenance.
6.15 COLLECTION OF RECEIVABLES; APPLICATION OF LOCKBOX AGREEMENT
PROCEEDS. At their own cost and expense, (i) arrange for remittances on all
Receivables to be made directly to lockboxes designated by the Agent under the
terms of the Lockbox Agreements or in such other manner as the Agent may direct,
and (ii) except for disputed items, promptly deposit all payments received by
the Borrowers on account of Receivables, whether in the form of cash, checks,
notes, drafts, bills of exchange, money orders or otherwise, in one or more
accounts designated by the Agent in precisely the form received (but with any
endorsements of the Borrowers necessary for deposit or collection ), subject to
withdrawal by the Agent only, as hereinafter provided, and until such payments
are deposited, such payments shall be deemed to be held in trust by the
Borrowers for and as the Lenders' property and shall not be commingled with the
Borrowers' other funds. All remittances and payments that are deposited in
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accordance with the foregoing will be immediately applied by the Agent to reduce
the outstanding balance of the Revolving Loans, subject to the continued accrual
of interest on the Revolving Loan balances to which such remittances and
payments are applied for one (1) Business Day (or two Business Days in the case
of remittances and payments received after 12:00 noon) and in any event subject
to final collection in cash of the item deposited.
6.16 ADDITIONAL RECEIVABLES DOCUMENTATION. In addition to the monthly
Receivables agings delivered pursuant to this Agreement at such intervals as the
Agent may require, furnish such further schedules and/or information as the
Agent may require relating to the Receivables (including without limitation,
sales invoices), and the Borrowers shall notify the Agent of any non-compliance
in respect of the representations and warranties contained in SECTION 5.21
hereof. The items to be provided under this SECTION 6.16 are to be in form
satisfactory to the Agent and are to be executed and delivered to the Agent from
time to time solely for its convenience in maintaining records of the
Collateral. The Borrowers' failure to give any of such items to the Agent shall
not affect, terminate, modify or otherwise limit the Agent's Lien or security
interest in the Collateral.
6.17 LICENSOR CONSENTS. On or before January 31, 1997, Borrowers shall
submit in writing to each licensor under (a) any License Agreement in effect as
of the Closing Date which remains in effect as of January 31, 1997 and (b) any
other Material License Agreement in effect as of January 31, 1997, a request to
execute and deliver to Agent a Licensor Consent Letter, PROVIDED that Borrowers
shall not be obligated to cause any such licensor to so execute and deliver the
requested Licensor Consent Letter.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees with the Agent and the Lenders that
prior to the termination of this Agreement it will not, and will not suffer or
permit any of its Subsidiaries to, do any of the following:
7.1 INDEBTEDNESS. Create, incur, suffer or permit to exist, or assume
or guarantee, directly or indirectly, or become or remain liable with respect to
any Indebtedness, whether direct, indirect, absolute, contingent or otherwise,
EXCEPT the following:
(a) Indebtedness to the Lenders and the Agent pursuant
hereto;
(b) Indebtedness secured by Liens permitted by SECTION 7.2
hereof;
(c) Purchase money Indebtedness incurred to finance specific
Capital Expenditures in an aggregate amount not to exceed $750,000 per fiscal
year (to the extent permitted by SECTION 7.12 hereof);
(d) Subordinated Indebtedness;
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(e) other liabilities existing on the date of this Agreement
and set forth on SCHEDULE 5.16 attached hereto, and all renewals and extensions
(but not increases) thereof on terms no less favorable to the Borrowers or their
Subsidiaries;
(f) current accounts payable and unsecured current
liabilities, not the result of borrowings, to vendors, suppliers and persons
providing services, for expenditures on ordinary trade terms for goods and
services normally required by the Borrowers or any of its Subsidiaries in the
ordinary course of its business;
(g) the Indebtedness of any Guarantor to any Borrower or to
any other Guarantor, or the Indebtedness of any Borrower to any other Borrower
or to any Guarantor;
(h) Indebtedness permitted by SECTION 7.7(E) hereof; and
(i) current and deferred taxes and other assessments and
governmental charges (to the extent permitted by SECTION 7.2(E) hereof).
THE BORROWERS, THE AGENT, THE LENDERS AND EACH GUARANTOR (BY ITS
EXECUTION OF A GUARANTY OR A JOINDER AGREEMENT) AGREE THAT, NOTWITHSTANDING
ANYTHING CONTAINED IN SECTIONS 7.1(G) AND (H) OR IN ANY OTHER PROVISION
CONTAINED IN THIS AGREEMENT WHICH MAY APPEAR TO BE TO THE CONTRARY, ANY AND ALL
INDEBTEDNESS PERMITTED BY SECTIONS 7.1(G) AND (H) HEREOF (TOGETHER WITH ANY AND
ALL LIENS FROM TIME TO TIME SECURING THE SAME AS PERMITTED BY SECTION 7.2(I)
HEREOF) IS HEREBY MADE AND AT ALL TIMES HEREAFTER SHALL BE INFERIOR AND
SUBORDINATE IN ALL RESPECTS TO THE INDEBTEDNESS FROM TIME TO TIME OWING TO THE
AGENT OR ANY LENDER PURSUANT HERETO AND TO ANY LIEN AGAINST ANY COLLATERAL FROM
TIME TO TIME NOW OR HEREAFTER SECURING ANY OF SUCH INDEBTEDNESS PURSUANT TO THE
TERMS HEREOF AND THE SECURITY DOCUMENTS. BORROWERS AGREE TO EXECUTE AND DELIVER
ON THEIR OWN BEHALF, AND TO CAUSE TO BE EXECUTED AND DELIVERED BY AND ON BEHALF
OF THE GUARANTORS, ANY AND ALL SUBORDINATION AGREEMENTS, IN FORM AND CONTENT
REASONABLY ACCEPTABLE TO THE AGENT AND THE REQUIRED LENDERS, WHICH THE AGENT OR
THE REQUIRED LENDERS MAY HEREAFTER REQUIRE TO FURTHER EVIDENCE THE SUBORDINATION
OF THE INDEBTEDNESS PERMITTED BY SECTIONS 7.1(G) AND (H) ABOVE AND THE LIENS
PERMITTED BY SECTION 7.2(I).
7.2 LIENS. Create or suffer to exist any Lien upon any of its Property
(including without limitation, real property assets) now owned or hereafter
acquired, or acquire any Property upon any conditional sale or other title
retention device or arrangement or any purchase money security agreement;
PROVIDED, HOWEVER, that the Borrowers and their Subsidiaries (or any of them)
may create or suffer to exist:
(a) Liens in effect on the date hereof and which are
described on SCHEDULE 7.2 attached hereto, PROVIDED, that the Property covered
thereby does not increase in quantity, and if such Liens are renewed and
extended, the amount of the Indebtedness secured by such Liens and the monthly
debt service payments required under such Indebtedness may not increase;
(b) Liens in favor of the Agent for the ratable benefit of
the Lenders;
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(c) Liens incurred and pledges and deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, old- age pensions and other social security benefits
(not including any lien described in Section 412(m) of the Code);
(d) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens and other similar liens, incurred
in good faith in the ordinary course of business and securing obligations which
are not overdue for a period of more than 30 days or which are being contested
in good faith by appropriate proceedings as to which any Borrower or any of its
Subsidiaries, as the case may be, shall, to the extent required by GAAP,
consistently applied, have set aside on its books adequate reserves;
(e) Liens securing the payment of taxes, assessments and
governmental charges or levies, that are not delinquent or are being diligently
contested in good faith by appropriate proceedings and as to which adequate
reserves have been established in accordance with GAAP; PROVIDED, HOWEVER, that
in no event shall the aggregate amount of taxes, assessments and governmental
charges or levies which are being contested at any time exceed $250,000 and that
in no event shall the aggregate amount of such reserves be less than the
aggregate amount secured by such Liens;
(f) Zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of property
or minor irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created, assumed
or permitted to exist and arising by, through or under a landlord or owner of
the leased property, with or without consent of the lessee) which do not in the
aggregate materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its business;
(g) Liens securing the performance of bids, tenders, leases,
contracts (other than for the repayment of borrowed money), statutory
obligations, surety, customs and appeal bonds and other obligations of like
nature, incurred as an incident to and in the ordinary course of business;
(h) Purchase money Liens securing the Indebtedness permitted
by SECTION 7.1(C) above, PROVIDED, that as a result of the creation of any such
Lien, (i) no Default or Event of Default shall have occurred, (ii) the principal
amount of such Lien does not exceed 100% of the purchase price of the asset
acquired with such permitted Indebtedness plus accrued interest on such
Indebtedness, and (ii) such Lien shall not apply to any other Property other
than the asset acquired with such purchase money Indebtedness; and
(i) Liens in favor of any Borrower or any Guarantor securing
any Indebtedness permitted pursuant to SECTIONS 7.1(G) and (H) hereof.
PROVIDED, HOWEVER, that notwithstanding anything contained above in this SECTION
7.2 to the contrary, if any of the permitted Liens are of the type that are
being contested in good faith by appropriate proceedings as to any Borrower or
any of its Subsidiaries,
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the Indebtedness giving rise to such contested Lien(s) must be immediately paid
upon commencement of any foreclosure process or proceeding with respect to such
Lien(s) unless the same shall be effectively stayed or a surety bond with
respect thereto (which is satisfactory in all respects to the Agent), is posted.
7.3 CONTINGENT LIABILITIES. Create, incur, suffer or permit to exist,
directly or indirectly, any Contingent Obligations, except for (a) Contingent
Obligations in effect on the date hereof and which are described on SCHEDULE 7.3
attached hereto and (b) Contingent Obligations hereafter incurred by any
Borrower or any Guarantor with respect to the Indebtedness of any other Borrower
or Guarantor otherwise permitted by SECTION 7.1 hereof.
7.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS AND ACQUISITIONS OF
ASSETS. In any single transaction or series of related transactions, directly or
indirectly:
(a) Wind up its affairs, liquidate or dissolve;
(b) Be a party to any merger or consolidation;
(c) Sell, convey, lease or otherwise dispose of all or any
portion of the assets (except for the sale of inventory in the ordinary course
of business) of any Borrower and/or its Subsidiaries, or agree to take any such
action;
(d) Sell, assign, pledge, transfer or otherwise dispose of,
or in any way part with control of, any Stock of any of its Subsidiaries or any
Indebtedness or obligations of any character of any of its Subsidiaries, or
permit any such Subsidiary to do so with respect to any Stock of any other
Subsidiary or any Indebtedness or obligations of any character of any Borrower
or any of its Subsidiaries, or permit any of its Subsidiaries to issue any
additional Stock other than to any Borrower;
(e) Take any action with a view toward dissolution,
liquidation or termination; or
(f) Purchase or otherwise acquire, directly or indirectly, in
a single transaction or a series of related transactions, all or a substantial
portion of the assets of any Person or such Person and its Affiliates, or any
shares of Stock of, or similar interest in, any Person or such Person and its
Affiliates;
PROVIDED, however, that:
(1) any Borrower or any of its Subsidiaries may merge or
consolidate with any other Borrower or any other domestic Subsidiary of
any Borrower, PROVIDED that if one or more of the entities so merging
or consolidating was a Borrower or Guarantor, (x) if the surviving
entity is not yet a Borrower or Guarantor, such surviving entity shall
simultaneously with such merger, execute and deliver to the Agent an
Assumption Agreement or a Joinder Agreement, together with all
requested Security Documents, as required at such time by the Required
Lenders, appropriately completed, and (y) if such surviving entity is a
Guarantor, such surviving entity shall simultaneously with such
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merger, if required at such time by the Required Lenders, execute and
deliver to the Agent an Assumption Agreement and all requested Security
Documents appropriately completed;
(2) any Borrower or any of its Subsidiaries may sell, lease,
transfer or otherwise dispose of any of its assets to another Borrower
or any other domestic Subsidiary of any Borrower; PROVIDED that if the
entity selling, leasing, transferring or otherwise disposing of its
assets is a Borrower or Guarantor, (x) if the entity to whom the sale,
lease, transfer or disposition was made is not yet a Borrower or
Guarantor, such surviving entities shall simultaneously with such
lease, transfer or disposition, execute and deliver to the Agent an
Assumption Agreement or a Joinder Agreement, together with all
requested Security Documents, as required at such time by the Required
Lenders, appropriately completed, and (y) if such entity to whom the
sale, lease, transfer or disposition was made is a Guarantor, such
entity shall simultaneously with such sale, lease, transfer or
disposition, execute and deliver to the Agent an Assumption Agreement
and all requested Security Documents, if required at such time by the
Required Lenders, all appropriately completed. If such transferring
entity is a wholly-owned Subsidiary of any Borrower, it may wind up its
affairs, liquidate or dissolve following the consummation of any such
sale, lease, transfer or disposal of all or substantially all of its
assets;
(3) any Dormant Subsidiary may wind up its affairs, liquidate
or dissolve prior to being obligated, if required by the Required
Lenders, to become a Borrower or Guarantor in accordance with the terms
and provisions of SECTION 6.10(A) hereof;
(4) Ace Acquisition may sell, transfer or otherwise dispose
of, upon terms reasonably acceptable to the Agent and the Lenders, all
of the real Property located in Los Angeles, California (including the
portion of such real Property which is not owned by any Borrower) which
is subject to and covered by a Mortgage as of the date hereof;
(5) Play By Play may sell, transfer or otherwise dispose of,
upon terms reasonably acceptable to the Agent and the Lenders, the
vending business owned and operated by Play By Play as of the date
hereof;
(6) Restaurants International, Inc. may transfer and assign to
Play By Play Toys & Novelties Europe, S.A. any and all rights to
receive payments evidenced by, and due and owing under that certain
contract dated April 12, 1996, by and between Restaurants
International, Inc. and Croitex, S.A.
(7) Any Borrower or any of its Subsidiaries may
acquire all or a substantial portion of the assets of one or more of
their respective account debtors in connection with, and as a result
of, collection actions in the ordinary course of business as a result
of delinquent Receivables or promissory notes owing by such account
debtors.
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7.5 NATURE OF BUSINESS. Materially change the nature of its business or
enter into any business which is substantially different from the business in
which it is engaged as of the Closing Date, or allow any Dormant Subsidiary to
commence any material business operations or activities of any kind.
7.6 TRANSACTIONS WITH RELATED PARTIES. (a) Except for transactions,
contracts or agreements existing on the date of this Agreement and which are set
forth on SCHEDULE 7.6 attached hereto, and any renewals and extensions of such
existing transactions, contracts or agreements so long as such renewals and
extensions are upon terms and conditions substantially identical to the terms
and conditions set forth in the existing transactions, contracts and agreements
(or otherwise no less favorable to the Borrowers and Guarantors, as applicable):
(i) enter into any other transaction, contract or agreement of any kind with any
Affiliate, officer or director of any Borrower or any of its Subsidiaries,
unless such transaction, contract or agreement is made upon terms and conditions
not less favorable to such Person than those which could have been obtained from
wholly independent and unrelated sources; and (ii) the Borrowers will not permit
the compensation paid by any Borrower or any of its Subsidiaries to any officer,
stockholder, director, partner or proprietor of any Borrower or any of its
Subsidiaries to be excessive, based on the reasonable discretion of the Agent,
taking into consideration the financial circumstances of the applicable Borrower
or Subsidiary and the position and qualifications of such Person; PROVIDED,
however, that any Borrower or any of its Subsidiaries may enter into any
transaction, contract or agreement of any kind with another Borrower or any
other Subsidiary of any Borrower upon terms and conditions more favorable to
such Person than those which could have been obtained from wholly independent
and unrelated sources if the applicable Borrowers or Subsidiaries which are
parties to such transaction, contract or agreement are either a Borrower or
Guarantor hereunder.
(b) No Borrower shall permit any executive officer or
director of any Borrower or any of its Subsidiaries to acquire or otherwise
usurp any corporate opportunity rightfully belonging to such Borrower or
Subsidiary in any manner which would constitute a breach of such executive
officer's or director's duty of loyalty to such Borrower or Subsidiary.
7.7 INVESTMENTS; LOANS. Make, directly or indirectly, any loan or
advance to or have any Investment in any Person, or make any commitment to make
such loan, advance or Investment, except:
(a) Stock of any Subsidiary existing as of the Closing Date;
(b) Permitted Investment Securities;
(c) Customer obligations and receivables owing to any Borrower or any
Subsidiary thereof and arising out of sales or leases made or the rendering of
services by any Borrower or any Subsidiary thereof in the ordinary course of
business;
(d) Loans otherwise permitted by the provisions of SECTION 7.1(G)
above;
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(e) Loans and other Investments in Play By Play Toys & Novelties
Europe, S.A., Play By Play Far East Limited or any other foreign Subsidiary of
any Borrower or any of its Subsidiaries, so long as (1) the aggregate amount of
such Loans and other Investments by all Borrowers and Guarantors does not exceed
in the aggregate $650,000 per fiscal year and (2) the provisions of SECTION
6.10(B) hereof have been satisfied;
(f) Letters of Credit issued for the account of the Borrowers and for
the benefit of Play By Play Toys & Novelties Europe, S.A. or any creditors
thereof, so long as (1) the aggregate undrawn amount of such Letters of Credit
then outstanding does not exceed $1,000,000 at any time and (2) the sum of (i)
the aggregate undrawn upon amount of such Letters of Credit then outstanding and
(ii) the aggregate outstanding principal amount of the obligations guaranteed
pursuant to SECTION 7.7(G) below does not exceed $1,500,000 at any time;
(g) One or more guaranties issued by a Borrower covering the
obligations of Play By Play Toys & Novelties Europe, S.A., so long as the sum of
(1) the aggregate outstanding principal amount of obligations so guaranteed and
(2) the aggregate undrawn upon amount of the Letters of Credit issued pursuant
to SECTION 7.7(F) above which are then outstanding does not exceed $1,500,000 at
any time;
(h) The transaction permitted by the provisions of SECTION 7.4(F)(6)
above (with the value of such asset being transferred not being included for
purposes of determining compliance with SECTION 7.7(E) above); and
(i) Investments in other Borrowers or Guarantors.
7.8 ERISA COMPLIANCE.
(a) At any time engage in any "prohibited transaction" as
defined in ERISA; or permit any Plan to be terminated in a manner which could
result in the imposition of a Lien on any Property of any Borrower or any of its
Subsidiaries pursuant to ERISA.
(b) Engage in any transaction in connection with which any
Borrower or any Subsidiary thereof could reasonably be expected to be subject to
either a material civil penalty assessed pursuant to the provisions of Section
502 of ERISA or a material tax imposed under the provisions of Section 4975 of
the Code.
(c) Terminate any Plan in a "distress termination" under
Section 4041 of ERISA, or take any other action which could reasonably be
expected to result in a material liability of any Borrower or any Subsidiary
thereof to the PBGC.
(d) Fail to make payment when due, or within any applicable
grace period allowed by the applicable Governmental Authority, of all amounts
which, under the provisions of any Plan, any Borrower or any Subsidiary thereof
is required to pay as contributions thereto, or, with respect to any Plan,
permit to exist any material "accumulated funding deficiency" (within the
meaning of Section 302 of ERISA and Section 412 of the Code), whether or not
waived, with respect thereto.
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(e) Adopt an amendment to any Plan requiring the provision of
security under Section 307 of ERISA or Section 401(a)(29) of the Code.
7.9 CREDIT EXTENSIONS. Extend credit other than (a) normal and prudent
extensions of credit to customers for goods and services in the ordinary course
of business and (b) loans otherwise permitted by the provisions of SECTIONS
7.1(G), 7.1(H) or SECTION 7.7 above.
7.10 CHANGE IN ACCOUNTING METHOD. Make or permit any change in
accounting method or financial reporting practices except as may be required by
GAAP, as in effect from time to time.
7.11 REDEMPTION, DIVIDENDS, DISTRIBUTIONS AND PAYMENTS. At any time:
(a) Redeem, purchase, retire or otherwise acquire, directly
or indirectly, any shares of its Stock or set aside any amount for such purpose;
(b) Declare or pay, directly or indirectly, (i) any cash
dividend, except dividends paid to any Borrower or Guarantor which is a direct
parent of the Subsidiary paying a dividend, or (ii) any management fees, except
management fees paid to any Borrower or Guarantor; or
(c) Make any other distribution of any Property, cash,
securities or a combination thereof, with respect to (whether by reduction of
capital or otherwise) any shares of its Stock.
7.12 CAPITAL EXPENDITURES. Permit the aggregate amount of payments made
by the Borrowers and their Subsidiaries, on a Consolidated basis, for Capital
Expenditures, including those in respect of Capital Lease Obligations and
Indebtedness permitted under SECTION 7.1(C) above, to exceed $1,750,000 in any
fiscal year.
7.13 INTEREST COVERAGE RATIO. Permit the Interest Coverage Ratio of the
Borrowers and their Subsidiaries, on a Consolidated basis, to be less than 3.50
to 1.00 as of the end of any fiscal quarter or fiscal year.
7.14 TANGIBLE NET WORTH. Permit the Tangible Net Worth of the Borrowers
and their Subsidiaries, on a Consolidated basis, to be less than the respective
amounts set forth below as of the end of any calendar month during the periods
indicated:
PERIOD AMOUNT
------ ------
Closing Date through July 30, 1996 $31,250,000
July 31, 1996 through October 30, 1996 $32,000,000
October 31, 1996 through January 30, 1997 $34,500,000
January 31, 1997 through April 29, 1997 $35,250,000
April 30, 1997 through July 30, 1997 $36,250,000
July 31, 1997 through October 30, 1997 $38,750,000
October 31, 1997 through January 30, 1998 $41,250,000
January 31, 1998 through April 29, 1998 $42,000,000
April 30, 1998 through Maturity Date $43,000,000
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7.15 DEBT COVERAGE RATIO. Permit the Debt Coverage Ratio of the
Borrowers and their Subsidiaries, on a Consolidated basis, to be less than the
respective amounts set forth below as of the dates indicated:
DATE RATIO
January 31, 1997 1.25:1.00
April 30, 1997 1.25:1.00
July 31, 1997 1.50:1.00
October 31, 1997 1.75:1.00
January 31, 1998 2.00:1.00
and the last day of each fiscal quarter
thereafter through Maturity Date
7.16 EBITDA. Permit EBITDA of the Borrowers and their Subsidiaries, on
a Consolidated Basis, to be less than the respective amounts set forth below for
the periods indicated:
PERIOD AMOUNT
------ ------
June 1 through July 31, 1996 $2,500,000
August 1, 1996 through October 31, 1996 $5,500,000
7.17 SALES OF RECEIVABLES. Sell, assign, discount, transfer or
otherwise dispose of any Receivables, promissory notes, drafts or trade
acceptances or other rights to receive payment held by it, with or without
recourse, except for the purpose of collection, settlement or discount of any
Receivables in the ordinary course of business.
7.18 NET INCOME. Permit Net Income of the Borrowers and their
Subsidiaries on a Consolidated basis, to be less than zero for any fiscal
quarter (commencing with the fiscal quarter ending July 31, 1996).
7.19 SALE AND LEASE-BACK TRANSACTIONS. Enter into any arrangement,
directly or indirectly, with any Person whereby any Borrower or any of its
Subsidiaries shall sell or transfer any Property, real or personal, which is
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such Property or other Property which such Borrower or
such Subsidiary intends to use for substantially the same purpose or purposes as
the Property being sold or transferred.
7.20 FOREIGN ENTITY STOCK. Permit Play By Play Toys & Novelties Europe,
S.A., Play By Play Far East Limited or any other non-Canadian, foreign
Subsidiary of any Borrower or any other Subsidiary acquired or formed after the
date hereof in compliance with the other provisions of this Agreement to issue
any further or additional indicia of equity rights (including without
limitation, capital stock) unless (a) sixty-five percent (65%) of any such
additional equity rights are promptly pledged to the Agent, for the ratable
benefit of the Banks, as additional Collateral for the Obligations, and (b) the
original certificates evidencing such additional equity rights (together with
appropriate stock powers or other requisite endorsements) are promptly delivered
to the Agent once issued.
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7.21 CHANGE OF NAME OR PLACE OF BUSINESS. Permit any Borrower or any of
its Subsidiaries to change its address, name, location of its chief executive
office or principal place of business or the place it keeps its books and
records, unless the Borrowers have (a) notified the Agent of such change in
writing at least thirty (30) days before the effective date of such change, (b)
taken such action, reasonably satisfactory to the Agent and the Lenders, to have
caused the Liens against all Collateral in favor of the Agent for the ratable
benefit of the Lenders to be at all times fully perfected and in full force and
effect and (c) delivered such certificates of Governmental Authorities as the
Agent may require substantiating such name change; PROVIDED, however, that Ace
shall be entitled to change its name to Ace Novelty Co., Inc. within 48 hours
after the Closing Date so long as all the other requirements of this SECTION
7.21 have been satisfied.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. If any of the following events shall occur and
be continuing, then the Agent may, if directed to do so by the Required Lenders
in writing actually received by the Agent prior to the Agent doing so (and, if
directed by the Required Lenders, shall), by written notice (or facsimile notice
promptly confirmed in writing) to the Borrowers, take any or all of the
following actions at the same or different times: (1) accelerate the Maturity
Date and declare the Notes, all Letter of Credit Advances, the Commitment Fees
and all other Obligations then outstanding to be, and thereupon the Notes, said
Letter of Credit Advances, the Commitment Fees and all other Obligations shall
forthwith become, immediately due and payable, without further notice of any
kind, notice of acceleration or of intention to accelerate, presentment and
demand or protest, or other notice of any kind all of which are hereby expressly
WAIVED by the Borrowers; (2) terminate all or any portion of the Commitments and
any obligation to issue any additional Letters of Credit; (3) demand that the
Borrowers and the Guarantors provide the Agent, for the ratable benefit of the
Lenders, and the Borrowers and the Guarantors jointly and severally agree upon
such demand, to provide cash collateral in an amount equal to the aggregate
Letter of Credit Exposure Amount then outstanding, on terms and pursuant to
documents in agreement and satisfactory in all respects to the Agent; and (4)
exercise any and all other rights pursuant to the Loan Documents:
(a) The Borrowers shall fail to pay or prepay any principal
of or interest on any Note, any Application, the Commitment Fees or any other
Obligation hereunder as and when due and payable, whether at the due date
thereof (by acceleration, lapse of time or otherwise) or at any date fixed for
prepayment thereof in accordance with the other provisions of this Agreement; or
(b) Any Borrower or any of its Subsidiaries (i) shall fail to
pay at maturity, or within any applicable period of grace, any Indebtedness, or
the equivalent thereof (excluding Indebtedness outstanding hereunder), in excess
of $100,000 in principal amount unless such payment is being contested in good
faith (by appropriate proceedings) and adequate reserves have been provided
therefor, or (ii) shall default in any other manner with respect to any
Indebtedness, or the equivalent thereof (excluding Indebtedness outstanding
hereunder), in excess of $100,000 in principal amount if the effect of any such
default or event of default shall be to accelerate or to
77
permit the holder of any such Indebtedness or equivalent obligation, at its
option, to accelerate the maturity of such Indebtedness or equivalent
obligations prior to the stated maturity thereof, (iii) shall fail to observe or
perform any term, covenant or agreement contained in any agreement or
obligation, other than any Loan Document, by which it or any of its Subsidiaries
is bound (the failure of which would or could reasonably be expected to have a
Material Adverse Effect), or (iv) is in default under or in violation of any
Legal Requirement, which failure would or could reasonably be expected to have a
Material Adverse Effect; or
(c) Any representation or warranty made or deemed made in
connection with any Loan Document shall prove to have been incorrect, false or
misleading in any material respect when made or deemed to have been made, if a
Material Adverse Effect would occur as a result thereof; or
(d) Except as provided in SECTION 8.1(E) hereof, default
shall occur in the punctual and complete performance or observance of any
covenant, condition or agreement to be observed or performed on the part of any
Borrower or any of its Subsidiaries pursuant to the terms of any provision of
this Agreement or any other Loan Document; or
(e) Default shall occur in the punctual and complete
performance or observance of any covenant, condition or agreement to be observed
or performed on the part of any Borrower or any of its Subsidiaries pursuant to
the terms of SECTIONS 6.2, 6.8(B) and 6.11(E) hereof, and such Default remains
uncured ten (10) days after the Agent has given written notice of such Default
to the Borrowers; or
(f) Judgment or judgments (or any decree or decrees for the
payment of any fine or any penalty) for the payment of an uninsured money award
in excess of $1,000,000 in the aggregate shall be rendered against any Borrower
or any of its Subsidiaries at any time, regardless of whether the same is being
appealed or reserves established therefor or paid in full; or
(g) Final judgment or judgments (or any decree or decrees for
the payment of any fine or any penalty) for the payment of money in excess of
$250,000 in the aggregate shall be rendered against any Borrower or any of its
Subsidiaries and the same shall remain undischarged for a period of thirty (30)
days during which execution shall not be effectively stayed; or
(h) Any Borrower or any Subsidiary of any Borrower shall
claim, or any court shall find or rule, that the Agent for the benefit of the
Lenders does not have a valid Lien on any portion of the Collateral which may
now or hereafter have been provided to secure the Obligations hereunder; or
(i) Any order shall be entered in any proceeding against any
Borrower or any of its Subsidiaries decreeing the dissolution, liquidation or
split-up thereof, and such order shall remain in effect for sixty (60) days; or
(j) Any Borrower or any of its Subsidiaries shall have
concealed, removed, or permitted to be concealed or removed, any part of its
Property, with intent
78
to hinder, delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its Property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or shall have made any transfer of its
Property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or
(k) A change shall occur in the financial condition, business
affairs or otherwise of any Borrower or any of its Subsidiaries, or in the value
of the Collateral given as security for the Obligations hereunder, which would
or does have a Material Adverse Effect; or
(l) Any of the following shall occur: (1) a material
Reportable Event shall have occurred with respect to a Plan; (2) the filing by
any Borrower, any ERISA Affiliate, or an administrator of any Plan of a notice
of intent to terminate such Plan in a "distressed termination" under the
provisions of Section 4041 of ERISA; (3) the receipt of notice by any Borrower,
any ERISA Affiliate or an administrator of a Plan that the PBGC has instituted
proceedings to terminate (or appoint a trustee to administer) such a Plan; (4)
any other event or condition exists which might, in the opinion of the Agent,
constitute grounds under the provisions of Section 4042 of ERISA for the
termination of or the appointment of a trustee to administer any Plan by the
PBGC; (5) a Plan shall fail to maintain a minimum funding standard required by
Section 412 of the Code for any plan year or a waiver of standard is sought or
granted under the provisions of Section 412(d) of the Code; (6) any Borrower or
any ERISA Affiliate has incurred, or is likely to incur, a liability under the
provisions of Section 4062, 4063, 4064 or 4201 of ERISA; (7) any Borrower or any
ERISA Affiliate fails to pay the full amount of an installment required under
Section 412(m) of the Code; (8) the occurrence of any other event or condition
with respect to any Plan which would constitute an event of default or default
under any other material agreement entered into by any Borrower or any ERISA
Affiliate; or
(m) One or more notices of Liens arising from unpaid federal,
state or local taxes exceeding $100,000 in the aggregate shall be filed against
any of the Properties or assets of any Borrower or any of its Subsidiaries; or
(n) This Agreement, any Note, any of the Security Documents
or any other Loan Documents shall for any reason cease to be, or shall be
asserted by any Borrower, any Guarantor or any Grantor not to be, a legal, valid
and binding obligation of the Borrowers, such Guarantors or such Grantor, as
applicable, enforceable in accordance with its terms, or the Lien purported to
be created by any of the Security Documents shall for any reason cease to be, or
be asserted by any Borrower, any Guarantor or any Grantor, as applicable, not to
be, a valid, first priority perfected Lien against any Collateral (except to the
extent otherwise permitted under this Agreement or any of the Security
Documents); or
(o) Any Borrower or any of its Subsidiaries which is a party
to any of the Lockbox Agreements fails to perform and observe, and/or cause to
be performed and observed, all covenants, provisions and conditions to be
performed, discharged and observed by any Borrower or any such Subsidiary under
the terms of the Lockbox Agreements; or
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(p) A Change of Control shall occur; or
(q) Any of the Material License Agreements are validly
terminated as a result of a default thereunder by any Borrower or any of its
Subsidiaries.
In addition, if any of the following events shall occur, then the Notes, the
Letter of Credit Advances, the Commitment Fees and all other Obligations then
outstanding and payable hereunder shall automatically, without demand,
presentment, protest, notice of intent to accelerate, notice of acceleration or
other notice to any Person of any kind, all of which are hereby expressly WAIVED
by the Borrowers, become immediately due and payable and all Commitments and
further obligation to issue any additional Letters of Credit shall be
immediately and automatically terminated:
(x) Any Borrower or any of its Subsidiaries shall make
a general assignment for the benefit of creditors or shall petition or
apply to any tribunal for the appointment of a trustee, custodian,
receiver or liquidator of all or any substantial part of its business,
estate or assets or shall commence any proceeding under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect; or
(y) Any such petition or application shall be filed or
any such proceeding shall be commenced against any Borrower or any of
its Subsidiaries and such Borrower or such Subsidiary by any act or
omission shall indicate approval thereof, consent thereto or
acquiescence therein, or an order shall be entered appointing a
trustee, custodian, receiver or liquidator of all or any substantial
part of the assets of any Borrower or any of its Subsidiaries or
granting relief to any Borrower or any of its Subsidiaries or approving
the petition in any such proceeding, and such order shall remain in
effect for more than sixty (60) days; or
(z) Any Borrower or any of its Subsidiaries shall
admit in writing its inability to pay its debts as they become due or
fail generally to pay its debts as they become due or suffer any writ
of attachment or execution or any similar process to be issued or
levied against it or any substantial part of its Property which is not
released, stayed, bonded or vacated within thirty (30) days after its
issue or levy.
8.2 REMEDIES CUMULATIVE. No remedy, right or power conferred upon the
Agent or any Lender is intended to be exclusive of any other remedy, right or
power given hereunder or now or hereafter existing at law, in equity, or
otherwise, and all such remedies, rights and powers shall be cumulative.
9. THE AGENT.
9.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby irrevocably
appoints and authorizes the Agent to act as its agent hereunder and under the
Letters of Credit and the other Loan Documents with such powers as are
specifically delegated to the Agent by the terms hereof and thereof, together
with such other powers as are
80
reasonably incidental thereto. Each Lender hereby irrevocably appoints and
authorizes the Agent to act as its agent under the Letters of Credit which the
Agent has issued with such powers as are specifically delegated to the Agent by
the terms hereof and thereof, together with such other powers as are reasonably
incidental thereto. The Agent (which such term as used in this SECTION 9, shall,
in each case, include reference to its Affiliates and its own and its
Affiliates' officers, directors, employees and agents) (a) shall not have duties
or responsibilities except those expressly set forth in this Agreement, the
Letters of Credit and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee for any Lender; (b) shall not
be responsible to any Lender for any recitals, statements, representations or
warranties contained in this Agreement, the Letters of Credit or any other Loan
Document, or in any certificate or other document referred to or provided for
in, or received by any of them under, this Agreement, the Letters of Credit or
any other Loan Document, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, the Letters of Credit or any
other Loan Document or any other certificate or document referred to or provided
for herein or therein or any property covered thereby or for any failure by any
Party or any other Person (other than the Agent) to perform any of its
obligations hereunder or thereunder; (c) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder or under the Letters
of Credit or any other Loan Document except to the extent requested by the
Required Lenders, and (d) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under the Letters of Credit or any other
Loan Document or any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith, INCLUDING PURSUANT TO
ITS OWN NEGLIGENCE, except for its own gross negligence or willful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by them with reasonable care. Without in any way limiting any of the
foregoing, each Lender acknowledges that the Agent shall not have any greater
responsibility in the operation of the Letters of Credit than is specified in
the Uniform Customs and Practice for Documentary Credits (1993 Revision,
International Chamber of Commerce Publication No. 500 or any successor
publication). In any foreclosure proceeding concerning any collateral for the
Notes, each holder of a Note if bidding for its own account or for its own
account and the accounts of other Lenders is prohibited from including in the
amount of its bid an amount to be applied as a credit against its Note or the
Notes of the other Lenders, instead such holder must bid in cash only. However,
in any such foreclosure proceeding, the Agent may (but shall not be obligated
to) submit a bid for all Lenders (including itself) in the form of a credit
against the Notes of all of the Lenders, and the Agent or its designee may (but
shall not be obligated to), with the consent of the Required Lenders, accept
title to such collateral for and on behalf of all Lenders.
9.2 RELIANCE. The Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel (which may be counsel for the
Borrowers), independent accountants and other experts selected by the Agent. As
to any matters not expressly provided for by this Agreement, the Letters of
Credit or any other Loan Document, the Agent shall in all cases be fully
81
protected in acting, or in refraining from acting, hereunder and thereunder in
accordance with instructions of the Required Lenders, and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders.
9.3 DEFAULTS. The Agent shall not be deemed to have knowledge of the
occurrence of a Default or Event of Default (other than the non-payment of
principal of or interest on Loans, non-payment of reimbursements of Letters of
Credit Advances, or non-payment of Commitment Fees or Letter of Credit fees
payable hereunder or under any other Loan Documents) unless it has received
notice from a Lender or the Borrowers specifying such Default or Event of
Default and stating that such notice is a "Notice of Default." In the event that
the Agent receives such a notice of the occurrence of a Default or Event of
Default, the Agent shall give prompt notice thereof to the Lenders (and shall
give each Lender prompt notice of each such non-payment). The Agent shall
(subject to SECTION 9.7 hereof) take such action with respect to such Default or
Event of Default as shall be directed by the Required Lenders and within its
rights under the Loan Documents and at law or in equity, PROVIDED that, unless
and until the Agent shall have received such directions, the Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
permitted hereby with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders and within its rights under
the Loan Documents, at law or in equity.
9.4 RIGHTS AS A LENDER. With respect to its Commitment, the Loans and
any Letter of Credit Exposure Amount, the Agent in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting as the Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
includes the Agent in its individual capacity. The Agent may (without having to
account therefor to any Lender) accept deposits from, lend money to and
generally engage in any kind of banking, trust, letter of credit, agency or
other business with any Borrower (and any of its Affiliates) as if it were not
acting as the Agent, and the Agent may accept fees and other consideration from
any Borrower (in addition to the fees heretofore agreed to between the Borrowers
and the Agent) for services in connection with this Agreement or otherwise
without having to account for the same to the Lenders.
9.5 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE AGENT (TO THE
EXTENT NOT REIMBURSED UNDER SECTION 2.10(G), SECTION 10.9 OR SECTION 10.10
HEREOF, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWERS UNDER SAID
SECTIONS 2.10(G), 10.9 AND 10.10), RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE
COMMITMENTS, FOR ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY
KIND AND NATURE WHATSOEVER (INCLUDING THE CONSEQUENCES OF THE NEGLIGENCE OF SUCH
INDEMNIFIED PERSON, BUT EXCLUDING THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH INDEMNIFIED PERSON) WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED
AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE
LETTERS OF CREDIT OR ANY OTHER LOAN DOCUMENT OR ANY OTHER DOCUMENTS CONTEMPLATED
BY OR REFERRED TO HEREIN OR THEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY (INCLUDING THE COSTS AND EXPENSES WHICH THE BORROWERS ARE OBLIGATED TO
PAY UNDER SECTIONS 2.10(G), 10.9 AND 10.10 HEREOF BUT EXCLUDING, UNLESS A
DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL
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ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY
DUTIES HEREUNDER) OR THE ENFORCEMENT OF ANY OF THE TERMS HEREOF OR THEREOF OR OF
ANY SUCH OTHER DOCUMENTS, INCLUDING THE NEGLIGENCE OF SUCH INDEMNIFIED PERSON,
BUT EXCLUDING THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED
PERSON. THE OBLIGATIONS OF THE LENDERS UNDER THIS SECTION 9.5 SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT AND THE REPAYMENT OF THE INDEBTEDNESS ARISING IN
CONNECTION WITH THIS AGREEMENT.
9.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it
has received current financial information with respect to the Borrowers and the
other Parties and that it has, independently and without reliance on the Agent
or any other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrowers and the other Parties
and decision to enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement
or any of the other Loan Documents. The Agent shall not be required to keep
itself informed as to the performance or observance by any Party of this
Agreement, the Letters of Credit or any of the other Loan Documents or any other
document referred to or provided for herein or therein or to inspect the
properties or books of the Borrowers or any Party. Except for notices, reports
and other documents and information expressly required to be furnished to the
Lenders by the Agent, under the Letters of Credit or the other Loan Documents,
the Agent shall not have any duty or responsibility to provide any Lender with
any credit or other information concerning the affairs, financial condition or
business of the Borrowers or any other Party (or any of their Affiliates) which
may come into the possession of the Agent.
9.7 FAILURE TO ACT. Except for action expressly required of the Agent
hereunder, under the Letters of Credit and under the other Loan Documents, the
Agent shall in all cases be fully justified in failing or refusing to act
hereunder and thereunder unless it shall receive further assurances to its
satisfaction by the Lenders of their indemnification obligations under SECTION
9.5 hereof against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action.
9.8 RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Lenders and the Borrowers, and the Agent
may be removed at any time with or without cause by the Required Lenders. Upon
any such resignation or removal, the Required Lenders shall have the right to
appoint a successor Agent reasonably acceptable to the Borrowers, PROVIDED
deposits with such successor Agent shall be insured by the Federal Deposit
Insurance Corporation or its successor. If no successor Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent's giving of notice of resignation or the
Required Lenders' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent reasonably acceptable to the
Borrowers. Any successor Agent shall be a Lender which has an office in the
United States with a combined capital and surplus of at least
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$500,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. Such successor Agent shall promptly specify by notice to the
Borrowers and the Lenders its office for the purpose of any notices and payments
hereunder. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this SECTION 9 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent.
10. MISCELLANEOUS.
10.1 NO WAIVER. No waiver of any Default or Event of Default shall be
deemed to be a waiver of any other Default or Event of Default. No failure to
exercise and no delay on the part of the Agent or any Lender in exercising any
right or power under any Loan Document or at law or in equity shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or the abandonment or discontinuance of steps to enforce any such right
or power, preclude any further or other exercise thereof or the exercise of any
other right or power. No course of dealing between the Borrowers and the Agent
or any Lender shall operate as a waiver of any right or power of the Agent or
any Lender. No amendment, modification or waiver of any provision of this
Agreement or any other Loan Document nor any consent to any departure therefrom
shall be effective unless the same is in writing and signed by the Person
against whom it is sought to be enforced, and then it shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on the Borrowers or any other Person shall entitle the Borrowers or any
other Person to any other or further notice or demand in similar or other
circumstances.
10.2 NOTICES. All notices under the Loan Documents shall be in writing
and either (i) delivered against receipt therefor, (ii) mailed by registered or
certified mail, return receipt requested, or (iii) sent by telex, telecopy
(promptly confirmed by mail, except for any notice pursuant to SECTION
4.1(A)(II) hereof which need not be confirmed by mail) or telegram, in each case
to the intended recipient at the "Address for Notices" specified below its name
on the signature pages hereof; or, as to any Lender who is a signatory hereto,
at such other address as shall be designated by such Lender in a notice to the
Borrowers and the Agent given in accordance with this SECTION 10.2 or to such
other address as a party may designate. Any of the Borrowers may change its
address for purposes hereof by providing written notice of such address change
to the Lenders and the Agent in accordance with the provisions of this SECTION
10.2, with any such change in address only being effective ten (10) Business
Days after such change of address has been deemed given in accordance with the
provisions hereof. Notices shall be deemed to have been given (whether actually
received or not) when delivered (or, if mailed, on the next Business Day);
however, the notices required or permitted by SECTIONS 2.2(B) and 4.1(A) hereof
shall be effective only when actually received by the Agent.
10.3 GOVERNING LAW. UNLESS OTHERWISE SPECIFIED THEREIN, EACH
LOAN DOCUMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (OTHER THAN
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THE CONFLICTS OF LAWS PRINCIPLES THEREOF) AND THE UNITED STATES
OF AMERICA.
10.4 SURVIVAL; PARTIES BOUND. All representations, warranties,
covenants and agreements made by or on behalf of any Borrower in connection
herewith shall survive the execution and delivery of the Loan Documents, shall
not be affected by any investigation made by any Person, and shall bind the
Borrowers and their respective successors, trustees, receivers and assigns and
inure to the benefit of the successors and assigns of the Agent and the Lenders,
provided that the undertaking of the Lenders hereunder to make Loans to the
Borrowers and to issue Letters of Credit for the account of the Borrowers shall
not inure to the benefit of any successor or assign of any Borrower. The term of
this Agreement shall be until the final maturity of each Note and the payment of
all amounts due under the Loan Documents.
10.5 COUNTERPARTS. This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an original
instrument, and all such separate counterparts shall constitute but one and the
same instrument.
10.6 LIMITATION OF INTEREST. The Borrowers and the Lenders intend to
strictly comply with all applicable laws, including applicable usury laws, if
any. Accordingly, the provisions of this SECTION 10.6 shall govern and control
over every other provision of this Agreement or any other Loan Document which
conflicts or is inconsistent with this Section, even if such provision declares
that it controls. As used in this Section, the term "interest" includes the
aggregate of all charges, fees, benefits or other compensation which constitute
interest under applicable law, PROVIDED that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized as an
expense or as compensation for something other than the use, forbearance or
detention of money and not as interest, and (b) all interest at any time
contracted for, reserved, charged or received shall be amortized, prorated,
allocated and spread, in equal parts during the full term of the Loans and the
Commitments. In no event shall the Borrowers or any other Person be obligated to
pay, or the Agent or any Lender have any right or privilege to reserve, receive
or retain, (Y) any interest in excess of the maximum amount of nonusurious
interest permitted under the laws of the United States or of any state, if any,
which are applicable to the Agent or such Lender, respectively, or (Z) total
interest in excess of the amount which the Agent or such Lender could lawfully
have contracted for, reserved, received, retained or charged had the interest
been calculated for the full term of the Loans at the Highest Lawful Rate, if
any, applicable to the Agent or such Lender. On each day, if any, that the sum
of the Alternate Base Rate or the Adjusted LIBOR Rate, as applicable, and the
Applicable Margin, or any other applicable rate called for under any other Loan
Document exceeds the Highest Lawful Rate, if any, applicable to any Lender, the
rate at which interest shall accrue for the applicable type of borrowing owing
to such Lender shall automatically be fixed by operation of this sentence at the
Highest Lawful Rate applicable to such Lender for that day, and shall remain
fixed at the Highest Lawful Rate applicable to such Lender for each day
thereafter until the total amount of interest accrued and owing to such Lender
equals the total amount of interest which would have accrued on such borrowing
owing to such Lender if there were no such ceiling rate as is imposed by this
sentence. Thereafter, interest shall accrue at the Alternate Base
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Rate plus the Applicable Margin, the Adjusted LIBOR Rate plus the Applicable
Margin or such other applicable rate, respectively, unless and until the sum of
the Alternate Base Rate and the Applicable Margin, the sum of the Adjusted LIBOR
Rate and the Applicable Margin or such other applicable rate (whichever is
applicable to the situation) again exceeds the Highest Lawful Rate applicable to
such Lender when the provisions of the immediately preceding sentence shall
again automatically operate to limit the interest accrual rate. The daily
interest rates to be used in calculating interest at the Highest Lawful Rate for
any Lender shall be determined by dividing the applicable Highest Lawful Rate,
if any, for such Lender per annum by the number of days in the calendar year for
which such calculation is being made. None of the terms and provisions contained
in this Agreement or in any other Loan Document which directly or indirectly
relate to interest shall ever be construed without reference to this SECTION
10.6, or be construed to create a contract to pay any Lender for the use,
forbearance or detention of money at an interest rate in excess of the Highest
Lawful Rate applicable to such Lender. If the term of any Loans or the Notes is
shortened by reason of acceleration of maturity as a result of any Default or
Event of Default or by any other cause, or by reason of any required or
permitted prepayment, and if for that (or any other) reason the Agent or any
Lender at any time is owed or receives (and/or has received) interest in excess
of interest calculated at the Highest Lawful Rate applicable to the Agent or
such Lender, then and in any such event all of any such excess interest owed to
or received by the Agent or such Lender shall be canceled automatically as of
the date of such acceleration, prepayment or other event which produces the
excess, and, if such excess interest has been paid to the Agent or such Lender,
it shall be credited PRO TANTO against the then-outstanding principal balance of
the Borrowers' respective obligations to the Agent or such Lender, effective as
of the date or dates when the event occurs which causes it to be excess
interest, until such excess is exhausted or all of such principal has been fully
paid and satisfied, whichever occurs first, and any remaining balance of such
excess shall be promptly refunded to its payor.
10.7 SURVIVAL. The obligations of the Borrowers under SECTIONS 2.3,
2.4(B), 2.9, 2.10(G), 10.9, 10.10 and 10.17 hereof shall survive the repayment
of the Loans, the termination of the Commitments and the cancellation or
expiration of the Letters of Credit.
10.8 CAPTIONS. The headings and captions appearing in the Loan
Documents have been included solely for convenience and shall not be considered
in construing the Loan Documents.
10.9 EXPENSES, ETC. Whether or not any Loan is ever made or any Letter
of Credit ever issued, the Borrowers jointly and severally agree to pay or
reimburse on demand each of the Lenders and the Agent for paying: (a) the
reasonable fees and expenses of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.,
counsel to the Agent or any other legal counsel engaged by the Agent, in
connection with (i) the preparation, execution and delivery of this Agreement
(including the exhibits and schedules hereto) and the Loan Documents and the
making of the Loans and the issuance of Letters of Credit hereunder and (ii) any
modification, supplement or waiver of any of the terms of this Agreement, the
Letters of Credit or any other Loan Document; (b) all reasonable costs and
expenses (including reasonable attorneys' fees) of the Lenders and the Agent
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in connection with the enforcement of this Agreement, the Letters of Credit or
any other Loan Document; (c) all transfer, stamp, documentary or other similar
taxes, assessments or charges levied by any governmental or revenue authority in
respect of this Agreement, any Letter of Credit or any other Loan Document or
any other document referred to herein or therein; (d) all costs, expenses,
taxes, assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
this Agreement, any other Loan Document or any document referred to herein or
therein, and the cost of title insurance; and (e) expenses of due diligence
incurred prior to or as of the Closing Date.
10.10 INDEMNIFICATION. THE BORROWERS JOINTLY AND SEVERALLY AGREE TO
INDEMNIFY THE AGENT, THE LENDERS AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL AND AGENTS FROM, AND HOLD EACH OF THEM
HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES (INCLUDING ENVIRONMENTAL
LIABILITIES), CLAIMS (INCLUDING ENVIRONMENTAL CLAIMS) OR DAMAGES TO WHICH ANY OF
THEM MAY BECOME SUBJECT, INSOFAR AS SUCH LOSSES, LIABILITIES, CLAIMS OR DAMAGES
ARISE OUT OF OR RESULT FROM ANY (A) ACTUAL OR PROPOSED USE BY ANY BORROWER OF
THE PROCEEDS OF ANY EXTENSION OF CREDIT (WHETHER A LOAN OR A LETTER OF CREDIT)
BY ANY LENDER HEREUNDER, (B) BREACH BY ANY BORROWER OF THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, (C) VIOLATION BY ANY BORROWER OR ANY OF ITS SUBSIDIARIES OF
ANY LAW, RULE, REGULATION OR ORDER INCLUDING ANY REQUIREMENTS OF ENVIRONMENTAL
LAW, (D) LIENS OR SECURITY INTERESTS GRANTED ON ANY PROPERTY PURSUANT TO OR
UNDER THE LOAN DOCUMENTS, TO THE EXTENT RESULTING FROM ANY HAZARDOUS SUBSTANCE
LOCATED IN, ON OR UNDER ANY SUCH PROPERTY, (E) OWNERSHIP BY THE LENDERS OR THE
AGENT OF ANY PROPERTY FOLLOWING FORECLOSURE UNDER THE LOAN DOCUMENTS, TO THE
EXTENT SUCH LOSSES, LIABILITIES, CLAIMS OR DAMAGES ARISE OUT OF OR RESULT FROM
ANY HAZARDOUS SUBSTANCE, LOCATED IN, ON OR UNDER SUCH PROPERTY PRIOR TO OR AT
THE TIME OF SUCH FORECLOSURE, INCLUDING LOSSES, LIABILITIES, CLAIMS OR DAMAGES
WHICH ARE IMPOSED UPON PERSONS UNDER LAWS RELATING TO OR REGULATING HAZARDOUS
SUBSTANCES, SOLELY BY VIRTUE OF OWNERSHIP, (F) ANY LENDER OR THE AGENT BEING
DEEMED AN OPERATOR OF ANY SUCH PROPERTY BY A COURT OR OTHER REGULATORY OR
ADMINISTRATIVE AGENCY OR TRIBUNAL OR OTHER THIRD PARTY, TO THE EXTENT SUCH
LOSSES, LIABILITIES, CLAIMS OR DAMAGES ARISE OUT OF OR RESULT FROM ANY HAZARDOUS
SUBSTANCE, PETROLEUM, PETROLEUM PRODUCT OR PETROLEUM WASTE LOCATED IN ON OR
UNDER SUCH PROPERTY AT OR PRIOR TO THE TIME OF ANY FORECLOSURE THEREON UNDER THE
LOAN DOCUMENT, OR (G) INVESTIGATION, LITIGATION OR OTHER PROCEEDING (INCLUDING
ANY THREATENED INVESTIGATION OR PROCEEDING) RELATING TO ANY OF THE FOREGOING,
AND THE BORROWERS JOINTLY AND SEVERALLY AGREE TO REIMBURSE THE AGENT AND EACH
LENDER, AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, COUNSEL AND AGENTS, UPON DEMAND FOR ANY EXPENSES (INCLUDING LEGAL
FEES) INCURRED IN CONNECTION WITH ANY SUCH INVESTIGATION OR PROCEEDING, AND
WHETHER ANY SUCH LOSS, LIABILITY, CLAIM OR DAMAGE RESULTS FROM THE NEGLIGENCE OF
ANY SUCH INDEMNIFIED PERSON; BUT EXCLUDING ANY SUCH LOSSES, LIABILITIES, CLAIMS,
DAMAGES OR EXPENSES INCURRED BY A PERSON OR ANY AFFILIATE THEREOF OR THEIR
RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL OR AGENTS BY REASON OF (I)
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PERSON, AFFILIATE, DIRECTOR,
OFFICER, EMPLOYEE OR AGENT OR (II) OWNERSHIP OR OPERATION OF ANY PROPERTY BY THE
LENDERS OR THE AGENT FOLLOWING FORECLOSURE UNDER THE LOAN DOCUMENTS IF SUCH
LOSSES, LIABILITIES, ETC. ARE ATTRIBUTABLE SOLELY TO THE POST-FORECLOSURE
ACTIONS OF THE LENDER OR THE AGENT. PROMPTLY AFTER RECEIPT BY AN INDEMNIFIED
PERSON OF NOTICE OF ANY CLAIM OR THE COMMENCEMENT OF ANY ACTION, SUCH
INDEMNIFIED PERSON SHALL, IF ANY CLAIM IN RESPECT THEREOF IS TO BE MADE AGAINST
THE
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BORROWERS UNDER THIS SECTION 10.10, NOTIFY THE BORROWERS IN WRITING OF THE CLAIM
OR THE COMMENCEMENT OF THAT ACTION. THE BORROWERS SHALL NOT BE LIABLE FOR ANY
SETTLEMENT OF ANY SUCH CLAIM OR ACTION INVOLVING THE PAYMENT OF MONETARY DAMAGES
EFFECTED WITHOUT ITS WRITTEN CONSENT NOT TO BE UNREASONABLY WITHHELD. IF ANY
SUCH CLAIM OR ACTION SHALL BE BROUGHT AGAINST AN INDEMNIFIED PERSON AND IT SHALL
NOTIFY THE BORROWERS THEREOF, THE BORROWERS SHALL BE ENTITLED TO PARTICIPATE IN
THE JOINT DEFENSE THEREOF.
10.11 AMENDMENTS, WAIVERS, ETC. No amendment or waiver of any provision
of this Agreement, the Notes or any other Loan Document, nor any consent to any
departure by any Borrower therefrom, shall in any event be effective unless the
same shall be agreed or consented to by the Required Lenders and the Borrowers,
and each such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; PROVIDED, that no amendment,
waiver or consent shall, unless consented to in writing by each Lender, do any
of the following: (a) increase any Commitment of any of the Lenders or subject
the Agent or any of the Lenders to any additional obligations; (b) reduce the
principal of, or interest on, any Loan, any Letter of Credit Exposure Amount or
any fee hereunder; (c) waive or postpone any scheduled date fixed for any
payment of principal of, or interest on, any Loan, any Letter of Credit Exposure
Amount or any fee or other sum to be paid hereunder; (d) change the percentage
of any of the Commitments or of the aggregate unpaid principal amount of any of
the Loans, any Letter of Credit Exposure Amount, or the number of Lenders which
shall be required for the Lenders or any of them to take any action under this
Agreement; (e) increase the Borrowing Base advance rate for Net Amount of
Eligible Receivables and/or the Inventory Advance Rate; (f) change any provision
contained in SECTIONS 2.2(D), 2.11, 10.9 or 10.10 hereof or this SECTION 10.11
or SECTION 10.16 hereof; (g) release any Borrower from liability for any of the
Obligations; (h) release any Guarantor from any Guaranty; (i) other than as
expressly permitted by this Agreement, release any Collateral for any of the
Obligations having a value in excess of $500,000, as reasonably determined by
the Agent; or (j) change the definition of "Required Lenders" contained herein.
Anything in this SECTION 10.11 to the contrary, no amendment, waiver or consent
shall be made with respect to SECTION 9 without the written consent of the
Agent.
10.12 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the
benefit of the Borrowers, the Agent and the Lenders and their respective
successors and permitted assigns. The Borrowers may not assign or transfer any
of their respective rights or obligations hereunder without the prior written
consent of all of the Lenders.
(b) Each Lender may sell participations to any Person in all
or part of any Loan, or all or part of its Notes, the Letter of Credit Exposure
Amount or Commitments, to another bank or other entity, in which event, without
limiting the foregoing, the provisions of SECTIONS 10.10 and 10.16 shall inure
to the benefit of each purchaser of a participation and the PRO-RATA treatment
of payments, as described in SECTION 2.11, shall be determined as if such Lender
had not sold such participation. In the event any Lender shall sell any
participation, (i) the Borrowers, the Agent and the other Lenders shall continue
to deal solely and directly with such selling Lender in connection with such
selling Lender's rights and obligations under the Loan Documents (including the
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Note(s) held by such selling Lender), (ii) such Lender shall retain the sole
right and responsibility to enforce the obligations of the Borrowers relating to
the Loans and Letter of Credit Exposure Amount, including the right to approve
any amendment, modification or waiver of any provision of this Agreement other
than (and then only if expressly permitted by the applicable participation
agreement) amendments, modifications or waivers with respect to (A) any fees
payable hereunder to the Lender and (B) the amount of principal or the rate of
interest payable on, or the dates fixed for the scheduled repayment of principal
of, the Loans and other sums to be paid to the Lenders hereunder, and (iii) the
Borrowers agree, to the fullest extent it may effectively do so under applicable
law, that any participant of a Lender may exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect to such participation
as fully as if such participant were a direct holder of Loans if such Lender has
previously given notice of such participation to the Borrowers.
(c) Each Lender may assign to one or more Lenders or Eligible
Assignees all or a portion of its interests, rights and obligations under this
Agreement (including all or a portion of its Commitment and the same portion of
the related Loans at the time owing to it, the related Note or Notes held by it
and its Letter of Credit Exposure Amount) (a "RATABLE ASSIGNMENT"); PROVIDED,
HOWEVER, that, (i) the Agent and the Borrowers must give their respective prior
written consent, which consent will not be unreasonably withheld, conditioned or
delayed, (ii) the aggregate amount of the applicable Commitment, Loans and
Letter of Credit Exposure Amount (without duplication) of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance (as defined below) with respect to such assignment is delivered to
the Agent) shall in no event be less than $5,000,000.00 (except for certain
exceptions approved by the Borrowers and the Agent) and shall be in an amount
that is an integral multiple of $1,000,000.00 (unless all of the assigning
Lender's applicable Commitment, Loans and Letter of Credit Exposure Amount is
being assigned); (iii) the aggregate amount of the applicable Commitment and/or
Loans of the assigning Lender immediately after each partial assignment must be
at least $5,000,000.00 (except for certain exceptions approved by the Borrowers
and the Agent) and shall be in an amount which is an integral multiple of
$1,000,000.00; and (iv) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in its records, an
Assignment and Acceptance in a form required by the Agent (each an "ASSIGNMENT
AND ACCEPTANCE") with blanks appropriately completed, together with any Note or
Notes subject to such assignment and a processing and recordation fee of $2,500
(for which the Borrowers shall have no liability). Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be at least five
(5) Business Days after the execution thereof, unless a shorter period of time
may be agreed to by the Agent in its sole and absolute discretion, (A) the
assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).
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(d) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim, such Lender
assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with any Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan Document or any
other instrument or document furnished pursuant thereto; (ii) such assignor
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrowers or any of its Subsidiaries
or the performance or observance by the Borrowers of any of its obligations
hereunder; (iii) such assignee confirms that it has received a copy of this
Agreement and the other Loan Documents, together with copies of the financial
statements of the Borrowers previously delivered in accordance herewith and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Agent, such
assignor Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Loan Documents; (v) such
assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under the Loan Documents as are delegated to
the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vi) such assignee agrees that it will perform in
accordance with their terms all obligations that by the terms of the Loan
Documents are required to be performed by it as a Lender.
(e) The Agent shall maintain at its office a copy of each
Assignment and Acceptance delivered to it and a record of the names and
addresses of the Lenders and the Commitments of, and principal amount of the
Loans owing to, and the Letter of Credit Exposure Amount of, each Lender from
time to time. The entries in the register shall be conclusive, in the absence of
manifest error, and the Borrowers, the Agent and the Lenders may treat each
person the name of which is recorded therein as a Lender hereunder for all
purposes of the Loan Documents. Such records shall be available for inspection
by the Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and the assignee thereunder together with the Note(s)
subject to such assignment, the written consent to such assignment and the fee
payable in respect thereto, the Agent shall, if such Assignment and Acceptance
has been completed with blanks appropriately filled, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Borrowers and the Lenders.
Contemporaneously with the receipt by the Borrowers of such Assignment and
Acceptance, the Borrowers, at its own expense, shall execute and deliver to the
Agent in exchange for the surrendered Note(s), a new Note or Notes payable to
the order of such assignee in an amount equal to the applicable Commitment,
Loans and Letter of Credit Exposure Amount (without duplication) assumed by it
pursuant to such Assignment and Acceptance and, if the assigning
90
Lender has retained Commitments, Loans and/or Letters of Credit hereunder, a new
Note or Notes to the order of the assigning Lender in an amount equal to the
applicable Commitment, Loans and/or Letters of Credit retained by it hereunder.
Such new Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note(s), shall be dated the effective date
of such Assignment and Acceptance and shall otherwise be in substantially the
form of the surrendered Note(s). Thereafter, such surrendered Note shall be
marked canceled and returned to the Borrowers.
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this SECTION
10.12, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrowers furnished to such Lender
by or on behalf of the Borrowers.
(h) Each Lender agrees that, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this SECTION 10.12, the Borrowers will not be responsible for the accuracy and
completeness of any written materials furnished by such Lender to any actual or
prospective assignee or participant, other than copies of (i) documents
furnished to such Lender pursuant to SECTIONS 5.2(A) and (B) hereof, and (ii)
any other documents which are prepared by the Borrowers for use in such
connection and which contain a statement to such effect.
(i) Notwithstanding anything herein to the contrary, no
Lender other than the Agent (in its capacity as a Lender hereunder) or Heller
Financial, Inc. (but only upon the terms described below) shall be entitled to
sell participations or assign any or all of its interests, rights and
obligations under this Agreement in accordance with the provisions of this
SECTION 10.12 until the earlier to occur of (1) the initial 180 days after the
Closing Date or (2) until such time that $48,750,000 of the Total Commitment has
been assigned through syndication by the Agent to Lenders other than TCB and the
Agent itself, acting in its capacity as a Lender hereunder. With respect to
syndication efforts by the Agent after the Closing Date, until Heller Financial
Inc.'s portion of the Total Commitment has been reduced to $25,000,000, any
assignments by the Agent of any portion of its Commitment, Loans and Letter of
Credit Exposure Amount to an Eligible Assignee shall require, if Heller
Financial, Inc. so elects, a pro-rata assignment to such Eligible Assignee by
Heller Financial, Inc. of its Commitment, Loans and Letter of Credit Exposure
Amount (such pro-rata amount to be determined by comparing the Agent's and TBC's
aggregate portion of the Total Commitment with Heller Financial, Inc.'s portion
of the Total Commitment immediately prior to such assignments.
(j) Notwithstanding anything herein to the contrary
(including the provisions of SECTION 10.12(I) hereof), each Lender may pledge
and assign all or any portion of its rights and interests under the Loan
Documents to any Federal Reserve Bank.
10.13 ENTIRE AGREEMENT. This Agreement and the other Loan Documents
embody the entire agreement and understanding among the Borrowers, the Agent and
the Lenders relating to the subject matter hereof and supersedes all prior
proposals, agreements and understandings relating to the subject matter hereof.
Any conflict
91
between the provisions of this Agreement and the provisions of any other Loan
Documents shall be governed by the provisions of this Agreement. Each Borrower
certifies that it is relying on no representation, warranty, covenant or
agreement except for those set forth in this Agreement and the other Loan
Documents of even date herewith.
10.14 SEVERABILITY. If any provision of any Loan Documents shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired thereby.
10.15 DISCLOSURES. Every reference in the Loan Documents to disclosures
of the Borrowers to the Agent and the Lenders in writing, to the extent that
such references refer to disclosures at or prior to the execution of this
Agreement, shall be deemed strictly to refer only to written disclosures
delivered to the Agent and the Lenders in an orderly manner prior to or
concurrently with the execution hereof.
10.16 CAPITAL ADEQUACY.
(a) If after the date of this Agreement, any Lender shall
have determined that the adoption or effectiveness (regardless of whether
previously announced) of any applicable Legal Requirement or treaty regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Lender with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such Governmental Authority, has or would have
the effect of increasing the cost of, or reducing the rate of return on the
capital of such Lender (or any holding company of which such Lender is a part)
as a consequence of its obligations hereunder or under any Letter of Credit or
its Note to a level below that which such Lender or holding company could have
achieved but for such adoption, change or compliance by an amount deemed by such
Lender to be material, then from time to time, upon demand by such Lender (with
a copy to the Agent), the Borrowers (subject to SECTION 10.6 hereof) jointly and
severally agree to pay to such Lender such additional amount or amounts as will
compensate such Lender or holding company for such reduction.
(b) The certificate of any Lender setting forth such amount
or amounts as shall be necessary to compensate such Lender or its holding
company as specified in SUBSECTION 10.16(A) above (and setting forth the
calculation thereof in reasonable detail) shall be delivered as soon as
practicable to the Borrowers and shall be conclusive and binding, absent
manifest error. The Borrowers shall pay such Lender the amount shown as due on
any such certificate within five days after such Lender delivers such
certificate. In preparing such certificate, such Lender may employ such
assumptions and allocations of costs and expenses as it shall in good faith deem
reasonable and may use any reasonable averaging and attribution method.
10.17 TAXES.
(a) As used in this SECTION 10.17, the following terms shall
have the following meanings:
92
(i) "INDEMNIFIABLE TAX" means any Tax, but excluding,
in any case, any Tax that (a) would not be imposed in respect of a
payment to a holder of any of the Notes under this Agreement, under the
Notes held by such holder or under any of the other Loan Documents
except for a present or former connection between the jurisdiction of
the Governmental Authority imposing such Tax and such holder (or a
shareholder or other Person with an interest in such holder), including
a connection arising from such holder's (or shareholder of such holder
or such other Person) being or having been a citizen or resident of
such jurisdiction, or being or having been organized, present or
engaged in a trade or business in such jurisdiction, or having or
having had a permanent establishment or fixed place of business in such
jurisdiction, but excluding a connection arising solely from such
holder having executed, delivered, performed its obligations or
received a payment under, or enforced, this Agreement, the Notes held
by such holder or any other Loan Documents, or (b) is imposed under
United States federal income tax law, any state income tax law or
otherwise constitutes a tax on gross receipts.
(ii) "TAX" means any present or future tax, levy,
impost, duty, charge, assessment or fee of any nature (including
interest thereon and penalties and additions thereto) that is imposed
by any Governmental Authority in respect of a payment to a holder of
any of the Notes under this Agreement, under the Notes or under any of
the other Loan Documents.
(b) If the Borrowers are required by any applicable Legal
Requirement to make any deduction or withholding for or on account of any Tax
from any payment to be made by it under this Agreement, under the Notes or under
any other Loan Documents, then the Borrowers shall (i) promptly notify the
holder of Notes hereunder that is entitled to such payment of such requirement
to so deduct or withhold such Tax, (ii) pay to the relevant authorities the full
amount required to be so deducted or withheld, (iii) promptly forward to such
holder an official receipt (or certified copies thereof), or other documentation
reasonably acceptable to such holder, evidencing such payment to such
Governmental Authorities and (iv) if such Tax is an Indemnifiable Tax, pay, to
the extent permitted by law, to such holder, in addition to whatever net amount
of such payment is paid to such holder, such additional amount as is necessary
to ensure that the total amount actually received by such holder (free and clear
of Indemnifiable Tax) will equal the full amount of the payment such holder
would have received had no such deduction or withholding been required. If the
Borrowers pay any additional amount to a holder pursuant to the preceding
sentence and such holder shall receive a refund of an Indemnifiable Tax with
respect to which, in the good faith opinion of such holder, such payment was
made, such holder shall pay to the Borrowers the amount of such refund promptly
upon receipt thereof.
(c) In the event that any Governmental Authority notifies any
Borrower that it has improperly failed to withhold or deduct any Tax from a
payment received by any holder of Notes under this Agreement, under the Notes
held by such holder or under any other Loan Documents, the Borrowers jointly and
severally agree to timely and fully pay such Tax to such Governmental Authority
and such holder shall, upon receipt of written notice of such payment,
immediately pay to the Borrowers, an amount necessary in order that the amount
of such payment to the Borrowers after
93
payment of all Taxes with respect to such payment, shall equal the amount that
the Borrowers paid to such Governmental Authority pursuant to this CLAUSE (C).
(d) Each holder of a Note shall, upon request by the
Borrowers, take requested measures to mitigate the amount of Indemnifiable Tax
required to be deducted or withheld from any payment made by the Borrowers under
this Agreement, under the Notes or under any other Loan Documents if such
measures can, in the sole and absolute opinion of such holder, be taken without
such holder suffering any economic, legal, regulatory or other disadvantage
(provided, however, that no such holder shall be required to designate a funding
office that is not located in the United States of America).
(e) Notwithstanding the foregoing, in no event shall the
amount payable under this SECTION 10.17 (to the extent, if any, constituting
interest under applicable laws) together with all amounts constituting interest
under applicable laws and payable in connection with this Agreement or the
Notes, exceed the Highest Lawful Rate or the maximum amount of interest
permitted to be charged by applicable laws.
(f) If any Lender requests compensation from the Borrowers
under SECTION 10.17(B) hereof, the Borrowers shall have the right to seek and
obtain for themselves one or more substitute lenders with the approval of the
Agent (which approval shall not be unreasonably withheld) to replace such Lender
hereunder in compliance with all relevant provisions of SECTION 10.12 hereof,
and upon the replacement of such Lender hereunder with one or more such
substitute lenders, the Borrowers may prepay in full the Loans owed to such
Lender, together with all accrued, unpaid interest thereon and any Consequential
Loss owing by the Borrowers to such Lender as a result of such prepayment.
10.18 WAIVER OF CLAIMS. EACH BORROWER HEREBY WAIVES AND RELEASES THE
AGENT AND ALL LENDERS FROM ANY AND ALL CLAIMS OR CAUSES OF ACTION WHICH ANY
BORROWER MAY OWN, HOLD OR CLAIM IN RESPECT OF ANY OF THEM AS OF THE DATE HEREOF.
10.19 RIGHT OF SETOFF. Upon the occurrence and during the continuation
of any Event of Default, the Lenders each are hereby authorized at any time and
from time to time, without notice to any Borrower or any of the Guarantors (any
such notice being expressly waived by the Borrowers and by the Guarantors by
their execution of a Guaranty or a Joinder Agreement), to setoff and apply any
and all deposits (general or special, time or demand, provisional or final,
whether or not such setoff results in any loss of interest or other penalty, and
including without limitation all certificates of deposit) at any time held, and
any other funds or property at any time held, and other Indebtedness at any time
owing by such Lender to or for the credit or the account of any Borrower or any
such Guarantor against any and all of the Indebtedness arising in connection
with this Agreement irrespective of whether or not such Lender will have made
any demand under this Agreement, the Notes or any other Loan Document. Each of
the Borrowers and the Guarantors (by their execution of a Guaranty or a Joinder
Agreement) also hereby grants to each of the Lenders a security interest in and
hereby transfers, assigns, sets over, and conveys to each of the Lenders, as
security for payment of all Loans and Letter of Credit Exposure Amount, all such
deposits, funds or property of any Borrower or any such Guarantor or
Indebtedness of any Lender to
94
any Borrower or any such Guarantor. Should the right of any Lender to realize
funds in any manner set forth hereinabove be challenged and any application of
such funds be reversed, whether by court order or otherwise, the Lenders shall
make restitution or refund to such Borrower or such Guarantor, as applicable,
pro rata in accordance with their respective Commitment Percentages. Each Lender
agrees to promptly notify the Borrowers and the Agent after any such setoff and
application, provided that the failure to give such notice will not affect the
validity of such setoff and application. The rights of the Agent and the Lenders
under this Section are in addition to other rights and remedies (including
without limitation other rights of setoff) which the Agent or the Lenders may
have. This Section is subject to the terms and provisions of SECTION 2.11
hereof.
10.20 WAIVER OF RIGHT TO JURY TRIAL. EXCEPT AS PROHIBITED BY APPLICABLE
LAW, EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT, THE NOTES, ANY OF THE OTHER LOAN DOCUMENTS OR
ANY TRANSACTIONS EVIDENCED THEREBY.
10.21 ADDITIONAL PROVISIONS REGARDING COLLECTION OF RECEIVABLES;
CONTROL OF INVENTORY AND OTHER COLLATERAL.
(a) Each of the Borrowers hereby constitutes the Agent or the
Agent's designee as such Borrower's attorney-in-fact with power to endorse such
Borrower's name upon any notes, acceptances, checks, drafts, money orders or
other evidence of payment of any Receivables or any other Collateral that may
come into its possession; to sign or endorse such Borrower's name on any
invoice, bill of lading or other title or ownership documents relating to any
Receivables or inventory, drafts against any customers of any Borrower,
assignments and verifications of Receivables and notices to customers of any
Borrower; to send verifications of Receivables; to notify the U.S. Postal
Service authorities to change the address for delivery of mail addressed to such
Borrower to such address as the Agent may designate at any time after the
occurrence of any Event of Default which is continuing; and to do all other acts
and things necessary to carry out this Agreement. All acts of said attorney or
designee are hereby ratified and approved by the Borrowers, and said attorneys
or designee shall not be liable for any acts of omission or commission, for any
error of judgement or for any mistake of fact or law, provided that the Agent or
its designee shall not be relieved of liability to the extent it is determined
by a final judicial decision that its act, error or mistake constituted gross
negligence or willful misconduct. The power of attorney granted under this
subparagraph is coupled with an interest and is irrevocable until all of the
Obligations are paid in full and this Agreement and the Total Commitment is
terminated.
(b) The Agent, without notice to or consent of the Borrowers,
at any time after the occurrence and during the continuation of an Event of
Default, (i) may sue upon or otherwise collect, extend the time of payment of,
or compromise or settle for cash, credit or otherwise upon any terms, any of the
Receivables or any instruments or insurance applicable thereto and/or release
any account debtor thereon; (ii) is authorized and empowered to accept or direct
shipments of inventory and accept the
95
return of the goods represented by any of the Receivables; and (iii) shall have
the right to receive, endorse, assign and/or deliver in its name or the name of
any of the Borrowers any and all checks, drafts and other instruments for the
payment of money relating to the Receivables, and each Borrower hereby waives
notice of presentment, protest and non-payment of any instrument so endorsed.
(c) Nothing herein contained shall be construed to constitute
any Borrower as agent of the Agent for any purpose whatsoever, and the Agent
shall not be responsible or liable for any shortage, discrepancy, damage, loss
or destruction of any part of the Collateral wherever the same may be located
and regardless of the cause thereof (except to the extent it is determined by a
final judicial decision that the Agent's or a Lender's act or omission
constituted gross negligence of willful conduct). The Agent and the Lenders
shall not, under any circumstances or in any event whatsoever, have any
liability for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Receivables or any instrument
received in payment thereof or for any damage resulting therefrom (except to the
extent it is determined by a final judicial decision that the Agent's or such
Lender's error, omission or delay constituted gross negligence or willful
misconduct). The Agent and the Lenders do not, by anything herein or in any
assignment or otherwise, assume any of the Borrowers' obligations under any
contract or agreement assigned to the Agent or the Lender, and the Agent and the
Lenders shall not be responsible in any way for the performance by the Borrowers
of any of the terms and conditions thereof.
(d) Upon the occurrence and during the continuation of any
Event of Default: (i) if any of the Receivables includes a charge for any tax
payable to any governmental tax authority, the Agent is hereby authorized (but
in no event obligated) in its discretion to pay the amount thereof to the proper
taxing authority for the account of the applicable Borrower and to charge the
Borrowers' account therefor; and (ii) the Borrowers shall notify the Agent if
any Receivables include any tax due to any such taxing authority and, in the
absence of such notice, the Agent shall have the right to retain the full
proceeds of such Receivables and shall not be liable for any taxes that may be
due from any Borrower by reason of the sale and delivery creating such
Receivables.
(e) Upon the occurrence and continuation of any Event of
Default, the Agent may at any time and from time to time employ and maintain in
the premises of the Borrowers a custodian selected by the Agent who shall have
full authority to do all acts necessary to protect the Agent's and Lenders'
interests and to report to the Agent thereon. The Borrowers hereby agree to
cooperate with any such custodian and to do so whatever the Agent may reasonably
request to preserve the Collateral. All costs and expenses incurred by the Agent
by reason of the employment of the custodian shall be charged to the Borrowers'
account and added to the Obligations.
10.22 JOINT AND SEVERAL OBLIGATIONS. Notwithstanding anything to the
contrary contained herein or in any other Loan Documents, the Borrowers and the
Guarantors are jointly and severally responsible for their respective
agreements, covenants, representations, warranties and obligations contained and
set forth in this Agreement or in any other Loan Document to which they are a
party.
96
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
PLAY BY PLAY TOYS & NOVELTIES, INC.,
a Texas corporation
By: MARK A. GAWLKIN
Name: MARK A. GAWLKIN
Title:PRESIDENT
ADDRESS FOR NOTICES:
4400 Tejasco
San Antonio, Texas 78218
Attention: Mr. Mark A. Gawlik
97
NEWCO NOVELTY, INC.,
a Texas corporation
By: MARK A. GAWLKIN
Name: MARK A. GAWLKIN
Title:PRESIDENT
ADDRESS FOR NOTICES:
4400 Tejasco
San Antonio, Texas 78218
Attention: Mr. Mark A. Gawlik
98
ACE NOVELTY ACQUISITION CO., INC.,
a Texas corporation
By: MARK A. GAWLKIN
Name: MARK A. GAWLKIN
Title:PRESIDENT
ADDRESS FOR NOTICES:
4400 Tejasco
San Antonio, Texas 78218
Attention: Mr. Mark A. Gawlik
99
CHEMICAL BANK,
a New York banking corporation, as a Lender
and as Agent
By: WINSTON CHANG
Winston Chang
Vice President
ADDRESSES FOR NOTICES:
633 Third Avenue, 7th Floor
New York, New York 10017-6764
Attention: Credit Deputy
DOMESTIC LENDING OFFICE:
633 Third Avenue
New York, New York 10017-6764
100
HELLER FINANCIAL, INC.,
a Delaware corporation, as a Lender
By: JOEL K. FONTENOT
Name: Joel K. Fontenot
Title: Vice President
ADDRESS FOR NOTICES:
500 W. Monroe, Floor 18
Chicago, IL 60661
Attention: Vicky Geist
DOMESTIC LENDING OFFICE:
500 W. Monroe, Floor 18
Chicago, IL 60661
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking
association, as a Lender
By: JEFFREY A. STERN
Name:JEFFREY A. STERN
Title: VICE PRESIDENT
ADDRESS FOR NOTICES:
1020 NE Loop 410
San Antonio, Texas 78209
Attention: Mr. Robert Carswell
DOMESTIC LENDING OFFICE:
1020 NE Loop 410
San Antonio, Texas 78209
101
CREDIT AGREEMENT
made and entered into
as of June 20, 1996
by and among
PLAY BY PLAY TOYS & NOVELTIES, INC.,
a Texas corporation,
ACE NOVELTY ACQUISITION CO., INC.,
a Texas corporation,
NEWCO NOVELTY, INC.,
a Texas corporation
EACH OF THE FINANCIAL INSTITUTIONS WHICH IS
A SIGNATORY HERETO OR
WHICH MAY FROM TIME TO TIME
BECOME A PARTY HERETO,
and
CHEMICAL BANK,
a New York banking corporation
as agent for such Financial Institutions
102
INDEX TO CREDIT AGREEMENT
PAGE
1. DEFINITIONS...........................................................1
1.1. CERTAIN DEFINED TERMS.......................................1
Acquisition.................................................1
Acquisition Agreement.......................................1
Acquisition Documents.......................................1
Adjusted LIBOR Rate.........................................1
Affiliate...................................................2
Agent.......................................................2
Alternate Base Rate.........................................2
Alternate Base Rate Borrowing...............................2
Annual Audited Financial Statements.........................2
Applicable Lending Office...................................3
Applicable Margin...........................................3
Applications................................................4
Assessment Rate.............................................4
Assignment and Acceptance...................................4
Availability................................................5
Base CD Rate................................................5
Borrower or Borrowers.......................................5
Borrowing Base..............................................5
Business Day................................................6
Business Entity.............................................6
Capital Expenditures........................................6
Capital Lease Obligations...................................6
Change of Control...........................................6
Closing Date................................................7
Code........................................................7
Collateral..................................................7
Commitment..................................................7
Commitment Fee..............................................7
Commitment Letter...........................................7
Consolidated................................................7
Contingent Obligation.......................................7
Contribution Agreement......................................8
Current Sum.................................................8
Debt Capacity Ratio.........................................8
Debt Coverage Ratio.........................................8
Debt Service Expense........................................8
Discontinued Operations.....................................8
Domestic Lending Office.....................................9
EBITDA......................................................9
Eligible Assignee...........................................9
Eligible Inventory..........................................9
Eligible Receivables.......................................10
Environmental Claim........................................11
INDEX TO CREDIT AGREEMENT
Page 1
<PAGE>
Environmental Liabilities..................................11
Environmental Permit.......................................12
ERISA......................................................12
ERISA Affiliate............................................12
Event of Default...........................................12
Excess Cash Flow...........................................12
Excess Interest Amount.....................................12
Federal Funds Effective Rate...............................12
Financial Officer..........................................13
Funded Indebtedness........................................13
Funds Flow from Operations.................................13
GAAP.......................................................13
Governmental Authority.....................................14
Grantor....................................................14
Guarantors.................................................14
Guaranty...................................................14
Hazardous Substance........................................14
Highest Lawful Rate........................................14
Indebtedness...............................................14
Interest Coverage Ratio....................................15
Interest Expense...........................................15
Interest Option............................................15
Interest Payment Dates.....................................15
Interest Period............................................16
Inventory Advance Rate.....................................16
Inventory Cap..............................................16
Investment.................................................16
Investment in Foreign Operations...........................17
Joinder Agreement..........................................17
Legal Requirement..........................................17
Lender or Lenders..........................................17
Letters of Credit..........................................17
Letter of Credit Advances..................................17
Letter of Credit Exposure Amount...........................17
LIBOR Borrowing............................................17
LIBOR Lending Office.......................................17
LIBOR Rate.................................................17
License Agreements.........................................18
Lien.......................................................18
Loan Documents.............................................18
Loans......................................................18
Lockbox Agreement..........................................18
Material Adverse Effect....................................18
Maturity Date..............................................19
Monthly Unaudited Financial Statements.....................19
Mortgages..................................................19
Net Amount of Eligible Receivables.........................19
Net Income.................................................19
Notes......................................................19
INDEX TO CREDIT AGREEMENT
Page 2
<PAGE>
Obligations................................................19
Officer's Certificate......................................20
Organizational Documents...................................20
Parties....................................................20
Past Due Rate..............................................20
PBGC.......................................................20
Permitted Investment Securities............................20
Person.....................................................21
Plan.......................................................21
Prime Rate.................................................21
Principal Office...........................................21
Proper Form................................................21
Property...................................................21
Rate Selection Date........................................21
Rate Selection Notice......................................21
Receivables................................................21
Regulation D...............................................21
Regulatory Change..........................................22
Reportable Event...........................................22
Request for Extension of Credit............................22
Required Lenders...........................................22
Requirements of Environmental Law..........................22
Responsible Officer........................................22
Revolving Credit Alternate Base Rate Borrowing.............22
Revolving Credit Commitment................................22
Revolving Credit Commitment Percentage.....................22
Revolving Credit LIBOR Borrowing...........................23
Revolving Credit Notes.....................................23
Revolving Credit Termination Date..........................23
Revolving Loans............................................23
Royalty Payment Reserve....................................23
Security Agreements........................................23
Security Documents.........................................24
Statutory Reserves.........................................24
Stock......................................................24
Subordinated Indebtedness..................................24
Subsidiary.................................................24
Tangible Net Worth.........................................24
TCB........................................................24
Term Alternate Base Rate Borrowing ........................24
Term LIBOR Borrowing.......................................24
Term Loan Commitment.......................................24
Term Loan Commitment Percentage............................24
Term Loans.................................................24
Term Notes.................................................24
Three-Month Secondary CD Rate..............................24
Total Commitment...........................................25
Total Revolving Credit Commitment..........................25
Total Term Loan Commitment.................................25
INDEX TO CREDIT AGREEMENT
Page 3
<PAGE>
Total Unsubordinated Liabilities...........................25
Transactions...............................................25
Unused Revolving Credit Commitment.........................25
1.2. ACCOUNTING TERMS AND DETERMINATIONS........................25
2. LOANS; LETTERS OF CREDIT; NOTES; PAYMENTS;
PREPAYMENTS; INTEREST RATES................................26
2.1. TERM LOAN COMMITMENTS AND REVOLVING CREDIT COMMITMENTS.....26
2.2. LOANS......................................................28
2.3. COMMITMENT AND OTHER FEES..................................28
2.4. TERMINATION AND REDUCTIONS OF COMMITMENTS..................30
2.5. MANDATORY AND VOLUNTARY PREPAYMENTS........................31
2.6. NOTES; PAYMENTS............................................34
2.7. APPLICATION OF PAYMENTS AND PREPAYMENTS....................35
2.8. INTEREST RATES FOR LOANS...................................36
2.9. SPECIAL PROVISIONS APPLICABLE TO LIBOR BORROWINGS..........37
2.10. LETTERS OF CREDIT..........................................41
2.11. PRO-RATA TREATMENT.........................................45
2.12. SHARING OF PAYMENTS, ETC...................................46
2.13. RECAPTURE..................................................46
3. COLLATERAL...........................................................48
3.1. SECURITY DOCUMENTS.........................................48
3.2. FILING AND RECORDING.......................................49
4. CONDITIONS...........................................................49
4.1. ALL LOANS..................................................49
4.2. FIRST LOAN.................................................50
5. REPRESENTATIONS AND WARRANTIES.......................................54
5.1. ORGANIZATION...............................................55
5.2. FINANCIAL STATEMENTS.......................................55
5.3. ENFORCEABLE OBLIGATIONS; AUTHORIZATION.....................56
5.4. OTHER DEBT.................................................56
5.5. LITIGATION.................................................56
5.6. TAXES......................................................56
5.7. NO MATERIAL MISSTATEMENTS..................................56
5.8. SUBSIDIARIES...............................................57
5.9. REPRESENTATIONS BY OTHERS..................................57
5.10. PERMITS, LICENSES, ETC.....................................57
5.11. ERISA......................................................57
5.12. TITLE TO PROPERTIES; POSSESSION UNDER LEASES...............57
5.13. ASSUMED NAMES..............................................58
5.14. INVESTMENT COMPANY ACT.....................................58
5.15. PUBLIC UTILITY HOLDING COMPANY ACT.........................58
5.16. AGREEMENTS.................................................58
5.17. ENVIRONMENTAL MATTERS......................................59
5.18. NO CHANGE IN CREDIT CRITERIA OR COLLECTION POLICIES........59
5.19. SOLVENCY...................................................59
5.20. ACQUISITION DOCUMENTS......................................60
INDEX TO CREDIT AGREEMENT
Page 4
<PAGE>
5.21. STATUS OF RECEIVABLES AND OTHER COLLATERAL.................60
6. AFFIRMATIVE COVENANTS................................................61
6.1. BUSINESSES AND PROPERTIES..................................61
6.2. TAXES......................................................62
6.3. FINANCIAL STATEMENTS AND INFORMATION.......................62
6.4. INSPECTION.................................................63
6.5. FURTHER ASSURANCES.........................................64
6.6. BOOKS AND RECORDS..........................................64
6.7. INSURANCE..................................................64
6.8. ERISA......................................................64
6.9. USE OF PROCEEDS............................................65
6.10. ADDITIONAL GUARANTIES OR SECURITY
DOCUMENTS; JOINDER AGREEMENT...............................65
6.11. NOTICE OF EVENTS...........................................66
6.12. ENVIRONMENTAL MATTERS......................................67
6.13. END OF FISCAL YEAR.........................................67
6.14. PAY OBLIGATIONS AND PERFORM OTHER COVENANTS................67
6.15. COLLECTION OF RECEIVABLES; APPLICATION OF
LOCKBOX AGREEMENT PROCEEDS.................................67
6.16. ADDITIONAL RECEIVABLES DOCUMENTATION.......................68
7. NEGATIVE COVENANTS...................................................68
7.1. INDEBTEDNESS...............................................68
7.2. LIENS......................................................69
7.3. CONTINGENT LIABILITIES.....................................71
7.4. MERGERS, CONSOLIDATIONS AND DISPOSITIONS AND
ACQUISITIONS OF ASSETS.....................................71
7.5. NATURE OF BUSINESS.........................................73
7.6. TRANSACTIONS WITH RELATED PARTIES..........................73
7.7. INVESTMENTS; LOANS.........................................73
7.8. ERISA COMPLIANCE...........................................74
7.9. CREDIT EXTENSIONS..........................................75
7.10. CHANGE IN ACCOUNTING METHOD................................75
7.11. REDEMPTION, DIVIDENDS, DISTRIBUTIONS.......................75
7.12. CAPITAL EXPENDITURES.......................................75
7.13. INTEREST COVERAGE RATIO....................................75
7.14. TANGIBLE NET WORTH.........................................75
7.15. DEBT COVERAGE RATIO........................................76
7.16. EBITDA.....................................................76
7.17. SALES OF RECEIVABLES.......................................76
7.18. NET INCOME.................................................76
7.19. SALE AND LEASE-BACK TRANSACTIONS...........................76
7.20. FOREIGN ENTITY STOCK.......................................76
8. EVENTS OF DEFAULT AND REMEDIES.......................................77
8.1. EVENTS OF DEFAULT..........................................77
8.2. REMEDIES CUMULATIVE........................................80
9. THE AGENT............................................................80
9.1. APPOINTMENT, POWERS AND IMMUNITIES.........................80
9.2. RELIANCE...................................................81
INDEX TO CREDIT AGREEMENT
Page 5
<PAGE>
9.3. DEFAULTS...................................................82
9.4. RIGHTS AS A LENDER.........................................82
9.5. INDEMNIFICATION............................................82
9.6. NON-RELIANCE ON AGENT AND OTHER LENDERS....................83
9.7. FAILURE TO ACT.............................................83
9.8. RESIGNATION OR REMOVAL OF AGENT............................83
10. MISCELLANEOUS........................................................84
10.1. NO WAIVER..................................................84
10.2. NOTICES....................................................84
10.3. GOVERNING LAW..............................................84
10.4. SURVIVAL; PARTIES BOUND....................................85
10.5. COUNTERPARTS...............................................85
10.6. LIMITATION OF INTEREST.....................................85
10.7. SURVIVAL...................................................86
10.8. CAPTIONS...................................................86
10.9. EXPENSES, ETC..............................................86
10.10. INDEMNIFICATION............................................87
10.11. AMENDMENTS, WAIVERS, ETC...................................88
10.12. SUCCESSORS AND ASSIGNS.....................................88
10.13. ENTIRE AGREEMENT...........................................91
10.14. SEVERABILITY...............................................92
10.15. DISCLOSURES................................................92
10.16. CAPITAL ADEQUACY...........................................92
10.17. TAXES......................................................92
10.18. WAIVER OF CLAIMS...........................................94
10.19. RIGHT OF SETOFF............................................94
10.20. WAIVER OF RIGHT TO JURY TRIAL..............................95
10.21. ADDITIONAL PROVISIONS REGARDING COLLECTION OF RECEIVABLES..95
10.22. JOINT AND SEVERAL OBLIGATIONS..............................96
EXHIBITS
A - Revolving Note Form (ss.1.1)
B - Term Note Form (ss.1.1)
C - Officer's Certificate (ss.1.1)
D - Request for Extension of Credit (ss.1.1)
E - Rate Selection Notice (ss.2.8[b][1])
F - Secretary's Certificate (ss.4.2[c])
G - Borrowing Base Compliance Certificate Form (ss.6.3[h])
H - Licensor Consent Letter Form (ss.1.1)
INDEX TO CREDIT AGREEMENT
Page 6
<PAGE>
SCHEDULES
1.1 - Revolving & Term Loan Commitments
3.1 - List of Real Property
5.5 - List of Litigation
5.8 - List of Subsidiaries
5.10 - License Agreements
5.12 - Leases of Real Property
5.13 - List of Assumed Names
5.16 - List of Existing Liens & Capital Leases
5.17 - Environmental Matters
7.2 - Permitted Liens
7.3 - List of Existing Contingent Obligations
7.6 - List of Existing Transactions with Related Parties
INDEX TO CREDIT AGREEMENT
Page 7
<PAGE>
New York, New York
$ , 1996
-------------------- -------------
FOR VALUE RECEIVED, PLAY BY PLAY TOYS & NOVELTIES, INC., a Texas
corporation, ACE NOVELTY ACQUISITION CO., INC., a Texas corporation, and NEWCO
NOVELTY, INC., a Texas corporation (herein collectively called "BORROWERS"),
jointly and severally promise to pay to the order of
(herein called "PAYEE"), a , at the banking house of CHEMICAL BANK, a
New York banking corporation acting in its capacity as Agent under the Credit
Agreement (together with its successors in such capacity being herein called
"AGENT"), located at 633 Third Avenue, New York, New York, or at such other
place as Agent may hereafter designate in writing, in immediately available
funds and in lawful money of the United States of America, the principal sum of
______________Dollars ($_______________________), (or the unpaid balance of all
principal advanced against this note, if that amount is less), together with
interest on the unpaid principal balance of this note from time to time
outstanding until maturity at the rate or rates provided for in the Credit
Agreement and interest on all past due amounts, both principal and accrued
interest, at the Past Due Rate; PROVIDED, that for the full term of this note,
the interest rate produced by the aggregate of all sums paid or agreed to be
paid to the holder of this note for the use, forbearance or detention of the
debt evidenced hereby shall not exceed the Highest Lawful Rate, if any,
applicable to Payee.
If, for any reason whatever, the interest paid or received on this note
during its full term produces a rate which exceeds the Highest Lawful Rate, if
any, applicable to Payee, the holder of this note shall refund to the payor or,
at the holder's option, credit against the principal of this note such portion
of said interest as shall be necessary to cause the interest paid on this note
to produce a rate equal to the Highest Lawful Rate, if any, applicable to Payee.
All sums paid or agreed to be paid to the holder of this note for the use,
forbearance or detention of the indebtedness evidenced hereby shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
in equal parts throughout the full term of this note, so that the interest rate
is uniform throughout the full term of this note.
This note has been issued pursuant to the terms of a Credit Agreement
(which, as it may have been or may be amended, restated, modified or
supplemented from time to time, is herein called the "CREDIT AGREEMENT") of even
date herewith, by and among Borrowers, Agent, Payee and certain other signatory
financial institutions named therein or which may be a party thereto from time
to time, to which reference is made for all purposes. This note is a Revolving
Credit Note under the terms of the Credit Agreement, and advances against this
note by Payee or other holder hereof, payments and prepayments hereunder and
acceleration hereof shall be governed by the Credit Agreement. Capitalized words
and phrases used herein and not defined herein and which are defined in the
Credit Agreement shall have the same meanings herein as are ascribed to them in
the Credit Agreement.
The unpaid principal balance of this note at any time shall be the
total of all principal lent or advanced against this note less the sum of all
principal payments and permitted prepayments made on this note by or for the
account of Borrowers. All loans
EXHIBIT A
Page 8 of 2 Pages
<PAGE>
and advances and all payments and permitted prepayments made hereon may be
endorsed by the holder of this note on the schedule which is attached hereto
(and hereby made a part hereof for all purposes) or otherwise recorded in the
holder's records; PROVIDED, that any failure to make notation of (a) any advance
shall not cancel, limit or otherwise affect Borrowers' obligations or any
holder's rights with respect to that advance, or (b) any payment or permitted
prepayment of principal shall not cancel, limit or otherwise affect Borrowers'
entitlement to credit for that payment as of the date received by the holder.
Borrowers and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re- extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES
THEREOF) AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT.
PLAY BY PLAY TOYS & NOVELTIES, INC.,
a Texas corporation
By:
Name:
Title:
ACE NOVELTY ACQUISITION CO., INC.,
a Texas corporation
By:
Name:
Title:
NEWCO NOVELTY, INC.,
a Texas corporation
By:
Name:
Title:
EXHIBIT A
Page 9 of 2 Pages
<PAGE>
New York, New York
$ , 1996
-------------------------- -------------------
FOR VALUE RECEIVED, PLAY BY PLAY TOYS & NOVELTIES, INC., a Texas
corporation, ACE NOVELTY ACQUISITION CO., INC., a Texas corporation, and NEWCO
NOVELTY, INC., a Texas corporation (herein collectively called "BORROWERS"),
jointly and severally promise to pay to the order of___________________________
(herein called "PAYEE"), a , at the banking house of CHEMICAL BANK, a New York
banking corporation acting in its capacity as Agent under the Credit Agreement
(together with its successors in such capacity being herein called "AGENT"),
located at 633 Third Avenue, New York, New York, or at such other place as Agent
may hereafter designate in writing, in immediately available funds and in lawful
money of the United States of America, the principal sum of_______________
Dollars ($_______________ ), together with interest on the unpaid principal
balance of this note from time to time outstanding until maturity at the rate or
rates provided for in the Credit Agreement and interest on all past due amounts,
both principal and accrued interest, at the Past Due Rate; PROVIDED, that for
the full term of this note the interest rate produced by the aggregate of all
sums paid or agreed to be paid to the holder of this note for the use,
forbearance or detention of the debt evidenced hereby shall not exceed the
Highest Lawful Rate, if any, applicable to Payee.
If, for any reason whatever, the interest paid or received on this note
during its full term produces a rate which exceeds the Highest Lawful Rate, if
any, applicable to Payee, the holder of this note shall refund to the payor or,
at the holder's option, credit against the principal of this note such portion
of said interest as shall be necessary to cause the interest paid on this note
to produce a rate equal to the Highest Lawful Rate, if any, applicable to Payee.
All sums paid or agreed to be paid to the holder of this note for the use,
forbearance or detention of the indebtedness evidenced hereby shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
in equal parts throughout the full term of this note, so that the interest rate
is uniform throughout the full term of this note.
This note has been issued pursuant to the terms of a Credit Agreement
(which, as it may have been or may be amended, restated, modified or
supplemented from time to time, is herein called the "CREDIT AGREEMENT") of even
date herewith, by and among Borrowers, Agent, Payee and certain other signatory
financial institutions named therein or which may be a party thereto from time
to time, to which reference is made for all purposes. This note is a Term Note
under the terms of the Credit Agreement, and the single advance of funds against
this note by Payee or other holder hereof, payments and prepayments hereunder
and acceleration hereof shall be governed by the Credit Agreement. Capitalized
words and phrases used herein and not defined herein and which are defined in
the Credit Agreement shall have the same meanings herein as are ascribed to them
in the Credit Agreement.
The unpaid principal balance of this note at any time shall be the
total of all principal lent or advanced against this note less the sum of all
principal payments and permitted prepayments made on this note by or for the
account of Borrowers. All payments and permitted prepayments made hereon may be
endorsed by the holder of this note on the schedule which is attached hereto
(and hereby made a part hereof for
EXHIBIT B
Page 1 of 2 Pages
<PAGE>
all purposes) or otherwise recorded in the holder's records; PROVIDED, that any
failure to make notation of any payment or permitted prepayment of principal
shall not cancel, limit or otherwise affect Borrowers' entitlement to credit for
that payment as of the date received by the holder.
Borrowers and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re- extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES
THEREOF) AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT.
PLAY BY PLAY TOYS & NOVELTIES, INC.,
a Texas corporation
By:
Name:
Title:
ACE NOVELTY ACQUISITION CO., INC.,
a Texas corporation
By:
Name:
Title:
NEWCO NOVELTY, INC.,
a Texas corporation
By:
Name:
Title:
EXHIBIT B
Page 2 of 2 Pages
<PAGE>
OFFICER'S CERTIFICATE
Date:__________
[Name and address of Lender
or Agent, as the case may be]
Attention:
Re: Financial Statements Required under Credit Agreement (as the
same may have been amended, modified and restated from time to
time, the "CREDIT AGREEMENT") dated as of June ____, 1996, by
and among Play by Play Toys & Novelties, Inc., Ace Novelty
Acquisition Co., Inc., Newco Novelty, Inc., the financial
institutions or party thereto from time to time and Chemical
Bank, as Agent
Gentlemen:
Capitalized words and phrases used herein and not defined herein and
defined in the Credit Agreement are used herein with the same meanings as are
assigned to them in the Credit Agreement.
The undersigned hereby certifies, warrants and represents to the
addressee named above that to the best knowledge of the undersigned:
(11) He or she is the duly appointed and acting Financial Officer
of Borrowers;
(12) The attached financial statements dated as of
were prepared in conformity with GAAP consistently applied,
subject only to normal and customary adjustments, and present
fairly the financial position of Borrowers and their
Subsidiaries on a Consolidated [and consolidating basis] as of
the date thereof and the results of its operations for the
period covered thereby.
(13) As of the end of the period covered by the attached financial
statements:
EXHIBIT C
Page 1
<PAGE>
(a) DEBT CAPACITY RATIO:
(i) Funded Indebtedness: $_____________
(ii) Funds Flow from Operations
less Capital Expenditures: $_____________
(iii) Debt Capacity Ratio _____to 1.00
[ratio of (i) TO (ii)]
(b) TANGIBLE NET WORTH:
(i) Actual Tangible Net Worth
of Borrowers and their
Subsidiaries on a
Consolidated basis: $_____________
(ii) Required Tangible Net Worth
of Borrowers and their
Subsidiaries on a
Consolidated basis: $_____________
(c) DEBT COVERAGE RATIO:
(i) Funds Flow from Operations
less Capital Expenditures
for applicable period: $_____________
(ii) Debt Service Expense for
applicable period: $_____________
(iii) Debt Coverage _______to 1.00
Ratio [ratio of (i) TO (ii)]
(iv) Required Debt _______to 1.00
Coverage Ratio
EXHIBIT C
Page 2
<PAGE>
(d) CAPITAL EXPENDITURES:
(i) Aggregate Capital Expendi-
tures of Borrowers and
their Subsidiaries for
current fiscal year: $______________
(ii) Maximum allowable Capital
Expenditures of the
Borrowers and their Subsi-
diaries for current fiscal year: $_________
(e) INTEREST COVERAGE RATIO:
(i) EBITDA less Capital
Expenditures: $_____________
(ii) Cash Interest Expense: $_____________
(iii) Interest Coverage Ratio __________to 1.00
[ratio of (i) TO (ii)]
(iv) Required Interest Coverage
Ratio ________to 1.00
(f) EBITDA:
(i) Net Income: $_________
(ii) Interest Expense: $_________
(iii) Depreciation and amortization
of intangibles: $_________
(iv) Federal, state and local
income taxes: $__________
(v) Actual EBITDA [sum of
(i), (ii), (iii) and (iv)]
(vi) Required EBITDA
EXHIBIT C
Page 3
<PAGE>
(g) ROYALTY PAYMENT RESERVE:
(i) Domestic and Canadian Sales of
Licensed Goods for preceding
month $____________
(ii) Actual Royalty Payment Reserve
[Line (i) TIMES 15%] $_____________
(h) EXCESS CASH FLOW:
(i) EBITDA: $___________
(ii) Debt Service Expense: $___________
(iii) Interest Expense: $___________
(iv) Capital Expenditures: $___________
(v) Federal, state and local
income taxes paid: $___________
(vi) Actual Excess Cash Flow
[Line (i) less sum of
Lines (ii), (iii), (iv) and (v)] $________
(14) The undersigned hereby certifies to his or her best knowledge
as follows:
(i) each representation or warranty of Borrowers and the
Guarantors contained in the Credit Agreement is true
in all material respects on and as of the date hereof
with the same effect as though such representations
and warranties had been made on and of this date;
(ii) no Event of Default or Default under the Credit
Agreement has occurred and is still continuing
(except for any Event of Default or Default which may
have been expressly waived in writing by the Banks);
and
(iii) no Borrower or Subsidiary thereof is in default in
the due performance of any covenant on its part in
the Credit Agreement.
Name:
EXHIBIT C
Page 4
<PAGE>
[Borrowers Letterhead]
REQUEST FOR EXTENSION OF CREDIT
Date:__________
Chemical Bank
633 Third Avenue
New York, New York 10017-6764
Attention:
Re: Loan under Credit Agreement dated as of June , 1996, by and
among the undersigned entities, the financial institutions a
party thereto from time to time, and Chemical Bank, as Agent
(as the same may have been amended, modified and/or restated
from time to time, the "CREDIT AGREEMENT")
Gentlemen:
Capitalized words and phrases used herein, but not defined herein, shall
have the same meanings as are ascribed to them in the Credit Agreement.
Borrowers request that a Loan be made under the Credit Agreement in the
amount of $ and that such Loan be made on , 19 , which is a Business Day (unless
this request for a Loan is received by Agent after 1:00 p.m., New York City
time, in which case, then on the next to occur Business Day hereafter).
The Loan is to be an (CHECK ONE) [] Alternate Base Rate Borrowing
[] LIBOR Borrowing. If the Loan is to be a LIBOR Borrowing, the Interest Period
is to be (CHECK ONE) [] one [] two [] three [] six months.
[The Company further requests that simultaneously with the making
of the Loan described above, the current [Alternate Base Rate Borrowing] [LIBOR
Borrowing] which matures on the same day that said Loan is to be made (i) be
converted to a LIBOR Borrowing with the same Interest Period selected for such
Loan and (ii) have its unpaid principal balance be combined with the new Loan so
that the aggregate thereof is treated as a single LIBOR Borrowing for the
Interest Period designated for the new Loan above and for all other purposes in
the Credit Agreement.]
Each of Borrowers hereby represent and warrant as follows:
(i) each representation or warranty of Borrowers and the
Guarantors contained in the Credit Agreement is true
in all material respects on and as of the date hereof
with the same effect as though such representations
and warranties had been made on and of this date;
(ii) no Event of Default or Default under the Credit
Agreement has occurred and is still continuing
(except for any Event of Default or
EXHIBIT D
Page 1
<PAGE>
Default which may have been expressly waived in
writing by the Lenders;
(iii) no Borrower or Subsidiary thereof is in default in
the due performance of any covenant on its part in
the Credit Agreement;
(iv) so far as is known to or is ascertainable by the
officers of Borrowers and their Subsidiaries, the
business and operations of Borrowers and all of their
Subsidiaries as conducted at all times relevant to
the transactions contemplated by the Credit Agreement
to and including the close of business on the date
hereof have been and are in compliance with all
applicable Legal Requirements materially affecting
the business and operations of Borrowers and their
Subsidiaries on a Consolidated basis.
The undersigned Responsible Officer executing this Request for
Extension of Credit on behalf of Borrowers is the duly elected, qualified and
acting
.
PLAY BY PLAY TOYS & NOVELTIES, INC.,
a Texas corporation
By:
Name:
Title:
ACE NOVELTY ACQUISITION CO., INC.,
a Texas corporation
By:
Name:
title:
NEWCO NOVELTY, INC.,
a Texas corporation
By:
Name:
Title:
EXHIBIT D
Page 2
<PAGE>
RATE SELECTION NOTICE
The undersigned entities, the financial institutions which are
signatories thereto from time to time (collectively, the "LENDERS") and Chemical
Bank, a New York banking corporation, as Agent for and on behalf of Lenders,
executed and delivered that certain Credit Agreement (as amended, supplemented
and restated, the "CREDIT AGREEMENT") dated as of June _____, 1996. Any term
used herein and not otherwise defined herein shall have the meaning herein
ascribed to it in the Credit Agreement.
In accordance with the Credit Agreement, Borrowers hereby notify Agent
of the exercise of an Interest Option.
E. CURRENT BORROWING
1. Interest Option now in effect:
2. Amount: $______________
3. Expiration of current Interest
Period, if applicable: ______, 199_
F. PROPOSED BORROWING
1. Amount: $_______________
2. Date Interest Option is to
be effective: ______, 199_
3. Interest Option to be applicable
(check one):
[ ] Alternate Base Rate
[ ] LIBOR Rate
4. Interest Period (check one if applicable):
[ ] 1 month [ ] 3 months
[ ] 2 months [ ] 6 months
EXHIBIT E
Page 1
<PAGE>
Borrowers represent and warrant that the Interest Option and the
Interest Period (if applicable) selected above comply with all provisions of the
Credit Agreement and that there exists no Event of Default or Default under the
Credit Agreement.
PLAY BY PLAY TOYS & NOVELTIES, INC.,
a Texas corporation
By:
Name:
Title:
ACE NOVELTY ACQUISITION CO., INC.,
a Texas corporation
By:
Name:
Title:
NEWCO NOVELTY, INC.,
a Texas corporation
By:
Name:
Title:
EXHIBIT E
Page 2
<PAGE>
SECRETARY'S CERTIFICATE
I, the undersigned, do hereby certify that I am the duly elected and
acting Chief Financial Officer, Secretary and Treasurer of , INC. (the
"CORPORATION"), a Texas corporation; that, by unanimous written consent by all
members of the Board of Directors of the Corporation, the following resolutions
have been duly adopted; that said resolutions have been recorded in the minute
books of the Corporation kept by me, are in accord with and pursuant to the
Certificate of Incorporation and Bylaws of the Corporation, have not been
amended, modified, superseded or revoked, and are now in full force and effect,
to-wit:
RESOLVED: That this Corporation (together with the other affiliates of
this Corporation listed as Borrowers in the Credit Agreement, the
"BORROWERS") enter into a Credit Agreement with such financial
institutions (together with all other financial institutions which may
become a party thereto pursuant to the terms of the Credit Agreement,
the "LENDERS" and each of Lenders being a "LENDER herein) as the
officer of this Corporation executing the same may in his discretion
approve, and with CHEMICAL BANK, in its capacity as Agent for and on
behalf of Lenders (in such capacity, the "AGENT"), substantially in the
form of the draft presented to this meeting, together with such changes
as the officer of this Corporation executing the same may in his
discretion approve, such Credit Agreement, together with such changes,
being herein called the "CREDIT AGREEMENT";
RESOLVED, FURTHER: That pursuant to the Credit Agreement, this
Corporation (together with the other Borrowers) execute and deliver to
each Lender a promissory note (each a "REVOLVING NOTE") in an original
principal amount equal to such Lender's Revolving Credit Commitment (as
that term is defined in the Credit Agreement), payable to the order of
such Lender, such Revolving Notes to bear interest on the unpaid
principal balances thereof at the rates provided in the Credit
Agreement, this Corporation to have the right pursuant to the terms of
the Credit Agreement to borrow, repay and reborrow prior to the
Revolving Credit Termination Date (as that term is defined in the
Credit Agreement), with accrued interest on each Revolving Note being
due and payable on the dates set forth in the Credit Agreement, and
with the outstanding principal balance of each Revolving Note being
finally due and payable on the Revolving Credit Termination Date;
RESOLVED, FURTHER: That pursuant to the Credit Agreement, this
Corporation (together with the other Borrowers) execute and deliver to
EXHIBIT F
Page 1
<PAGE>
each Lender a promissory note (each a "TERM NOTE") in an original
principal amount equal to such Lender's Term Loan Commitment (as that
term is defined in the Credit Agreement), payable to the order of such
Lender, such Term Notes to bear interest on the unpaid principal
balances thereof at the rates provided in the Credit Agreement, with
principal installments and accrued interest on each Term Note being due
and payable on the date set forth in the Credit Agreement, and with the
remaining principal balance of each Term Note being finally due and
payable on the Maturity Date (as that term is defined in the Credit
Agreement);
RESOLVED, FURTHER: That pursuant to the Credit Agreement, this
Corporation (together with the other Borrowers) enter into a
Contribution Agreement (the "CONTRIBUTION AGREEMENT") of even date with
the Credit Agreement, pursuant to which this Corporation agrees, among
other things, to indemnify each other Borrower and each other Guarantor
(as that term is defined in the Credit Agreement) from time to time a
party thereto against any losses incurred thereby under the Credit
Agreement or any Guaranty (as that term is defined in the Credit
Agreement) now or hereafter executed by any Guarantor in connection
therewith;
RESOLVED, FURTHER: That pursuant to the Credit Agreement, this
Corporation execute and deliver to Agent, for the ratable benefit of
Lenders, all of the Security Documents (as that term is defined in the
Credit Agreement) required by Agent to evidence and perfect the liens
against, security interests in, and assignments and pledges of all
Collateral (as that term is defined in the Credit Agreement);
RESOLVED, FURTHER: That the Credit Agreement, each Revolving Note, each
Term Note, the Contribution Agreement, the Security Documents and other
instruments as Agent and Lenders may reasonably require in connection
with the same shall be in form and substance satisfactory to Agent and
Lenders and in form and substance approved by the officer of this
Corporation executing the same, his approval of each such instrument to
be conclusively evidenced by the execution thereof;
RESOLVED, FURTHER: That the obligations incurred upon the execution and
delivery by this Corporation of the Credit Agreement, each Revolving
Note, each Term Note, the Contribution Agreement, the Security
Documents and any other document executed in connection with the
transactions contemplated in any of the foregoing shall become binding
and enforceable obligations of this Corporation;
RESOLVED, FURTHER: That the Chairman of the Board-Chief Executive
Officer, the President-Chief Operating Officer, the Treasurer- Chief
Financial Officer, or the Secretary of this Corporation be, and each
acting alone hereby is, severally authorized and directed for and on
behalf, and as the act and deed, of this Corporation, to execute and
deliver to Agent and Lenders, the Credit Agreement, each Revolving Note
(including without limitation, each new Revolving Note executed from
time to time hereafter, as contemplated in the Credit Agreement), each
Term Note
EXHIBIT F
Page 2
<PAGE>
(including without limitation, each new Term Note executed from time to
time hereafter, as contemplated in the Credit Agreements), the
Contribution Agreement, the Security Documents and such other
instruments as Agent or any Lender may require in its sole and absolute
discretion and to take such other action in the consummation of the
transaction herein contemplated as the officer acting shall deem to be
necessary or desirable, and any and all acts heretofore taken by each
of the officers above delineated of this Corporation to such end are
hereby expressly ratified and confirmed as the acts and deeds of this
Corporation;
RESOLVED, FURTHER: That any and all documents, agreements,
certificates, opinions, letters, financing statements, consents,
schedules and other instruments and writings executed and delivered on
behalf of this Corporation in connection with the foregoing resolutions
by any one of the above-named officers of this Corporation shall be
deemed to be the act of this Corporation and shall be in all respects
binding against this Corporation;
RESOLVED, FURTHER: That the directors have found that good, fair and
valuable consideration and reasonably equivalent value have been and
will be received by this Corporation for entry into and performance of
all the foregoing agreements referred to in the preceding paragraphs,
and that the incurrence of the obligations evidenced by such agreements
is in the best interest of this Corporation and may be expected to
benefit this Corporation, directly or indirectly;
RESOLVED, FURTHER: That the Chairman of the Board-Chief Executive
Officer, the President-Chief Operating Officer, the Treasurer- Chief
Financial Officer, or the Secretary of this Corporation be, and each
acting alone hereby is, severally authorized and directed for and on
behalf, and as the act and deed, of this Corporation to negotiate and
agree to on terms acceptable to such officer any and all renewals,
extensions, modifications and amendments to the Credit Agreement, any
Revolving Note, any Term Note, the Contribution Agreement, any of the
Security Documents or any other document executed in connection with
the transactions contemplated in any of the foregoing, and to execute
and deliver to Agent and Lenders such documents as Agent or any Lender
shall require to evidence any such renewal, extension, modification or
amendment and to take such other action in the consummation of the
transactions contemplated as the officer acting shall deem to be
necessary or desirable; and
FURTHER RESOLVED: That Joe M. Guerra as the Secretary of the
Corporation be, and is hereby authorized, empowered and directed to
certify and attest, any documents which he may deem necessary or
appropriate to consummate the transactions contemplated by the Credit
Agreement, any Revolving Note, any Term Note, the Contribution
Agreement, any of the Security Documents or any other document executed
in connection with the transactions contemplated in any of the
foregoing; but such certification or attestation shall not be required
for the validity of the particular document.
EXHIBIT F
Page 3
<PAGE>
I further certify that ______________________and___________________are
the duly elected and incumbent _______________________and______________________
respectively, of the Corporation, that their true and correct signatures are set
forth below:
______________________________________
(Signature of ________________________)
_____________________________________
(Signature of ________________________)
I further certify that attached hereto as ANNEX I is a true, correct
and complete copy of the Articles of Incorporation of the Corporation, together
with all amendments thereto; and that attached hereto as ANNEX II is a true,
correct and complete copy of the Bylaws of the Corporation, together with all
amendments thereto.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name by order of
the Board of Directors thereof on this day of , 1996.
Name:
I do hereby certify that I am the duly elected and acting _____________
[Vice President] of _______________ , Inc. and that _____________________is the
duly elected and acting Chief Financial Officer, Secretary and Treasurer of
______________, Inc.
Name:
EXHIBIT F
Page 4
<PAGE>
BORROWING BASE CERTIFICATE
The undersigned hereby certifies that (s)he is a Responsible Officer of
Play by Play Toys & Novelties, Inc., Ace Novelty Acquisition Co., Inc. ("ACE
ACQUISITION"), Newco Novelty, Inc., all Texas corporations (collectively the
"BORROWERS"), and that as such (s)he is authorized to execute this Borrowing
Base Certificate on behalf of Borrowers pursuant to the Credit Agreement (as it
may be amended, supplemented or restated from time to time, the "AGREEMENT")
dated as of June ________, 1996, by and among Borrowers, Chemical Bank, as
Agent, and Lenders therein named. The undersigned further certifies, represents
and warrants that to his or her best knowledge (each capitalized term used
herein having the same meaning given to it in the Agreement unless otherwise
specified herein):
(a) The Borrowing Base as the date hereof is calculated as follows:
(i) Net Amount of Eligible Receivables
as of the date hereof $___________
(ii) 80% TIMES Line (a)(i) $___________
-----
(iii) Eligible Inventory
as of the date hereof $___________
(iv) Aggregate undrawn amount of
outstanding documentary Letters
of Credit issued by Agent to
inventory suppliers $___________
(v) Aggregate undrawn amount of
outstanding Indemnified
Letters of Credit $___________
(vi) Inventory Advance Rate TIMES
Line (a)(iii), (a)(iv)
and (a)(v) $___________
(vii) Value of Close-Out Inventory of
Ace Novelty Co., Inc. and its
Subsidiaries acquired by Ace
Acquisition $___________
(viii) 40% TIMES Line (a)(vii)
[not to exceed $1,521,000] $___________
(ix) Sum of Line (a)(vi)
PLUS Line (a)(viii) $___________
(x) Inventory Cap $___________
EXHIBIT G
Page 1
<PAGE>
(xi) Lesser of Line (a)(ix)
or Line (a)(x) $___________
(xii) Borrowing Base as the date
hereof [sum of Line (a)(ii)
PLUS Line (a)(xi)] $___________
(b) Calculations of Eligible Receivables, Net Amount of Eligible
Receivables and Eligible Inventory are set forth on SCHEDULE 1
attached hereto and such calculations are true and correct in
all respects and conform to the definitions of "Eligible
Receivables," "Net Amount of Eligible Receivables" and
"Eligible Inventory" set forth in the Agreement.
(c) The representations and warranties made in each Loan Document
are true and correct in all material respects on and as of the
time of delivery hereof, with the same force and effect as if
made on and as of the time of delivery hereof.
(d) No Default or Event of Default has occurred and is continuing.
Dated _____________________, 199____.
[SIGNATURE OF RESPONSIBLE OFFICER]
EXHIBIT G
Page 2
<PAGE>
EXHIBIT H
_________ ___, 199__
[ NAME AND ADDRESS OF
APPLICABLE LICENSOR ]
RE: License Agreement (the "License Agreement") dated_____,
199___, by and between
(the "Licensor") and
(the "Licensee")
Ladies and Gentlemen:
RECITALS:
Reference is hereby made to that certain Credit Agreement dated as of ,
1996, by and among Play By Play Toys & Novelties, Inc. ("Play By Play"), a Texas
corporation (Play By Play and such other entities now or hereafter becoming
"Borrowers" under the Credit Agreement described below collectively referred to
as the "Debtors"), Chemical Bank, a New York banking corporation, as Agent (said
Agent, together with any other entity which may hereafter be appointed as Agent
under the Credit Agreement described below, is hereinafter referred to as the
"Agent"), and the financial institutions (collectively the "Lenders") which are
now or may hereafter become parties to such Credit Agreement (said Credit
Agreement, as amended, extended, supplemented and restated from time to time,
being hereinafter referred to as the "Credit Agreement").
Subject to the terms and conditions of the Credit Agreement, the Lenders
have agreed to make certain loans to the Debtors. Said loans are secured, among
other collateral, by a security interest held by the Agent for the ratable
benefit of the Lenders in and to all of the Licensee's inventory now or
hereafter owned, including without limitation, inventory manufactured and sold
by the Licensee in accordance with the terms and provisions of the License
Agreement (the "Licensed Inventory").
AGREEMENTS:
By its execution and delivery of this confirmation letter, the Licensor
acknowledges and confirms that in connection with any foreclosure sale by the
Agent with respect to the above-described security interest in all or any
portion of the Licensed Inventory, the Agent shall have the right under the
terms of the License Agreement to sell or resell all or any portion of the
Licensed Inventory during or for a period of not more than 180 days after
foreclosure, including without limitation, the ability to distribute, market and
advertise for sale such Licensed Inventory, so long as
Page 4
the following requirements are satisfied: (a) such Licensed Inventory shall have
been manufactured or produced by the Licensee prior to such foreclosure in
compliance with all of the applicable terms and provisions of the License
Agreement; (b) such sales and resales shall otherwise be in compliance with all
provisions of the License Agreement relating to the distribution and sale of
Licensed Inventory; and (c) the Agent shall timely remit all royalty payments
and other amounts due and owing to the Licensor under the terms of the License
Agreement with respect to any and all such Licensed Inventory sold in connection
with or after such foreclosure sale.
The Licensor acknowledges and agrees that the Agent and the Lenders do
not and shall not have any personal liability or obligation whatsoever for the
performance of the duties or obligations of the Licensee under the License
Agreement (except with respect to the liabilities and obligations owing to the
Licensor by the Agent as described in the immediately preceding paragraph), and
the Licensor shall look solely to the Licensee in the event of any failure to
perform any of such duties or obligations (other than as expressly noted above).
The Agent agrees to provide the Licensor with at least ten (10) days
prior written notice of any foreclosure of the above-described security interest
in the Licensed Inventory. For purposes hereof, such written notice shall be
given by the Agent by addressing the same to the Licensor at the address for the
Licensor set forth below (or any subsequent address for the Licensor which the
Licensor has designated to the Agent in writing and for which the Agent has been
receipt of such written designation for at least ten business days) and
depositing the same for delivery in the U.S. mail, postage prepaid, via
certified mail, return receipt requested. Such notice shall be deemed given to
the Licensor two (2) business days after deposit of the same in the U.S.
mail.
The terms and provisions of this confirmation letter may not be revoked,
amended, changed or modified without the prior written consent of the Agent and
the Licensor, and this confirmation letter represents the entire agreement
between the parties hereto with respect to the Agent's right to sell or resell
any Licensed Inventory in connection with or after any foreclosure of the
above-described security interest in such Licensed Inventory.
This confirmation letter shall be construed in accordance with and
governed by the laws of the State of New York (other than the conflicts of laws
principles thereof).
If this confirmation letter correctly reflects your understanding of the
parties' agreements regarding the subject matter hereof, please execute and
return a fully executed original of the same to the undersigned officer of the
Agent.
Sincerely,
CHEMICAL BANK, AGENT
Page 5
By:
Name:
Title:
ACKNOWLEDGED AND AGREED TO:
By:
Name:
Title:
Date:
LICENSOR'S ADDRESS:
SCHEDULE 1.1
REVOLVING CREDIT COMMITMENTS
Chemical Bank $19,025,641
Texas Commerce Bank 7,474,359
Heller Financial 26,500,000
TERM LOAN COMMITMENTS
Chemical Bank $ 4,308,000
Texas Commerce Bank 1,692,000
Heller Financial 6,000,000
SCHEDULE 3.1
REAL PROPERTY
1. LOS ANGELES FACILITY:
Situated in the City of Los Angeles, County of Los Angeles, State of
California and more particularly described as follows:
LOT 9 OF TRACT NO. 10542 PER MAP RECORDED IN BOOK 159 PAGES 32
AND 33 IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
LOTS 163, 164, 186, 187 AND 188 OF THE WINGERTER
TRACT PER MAP RECORD IN BOOK 15, PAGE 52 OF
MISC. RECORDS IN THE OFFICE OF THE COUNTY
RECORDED OF SAID COUNTY.
2. CHICAGO FACILITY:
PARCEL 1: THAT PART OF THE SOUTH 1/2 OF SOUTHWEST 1/4 OF THE SOUTHWEST
1/4 OF SECTION 32, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE THIRD
PRINCIPAL MERIDIAN, BOUNDED AND DESCRIBED AS FOLLOWS: COMMENCING AT A
POINT OF INTERSECTION OF A LINE PARALLEL TO AND 33 FEET EAST OF THE WEST
LINE OF SAID SECTION 32 WITH A LINE PARALLEL TO AND 263 FEET NORTH OF
THE SOUTH LINE OF SAID SECTION 32; THENCE EAST ON LAST DESCRIBED LINE
303.54 FEET TO A POINT OF CURVE AND POINT OF BEGINNING; THENCE
NORTHEASTERLY ON A CURVE CONVEX TO THE SOUTHEAST, WITH A RADIUS OF 192
FEET, A DISTANCE OF 273.82 FEET, MORE OR LESS, TO A POINT 526.56 FEET
EAST OF THE WEST LINE AND 427.5 FEET NORTH OF THE SOUTH LINE OF SAID
SECTION 32; THENCE NORTHERLY ON A STRAIGHT LINE A DISTANCE OF 44.89
FEET, MORE OR LESS, TO A POINT IN A LINE WHICH IS PARALLEL TO AND 533
FEET EAST OF THE WEST LINE OF SAID SECTION 32, SAID POINT BEING 471.93
FEET NORTH OF THE SOUTH LINE OF SAID SECTION 32; THENCE SOUTH ON LAST
DESCRIBED PARALLEL LINE A DISTANCE OF 85.25 FEET MORE OR LESS TO A POINT
WHICH IS 386.68 FEET NORTH OF THE SOUTH LINE OF THE SOUTHWEST 1/4 OF
SAID SECTION 32; THENCE SOUTHWESTERLY ON A CURVE CONVEX TO THE
SOUTHEAST, WITH A RADIUS OF 208 FEET, A DISTANCE OF 123 FEET, MORE OR
LESS, TO A POINT 461.55 FEET EAST OF THE WEST LINE OF SAID SECTION 32
AND 289.60 FEET NORTH OF THE SOUTH LINE OF SAID SOUTHWEST 1/4 OF SECTION
32; THENCE SOUTHWESTERLY ALONG A STRAIGHT LINE 43.70 FEET TO A POINT
426.23 FEET EAST OF THE WEST LINE OF SAID SECTION 32 AND 263 FEET NORTH
OF THE SOUTH LINE OF SAID
-7-
SECTION 32; THENCE WEST ALONG A LINE 263 FEET NORTH OF AND PARALLEL WITH
THE SOUTH LINE OF SAID SECTION 32, 89.69 FEET TO THE POINT OF BEGINNING,
IN COOK COUNTY, ILLINOIS;
PARCEL 2: THAT PART OF THE SOUTH 1/2 OF THE SOUTHWEST 1/4 OF THE
SOUTHWEST 1/4 OF SECTION 32, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE
THIRD PRINCIPAL MERIDIAN, BOUNDED AND DESCRIBED AS FOLLOWS: BEGINNING AT
A POINT OF INTERSECTION OF A LINE PARALLEL TO AND 576 FEET EAST OF THE
WEST LINE OF SAID SECTION 32 WITH A LINE PARALLEL TO AND 33 FEET NORTH
OF THE SOUTH LINE OF SAID SECTION 32; THENCE EAST ON THE LAST DESCRIBED
LINE 20 FEET TO A LINE PARALLEL TO AND 596 FEET EAST OF THE WEST LINE OF
SAID SECTION 32; THENCE NORTH ON SAID PARALLEL LINE A DISTANCE OF 484.07
FEET TO A POINT OF CURVE; THENCE NORTHEASTERLY ALONG A CURVED LINE
CONVEX TO THE NORTHWEST WITH A RADIUS OF 262.70 FEET AN ARC DISTANCE OF
128.24 FEET TO A POINT 25 FEET SOUTH OF THE NORTH LINE OF THE SOUTH 1/2
OF THE SOUTHWEST 1/4 OF THE SOUTHWEST 1/4 OF SAID SECTION 32 AND 626.57
FEET EAST OF THE WEST LINE OF SAID SECTION 32; THENCE WEST ALONG A LINE
25 FEET SOUTH OF THE NORTH LINE OF THE SOUTH 1/2 OF THE SOUTHWEST 1/4 OF
THE SOUTHWEST 1/4 OF SAID SECTION 32, 50.57 FEET TO A LINE PARALLEL TO
AND 576 FEET EAST OF THE WEST LINE OF SAID SECTION 32; THENCE SOUTH ON
SAID PARALLEL LINE TO THE POINT OF BEGINNING, ALL IN COOK COUNTY,
ILLINOIS.
PARCEL 3: THAT PART OF THE SOUTH 1/2 OF THE SOUTHWEST 1/4 OF THE
SOUTHWEST 1/4 OF SECTION 32, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: BEGINNING AT THE POINT
OF INTERSECTION OF A LINE PARALLEL TO AND 33 FEET EAST OF THE WEST LINE
OF SAID SECTION 32 WITH A LINE PARALLEL TO AND 275 FEET SOUTH OF THE
NORTH LINE OF THE SOUTH 1/2 OF THE SOUTHWEST 1/4 OF THE SOUTHWEST 1/4 OF
SAID SECTION 32; THENCE EAST ON LAST DESCRIBED LINE 462.93 FEET; THENCE
NORTHEASTERLY ON CURVE CONVEX TO SOUTH EAST, WITH A RADIUS OF 350 FEET,
A DISTANCE OF 162.48 FEET TO A POINT OF TANGENT IN A LINE PARALLEL TO
AND 533 FEET EAST OF THE WEST LINE OF SECTION 32, AFORESAID; THENCE
NORTH ON LAST DESCRIBED LINE 41.03 FEET TO A POINT 77.2 FEET SOUTH OF
THE NORTH LINE OF THE SOUTH 1/2 OF THE SOUTHWEST 1/4 OF THE SOUTHWEST
1/4 OF SAID SECTION 32; THENCE SOUTHWESTERLY ON CURVE CONVEX TO SOUTH
EAST, WITH A RADIUS OF 227.2 FEET, A DISTANCE OF 180.25 FEET TO POINT OF
TANGENT IN A LINE PARALLEL TO AND 145 FEET SOUTH OF THE NORTH LINE OF
SAID SOUTH 1/2 OF THE SOUTHWEST 1/4 OF THE SOUTHWEST 1/4 OF SECTION 32;
THENCE WEST ON LAST DESCRIBED LINE 338 FEET TO A POINT IN A LINE
PARALLEL TO AND 33 FEET EAST OF THE WEST LINE
-8-
OF SECTION 32, AFORESAID; THENCE SOUTH ON LAST DESCRIBED
LINE 130 FEET TO PLACE OF BEGINNING IN COOK COUNTY, ILLINOIS
PARCEL 4: THAT PART OF THE SOUTH 1/2 OF THE SOUTHWEST 1/4 OF THE
SOUTHWEST 1/4 OF SECTION 32, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE
THIRD PRINCIPAL MERIDIAN, BOUNDED AND DESCRIBED AS FOLLOWS: BEGINNING AT
A POINT OF INTERSECTION OF A LINE PARALLEL TO AND 33 FEET EAST OF THE
WEST LINE OF SAID SECTION 32 WITH A LINE PARALLEL TO AND 263 FEET NORTH
OF THE SOUTH LINE OF SAID SECTION 32; THENCE EAST ON LAST DESCRIBED LINE
303.54 FEET TO A POINT OF CURVE; THENCE NORTHEASTERLY ON A CURVE
CONVEXED TO SOUTH EAST, WITH A RADIUS OF 192 FEET, A DISTANCE OF 273.82
FEET, MORE OR LESS, TO A POINT 526.56 FEET EAST OF THE WEST LINE AND
427.5 FEET NORTH OF THE SOUTH LINE OF SAID SECTION 32; THENCE NORTHERLY
ON A STRAIGHT LINE A DISTANCE OF 44.89 FEET, MORE OR LESS, TO A POINT IN
A LINE WHICH IS PARALLEL TO AND 533 FEET EAST OF THE WEST LINE OF SAID
SECTION 32, SAID POINT BEING 471.93 FEET NORTH OF THE SOUTH LINE OF SAID
SECTION 32; THENCE NORTH ON LAST DESCRIBED PARALLEL LINE A DISTANCE OF
75.07 FEET, MORE OR LESS, TO A POINT WHICH IS 118.23 FEET SOUTH OF THE
NORTH LINE OF SAID SOUTH 1/2 OF THE SOUTHWEST 1/4 OF THE SOUTHWEST 1/4
OF SAID SECTION 32; THENCE SOUTHWESTERLY ON A CURVE CONVEXED TO SOUTH
EAST, WITH A RADIUS OF 350 FEET, A DISTANCE OF 162.48 FEET, MORE OR
LESS, TO A POINT IN A LINE PARALLEL TO AND 275 FEET SOUTH OF THE NORTH
LINE OF THE SOUTH 1/2 OF THE SOUTHWEST 1/4 OF THE SOUTHWEST 1/4 OF SAID
SECTION 32, SAID POINT BEING 495.93 FEET EAST OF THE WEST LINE OF SAID
SECTION 32; THENCE WEST ON LAST DESCRIBED PARALLEL LINE 462.93 FEET TO
ITS INTERSECTION WITH A LINE DRAWN PARALLEL WITH AND 33 FEET EAST OF THE
WEST LINE OF SAID SECTION 32; THENCE SOUTH ON LAST DESCRIBED PARALLEL
LINE 127.35 FEET, MORE OR LESS, TO THE POINT OF BEGINNING IN COOK
COUNTY, ILLINOIS;
PARCEL 5: THAT PART OF THE SOUTHWEST 1/4 OF THE SOUTHWEST 1/4 OF SECTION
32, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN,
DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF A LINE PARALLEL
TO AND 33 FEET EAST OF THE WEST LINE WITH A LINE PARALLEL TO AND 33 FEET
NORTH OF THE SOUTH LINE OF SAID SECTION 32; THENCE EAST ON LAST
DESCRIBED LINE A DISTANCE OF 280 FEET; THENCE NORTH ON A LINE PARALLEL
TO AND 313 FEET EAST OF THE WEST LINE OF SAID SECTION 32, A DISTANCE OF
63 FEET TO A POINT OF CURVE; THENCE ON A CURVE TANGENT TO LAST DESCRIBED
LINE AND CONVEX TO NORTH WEST, WITH A RADIUS OF 208 FEET, A DISTANCE OF
193.92 FEET, MORE OR LESS, TO ITS INTERSECTION WITH A LINE
-9-
PARALLEL TO AND 263 FEET NORTH OF THE SOUTH LINE OF SECTION 32,
AFORESAID; THENCE WEST ON LAST DESCRIBED LINE A DISTANCE OF 364.05 FEET,
MORE OR LESS, TO ITS INTERSECTION WITH A LINE PARALLEL TO AND 33 FEET
EAST OF THE WEST LINE OF SAID SECTION 32 (BEING THE EAST LINE OF SOUTH
ASHLAND AVENUE); THENCE SOUTH ON LAST DESCRIBED LINE A DISTANCE OF 230
FEET TO A POINT OF BEGINNING IN COOK COUNTY, ILLINOIS.
PARCEL 6: THE EAST 43 FEET OF THE WEST 576 FEET OF THAT PART OF THE
SOUTH 1/2 OF THE SOUTHWEST 1/4 OF SECTION 32, TOWNSHIP 39 NORTH, RANGE
14, EAST OF THE THIRD PRINCIPAL MERIDIAN, LYING SOUTH OF THE NORTH LINE
OF WEST 38TH STREET AND NORTH OF THE NORTH LINE OF WEST 39TH STREET
(PERSHING ROAD) ALL IN COOK COUNTY, ILLINOIS.
-10-
SCHEDULE 5.5
LITIGATION
1. RAY RODRIGUEZ V. PLAYO BYO PLAY TOYS & NOVELTIES, INC., F/K/A TMI TOYS &
NOVELTIES, INC. F/K/A/ PMI TOYS & NOVELTIES, INC. & KIM'S TOY COMPANY,
INC., Civil Action No. 94-CI-13731 in the District Court, 131st Judicial
District, Bexar County, Texas. Suit to recover for breach of contract,
misrepresentation, fraud, and various alternative legal theories, all
stemming from Plaintiff's employment with the company as a salesperson
and, subsequently, as a commission-only salesperson. Plaintiff claims
that the company failed to pay certain commissions and wages due and
owing to Plaintiff and terminated Plaintiff in order to avoid paying
commissions to Plaintiff fully and completely.
2. ISMAEL VELOZ. Unemployment claim from former employee filed with Texas
Employment Commission.
3. BRUCE M. ROLLINSON VS. VAL VERDE VENDING., INC., EEOC Charge Number
360960435. Charging Party alleges he has been discriminated against
because of his national origin, Anglo, and because of his participation
in a sexual harassment investigation in violation of Title VII of the
Civil Rights Act of 1964, as amended.
4. LYDIA S. MORENO V. PLAYO BYO PLAY TOYS & NOVELTIES, INC., Texas
Commission on Human Rights and EEOC Charge No. 360951440. Charging Party
alleges that she has been discriminated against because of her sex,
female, in violation of Title VII of the Civil Rights Act of 1964, as
amended.
5. In re: OLYMPIA HOLDING CORPORATION, F/K/A P.I.E. NATIONWIDE, INC.,
DEBTORS, Case No. 90-4223-BKC-3P7, in the United States Bankruptcy
Court, Middle District of Florida; LLOYD T. WHITAKER, AS TRUSTEE OF THE
ESTATE OF OLYMPIA HOLDING CORPORATION, DEBTOR V. PIZZA MANAGEMENT, INC.,
Adversary No. 92-19280, withdrawn to the United States District Court
for the Middle District of Florida, Jacksonville Division, and assigned
Civil Case No. 93-914-Civ-J-16. The Trustee has asserted a claim against
Pizza Management, Inc. ("Pizza") for allegedly failing to pay P.I.E.
Nationwide, Inc. ("P.I.E.") for the lawful tariff rate for certain
shipping allegedly provided to Pizza by P.I.E.
6. In re: OLYMPIA HOLDING CORPORATION, F/K/A P.I.E. NATIONWIDE, INC.,
DEBTORS, Case No. 90-4223-BKC-3P7, in the United States Bankruptcy
Court, Middle District of Florida; LLOYD T. WHITAKER, AS TRUSTEE OF THE
ESTATE OF OLYMPIA HOLDING CORPORATION, F/K/A P.I.E. NATIONWIDE, INC.,
DEBTOR V. LARAMIE INTEREST, Adversary No. 92-1766, withdrawn to the
United States District Court for the Middle District of Florida,
Jacksonville Division, and assigned Civil Case No. 93-802-Civ-J-16. The
Trustee has asserted a claim against Laramie Interest
for allegedly failing to pay P.I.E. for the lawful tariff rate for
certain shipping allegedly provided to Laramie Interest by P.I.E. On
June 6, 1996, the Trustee offered to accept $2,400.51 in full settlement
of such claim.
7. NORTH FLORIDA EXPRESS, INC. Claimant has asserted a claim against Play
By Play Toys & Novelties, Inc. ("Play By Play") for freight charges due
under a Bill of Lading Contract. Claimant presented a bill for such
unpaid freight charges to the broker that Play By Play enlisted to
provide transportation for a shipment from Brooklyn, New York to Busch
Gardens in Tampa, Florida. The broker has failed to pay Claimant,
although Play By Play has remitted payment to the broker.
8. LYNN R. WEINBERG V. PLAY BY PLAY TOYS & NOVELTIES, INC. AND PLAY BY PLAY
NOVELTIES, INC. Civil Action in the Civil Court of the City of New York,
County of New York. Suit to recover for breach of contract, breach of
copyright and licensing, wrongful conversion and fraud in regards to
certain original creations and works of art allegedly not returned to
Plaintiff and allegedly without compensation to Plaintiff.
9. RICHARD POSTMAN. Former employee has threatened to sue under theories of
breach of contract and truth-in-hiring, the latter of which focuses on
promises allegedly made to the former employee during the hiring
process.
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SCHEDULE 5.8
SUBSIDIARIES
PLAY BY PLAY TOYS & NOVELTIES, INC.
Ace Novelty Acquisition Co., Inc., a Texas corporation
Play By Play (Hong Kong) Limited, a Hong Kong corporation (99.9% legal
ownership) Play By Play Toys and Novelties Europe, S.A., a Spanish corporation
Restaurants International, Inc., a Texas corporation Play By Play Far East
Limited, a Hong Kong corporation (99.9% legal ownership) Alegria Toys, Inc., a
Texas corporation (49% ownership)
ACE NOVELTY ACQUISITION CO., INC.
Newco Novelty, Inc., a Texas corporation
NEWCO NOVELTY, INC.
None
DORMANT SUBSIDIARIES
Play By Play (Hong Kong) Limited
Restaurants International, Inc.
Alegria Toys, Inc.
The assets owned by the above-listed Dormant Subsidiaries do not have an
aggregate value in excess of $1.2 million.
SCHEDULE 5.10
LICENSE AGREEMENTS
1. Warner Bros. License Agreement #3775-WBLT (Looney Tunes), dated March
22, 1994, between Ace Novelty Co., Inc. and Warner Bros. Consumer
Products.
a. Amendment #1, effective as of October 6, 1994, to Warner Bros.
License Agreement #3775-WBLT (Looney Tunes), between Ace Novelty
Co., Inc. and Warner Bros. Consumer Products.
b. Amendment #2, effective as of June 23, 1995, to Warner Bros.
License Agreement #3775-WBLT (Looney Tunes), between Ace Novelty
Co., Inc. and Warner Bros. Consumer Products.
c. Amendment #3, effective as of March 15, 1995, to Warner Bros.
License Agreement #3775-WBLT (Looney Tunes), between Ace Novelty
Co., Inc. and Warner Bros. Consumer Products.
d. Amendment #4, effective as of February, 29, 1996, to Warner
Bros. License Agreement #3775-WBLT (Looney Tunes), between Ace
Novelty Co., Inc. and Warner Bros. Consumer Products.
2. Major League Baseball Properties, Inc. License Agreement No. ML-2487B,
effective December 28, 1994, between Ace Novelty Co., Inc. and Major
League Baseball Properties, Inc.
a. Amendment #1 (assorted novelties), effective as of October 17,
1995, to Major League Baseball Properties, Inc. License
Agreement No. ML-2487B, between Ace Novelty Co., Inc. and Major
League Baseball Properties, Inc.
3. Major League Baseball Properties, Inc. License Agreement No. ML-3125
(Looney Tunes), effective September 23, 1994, between Ace Novelty Co.,
Inc. and Major League Baseball Properties, Inc.
a. Amendment #1, effective as of October 17, 1995, to Major League
Baseball Properties, Inc. License Agreement No. ML-3125, between
Ace Novelty Co., Inc. and Major League Baseball Properties, Inc.
4. 1993-1996 U.S. Olympic Merchandise Agreement, dated January 31, 1994,
between Ace Novelty Co., Inc. and United States Olympic Committee.
a. Amendment #1, effective January 17, 1995, to 1993-1996 U.S.
Olympic Merchandise Agreement, between Ace Novelty Co., Inc. and
United States Olympic Committee.
5. Retail Product License Agreement, effective July 13, 1995, between Ace
Novelty Co., Inc. and NBA Properties, Inc.
6. Warner Bros. License Agreement #4726-ANM (Animaniacs), dated November 3,
1994, between Ace Novelty Co., Inc. and Warner Bros.
a. Amendment #1, effective May 30, 1995, between Ace Novelty Co.,
Inc. and Warner Bros. Consumer Products.
7. Warner Bros. License Agreement #4416-TT (Tiny Toons), dated March 13,
1995, between Ace Novelty Co., Inc. and Warner Bros.
8. Pink Panther License Agreement #6166, dated January 10, 1996, between
MGM/UA Licensing and Merchandising and Ace Novelty Co., Inc.
9. License Agreement, dated September 30, 1994, between Harley-Davidson,
Inc. and Ace Novelty Co., Inc.
10. License Agreement (Bananas in Pajamas), dated October 2, 1995, between
Australian Broadcasting Corporation and Ace Novelty Co., Inc.
11. Retail Licensing Agreement, dated August 15, 1995, between National
Football League Properties, Inc. and Ace Novelty Co., Inc.
12. The Ohio State University Standard License Agreement, dated February 28,
1996, between The Ohio State University and Ace Novelty Co., Inc.
13. Retail License, Warner Bros. Consumer Products #6832-SPJ/WBLT (Space
Jam), dated March 22, 1996, between Ace Novelty Co., Inc. and Warner
Bros.
14. The Collegiate Licensing Company License Agreement to use Licensed
Indicia of Member Universities, effective August 24, 1995, between Ace
Novelty Co., and The Collegiate Licensing Company.
a. As amended to add Villanova University, by that addendum to
the Collegiate Licensing Company License Agreement, between
the Collegiate Licensing Company and Ace Novelty Company,
dated April 18, 1996, and executed by Ace Novelty.
15. License Agreement, dated January 1, 1994, between Ace Novelty Company,
Inc. and The Board of Regents of the University of Texas System.
-2-
16. Standard "UCLA" License Agreement No. 920150, effective April 1, 1992,
between The Regents of the University of California and Ace Novelty Co.,
Inc.
a. Schedule A to License Agreement No. 920150, amending term of
License from July 1, 1995, for a term of one year.
b. UCLA Trademarks and Licensing Renewal Request, dated May 31,
1996.
17. Indiana University Nonexclusive Trademark License #11910705, effective
November 18, 1995, between The Trustees of Indiana University and Ace
Novelty Co., Inc.
18. Interim License Agreement (inflatable lollipop), dated May 14, 1993,
between Northeast Import and Ace Novelty Co. Inc.
a. Letter Agreement, dated May 26, 1993, amending May 14, 1993 Interim
License Agreement.
19. License #939, between Texas Tech University and Ace Novelty Co., Inc.
a. Letter of Agreement dated February 1, 1996, between Texas Tech
University and Ace Novelty Co., Inc., amending License #939 term
until February 15, 1999.
20. Syracuse University License Agreement, dated July 1, 1994, between
Syracuse University and Ace Novelty Company, Inc.
21. Nonexclusive License, dated April 1, 1996, between The Regents of the
University of Minnesota and Ace Novelty Co., Inc.
22. License Agreement, effective July 1, 1992, between the University of
Southern California and Ace Novelty Co., Inc.
a. Amendment to License Agreement, amending term of License to July
1, 1995 through June 30, 1996.
23. University of Miami License Agreement, dated January 1, 1996, between
Ace Novelty Co., Inc. and University of Miami.
24. Merchandise Licensing Agreement (Street Fighters), dated November 19,
1992, between Capcom U.S.A., Inc. and Ace Novelty Co., Inc.
25. Licensing Agreement, dated December 17, 1993, between The Hearst
Corporation and Ace Novelty Co., Inc.
-3-
26. Memorandum of Understanding between Ace Novelty Company, Inc. and Planet
Hollywood International, Inc., dated April 16, 1996.
27. Amendment #1 to License Agreement #6832-SPJ/WBLT (Space Jam), dated
April 24, 1996, between Ace Novelty Co., Inc. and Warner Bros.
28. Retail License Agreement, Warner Bros. Consumer Products #3668-LB
(Looney Tunes Baseball), dated March 22, 1994, between Ace Novelty Co.,
Inc. and Warner Bros.
29. Amendment #1 to License Agreement #3668-LB (Looney Tunes Baseball),
dated April 10, 1994, between Ace Novelty Co., Inc. and Warner Bros.
30. License Agreement to use Licensed Indicia of the University of
Louisville, dated June 7, 1996, between Creative Alliance Licensing and
Ace.
31. Turner Home Entertainment, Inc. License Agreement #93272HBD
(Flintstones) effective August 17, 1993, between Play By Play Toys &
Novelties, Inc. and Turner Home Entertainment, Inc.
32. NBA Properties, Inc. License Agreement #818, effective April 1, 1994,
between Play By Play Toys & Novelties, Inc. and NBA Properties, Inc.
a. Amendment #1, effective as of June 7, 1994, to NBA Properties
Inc. License Agreement #818, between Play By Play Toys &
Novelties, Inc. and NBA Properties.
33. Turner Home Entertainment, Inc. License Agreement #93548HBD (Flintstones
Series), effective as of October 13, 1993, between Play by Play Toy &
Novelties and Turner Home Entertainment, Inc.
a. Amendment #1, effective as of September 26, 1995 to Turner Home
Entertainment, Inc. License Agreement #93548HBD (Flintstones
Series), between Turner Home Entertainment, Inc. and Play By
Play Toy & Novelty, Inc.
34. MGM/UA Licensing and Merchandising, a division of Metro-Goldwyn-Mayer
Inc., License Agreement #6167 (Pink Panther), effective as of February
29, 1996, between Play By Play Toys and Novelties and MGM/UA Licensing
and Merchandising, a division of Metro-Goldwyn-Mayer Inc.
35. Turner Home Entertainment, Inc. License Agreement #94246HBF (the
Flintstones), effective as of April 19, 1994, between Play By Play and
Turner Home Entertainment, Inc.
-4-
36. Turner Home Entertainment, Inc. License Agreement #93670HBPD (SWAT KATS
- Radical Squadron), effective as of November 12, 1993, between Play By
Play Toy & Novelty, Inc. and Turner Home Entertainment, Inc.
37. Turner Home Entertainment, Inc. License Agreement #93669HBD (Hanna-
Barbera Productions, Inc.), effective as of November 23, 1993, between
Play By Play Toy & Novelty, Inc. and Turner Home Entertainment, Inc.
a. Amendment #1, effective as of December 20, 1994, to Turner
Home Entertainment, Inc. License Agreement #93669HBD
(Hanna-Barbera Productions, Inc.), between Play By Play
Toy & Novelty, Inc. and Turner Home Entertainment, Inc.
b. Second Renewal, effective as of June 2, 1995, to Turner
Home Entertainment, Inc. License Agreement #93669HBD
(Hanna-Barbera Productions, Inc.), between Play By Play
Toy & Novelty, Inc. and Turner Home Entertainment, Inc.
38. National Football League Properties, Inc. License Agreement #R02666
("League Marks", "Club Marks", "Huddles"), effective as of August 19,
1993, between Play By Play Toy & Novelties, Inc. and National Football
League Properties, Inc.
39. UPA Productions of America License Agreement, effective as of October 1,
1995, between Play by Play Toys & Novelties, Inc. and UPA Productions of
America (Godzilla).
40. Nintendo of America Inc. License Agreement (Licensed Products),
effective as of November 10, 1994, between Play By Play Toys & Novelties
and Nintendo of America Inc.
41. Saban Entertainment, Inc. License Agreement (Mighty Morphin Power
Rangers), effective as of February 24, 1994, between Play By Play Toys
and Novelties and Saban Entertainment, Inc.
42. Sega of America, Inc. License Agreement effective as of October 1, 1993
(Sonic the Hedgehog), between Play By Play Toys and Novelties and Sega
of America, Inc.
43. Felix the Cat Productions, Inc. License Agreement (Felix the Cat),
effective as of October 1, 1993, between Play by Play Toys and Novelties
and Felix the Cat Productions, Inc.
44. Miller Brewing Company License Agreement #112094 (Licensed Trademarks
and Products), effective as of July 1, 1993, between Play by Play and
Miller Brewing Company.
-5-
45. MGM/UA Licensing and Merchandising, a division of Metro-Goldwyn-Mayer,
Inc., License Agreement #6140 (Pink Panther), effective as of March 9,
1995, between Play By Play Toys and Novelties and MGM/UA Licensing and
Merchandising, a division of Metro-Goldwyn-Mayer Inc.
46. New World Licensing Brentwood Television Funnies, Inc. License Agreement
(Biker Mice from Mars), effective as of April 1, 1994, between
Play*By*Play and New World Licensing Brentwood Television Funnies, Inc.
47. MacMillan Character Licensing, Division of MacMillan, Inc. License
Agreement (Raggedy Ann, Raggedy Andy, and associated characters),
effective as of June 20, 1994, between Play By Play Toys + Novelties and
MacMillan Character Licensing, Division of MacMillan, Inc.
48. MGM/UA Licensing and Merchandising, a division of Metro-Goldwyn-Mayer
Inc., License Agreement #6154 (Pink Panther), effective as of November
28, 1995, between Play By Play Toys & Novelties and MGM/UA Licensing and
Merchandising, a division of Metro-Goldwyn-Mayer Inc.
49. Larry Harmon Pictures Corporation License Agreement (Bozo the Clown),
effective as of September 23, 1993, between Play By Play and Larry
Harmon Pictures Corporation.
50. Giordano Art Ltd. License Agreement #G/G 178 (Artwork), effective as of
April 15, 1994, between Play by Play and Giordano Art Ltd.
a. Renewal of Agreement, effective January 1, 1996 to
Giordano Art Ltd. License Agreement #G/G 178, between
Play By Play and Giordano Art Ltd.
51. Larry Harmon Pictures Corporation License Agreement (Bozo the Clown),
effective as of February 11, 1994, between Play-By-Play and Larry Harmon
Pictures Corporation.
52. The Foreign Candy Company, Inc. License Agreement (Wally Warhead and
Mega Warhead Trademarks), effective as of October 5, 1993, between
Laramie Interests, Inc. and The Foreign Candy Company, Inc.
53. Dic Entertainment, L.P. License Agreement (Superhuman Samurai
Syber-Squad Characters), effective as of November 27, 1994, between
Play-By-Play and Dic Entertainment, L.P.
54. Chevrolet Motor Division, General Motors Corporation License Agreement
(Trademarks), effective October 13, 1992, between T.M.I. International
a/k/a Play
-6-
By Play Toys and Novelties and Chevrolet Motor Division, General Motors
Corporation.
a. Amendment #1, effective as of October 23, 1992, to
Chevrolet Motor Division License Agreement effective as of
October 13, 1992, between T.M.I. International a/k/a Play By
Play Toys and Novelties and Chevrolet Motor Division, General
Motors Corporation.
b. Amendment #2, effective as of June 6, 1994, to Chevrolet Motor
Division License Agreement effective October 13, 1992, between
T.M.I. International a/k/a Play By Play Toys and Novelties and
Chevrolet Motor Division, General Motors Corporation.
55. Disney Enterprises, Inc. License Agreement (Disney's The Hunchback of
Notre Dame), effective as of February 1, 1996, between Play By Play Toys
& Novelties, Inc. and Disney Enterprises, Inc.
56. The Walt Disney Company License Agreement (Winnie The Pooh), effective
as of March 15, 1995, between Play By Play Toys and Novelties and The
Walt Disney Company.
57. The Walt Disney Company License Agreement (Disney's 101 Dalmatians -
Live Action), effective as of January 12, 1996, between Play By Play
Toys and Novelties and The Walt Disney Company.
58. The Walt Disney Company License Agreement (Toy Story), effective as of
January 10, 1996, between Play By Play Toys & Novelties, Inc. and The
Walt Disney Company.
59. Disney Enterprises, Inc. License Agreement (Disney's 101 Dalmatians -
Live Action), effective as of February 5, 1996, between Play By Play
Toys & Novelties, Inc. and Disney Enterprises, Inc.
60. Disney Enterprises, Inc. License Agreement (Toy Story), effective as of
May 6, 1996, between Play by Play Toys & Novelties and Disney
Enterprises, Inc.
61. The Walt Disney Company License Agreement (Disney's Pocahontas),
effective as of May 10, 1995, between Play By Play Toys & Novelties,
Inc. and The Walt Disney Company.
62. The Walt Disney Company License Agreement (Disney's The Hunchback of
Notre Dame), effective as of January 10, 1996, between Play By Play Toys
& Novelties, Inc. and The Walt Disney Company.
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63. The Walt Disney Company License Agreement (The Lion King), effective as
of July 27, 1995, between Play By Play Toys & Novelties, Inc. and The
Walt Disney Company.
64. The Walt Disney Company License Agreement (Disney's Pocahontas),
effective as of March 3, 1995, between Play By Play Toys & Novelties and
The Walt Disney Company.
65. The Walt Disney Company License Agreement (Mickey's Stuff for Kids and
Mickey & Co.), effective as of February 23, 1995, between Play By Play
Toys & Novelties and The Walt Disney Company.
66. Warner Bros., a division of The Time Warner Entertainment Company L.P.,
License Agreement #95692-WBLT (Looney Tunes), effective as of March 11,
1996, between Play By Play Toys and Warner Bros., a division of Time
Warner Entertainment Company LP.
67. DC Comics, c/o Warner Bros. Consumer Products, a Time Warner
Entertainment Company, License Agreement #5324-BATTV (Batman), effective
as of May 12, 1995, between Play By Play Toys & Novelties and DC Comics,
c/o Warner Bros. Consumer Products, a Time Warner Entertainment Company.
68. Warner Bros. Division of Time Warner Entertainment Company L.P. License
Agreement #95445-WBLT (Looney Tunes), effective as of April 26, 1995,
between Play By Play Toys and Novelties and Warner Bros. Division of
Time Warner Entertainment Company L.P.
a. Amendment #1, effective as of May 13, 1996, to Warner
Bros. License agreement #95445-WBLT (Looney Tunes),
between Play By Play Toys and Novelties and Warner Bros.
Consumer Products.
69. Warner Bros. License Agreement #95595-ANM (Animaniacs), effective as of
December 7, 1995, between Play By Play Toys and Novelties and Warner
Bros. Division of Time Warner Entertainment Company L.P.
a. Amendment #1, effective as of May 10, 1996, to Warner
Bros. License Agreement #95595-ANM (Animaniacs),
between Play By Play Toys and Novelties and Warner Bros.
Consumer Products.
70. Shari Lewis Enterprises, Inc. License Agreement #3966-SLLC (Lamb Chop &
Friends), effective as of May 19, 1994, between Play By Play Toys &
Novelties and Shari Lewis Enterprises, Inc.
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71. Warner Bros., a division of Time Warner Entertainment Company L.P.,
License Agreement #95654-ANM (Animaniacs), effective as of February 9,
1996, between Play By Play Toys and Novelties and Warner Bros., a
division of Time Warner Entertainment Company, L.P.
72. Warner Bros., a division of Time Warner Entertainment Company L.P.,
License Agreement #6389-WBLT (Looney Tunes Characters), effective as of
January 25, 1996, between Play By Play Toys & Novelties, Inc. and Warner
Bros., a division of Time Warner Entertainment Company, L.P.
a. Amendment #1, effective as of April 8, 1996 to Warner
Bros., a division of Time Warner Entertainment Company,
L.P., License Agreement #6389-WBLT (Looney Tunes
Characters), between Play by Play Toys & Novelties, Inc.
and Warner Bros., a division of Time Warner Entertainment
Company, L.P.
73. The Walt Disney Company License Agreement (Winnie The Pooh), effective
as of May 12, 1995, between Play By Play Toys & Novelties, Inc. and The
Walt Disney Company.
74. The Walt Disney Company License Agreement (Mickey's Stuff for Kids),
effective as of May 11, 1995, between Play by Play Toys & Novelties and
The Walt Disney Company.
75. Warner Bros. Consumer Products, a division of Time Warner Entertainment
Company, License Agreement #90068-WBLT (Looney Tunes characters),
effective as of March 6, 1996, between Play By Play Toys & Novelties,
Inc. and Warner Bros. Consumer Products, a division of Time Warner
Entertainment Company.
76. Warner Bros. Consumer Products, a division of Time Warner Entertainment
Company, License Agreement #90067-ANM (Animaniacs), effective as of
March 6, 1996, between Play By Play Toys & Novelties, Inc. and Warner
Bros. Consumer Products, a division of Time Warner Entertainment
Company.
77. Warner/Chappell Music, Inc., c/o Warner Bros. Consumer Products, a Time
Warner Entertainment Company, License Agreement #4521-FR (Frosty The
Snowman), effective as of September 13, 1994, between Play By Play Toys
& Novelties, Inc. and Warner/Chappell Music, Inc., c/o Warner Bros.
Consumer Products, a Time Warner Entertainment Company.
78. Warner Bros., a division of Time Warner Entertainment Company L.P.,
License Agreement #4983-ANM (Animaniacs), between Play By Play Toys &
Novelties and Warner Bros., a division of Time Warner Entertainment
Company, L.P.
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a. Amendment #1, effective April 9, 1996, to Warner Bros., a
division of Time Warner Entertainment Company, L.P., License
Agreement #4983- ANM (Animaniacs), between Play By Play Toys &
Novelties and Warner Bros., a division of Time Warner
Entertainment Company, L.P.
79. Warner Bros., a division of Time Warner Entertainment Company, L.P.,
License Agreement #5884-ANM (Animaniacs), effective as of October 10,
1995, between Play By Play Toys & Novelties and Warner Bros., a division
of Time Warner Entertainment Company, L.P.
80. Warner/Chappell Music Inc. Agreement (Frosty The Snowman Composition),
dated October 1, 1994, between Play By Play Toys & Novelties and
Warner/Chappell Music Inc.
81. The Hearst Corporation, King Features Syndicate ("King") License
Agreement (Betty Boop), effective as of May 31, 1995, between Play By
Play Toys & Novelties and the Hearst Corporation, King Features
Syndicate Division ("King").
82. The Hearst Corporation, King Features Syndicate Division ("King")
License Agreement #008272 (Popeye), effective as of May 25, 1994,
between Play By Play Toys & Novelties, Inc. and The Hearst Corporation,
King Features Syndicate Division ("King").
83. Harley-Davidson, Inc. License Agreement (Licensed Articles), effective
as of June 28, 1994, between Play By Play Toys & Novelties and
Harley-Davidson, Inc.
84. Twentieth Century Fox Licensing and Merchandising, a Unit of Fox, Inc.
("Fox") License Agreement #4283 (The Simpsons), effective as of July 7,
1992, between Play By Play Toys & Novelties and Twentieth Century Fox
Licensing and Merchandising, a Unit of Fox, Inc. ("Fox").
85. CSC Advertising, Inc., acting on behalf of its parent company and
principal, Campbell Soup Company, License Agreement ("Property" &
"Licensed Articles"), effective as of June 9, 1993, between Play By Play
and CSC Advertising, Inc., acting on behalf of its parent company and
principal, Campbell Soup Company.
86. Syracuse University License Agreement ("Symbols"), effective as of April
28, 1995, between Play By Play Toys and Novelties, Inc. and Syracuse
University.
87. The Board of Regents of the University of Oklahoma License Agreement
(Licensed Marks and Products), effective as of August 17, 1995, between
Play By Play and The Board of Regents of the University of Oklahoma.
88. The Board of Regents of the University of Texas System License Agreement
(Licensed Marks and Products), effective as of October 1, 1995, between
Play By Play Toys & Novelties Inc. and the Board of Regents of the
University of Texas System.
89. The University of Southern California License Agreement ("Licensed
Trademarks and Products"), effective as of September 21, 1995, between
Play By Play and the University of Southern California.
90. The University of Notre Dame du Lac License Agreement ("Licensed Marks
and Products"), effective as of June 30, 1995, between Play By Play Toys
& Novelties, Inc. and the University of Notre Dame du Lac.
91. University of Miami License Agreement ("Marks"), effective as of May 11,
1995, between Play By Play Toys and Novelties and University of Miami.
92. Jay Foreman License Agreement ("Licensed Mark and Products"), (E.G.,
"Goosebumps"), effective as of March 12, 1996, between Play By Play Toys
& Novelties, Inc. and Jay Foreman.
93. The Hearst Corporation, King Features Syndicate Division ("King")
License Agreement (Betty Boop), effective as of May 31, 1995, between
Play by Play Toys & Novelties and The Hearst Corporation, King Features
Syndicate Division ("King").
94. Diresta Diversified License Agreement (Development), effective as of May
13, 1996, between Play By Play and Diresta Diversified.
95. Wow Wee International Ltd. License Agreement (Name), effective as of
July 1, 1995, between Play By Play and Wow Wee International Ltd.
96. St. Nicholas Music Inc. License Agreement ("Products" and
"Composition"), effective as of July 19, 1995, between Play By Play Toys
& Novelties and St. Nicholas Music Inc.
97. Jim Davis (the "Licensed Property"), Paws, Incorporated ("Paws") License
Agreement ("Licensed Articles"), effective as of April 1, 1996, between
Play By Play and Jim Davis (the "Licensed Property"), Paws, Incorporated
("Paws").
98. Applause Inc. Sublicense Agreement ("Rudolph the Red-Nosed Reindeer"),
effective as of July 7, 1994, between Play By Play and Applause Inc.
a. Amendment #1, effective as of September 1, 1994, to Applause
Inc. Sublicense Agreement ("Rudolph the Red-Nosed Reindeer"),
between Play By Play and Applause Inc.
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99. Marvel Entertainment Group, Inc. License Agreement #D94049 (Marvel
Classic Characters), between Play By Play and Marvel Entertainment
Group, Inc.
100. Marvel Characters, Inc. License Agreement #D95095R (Licensed
Characters), Effective as of September 30, 1995, between Play By Play
Toys & Novelties and Marvel Characters, Inc.
a. Amendment #1. Effective as of March 14, 1996, to Marvel
Characters, Inc. License Agreement #D95095R (Licensed
Characters), between Play By Play Toys & Novelties and Marvel
Characters, Inc. Reference #D95095R-1R.
101. Marvel Characters, Inc. License Agreement #D95106R ("Licensed Articles
and Property"), effective as of September 30, 1995, between Play By Play
Toys and Novelties and Marvel Characters, Inc.
102. Marvel Characters, Inc. License Agreement #D95068R ("Licensed Articles
and Properties"), effective as of September 1, 1995, between Play By
Play Toys & Novelties and Marvel Characters, Inc.
103. Planky Road Brewery License Agreement #112679 ("Licensed Trademarks and
Products"), effective February 20, 1996, between Play By Play and Planky
Road Brewery.
104. Atlanta Centennial Olympic Properties License Agreement (Licensed
Marks), effective as of October 25, 1994, between Play By Play Toys &
Novelties and Atlanta Centennial Olympic Properties.
105. Scholastic Inc. License Agreement (Licensed Materials and Articles),
effective as of March 27, 1996, between Play By Play Toys and Scholastic
Inc.
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106. The Hearst Corporation, King Features Syndicate Division ("King")
License Agreement #007341 (The Berenstein Bears), effective as of
February 19, 1993, between Play By Play Toys & Novelties, Inc. and The
Hearst Corporation, King Features Syndicate Division ("King").
107. The Hearst Corporation, King Features Syndicate Division ("King")
License Agreement #008273 (Betty Boop), effective as of May 25, 1994,
between Play By Play Toys & Novelties, Inc. and The Hearst Corporation,
King Features Syndicate Division ("King").
a. Amendment #1, effective as of December 12, 1995, to The Hearst
Corporation, King Features Syndicate Division ("King") License
Agreement #008273 (Betty Boop), between Play By Play Toys &
Novelties and The Hearst Corporation, King Features Syndicate
Division ("King").
b. Amendment #2, effective as of January 6, 1995, to The Hearst
Corporation, King Features Syndicate Division ("King") License
Agreement #008273, between Play By Play Toys & Novelties and
The Hearst Corporation, King Features Syndicate Division
("King").
c. Rider #1, effective as of May 25, 1994, to The Hearst
Corporation, King Features Syndicate Division ("King") License
Agreement #008273, between Play By Play Toys & Novelties and
The Hearst Corporation, King Features Syndicate Division
("King").
108. The Hearst Corporation, King Features Syndicate Division ("King")
License Agreement #008049 (Betty Boop), effective as of February 10,
1994, between Play By Play Toys and Novelties and The Hearst
Corporation, King Features Syndicate Division ("King").
a. Amendment #1, effective as of September 28, 1995, to The
Hearst Corporation, King Features Syndicate Division ("King")
License Agreement #008049 (Betty Book), between Play By Play
Toys & Novelties and The Hearst Corporation, King Features
Syndicate Division ("King").
109. The Hearst Corporation, King Features Syndicate Division ("King")
License Agreement (Betty Boop and Popeye), effective as of December 11,
1995, between Play By Play Toys & Novelties and The Hearst Corporation,
King Features Syndicate Division ("King").
110. Disney Consumer Products (Mexico), SA de C.V. License Agreement
(Standard Characters and Brands), effective as of November 1, 1995,
between Play By Play Toys and Novelties and Disney Consumer Products
(Mexico) S.A. de C.V.
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111. Surge Licensing, Inc. License Agreement (Teenage Mutant Ninja Turtles),
effective as of August 17, 1993, between Play By Play and Surge
Licensing, Inc.
a. Amendment #1, effective as of September 29, 1995, to Surge
Licensing, Inc. License Agreement (Teenage Mutant Ninja
Turtles), between Play By Play and Surge Licensing, Inc.
112. Paws, Incorporated License Agreement (Garfield), effective as of
November 8, 1994, between Play By Play Toys and Novelties and Paws,
Incorporated.
a. Amendment #1, effective as of May 5, 1995, to Paws, Incorporated
License Agreement (Garfield), between Play By Play Toys and
Novelties and Paws, Incorporated. PBP_USA01-01.
b. Amendment #2, effective as of January 1, 1995, to Paws,
Incorporated License Agreement (Garfield), between Play By Play
Toys and Novelties and Paws, Incorporated. PBP_USA01-03.
c. Amendment #3, effective as of April 1, 1996, to Paws,
Incorporated License Agreement (Garfield), between Play By Play
Toys and Novelties and Paws, Incorporated. PBP_USA-02-01.
113. The Coca-Cola Company and Coca-Cola Ltd. License Agreement (License
Articles and Properties), effective as of February 13, 1995, between
T.M.I., Inc. d/b/a Play By Play and the Coca-Cola Company and Coca-Cola
Ltd.
a. Amendment #1, effective as of April 11, 1995, to the Coca-Cola
Company and Coca-Cola Ltd. License Agreement (License Articles
and Properties), between T.M.I., Inc. d/b/a Play By Play and the
Coca-Cola Company and Coca-Cola Ltd.
b. Amendment #2, effective as of July 17, 1995, to the Coca-Cola
Company and Coca-Cola Ltd. License Agreement (License Articles
and Properties), between T.M.I., Inc. d/b/a Play By Play and the
Coca-Cola Company and Coca-Cola Ltd.
c. Amendment #3, Renewal, effective as of April 11, 1995, to the
Coca-Cola Company and Coca-Cola Ltd. License Agreement (License
Articles and Properties), between T.M.I., Inc. d/b/a Play By
Play and the Coca-Cola Company and Coca-Cola Ltd.
-14-
SCHEDULE 5.12
LEASEHOLD INTERESTS
1. Tenancy under that certain Lease Agreement and Addendum dated December
21, 1992, by and between Utah State Retirement Fund, as lessor, and TMI,
Inc. d/b/a Play-By-Play Toys & Novelties, as lessee, covering premises
consisting of approximately 120,000 square feet located at 4415 Tejasco,
San Antonio, Texas, and known as Building 5, Rittiman West, said
premises being more particularly described as NCB 16376, Blk 3, Lot 5,
IRR 40 of 4 Rittiman West Business Park UT 3, in the City of San
Antonio, Bexar County, Texas.
2. Tenancy under that certain Lease Agreement and Addendum dated December
21, 1992, by and between Utah State Retirement, as lessor, and TMI, Inc.
d/b/a Play- By-Play Toys & Novelties, Inc., as lessee, covering premises
consisting of approximately 62,125 square feet located at 4514 Tejasco,
San Antonio, Texas, and known as Building 1B, Rittiman West, said
premises being more particularly described as NCB 16376, Blk 3, Lot 3,
Rittiman West Business Park UT 3, San Antonio, Bexar County, Texas.
3. Tenancy under that certain Lease Agreement and Addendum, dated March
1996, by and between Utah State Retirement Fund, as lessor, and
Play-By-Play Toys & Novelties, Inc., as lessee, covering premises
consisting of approximately 42,189 square feet located at 4530 Tejasco
Drive, San Antonio, Texas, and known as Building 1A, said premises being
more particularly described as NCB 16376, Blk 3, Lot 3, Rittiman West
Business Park UT 3, in the City of San Antonio, Bexar County, Texas.
4. Tenancy under that certain Standard Industrial Sublease and Addendum
dated December 12, 1994, by and between R.C.R. Classic Designs, Inc., as
lessor, and Play by Play, Inc., as lessee, covering premises consisting
of approximately 28,000 square feet located at 724 E. 62nd Street, Los
Angeles, California. (Lease expired on January 14, 1995, and is
currently in effect on a month-to-month basis.)
5. Tenancy under that certain Store Lease dated June 22, 1983, by and
between Pizza Management Inc., as lessee, and Torres and Place Rentals,
as lessor, the lessor's interest having been assigned effective January
1, 1993 to Arturo G. Torres, individually, covering the premises located
at 3816 Andrews Highway, Odessa, Texas. (Lease is effective on a
year-to-year basis.)
6. Tenancy under that certain Lease dated November 16, 1994, between 200
Fifth Avenue Associates, as lessor, and T.M.I., Inc., d.b.a.
Play-By-Play Toys and Novelties, as lessee, covering Rooms 1240, 1242,
1244, and 1246 in the building known as The Toy Center South, Block 825,
Lot 31, 200 Fifth Avenue, New York, New York 10010.
7. Tenancy under that certain Commercial Lease dated May 17, 1994, by and
between Extensive Enterprises, Inc., as lessor, and Val Verde Vending,
as lessee, covering premises consisting of approximately 1,060.00 square
feet located at 200 E. 37th Street, Odessa, Texas, legally described as
Lot Two, Block Two, Hines Addition 2-15, Unit #14. (Lease expired on May
31, 1995, and is currently in effect on a month-to-month basis.)
8. Tenancy under that certain Industrial Lease dated January 5, 1996,
between World Wide Services Corporation, as lessor, and Play-By-Play
Toys & Novelties, Inc., as lessee, covering a building consisting of
approximately 26,223.00 square feet, plus a parking lot adjacent
thereto, located at 2275 N.W. 84th Avenue, Miami, Florida 33126, and
being more particularly described as Tract "J", Beacon Centre Phase VII,
according to the plat thereof, as recorded in Plat Book 143, Page 97, of
the Public Records of Dade County, Florida.
9. Tenancy under that certain Standard Industrial/Commercial Single-Tenant
Lease- -Gross dated December 12, 1995, by and between Christopher J. and
Darlene Telles, Husband and Wife, as lessor, and Play By Play Toys &
Novelties, Inc., as lessee, covering premises consisting of
approximately 26,082 square feet located at 734 E. 62nd Street, Los
Angeles, California. (Lease expired on January 14, 1996, and is
currently in effect on a month-to-month basis.)
10. Tenancy under that certain Agreement of Lease dated as of January 1,
1996, by and between Zumck Realty, as lessor, and Play By Play Toys &
Novelties Inc., as lessee, covering premises located at 255-271 McKibbin
Street, Block 3082, Lot 65, Brooklyn, New York 11206.
11. Tenancy under that certain Lease Agreement dated September 21, 1993,
between Irless Jordan, as lessor, and Val Verde Vending, Inc.,
Subsidiary of TMI, Inc., as lessee, and Lease Renewal dated March 10,
1995, covering approximately 2,400 square feet of office warehouse
located at 101B Vinson Street, Arlington, Texas 76010.
12. Tenancy under that certain Lease Agreement dated January 1978, between
Western Marketing, Inc., as lessor, and Pizza Management, Inc., as
lessee, covering the premises at 4033 North First Street, Abilene,
Taylor County, Texas.
13. Tenancy under that certain Standard Industrial/Commercial Single-Tenant
Lease- -Gross, with Addenda, dated February 10, 1992, by and between
Grankol Enterprises, Inc. & Koll Family Trust, as lessor, and Salton Toy
Co., Inc., as lessee, and Addendum to Standard Industrial Lease by and
between Grankol, Inc., Will of Milton L. Koll and the Will of Walter A
Koll also known as the KWK
-2-
Family Trust, as lessor, and Play By Play, as lessee, said lessee
replacing Salton Toy Co., Inc. as lessee by said Addendum, covering a
brick industrial building of approximately 24,500 square feet located at
739 E. 62nd Street, Los Angeles, California 90001.
14. Tenancy under that certain Lease Agreement by and between Equities
Consultants (1972) Ltd., as lessor, and Specialty Manufacturing Ltd., as
lessee, covering property located at 1680 Bonhill Road, Missauga,
Ontario L5T 1C8.
15. Tenancy under that certain Lease Agreement by and between Midpoint
Products Inc., as lessor, and Specialty Manufacturing Ltd., as lessee,
covering property located at 2421B Alpha Street, Burnaby, British
Columbia V5C 5L2.
16. Tenancy under that certain Standard Industrial Lease--Multi-Tenant dated
May 23, 1992, and Lease Extension dated June 1, 1995, by and between
Tobman, Rothner and Wolf and Ace Novelty Co., covering the most easterly
17,000 square feet of that certain property known as and numbered 350 S.
Anderson Street, Los Angeles, California 90033.
17. Tenancy under that certain lease agreement by and between Southwest
Freight of San Antonio, Inc., as lessor, and Ace Novelty Co., as lessee,
covering property located at 13434 N.E. 16th Street, Bellevue,
Washington 98005.
18. Tenancy under that certain lease agreement by and between Benjamin and
Lois Mayer, husband and wife, and Ace Novelty Acquisition Co., Inc., as
tenants in common, as lessor, and Ace Novelty Acquisition Co., Inc., as
lessee, covering property located at 1855 Industrial and 660 Mateo
Street, Los Angeles, California.
-3-
SCHEDULE 5.13
ASSUMED NAMES
Laramie Interests
Val Verde Vending
Ideal Gift Shopper
Kid'z Holiday Store
Holiday Store
Specialty Manufacturing, Ltd.
A-1 Novelty
Ace
Ace Novelty Co.
Ace Plus
Acme Premium Supply Corp.
Fun Services
Holiday Gift Shop
Santa's Secret Shop
Good Neighbor General Store
Mother's Day Boutique
Santa's Workshop
SCHEDULE 5.16
EXISTING LIENS & CAPITAL LEASES
1. Lease dated October 10, 1994, between TMI Inc./Play by Play and AT&T
Credit Corp. Secured by telephone equipment.
2. Lease dated June 30, 1993, between TMI Inc./Play by Play and AT&T Credit
Corp. Secured by telephone equipment.
3. Lease dated April 29, 1994, between TMI Inc./Play by Play and North
Texas Equipment Credit Corp. Secured by telephone equipment. On May 27,
1994 the Lease was assigned to Advanta Leasing Corp.
4. Schedule 1 Lease dated April 1, 1996, between Play by Play Toys and
Novelties and BancBoston. Leasing secured by telephone equipment.
5. Schedule 2 Lease dated April 1, 1996, between Play by Play Toys &
Novelties and BancBoston. Leasing secured by warehouse equipment.
6. Schedule 3 Lease dated June 1, 1996, between Play by Play Toys &
Novelties and BancBoston. Leasing secured by computer equipment.
7. Schedule 4 Lease dated June 1, 1996, between Play by Play Toys &
Novelties and BancBoston. Leasing secured by software.
8. Schedule 5 Lease dated June 1, 1996, between Play by Play Toys &
Novelties and BancBoston. Leasing secured by computer equipment.
9. Schedule 6 Lease dated June 1, 1996, between Play by Play Toys &
Novelties and BancBoston. Leasing secured by computer equipment.
10. Schedule 7 Lease dated June 1, 1996, between Play by Play Toys &
Novelties and BancBoston. Leasing secured by warehouse equipment.
11. Schedule 8 Lease dated June 1, 1996, between Play by Play Toys &
Novelties and BancBoston. Leasing secured by forklift.
12. Lease dated November 17, 1994, between TMI Inc./Play by Play and Copelco
Capital, Inc. Secured by computer equipment.
13. Lease dated June 20, 1994, between TMI, Inc./Play by Plan and Digital
Financial Services. Secured by computer equipment.
14. Lease dated December 9, 1994, between TMI, Inc./Play by Play and Digital
Financial Services. Secured by computer equipment.
15. Lease dated July 28, 1994, between Play by Play Toys & Novelties and
Leslie Copiers. Secured by copier equipment.
16. Lease dated April 13, 1995, between Play by Play Toys and Novelties and
Professional Leasing Service. Secured by computer equipment. Assigned by
Professional Leasing Service, as secured party, to Oswego City Savings
Bank.
17. Lease dated May 5, 1995, between Play by Play Toys and Novelties and
Raymond Leasing Corporation. Secured by electric walkies. Assigned by
N.J. Malin & Associates, Inc., as secured party, to Raymond Leasing
Corporation.
18. Note dated March 7, 1996, between Play by Play Toys & Novelties and
Toyota Motor Credit. Secured by forklift equipment. Assigned by
Southwest Lift, Inc., as secured party, to Toyota Motor Credit Corp.
19. Note dated February 22, 1996, between Play by Play Toys & Novelties and
Toyota Motor Credit. Secured by forklift equipment. Assigned by
Southwest Lift, Inc., as secured party, to Toyota Motor Credit Corp.
20. Note dated April 19, 1996, between Play by Play Toys & Novelties and
Toyota Motor Credit. Secured by forklift equipment. Assigned by
Southwest Lift, Inc., as secured party, to Toyota Motor Credit Corp.
21. Note dated March 28, 1991, between PMI and Concord Commercial
Corporation. Secured by pallet storage racks.
22. Operating Lease dated June 8, 1995 between Play by Play Toys & Novel and
Nissan Acceptance. Monthly Payments of $385.75.
23. Operating Lease Several Vehicles, between Play by Play Toys & Novelties
and McCullaugh Leasing. Monthly Payments of $5,080.03.
24. Lease dated April 25, 1995, between Play By Play Toys & Novelties, Inc.
and Ingersoll-Rand Air Center. Secured by Ingersoll-Rand Model HP100 SSR
Air Compressor S/N F11987. Lease was paid in full on August 29, 1995.
25. Lease 9516 dated March 22, 1995, between Jacom Computer Services, Inc.
and TMI, Inc. and subsidiaries. Lease was paid in full on November 29,
1995.
26. Lien held by Storage Technology Corporation, perfected by financing
statement filed in the state of New York on February 1, 1988, as amended
on May 31, 1990. Debtor: TMI Corp.
27. Lien held by Storage Technology Corp., perfected by financing statement
filed in the state of New York on August 25, 1987. Debtor: TMI Corp.
The following property and leases were assigned by Ace Novelty Co., Inc. to Ace
Novelty Acquisition Co., Inc.
1. Lease dated October 3, 1994, between NELCO, Ltd. and Ace Novelty Co.,
Inc. Secured by IBM computer equipment and related software.
2. Lease dated October 3, 1994, between NELCO, Ltd. and Ace Novelty Co.,
Inc. Secured by certain computer equipment. Assigned by NELCO, Ltd., as
secured party, to Crestar Bank.
3. Master Lease Agreement No. 3104 dated November 8, 1994, between
Technology Credit Corporation and Ace Novelty Co., Inc. and
subsidiaries. Secured by voice processing system. Assigned by Technology
Credit Corporation, as secured party, to Leasetec Corporation.
4. Lease dated December 6, 1995, between Copelco Capital, Inc. and Ace
Novelty Co., Inc. Secured by certain office equipment.
The following property and leases were assigned by Acme Acquisition Corp. to Ace
Novelty Acquisition Co., Inc.:
1. Lease dated April 19, 1993, between TRAK International, Inc. and ACME
Acquisition Corp. d/b/a Tri-W Rental. Consignment of 2 TRAK
International Sky Trak Rough Terrain Forklifts.
-2-
2. Lease dated April 19, 1993, between AEL Leasing Co., Inc. and ACME
Acquisition Corp. Secured by certain computer equipment. Assigned by AEL
Leasing Co., Inc., as secured party, to American Commercial Credit Corp.
3. Lease dated May 10, 1995, between IBM Credit Corporation and ACME
Acquisition Corp. Secured by computer equipment.
The following property and leases were assigned by Specialty Manufacturing Ltd.
to Newco Novelty, Inc.:
1. Lease dated November 3, 1995, between Momentum, a PrimeSource Company,
and Specialty Manufacturing, Inc. Secured by lithograph plates, film,
prepressed proofing materials, chemistry and related lithographic
supplies.
-3-
SCHEDULE 5.17
ENVIRONMENTAL MATTERS
1. No activity of any Borrower or any of its Subsidiaries requires any
Environmental Permit which has not been obtained and which is not now in
full force and effect, except to the extent failure to have any such
Environmental Permit could not reasonably be expected to have a Material
Adverse Effect, except as described in the following documents:
a. Phase I Environmental Site Assessment dated March 27,
1996, conducted by ATEC Associates, Inc. for Ace Novelty
Company, located at 1855 Industrial Street, Los Angeles,
California 90021 (ATEC Project No. 45-07-960063).
b. Phase I Environmental Property Assessment Update dated
March 25, 1996, conducted by EPS Environmental Services,
Inc., for property located at 3815-3859 South Ashland
Avenue, Chicago, Illinois (Project No. 949-15036).
c. Phase II Magnetometer Survey, Limited Subsurface
Investigation, PCP Sampling and Asbestos Survey-
Assessment dated February 2, 1994, conducted by EPS
Environmental Services, Inc., for property located at
3815-59 South Ashland Avenue, Chicago, Illinois (Project
No. 369-03123R).
d. Assessment being prepared by Coopers & Lybrand L.L.P.
for property located in Chicago, Illinois.
2. Each Borrower and its Subsidiaries are in compliance with all
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
applicable Requirement of Environmental Law or Environmental Permit,
except where failure to be in such compliance could not reasonably be
expected to have a Material Adverse Effect, except as described in the
following documents:
a. Phase I Environmental Site Assessment dated March 27,
1996, conducted by ATEC Associates, Inc. for Ace Novelty
Company, located at 1855 Industrial Street, Los Angeles,
California 90021 (ATEC Project No. 45-07-960063).
b. Phase I Environmental Property Assessment Update dated
March 25, 1996, conducted by EPS Environmental Services,
Inc., for property located at 3815-3859 South Ashland
Avenue, Chicago, Illinois (Project No. 949-15036).
-2-
c. Phase II Magnetometer Survey, Limited Subsurface
Investigation, PCP Sampling and Asbestos Survey-
Assessment dated February 2, 1994, conducted by EPS
Environmental Services, Inc., for property located at
3815-59 South Ashland Avenue, Chicago, Illinois (Project
No. 369-03123R).
d. Assessment being prepared by Coopers & Lybrand L.L.P.
for property located in Chicago, Illinois.
3. Each Borrower and its Subsidiaries (and, to the knowledge of each
Borrower, each of the prior owners or operators and predecessors in
interest with respect to any of its or its Subsidiaries' Property) (i)
have obtained and maintained in effect all Environmental Permits, the
failure to obtain which could reasonably be expected to have a Material
Adverse Effect, (ii) along with their respective Property have been and
are in compliance with all applicable Requirements of Environmental Law
and Environmental Permits where such failure to comply therewith could
reasonably be expected to have a Material Adverse Effect, (iii) along
with their Property are not subject to any (A) Environmental Claims or
(B) Environmental Liabilities, in either case direct or contingent, and
whether known or unknown, arising from or based upon any act, omission,
event, condition or circumstance occurring or existing on or prior to
the date hereof which could reasonably be expected to have a Material
Adverse Effect, and (v) have not received individually or collectively
any notice of any violation or alleged violation of any Requirements of
Environmental Law or Environmental Permit or any Environmental Claim in
connection with their respective property which could reasonably be
expected to have a Material Adverse Effect, except as described in the
following documents:
a. Phase I Environmental Site Assessment dated March 27,
1996, conducted by ATEC Associates, Inc. for Ace Novelty
Company, located at 1855 Industrial Street, Los Angeles,
California 90021 (ATEC Project No. 45-07-960063).
b. Phase I Environmental Property Assessment Update dated
March 25, 1996, conducted by EPS Environmental Services,
Inc., for property located at 3815-3859 South Ashland
Avenue, Chicago, Illinois (Project No. 949-15036).
c. Phase II Magnetometer Survey, Limited Subsurface
Investigation, PCP Sampling and Asbestos Survey-
Assessment dated February 2, 1994, conducted by EPS
Environmental Services, Inc., for property located at
3815-59
-3-
South Ashland Avenue, Chicago, Illinois (Project No.
369-03123R).
d. Assessment being prepared by Coopers & Lybrand L.L.P.
for property located in Chicago, Illinois.
4. The present and future liability (including any Environmental Liability
and any other damage to Persons or Property), if any, of any Borrower
and with respect to the Property of any of Borrower or any of its
Subsidiaries which is reasonably to arise in connection with
Requirements of Environmental Law, Environmental Permits and other
environmental matters will not have a Material Adverse Effect, except as
described in the following documents:
a. Phase I Environmental Site Assessment dated March 27,
1996, conducted by ATEC Associates, Inc. for Ace Novelty
Company, located at 1855 Industrial Street, Los Angeles,
California 90021 (ATEC Project No. 45-07-960063).
b. Phase I Environmental Property Assessment Update dated
March 25, 1996, conducted by EPS Environmental Services,
Inc. for property located at 3815-3859 South Ashland
Avenue, Chicago, Illinois (Project No. 949-15036).
c. Phase II Magnetometer Survey, Limited Subsurface
Investigation, PCP Sampling and Asbestos Survey-
Assessment dated February 2, 1994, conducted by EPS
Environmental Services, Inc. for property located at
3815-59 South Ashland Avenue, Chicago, Illinois (Project
No. 369-03123R).
d. Assessment being prepared by Coopers & Lybrand L.L.P.
for property located in Chicago, Illinois.
-4-
SCHEDULE 7.2
PERMITTED LIENS
A. PLAY BY PLAY TOYS & NOVELTIES, INC.
1. Filed in Texas
a. Fin. Statement No. 95-081531
File Date April 25, 1995
Debtor Play By Play Toys & Novelties, Inc.
Secured Party Ingersoll-Rand Air Center
Affected Property Ingersoll-Rand Model HP100 SSR
Air Compressor S/N F11987
b. Fin. Statement No. 95-093792
File Date May 12, 1995
Debtor Play By Play Toys & Novelties, Inc.
Secured Party N.J. Malin & Associates, Inc.
Assignee of Secured
Party Raymond Leasing Corporation
Affected Property 2 Raymond Electric Walkies
2 Exide Batteries
2 Exide Chargers
c. Fin. Statement No. 95-149506
File Date July 31, 1995
Debtor Play By Play Toys & Novelties, Inc.
Secured Party Professional Leasing Services
Assignee of Secured
Party Oswego City Savings Bank
Affected Property Specific Corbey computer systems
(4) and related software
d. Fin. Statement No. 96-042066
File Date March 4, 1996
Debtor Play By Play Toys & Novelties, Inc.
Secured Party Southwest Lift, Inc.
Assignee of Secured
Party Toyota Motor Credit Corp.
Affected Property New Toyota Forklift Truck
-1-
e. Fin. Statement No. 96-050284
File Date March 14, 1996
Debtor Play By Play Toys & Novelties, Inc.
Secured Party Southwest Lift, Inc.
Assignee of Secured
Party Toyota Motor Credit Corp.
Affected Property New Toyota Forklift Truck
f. Fin. Statement No. 96-081669
File Date April 25, 1996
Debtor Play By Play Toys & Novelties, Inc.
Secured Party Southwest Lift, Inc.
Assignee of Secured
Party Toyota Motor Credit Corp.
Affected Property New Toyota Forklift Truck
g. Fin. Statement No. 95-036573
File Date February 28, 1995
Debtor Play By Play Toys & Novelties, Inc.
Secured Party Nationsbank of Texas, N.A.
Affected Property Certain accounts, inventory and
general intangibles
h. Fin. Statement No. 96-078785
File Date April 25, 1996
Debtor Play By Play Toys & Novelties, Inc.
Secured Party UPA Productions of America
Affected Property All right,
title and interest in
and to the fictional
character known as
Godzilla.
2. Filed in New York
a. Fin. Statement No. 95PK07439
File Date May 30, 1995
Debtor Play By Play Toys
Secured Party Jacom Computer Services, Inc.
Affected Property Lease 9516 dated March 22, 1995,
between Secured Party as Lessor
and TMI, Inc. and subsidiaries as
Lessee.
b. Fin. Statement No. 88026133
File Date February 1, 1988
Debtor TMI Corporation
Secured Party Storage Technology Corporation
-2-
c. Fin. Statement No. 87-260872
File Date August 25, 1987
Debtor TMI Corp.
Secured Party Storage Technology Corp.
-3-
B. ACE NOVELTY ACQUISITION CO., INC.
1. Ace Novelty Co., Inc. -- Filed in Washington
a. Fin. Statement No. 94-276-0934
File Date October 3, 1994
Debtor Ace Novelty Co., Inc.
Secured Party NELCO, Ltd.
Affected Property Lease of certain IBM computer
equipment and related software
b. Fin. Statement No. 94-276-0936
File Date October 3, 1994
Debtor Ace Novelty Co., Inc.
Secured Party NELCO, Ltd.
Assignee of
Secured Party Crestar Bank
Affected Property Lease of certain equipment
c. Fin. Statement No. 94-312-0127
File Date November 8, 1994
Debtor Ace Novelty Co., Inc. and subsidiaries
Secured Party Technology Credit Corporation
Assignee of
Secured Party Leasetec Corporation
Affected Property Master Lease Agreement No. 3104
between Debtor and Secured Party
relating to a certain voice
processing system
d. Fin. Statement No. 95-340-0174
File Date December 6, 1995
Debtor Ace Novelty Co., Inc.
Secured Party Copelco Capital, Inc.
Affected Property Lease of a certain Sharp copier
and sorter
e. Fin. Statement No. 93-217-0009
File Date August 5, 1993
Debtor Ace Novelty Co.
Secured Party Scitex America Corp.
Affected Property Certain office equipment
-4-
f. Fin. Statement No. 94-186-0617
File Date July 5, 1994
Debtor Ace Novelty Co.
Secured Party Fuji Photo Film U.S.A. Inc.
Affected Property Certain office equipment
g. Fin. Statement No. 94-080-0683
File Date March 21, 1994
Debtor Ace Novelty Co.
Secured Party International Video
Affected Property Productions, Inc. Certain
equipment related to the motion
picture entitled "Stoned
Protectors".
h. Fin. Statement No. 94-214-0067
File Date August 2, 1994
Debtor Ace Novelty Co., Inc.
Secured Party Momentum Corporation
Affected Property Lithograph plates, film,
prepressed proofing materials
and miscellaneous lithographic
supplies.
2. Ace Novelty Co., Inc. -- Filed in California
a. Fin. Statement No. 94029394
File Date February 14, 1994
Debtor Ace Novelty Co.
Secured Party International Video
Affected Property Productions, Inc. Certain
equipment related to motion
picture entitled "Stone
Protectors".
3. Acme Acquisition Corp. -- Filed in California
a. Fin. Statement No. 93078466
File Date April 19, 1993
Debtor Acme Acquisition Corp., d/b/a Tri-W
Secured Party Rental TRAK International,
Affected Property Inc. Consignment of 2 TRAK
International Sky Trak Rough
Terrain Forklifts
b. Fin. Statement No. 93078912
File Date April 19, 1993
Debtor ACME Acquisition Corp.
Secured Party AEL Leasing Co., Inc.
Assignee of
Secured Party American Commercial Credit Corp.
-5-
Affected Property Lease of certain computer
equipment
c. Fin. Statement No. 9513260515
File Date May 10, 1995
Debtor ACME Acquisition Corporation
Secured Party IBM Credit Corporation
Affected Property Lease of certain computer
equipment
4. Specialty Manufacturing Ltd. -- Filed in Washington
a. Fin. Statement No. 95-307-0453
File Date November 3, 1995
Debtor Specialty Manufacturing, Inc.
Secured Party Momentum, A PrimeSource
Affected Property Company Certain lithograph
plates, film, prepressed
proofing materials, chemistry
and related lithographic
supplies
b. Fin. Statement No. 95-307-0453
File Date November 3, 1995
Debtor Specialty Manufacturing, Inc.
Secured Party Momentum, a PrimeSource
Affected Property Company Lithographic plates,
film, prepressed proofing
materials, chemistry and
miscellaneous lithographic
supplies.
-6-
SCHEDULE 7.3
CONTINGENT OBLIGATIONS
1. Play By Play Toys & Novelties, Inc. -- corporate guaranty of (mortgage)
loan from NationsBank of Texas, N.A. to Connor Kim for purchase of
residence in Del Rio, Texas; Current outstanding principal balance of
the note is $64,005.01. Note matured on 5/16/96 and bank is discussing
with Mr. Kim his plan of action with respect to this note.
2. Play By Play Toys & Novelties, Inc. -- corporate guaranty of office
lease between C&CB L.L.C. and Crutcher-Tufts Corporation. Lease is dated
January 16, 1996, and the lease term is from February 1, 1996 to January
31, 1999 and calls for monthly rental payments of $1,000 per month plus
proportionate share of operating expenses. C&CB acts as a sales
representative organization for Play By Play.
3. Play By Play Toys & Novelties, Inc. -- corporate guaranty of the
obligations of Play By Play Toys & Novelties Europe, S.A. to Banco del
Comercio up to an aggregate amount not to exceed (U.S.) $750,000
pursuant to a letter agreement dated June 11, 1996.
SCHEDULE 7.6
EXISTING TRANSACTIONS WITH RELATED PARTIES
1. All related party transactions discussed in the Form 10-K of Play By
Play Toys & Novelties, Inc. ("Play By Play") for the fiscal year ended
July 31, 1995.
2. All related party transactions discussed in the Proxy Statement of Play
By Play dated November 21, 1995.
3. Tomas Duran, a director of Play By Play, provides medical benefits
consulting services for Play By Play through his company Duran Insurance
Brokerage.
4. Buster Auerbach, Play By Play's construction contractor, is on Play By
Play's group medical insurance plan. He reimburses Play By Play for the
full amount of the premiums.
5. Arturo Torres' credit card is used to purchase all airline tickets for
Play By Play travel, for which he is reimbursed in full.
Exhibit 10.2
PROMISSORY NOTE
June 20, 1996 $3,000,000
San Antonio, Texas
FOR VALUE RECEIVED, Play by Play Toy & Novelties, Inc., a Texas
corporation ("Maker"), promises to pay to the order of Arturo G. Torres the sum
of Three Million Dollars ($3,000,000), with interest thereon from the date
hereof until paid at a per annum rate equal to the lesser of (x) the Alternate
Base Rate (as defined in that certain Credit Agreement of even date herewith
(the "Credit Agreement") among the Company, Ace Novelty Acquisition Co., Inc., a
Texas corporation, Newco Novelty, Inc., a Texas corporation, each of the
financial institutions which is a signatory thereto (collectively, the
"Lenders") and Chemical Bank, as agent ("Chemical")) and (y) the maximum rate of
nonusurious interest which, under applicable law, may be charged, collected or
received by Lender from time to time with respect to the Loan (the "Maximum
Lawful Rate"). Said interest shall be payable monthly in arrears with principal
payable upon demand or, if no demand is sooner made, on June 21, 1998. Any
amount of principal and, to the extent permitted by applicable law, interest
that is not paid on the day when the same first became due and payable shall
bear interest, payable on demand, at a per annum rate equal to the lesser of (x)
the Alternate Base Rate plus two percent (2%) and (y) the Maximum Lawful Rate.
No liability shall arise against any holder or holders hereof from any
act, or the omission of any act, pertaining to the collection of, or failure to
collect, any collateral which said holder or holders may hold to secure this
obligation.
No act or omission of any kind on the part of the holder hereof shall in
any way whatsoever affect or impair this Promissory Note. This Promissory Note
shall extend to, and be binding upon Maker and its respective heirs, personal
representatives, successors and permitted assigns. Maker shall have the
privilege of prepaying this Promissory Note at any time, in whole or in part
without premium or other penalty.
Maker hereby waives demand for payment, presentment, notice of
presentment, notice of acceleration, notice of intent to accelerate, protest,
notice of protest, and notice of dishonor, and hereby consents to any renewal or
extension of time of payment of this Promissory Note, without notice, and
without affecting or releasing the liability of Maker.
Maker hereby agrees to pay all reasonable fees and expenses (including,
without limitation, attorneys' fees) incurred by any holder of this Promissory
Note in connection with any proceedings to enforce this Promissory Note or
collect the indebtedness evidenced hereby.
This Promissory Note shall be governed by and construed in accordance with
the internal laws of the State of Texas.
The payment of the indebtedness evidenced hereby has been subordinated to
the payment of certain indebtedness owing to Chemical Bank, Agent, pursuant to
the terms of that certain Subordination Agreement dated effective June 20, 1996,
between Play By Play Toys & Novelties, Inc., Arturo Torres and Chemical Bank,
Agent.
IN WITNESS WHEREOF, this Promissory Note has been duly executed this 20th
day of June, 1996.
PLAY BY PLAY TOYS & NOVELTIES, INC.
By /s/ MARK A. GAWLIK
Mark A. Gawlik
President
Attest:
BY /s/ JOE GUERRA
Joe Guerra
Secretary
Exhibit 10.3
SUBORDINATION AGREEMENT
(ARTURO TORRES)
THIS SUBORDINATION AGREEMENT ("Agreement") is dated effective as of June
20, 1996, and is by and among ARTURO TORRES ("Subordinate Creditor"), of Bexar
County, Texas, PLAY BY PLAY TOYS & NOVELTIES, INC. ("Play By Play"), a Texas
corporation, and CHEMICAL BANK, a New York banking corporation, as Agent (the
"Agent") for the financial institutions (collectively the "Lenders") which are
now or may hereafter become parties to that certain Credit Agreement dated as of
June 20, 1996, by and among Play By Play, Ace Novelty Acquisition Co., Inc.
("Ace"), a Texas corporation, Newco Novelty, Inc. ("Newco"), a Texas
corporation, Agent and Lenders (said Credit Agreement, as amended, extended,
supplemented and restated from time to time, being hereinafter referred to as
the "Credit Agreement").
RECITALS:
1. Reference is hereby made to that certain Asset Purchase Agreement (the
"Asset Purchase Agreement") dated as of May 1, 1996, executed by and among
Subordinate Creditor, Borrowers, Specialty Manufacturing Ltd., a British
Columbia, Canada corporation, Acme Acquisition Corp., a Washington corporation,
Benjamin H. Mayers, Lois E. Mayers, Ronald S. Mayers, Karen Gamoran and Beth
Weisfield. In connection with consummating the transactions contemplated by the
Asset Purchase Agreement, (a) Subordinate Creditor has advanced and loaned to
Play By Play the amount of $3,000,000 and (b) Play By Play has executed and
delivered to Subordinate Creditor a promissory note of even date herewith
(which, as it may have been or may be renewed, extended, modified or rearranged
with the prior written consent of Agent, is called the "Subordinate Note") in
the original principal sum of $3,000,000 in order to evidence Ace's repayment
obligations to Subordinate Creditor with respect to such loan (a copy of the
Subordinate Note being attached hereto as EXHIBIT A). The Asset Purchase
Agreement, the Subordinate Note, and all other documents and instruments now or
hereafter executed in connection with the Asset Purchase Agreement are sometimes
hereinafter collectively referred to as the "Asset Purchase Documents."
2. Lenders have agreed, subject to the terms and conditions of the Credit
Agreement, to make certain loans to Borrowers (as defined in the Credit
Agreement), including without limitation, Ace, Play By Play and Newco, as
evidenced by various promissory notes (which, as they may hereafter be renewed,
extended, rearranged or replaced, being herein collectively called "Senior
Notes") now or hereafter executed by Borrowers, payable to the order of the
applicable Lenders. Pursuant to the terms of the Credit Agreement, Borrowers
shall also incur certain other indebtedness and become responsible for the
performance of certain other obligations to Agent and Lenders in accordance with
the terms thereof.
3. As a condition to their advancing funds or otherwise extending credit
to Borrowers under the Credit Agreement, Agent and Lenders have required Ace,
Play By Play and Subordinate Creditor to execute and deliver this Agreement to
Agent for the benefit of Lenders.
AGREEMENTS:
In consideration of the premises and the mutual agreements herein set
forth, Ace, Play By Play, Subordinate Creditor and Agent hereby agree as
follows:
1. As used in this Agreement, the following terms shall have the
respective meanings indicated:
(a) SENIOR INDEBTEDNESS shall mean (a) all indebtedness and
obligations of any and all Borrowers and Guarantors (as defined in the Credit
Agreement) incurred under the terms of the Credit Agreement and all other
documents executed or delivered to Agent or any of the Lenders in connection
therewith, including without limitation, the indebtedness evidenced by the
Senior Notes and any and all Applications (as defined in the Credit Agreement),
and (b) all renewals, extensions, rearrangements, refundings and modifications
of any and all of such indebtedness and obligations. The Senior Indebtedness
shall include amounts accruing subsequent to the filing by any Borrower, any
Guarantor or any other obligors under the Credit Agreement of any bankruptcy,
receivership, insolvency or like petition. Without limiting the generality of
the foregoing, Senior Indebtedness shall include all obligations for fees, for
enforcement and collection costs, to indemnify, to reimburse for expenses and to
reimburse for protective advances (whether for the payment of taxes, insurance
premiums, the preservation or protection of property or the title thereto or for
any other reason) arising under or incurred pursuant to the Credit Agreement or
any other documents executed or delivered to Agent or any of the Lenders in
connection therewith.
(b) SUBORDINATED INDEBTEDNESS shall mean all indebtedness evidenced
by the Subordinate Note, including without limitation, all interest, principal,
fees and premiums, if any, and all renewals, extensions, increases,
rearrangements, refundings and modifications of the Subordinate Note consented
to in writing by Agent and the Required Lenders (as defined in the Credit
Agreement).
2. Unless and until all Senior Indebtedness shall have been fully paid and
satisfied in cash and the obligation of Lenders to make any further extensions
of credit to any Borrower or any other party under the Credit Agreement shall
have ceased and terminated, Subordinate Creditor will not (except as otherwise
provided in SECTIONS 3 and 4 hereof) do any of the following without the prior
written consent of Agent: (a) ask, demand, sue for, take or receive, or retain,
from any Borrower or any other person or entity, by setoff or in any other
manner, payment of all or any part of the Subordinated Indebtedness; (b)
forgive, cancel or discharge, or permit to be converted into any evidence of
equity or ownership, any of the Subordinated Indebtedness; (c) ask, demand or
receive any security for the Subordinated Indebtedness; (d) amend or modify the
Subordinate Note, the Guaranty or any other document now or hereafter existing
in connection with the Subordinated Indebtedness, except with the prior written
consent of Agent and Required Lenders; or (e) declare the Subordinated
Indebtedness due and payable by reason of any default or for any other reason,
or bring or join with
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any creditor in bringing any proceeding against any Borrower or any Guarantor
under any bankruptcy, reorganization, readjustment or arrangement of debt,
suspension of payments, receivership, liquidation or insolvency or similar law
or statute now or hereafter in effect ("Proceedings"). Subordinate Creditor
hereby directs Play By Play and all other Borrowers to make, and Play By Play
hereby agrees to make, such prior payment of the Senior Indebtedness to Agent
for the ratable benefit of the Lenders.
3. Notwithstanding any provisions to the contrary contained in this
Agreement, Play By Play may pay, and Subordinate Creditor may accept and apply,
regularly scheduled payments of accrued interest only (but not principal) on the
Subordinated Indebtedness evidenced by the Subordinate Note attached hereto as
EXHIBIT A, as it may be renewed, extended or modified with the prior written
consent of Agent and the Required Lenders, so long as no Default or Event of
Default shall have occurred under the Credit Agreement (after giving effect to
such regularly scheduled interest payment or payments) which has not been cured
to the reasonable satisfaction of Agent and the Required Lenders at the time of
the applicable regularly scheduled payment of interest. Agent acknowledges and
agrees that if any regularly scheduled payment of interest on the Subordinated
Indebtedness was not paid by Play By Play to Subordinate Creditor when due or
when otherwise allowed hereby as a result of the occurrence of any Default or
Event of Default at the time such regularly scheduled payment of interest was
originally due, Play By Play shall thereafter be entitled to promptly pay to
Subordinate Creditor any such regularly scheduled payments of interest then
owing on the Subordinated Indebtedness once such Default or Event of Default has
been cured to the reasonable satisfaction of Agent and the Required Lenders and
no other Defaults or Events of Default have occurred which are then continuing.
4. Notwithstanding any provisions to the contrary contained in this
Agreement, at any time after Agent and Lenders have (i) received from Borrowers
the Monthly Unaudited Financial Statements for the month ending November 30,
1996 pursuant to SECTION 6.3(B) of the Credit Agreement, and (ii) had five (5)
business days to review such Monthly Unaudited Financial Statements to
reasonably confirm compliance with subparagraph (a) below, Play By Play may
prepay, and Subordinate Creditor may demand, accept and apply, any full or
partial prepayments of principal and accrued interest on the Subordinated
Indebtedness, so long as all of the following conditions have been fully
satisfied at the time of such prepayment or prepayments (after giving effect to
such prepayment or prepayments):
(a) No Default or Event of Default shall have occurred under the
Credit Agreement, including without limitation, any violation of SECTION 6.3 and
SECTIONS 7.12 through 7.16 thereof, which has not been cured to the reasonable
satisfaction of Agent and the Required Lenders;
(b) Availability (as defined in the Credit Agreement) as of the date
of such prepayment or prepayments, calculated after giving effect to such
prepayment or prepayments, shall be greater than or equal to the level of
projected Availability set forth for the end of the calendar month in which such
prepayment is being made according to Borrowers' financial projections attached
hereto as EXHIBIT B;
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(c) The ratio of (i) the sum of accounts payable and documentary
Letters of Credit (as defined in the Credit Agreement) then outstanding to (ii)
inventory for Borrowers and their Subsidiaries (as defined in the Credit
Agreement), on a consolidated basis, as of the end of the calendar month ending
immediately prior to the date of such prepayment or prepayments (as determined
on the basis of accounts payable agings, Letters of Credit status reports and
inventory designations for the Borrowers and their Subsidiaries, on a
consolidated basis, as of the end of the calendar month ending immediately prior
to the date of such prepayment or prepayments) shall not exceed by more than
four percent (4%) the projected ratio of (i) the sum of accounts payable and
documentary Letters of Credit then outstanding to (ii) inventory for Borrowers
and their Subsidiaries, on a consolidated basis, as determined by reference to
Borrowers' financial projections attached hereto as EXHIBIT B;
(d) The amount of such prepayment shall be in a minimum amount of
$500,000.00 or the outstanding principal balance of the Subordinated
Indebtedness, whichever is less; and
(e) Contemporaneously with the receipt of such prepayment or
prepayments by Subordinate Creditor, written notice confirming the amount and
receipt of such prepayment or prepayments is provided to Agent by Subordinate
Creditor.
With respect to Borrowers' delivery of accounts payable agings and inventory
reports for calendar months ending as of or after November 30, 1996, the parties
hereto acknowledge and agree that Play By Play may not pay, and Subordinate
Creditor may not accept and apply, any prepayments in accordance with the terms
of this SECTION 4 unless and until Agent and Lenders have received from
Borrowers at the time of the proposed prepayment or prepayments accounts payable
agings and inventory reports for the end of the immediately preceding calendar
month as of the date of such proposed prepayment or prepayments AND Agent and
Lenders have had three (3) business days to review such accounts payable agings
and inventory reports to reasonably confirm compliance with subparagraph (c)
above.
5. (a) Upon any distribution of the assets of any Borrower or any
Guarantor in connection with any dissolution, winding up, liquidation or
reorganization of such Borrower or such Guarantor (whether in Proceedings or
upon an assignment for the benefit of creditors or any other marshalling of the
assets and liabilities of such Borrower or such Guarantor, or otherwise), Agent
shall first be entitled to receive, for the ratable benefit of Lenders, full
payment in cash of all Senior Indebtedness before Subordinate Creditor shall be
entitled to receive any payment in respect of the Subordinated Indebtedness.
Upon any such dissolution, winding up, liquidation or reorganization, any
payment or distribution of assets of any Borrower or any Guarantor of any kind
or character, whether in cash, property or securities, to which Subordinate
Creditor would be entitled except for the provisions of this Agreement
(including any such payment or distribution which may be payable or deliverable
by virtue of the provisions of any securities which are subordinated as junior
in right of payment to the Subordinated Indebtedness) shall be made by the
liquidating trustee or agent or other persons making such payment or
distribution (whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise) (a "Paying Party"), or if received by Subordinate Creditor, by
Subordinate Creditor, directly to Agent, to the extent
4
necessary to fully pay in cash the Senior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution to Agent. Subordinate
Creditor hereby authorizes and directs each Paying Party to pay over to Agent
upon demand by Agent, all such payments or distributions without the necessity
of any inquiry as to the status or balance of the Senior Indebtedness, and
without further notice to or consent of Subordinate Creditor. In furtherance of
the foregoing, but not by way of limitation thereof, in the event any Borrower
or any Guarantor is subject to any Proceeding, with the result that such
Borrower or such Guarantor is excused from the obligation to pay all or part of
the interest otherwise payable in respect of the Senior Indebtedness during the
period subsequent to the commencement of any such Proceeding, Subordinate
Creditor agrees that all or such part of such interest, as the case may be,
shall be payable out of, and to that extent diminish and be at the expense of,
reorganization dividends or distributions in respect of the Subordinated
Indebtedness.
(b) Subordinate Creditor hereby irrevocably authorizes and empowers
Agent to demand, sue for, collect and receive every such payment or distribution
and give acquittance therefor, to execute, sign, endorse, transfer and deliver
any and all receipts and instruments, and to file claims and take such other
proceedings, all in the name of Subordinate Creditor, or otherwise, as Agent may
deem necessary or advisable for the enforcement of this Agreement, but Agent has
no obligation to do so.
(c) In the event any payment or distribution of assets of any
Borrower or any Guarantor of any kind or character, whether in cash, property or
securities, and whether or not pursuant to any dissolution, winding up,
liquidation or reorganization, not permitted by or in accordance with the
provisions of this Agreement shall be received by Subordinate Creditor, such
payment or distribution to Subordinate Creditor shall not be commingled with
other funds and shall be held in trust for the benefit of, and shall be paid
over or delivered to, Agent, or to its representative, in precisely the form
received (except for the endorsement or assignment of Subordinate Creditor where
necessary). In the event of any failure by Subordinate Creditor to make any such
endorsement or assignment, Agent is hereby irrevocably authorized to make same.
(d) Notwithstanding the terms and provisions of this Agreement,
Subordinate Creditor shall not be entitled to be subrogated to any of the rights
of Agent or any Lender against any Borrower, any Guarantor or any other person
or entity or with respect to any collateral security or rights of offset held by
Agent or any Lender for the payment of the Senior Indebtedness unless and until
the Senior Indebtedness has been fully paid and satisfied in cash and the
obligation of Lenders to make any further extensions of credit under the Credit
Agreement to Borrowers or any other person or entity shall have ceased and
terminated. Once the Senior Indebtedness has been fully and finally paid in cash
and Lenders have no further obligation to make any additional extensions of
credit under the Credit Agreement to Borrowers or any other person or entity,
Subordinate Creditor shall be subrogated to the rights of Agent or any Lender
against any Borrower, any Guarantor or any other person or entity or with
respect to any collateral security as a result of any payment by Subordinate
Creditor of all or any portion of the Senior Indebtedness.
5
(e) The provisions of this Agreement are solely for the purpose of
defining the relative rights of Subordinate Creditor, Lenders and Agent, and are
solely for the benefit of Agent and Lenders and may not be relied upon or
enforced by any party other than Agent and Lenders, and nothing contained in
this Agreement is intended to or shall impair the obligations of Ace and Play By
Play, which are unconditional and absolute, to pay to Subordinate Creditor the
principal of and interest on the Subordinated Indebtedness as and when the same
shall become due and payable in accordance with its terms, or to affect the
relative rights of Subordinate Creditor and creditors of Borrowers or Guarantors
other than Agent and Lenders.
(f) Agent (and if required by SECTION 10.11 of the Credit Agreement,
Lenders) may, at any time and from time to time, without the consent of or
notice to Subordinate Creditor, and without impairing or releasing the
obligations of Subordinate Creditor hereunder (i) change the manner, place or
terms of payment or change or extend the time of payment of, or renew, increase
or alter, the Senior Indebtedness or the security therefor, or otherwise amend
in any manner the Credit Agreement or any document executed in connection
therewith; (ii) exercise or refrain from exercising any rights against Borrowers
and Guarantors; (iii) apply any sums by whomsoever paid or however realized to
the Senior Indebtedness; (iv) sell, exchange, release, surrender, realize upon
or otherwise deal with in any manner and in any order any property whatsoever
and by whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, any Senior Indebtedness; (v) release anyone liable in any manner for
the payment or collection of any Senior Indebtedness; and (vi) settle or
compromise all or any part of the Senior Indebtedness, and subordinate the
payment of any part of the Senior Indebtedness to the payment of any other
indebtedness (including any other part of the Senior Indebtedness). No
invalidity, irregularity or unenforceability of all or any part of the Senior
Indebtedness or of any collateral security shall affect, impair or be a defense
to this Agreement.
6. Subordinate Creditor represents and warrants that no liens, security
interests or assignments exist to secure any Subordinated Indebtedness, and
Subordinate Creditor agrees that no liens, security interests or assignments
will arise or will be taken in the future to secure any Subordinated
Indebtedness.
7. Subordinate Creditor, its successors or assigns or any other legal
holder of the Subordinated Indebtedness shall not acquire by subrogation,
contract or otherwise with respect to any Subordinated Indebtedness any lien
upon or other estate, right or interest in any property (including but not
limited to any which may arise in respect to real estate taxes, assessments or
other governmental charges) which is or may be prior in right to any collateral
security for the Senior Indebtedness or any renewal, extension, refinancing,
consolidation, modification or supplement thereof.
8. Subordinate Creditor represents to Agent that the Subordinated
Indebtedness is in good standing and in full force and effect and no breaches or
defaults exist thereunder which have not been cured or waived, and that the
outstanding principal balance of the Subordinate Note on this date is
$3,000,000.
6
9. This Agreement extends to and covers all amounts due on the Senior
Indebtedness both before and after the filing of any Proceeding by or against
any Borrower or any Guarantor, and Agent and Lenders shall be entitled to
amounts accruing on the Senior Indebtedness from the date of filing of said
Proceeding to the date of full and final payment in cash of the Senior
Indebtedness.
10. No part of the Subordinated Indebtedness or any instrument evidencing
the same has been heretofore transferred or assigned, and Subordinate Creditor
will not transfer or assign any part of the Subordinated Indebtedness nor any
instrument evidencing the same while the Senior Indebtedness remains unpaid,
unless such transfer or assignment is made subject to the provisions of this
Agreement. Any instrument evidencing the Subordinated Indebtedness will contain
provisions referring specifically to this Agreement.
11. In the event of a breach by any party hereto of any of the provisions
of this Agreement, or in the event any representation or warranty contained
herein or furnished to Agent by any party hereto shall prove to have been false
when made, Agent shall have all rights provided to it under law or equity,
including without limitation, the right to sue the breaching party or parties to
recover damages suffered by Agent as a result of such breach, and the right to
obtain injunctive relief.
12. Subordinate Creditor shall stamp or type in a conspicuous place on the
Subordinate Note and any other instrument evidencing any of the Subordinated
Indebtedness the following notation:
The payment of the indebtedness evidenced hereby has been
subordinated to the payment of certain indebtedness owing to
Chemical Bank, Agent, pursuant to the terms of that certain
Subordination Agreement dated effective June 20, 1996, between Play
By Play Toys & Novelties, Inc., Arturo Torres and Chemical
Bank, Agent.
Subordinate Creditor also hereby agrees to hereafter supplement or modify any
such notation previously stamped or typed upon any instrument evidencing any of
the Subordinated Indebtedness in order to properly reflect any subsequent
modification of this Agreement pursuant to a written agreement by Subordinate
Creditor and Agent, and consented to in writing by the Required Lenders.
13. This Agreement is a continuing one, and all Senior Indebtedness to
which it applies or may apply under the terms hereof shall conclusively be
presumed to have been created in reliance hereon.
14. Ace and Play By Play hereby jointly and severally agree to pay upon
demand all attorneys' fees and expenses reasonably incurred by Agent in
connection with the enforcement of its rights under this Agreement.
7
15. Subordinate Creditor, and Play By Play agree that, if at any time all
or any part of any payment previously applied by Agent to the Senior
Indebtedness is or must be returned by Agent or any Lender--or recovered from
Agent or any Lender--for any reason (including the order of any bankruptcy
court), this Agreement shall automatically be reinstated to the same effect, as
if the prior application had not been made, and, in addition, Ace and Play By
Play hereby jointly and severally agree to indemnify Agent and Lenders against,
and to save and hold Agent and the Lenders harmless from any required return by
Agent or any Lender--or recovery from Agent or any Lender--of any such payments
because of its being deemed preferential under applicable bankruptcy,
receivership or insolvency laws, or for any other reason.
16. Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering it against receipt for
it, by depositing it with an overnight delivery service or by depositing it in a
receptacle maintained by the United States Postal Service, postage prepaid,
registered or certified mail, return receipt requested, addressed to the
respective parties at the following addresses (and if so given, shall be deemed
given when mailed):
If to Subordinate Creditor:
Arturo Torres
R.R. 1, Box 112T
Karnes City, Texas 78118
If to Borrowers:
Ace Novelty Acquisition Co., Inc.
4400 Tejasco
San Antonio, Texas 78218
Attention: Mr. Mark A. Gawlik
Play By Play Toys & Novelties, Inc.
4400 Tejasco
San Antonio, Texas 78218
Attention: Mr. Mark A. Gawlik
If to Agent:
Chemical Bank
633 Third Avenue, Seventh Floor
New York, New York 10017
Attention: Credit Deputy
Subordinate Creditor's, Ace's, Play By Play's and Agent's respective addresses
for notice may be changed at any time and from time to time, but only after ten
(10) days' advance written notice of such address change has been given to the
other parties hereto, and each such party's address for notice shall be the most
recent such address furnished in writing by such party. Actual notice, however
and from whomever given or received, shall always be effective when received.
8
17. This Agreement shall not be changed orally but shall be changed only
by agreement in writing signed by Subordinate Creditor and Agent (without any
necessity for notice to or consent by Play By Play and Ace, which are expressly
WAIVED by Play By Play and Ace), with any such amendment to be consented to in
writing by the Required Lenders to be effective. No course of dealing between
the parties, no usage of trade and no parole or extrinsic evidence of any nature
shall be used to supplement or modify any of the terms or provisions of this
Agreement.
18. If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws, the legality, validity and
enforceability of the remaining provisions of this Agreement shall not be
affected thereby, and this Agreement shall be liberally construed so as to carry
out the intent of the parties to it.
19. This Agreement (a) shall be binding upon and inure to the benefit of
the parties hereto and their respective personal representatives, heirs,
successors and assigns; (b) may be modified or amended only by a writing and
signed by each party hereto; (c) may be executed in several counterparts, and by
the parties hereto on separate counterparts and each counterpart when so
executed and delivered shall constitute an original agreement, and all such
separate counterparts shall constitute but one and the same agreement; and (d)
embodies the entire agreement and understanding between the parties with respect
to the subject matter hereof and supersedes all prior agreements, consents and
understandings relating to such subject matter.
20. EXCEPT AS PROHIBITED BY APPLICABLE LAW, EACH PARTY HERETO WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.
21. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE APPLICABLE LAWS OF THE STATE OF NEW YORK (OTHER THAN THE CONFLICTS OF LAWS
PRINCIPLES THEREOF) AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.
9
EXECUTED as of the date first above written.
"SUBORDINATE CREDITOR":
/s/ ARTURO TORRES
ARTURO TORRES
"PLAY BY PLAY": PLAY BY PLAY TOYS & NOVELTIES, INC.,
a Texas corporation
By: /s/ MARK A. GAWLIK
Name: MARK A. GAWLIK
Title: PRESIDENT
10
"AGENT": CHEMICAL BANK, AGENT
By: /s/ WINSTON CHANG
Name: WINSTON CHANG
Title: VICE PRESIDENT
EXHIBIT A - Instrument Evidencing Subordinated Indebtedness
11
EXHIBIT A
PROMISSORY NOTE
June 20, 1996 $3,000,000
San Antonio, Texas
FOR VALUE RECEIVED, Play by Play Toy & Novelties, Inc., a Texas
corporation ("Maker"), promises to pay to the order of Arturo G. Torres the sum
of Three Million Dollars ($3,000,000), with interest thereon from the date
hereof until paid at a per annum rate equal to the lesser of (x) the Alternate
Base Rate (as defined in that certain Credit Agreement of even date herewith
(the "Credit Agreement") among the Company, Ace Novelty Acquisition Co., Inc., a
Texas corporation, Newco Novelty, Inc., a Texas corporation, each of the
financial institutions which is a signatory thereto (collectively, the
"Lenders") and Chemical Bank, as agent ("Chemical")) and (y) the maximum rate of
nonusurious interest which, under applicable law, may be charged, collected or
received by Lender from time to time with respect to the Loan (the "Maximum
Lawful Rate"). Said interest shall be payable monthly in arrears with principal
payable upon demand or, if no demand is sooner made, on June 21, 1998. Any
amount of principal and, to the extent permitted by applicable law, interest
that is not paid on the day when the same first became due and payable shall
bear interest, payable on demand, at a per annum rate equal to the lesser of (x)
the Alternate Base Rate plus two percent (2%) and (y) the Maximum Lawful Rate.
No liability shall arise against any holder or holders hereof from any
act, or the omission of any act, pertaining to the collection of, or failure to
collect, any collateral which said holder or holders may hold to secure this
obligation.
No act or omission of any kind on the part of the holder hereof shall in
any way whatsoever affect or impair this Promissory Note. This Promissory Note
shall extend to, and be binding upon Maker and its respective heirs, personal
representatives, successors and permitted assigns. Maker shall have the
privilege of prepaying this Promissory Note at any time, in whole or in part
without premium or other penalty.
Maker hereby waives demand for payment, presentment, notice of
presentment, notice of acceleration, notice of intent to accelerate, protest,
notice of protest, and notice of dishonor, and hereby consents to any renewal or
extension of time of payment of this Promissory Note, without notice, and
without affecting or releasing the liability of Maker.
Maker hereby agrees to pay all reasonable fees and expenses (including,
without limitation, attorneys' fees) incurred by any holder of this Promissory
Note in connection with any proceedings to enforce this Promissory Note or
collect the indebtedness evidenced hereby.
12
This Promissory Note shall be governed by and construed in accordance with
the internal laws of the State of Texas.
The payment of the indebtedness evidenced hereby has been subordinated to
the payment of certain indebtedness owing to Chemical Bank, Agent, pursuant to
the terms of that certain Subordination Agreement dated effective June 20, 1996,
between Play By Play Toys & Novelties, Inc., Arturo Torres and Chemical Bank,
Agent.
IN WITNESS WHEREOF, this Promissory Note has been duly executed this 20th
day of June, 1996.
PLAY BY PLAY TOYS & NOVELTIES, INC.
By ___________________
Mark A. Gawlik
President
Attest:
By ___________________
Joe Guerra
Secretary
13
Exhibit 10.4
LOAN AGREEMENT
This LOAN AGREEMENT ("Agreement") is made and entered into as of this 20th
day of June, 1996.
BY AND BETWEEN ARTURO G. TORRES, an
individual, hereinafter
referred to as the
"Lender"
AND PLAY BY PLAY TOYS & NOVELTIES, INC., a Texas
corporation, hereinafter
referred to as the
"Company"
W I T N E S S E T H:
WHEREAS, the Lender desires to lend certain funds to the Company and the
Company desires to borrow from the Lender said funds upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. PURPOSE. The purpose of this Agreement is to establish the rights and
obligations in a certain loan of Three Million Dollars ($3,000,000) (the
"Loan").
2. PROMISSORY NOTE. The Lender agrees to lend the Company the aggregate
principal amount of the Loan on or before the date hereof; said Loan to be
evidenced by a promissory note (the "Promissory Note") in the above amount, with
interest on the outstanding principal amount thereof at the rate specified in
the Promissory Note, said interest and principal to be payable as set forth
therein. The Company shall execute and deliver the Promissory Note to evidence
the Loan, which shall be substantially in the form attached hereto and marked
Exhibit "A".
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a basis upon which
this Agreement is made, the Lender hereby relies upon, and the Company hereby
represents and warrants to the Lender as of the date hereof and as of the date
upon which funds are remitted by the Lender hereunder, as follows:
A. CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Texas, and is duly qualified and in good standing under
the laws of each jurisdiction in which the conduct of its business
or the ownership of its assets requires such qualification;
B. AUTHORITY. The Company has all necessary power and
authority to execute and perform this Agreement and to consummate
the transactions contemplated herein;
C. APPROVALS. The execution and performance of this Agreement
will not violate any provision of the applicable laws of the State
of Texas or the United States of America, or the Articles of
Incorporation or Bylaws of the Company, and will not conflict with
or result in any breach of any of the terms, conditions or
provisions of, or constitute a default or acceleration, in whole or
in part, under, or result in the creation or imposition of any lien,
charge or encumbrance upon any of the properties or assets of the
Company pursuant to the terms of any indenture, mortgage, deed of
trust, order, judgment, contract, or other agreement or instrument
to which the Company is a party or by which it or its properties are
bound; and
D. BINDING AGREEMENT. This Agreement has been duly executed
and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company
in accordance with its terms.
4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE LENDER. The obligations
of the Lender to make the Loan and remit the funds thereunder is conditioned
upon and subject to the fulfillment and satisfaction at the time of funding, or
prior thereto, of each of the following conditions, any or more of which may be
waived by the Lender only by a writing directed to the Company:
A. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in this Agreement shall be
correct in all respects immediately prior to the time the funds are
remitted, except as to representations which are expressly limited
to a state of facts existing at a time prior thereto, and shall be
deemed to have been made as of the time of remittance; and
B. REQUISITE ACTIONS. All actions required by law to have been
taken by the Board of Directors and stockholders of the Company
shall have been duly and validly taken.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Texas.
-2-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ARTURO G. TORRES
BY /s/ JON C. DENNISON
JON C. DENNISON,
Attorney-in-Fact
BY /s/ VIVIAN TORRES
VIVIAN TORRES,
Attorney-in-Fact
"LENDER"
PLAY BY PLAY TOYS & NOVELTIES, INC.
BY /S/ MARK A. GAWLIK
MARK A. GAWLIK, PRESIDENT
"COMPANY"
-3-
EXHIBIT "A"
PROMISSORY NOTE
June 20, 1996 $3,000,000
San Antonio, Texas
FOR VALUE RECEIVED, Play by Play Toy & Novelties, Inc., a Texas
corporation ("Maker"), promises to pay to the order of Arturo G. Torres the sum
of Three Million Dollars ($3,000,000), with interest thereon from the date
hereof until paid at a per annum rate equal to the lesser of (x) the Alternate
Base Rate (as defined in that certain Credit Agreement of even date herewith
(the "Credit Agreement") among the Company, Ace Novelty Acquisition Co., Inc., a
Texas corporation, Newco Novelty, Inc., a Texas corporation, each of the
financial institutions which is a signatory thereto (collectively, the
"Lenders") and Chemical Bank, as agent ("Chemical")) and (y) the maximum rate of
nonusurious interest which, under applicable law, may be charged, collected or
received by Lender from time to time with respect to the Loan (the "Maximum
Lawful Rate"). Said interest shall be payable monthly in arrears with principal
payable upon demand or, if no demand is sooner made, on June 21, 1998. Any
amount of principal and, to the extent permitted by applicable law, interest
that is not paid on the day when the same first became due and payable shall
bear interest, payable on demand, at a per annum rate equal to the lesser of (x)
the Alternate Base Rate plus two percent (2%) and (y) the Maximum Lawful Rate.
No liability shall arise against any holder or holders hereof from any
act, or the omission of any act, pertaining to the collection of, or failure to
collect, any collateral which said holder or holders may hold to secure this
obligation.
No act or omission of any kind on the part of the holder hereof shall in
any way whatsoever affect or impair this Promissory Note. This Promissory Note
shall extend to, and be binding upon Maker and its respective heirs, personal
representatives, successors and permitted assigns. Maker shall have the
privilege of prepaying this Promissory Note at any time, in whole or in part
without premium or other penalty.
Maker hereby waives demand for payment, presentment, notice of
presentment, notice of acceleration, notice of intent to accelerate, protest,
notice of protest, and notice of dishonor, and hereby consents to any renewal or
extension of time of payment of this Promissory Note, without notice, and
without affecting or releasing the liability of Maker.
Maker hereby agrees to pay all reasonable fees and expenses (including,
without limitation, attorneys' fees) incurred by any holder of this Promissory
Note in connection with any proceedings to enforce this Promissory Note or
collect the indebtedness evidenced hereby.
This Promissory Note shall be governed by and construed in accordance with
the internal laws of the State of Texas.
The payment of the indebtedness evidenced hereby has been subordinated to
the payment of certain indebtedness owing to Chemical Bank, Agent, pursuant to
the terms of that certain Subordination Agreement dated effective June 20, 1996,
between Play By Play Toys & Novelties, Inc., Arturo Torres and Chemical Bank,
Agent.
IN WITNESS WHEREOF, this Promissory Note has been duly executed this 20th
day of June, 1996.
PLAY BY PLAY TOYS & NOVELTIES, INC.
By _____________________
Mark A. Gawlik
President
Attest:
By _____________________
Joe Guerra
Secretary
-2-
Exhibit 10.5
PROMISSORY NOTE
$2,900,000.00 Seattle, Washington
June 20, 1996
The undersigned, ACE NOVELTY ACQUISITION CO., INC., a Texas corporation
("Maker"), hereby promises to pay to ACE NOVELTY CO., Inc., a Washington
corporation, or order ("Holder"), the principal sum of TWO MILLION NINE HUNDRED
THOUSAND AND NO/100 DOLLARS ($2,900,000.00), in lawful money of the United
States of America, together with interest thereon, all as hereinafter provided
and upon the following agreements, terms and conditions.
1. ASSET PURCHASE AGREEMENT. This Promissory Note is delivered pursuant to
the terms of that certain Asset Purchase Agreement dated as of May 1, 1996, by
and among Maker; Holder; Play By Play Toys & Novelties, Inc., a Texas
corporation and the parent corporation of Maker; Specialty Manufacturing Ltd., a
British Columbia, Canada corporation; Acme Acquisition Corp., a Washington
corporation; Benjamin H. Mayers, Lois E. Mayers, Ronald S. Mayers, Karen Gamoran
and Beth Weisfield, as amended by Amendment No. 1 to Asset Purchase Agreement
(the "Asset Agreement"). Unless otherwise defined herein or the context hereof
otherwise requires, terms used in this Promissory Note which are defined in the
Asset Agreement shall have the meanings set forth in the Asset Agreement.
2. FINAL BALANCE SHEET PAYMENT. Six Hundred Thousand Dollars ($600,000.00)
of the principal balance of this Promissory Note together with interest thereon
at the rate of eight percent (8%) per annum, shall be due and payable within two
(2) business days following the determination of the Final Balance Sheet in
accordance with Section 4.03 of the Asset Agreement, subject to offset for the
Adjustment set forth in Section 4.03(H) of the Asset Agreement and as provided
in paragraph 5 below.
3. OTHER PRINCIPAL PAYMENT. (i) One Million Dollars ($1,000,000.00) of the
principal balance of this Promissory Note together with any accrued and unpaid
interest thereon shall be due and payable six (6) months from the date hereof,
of which Five Hundred Thousand Dollars ($500,000.00) shall be subject to Offset
as provided in paragraph 5 below, (ii) Five Hundred Thousand Dollars
($500,000.00) of the principal balance of this Promissory Note, together with
any accrued and unpaid interest thereon, shall be due and payable, subject to
Offset as provided in paragraph 5 below, twelve (12) months from the date
hereof, and (iii) Eight Hundred Thousand Dollars ($800,000.00) of the principal
balance of this Promissory Note together with any accrued and unpaid interest
thereon shall be due and payable, subject to Offset as provided in paragraph 5
below, twenty-four (24) months and one day from the date hereof. No payments of
principal or interest shall be subject to Offset or deduction for any reason
except as expressly set forth in paragraph 2 above, this paragraph 3 and in
accordance with the procedures in paragraph 5 below.
4. INTEREST. Interest on the unpaid principal balance of this Promissory
Note, other than with respect to the Six Hundred Thousand Dollar ($600,000.00)
portion first referenced above (which shall bear interest at the rate of eight
percent (8%) per annum), shall accrue at the rate of twelve percent (12%) per
annum during the first six months that this Promissory Note shall remain
outstanding and at the rate of ten percent (10%) per annum thereafter (except
with respect to the Eight Hundred Thousand Dollar ($800,000.00) portion due in
24 months and one day which shall continue to bear interest at twelve percent
(12%) per annum), with interest being paid to Holder monthly in arrears on the
20th day of each month. In the event that an amount which would otherwise be due
and payable becomes subject to Offset as hereinafter provided, Maker may suspend
payment of interest on that portion of the principal that is the subject of
Offset; provided, however, in the event that all or any portion of the principal
that is the subject of Offset is ultimately determined to be properly payable to
Holder, regardless of whether such amount is deposited with the Escrow Agent
pursuant to Section 5, Maker shall, within two (2) business days of such
determination, pay to Holder the amount of interest that otherwise would have
accrued on the Offset amount from the date that Maker effected the Offset until
the date such accrued interest is actually paid.
5. OFFSET. Upon the completion of the definitive Final Balance Sheet and
the determination of the Adjustment, if any, pursuant to Section 4.03(H) of the
Asset Agreement, Maker may offset against the Six Hundred Thousand Dollar
($600,000.00) portion of the principal first referenced above the amount of the
Adjustment (if negative to Holder), if any. From time to time, Maker may also
Offset any other portions of the principal that are subject to Offset as
described in paragraph 3 above, by asserting a proper claim by it against
Sellers or Stockholders under the Asset Agreement, for any amount claimed by
Maker pursuant to the indemnification provision contained in ARTICLE VIII of the
Asset Agreement, and following the procedures as provided herein. When asserting
a claim of offset, Maker shall give notice thereof to Sellers and Stockholders,
which notice shall specify the amount of the claim and shall identify such
provision of the Asset Agreement which it asserts gives rise to such claim. If
on or before ten (10) business days after Maker shall have delivered such notice
to Sellers and Stockholders it shall not have received written notice from
Sellers or Stockholders questioning the propriety of such claim, the amount
specified in Maker's notice shall be deemed an Offset against this Promissory
Note. If, however, on or before ten (10) business days after such notice shall
have been given to Sellers and Stockholders, Maker shall receive written notice
from Sellers or any Stockholder questioning the propriety of such claim or any
part thereof, the amount specified in Maker's request not questioned by Sellers
or Stockholders shall be deemed an Offset against this Promissory Note, and the
amount specified in Maker's request that is questioned by Sellers or any
Stockholder ("Offset Dispute") shall be deemed an Offset against this Promissory
Note only upon: (i) Maker, Sellers and Stockholders finally agreeing to an
Offset, or (ii) the receipt of a final decision of a court of competent
jurisdiction with respect to such claim, which decision is final and not
appealable. In addition, if any portion of a payment due under this Promissory
Note is the subject of an Offset Dispute at the time the payment is otherwise
due and payable pursuant to paragraphs 2 or 3 above, then Maker shall pay the
portion subject to the Offset Dispute to Texas Commerce Bank, National
Association, as escrow agent (the "Escrow Agent") to be held by the Escrow Agent
pursuant to the terms of the Escrow Agreement attached to the Asset Agreement as
Exhibit B until (i) the Maker, Sellers and Stockholders finally agree to an
Offset or, (ii) the receipt of a final decision of a court of competent
jurisdiction with respect to such claim, which decision is final and
nonappealable.
6. BUSINESS PURPOSE. Maker hereby represents and warrants to Holder that
the proceeds of this Promissory Note shall be used by Maker exclusively for
commercial and business purposes, and that none of the proceeds of this
Promissory Note shall be used by Maker for personal, family or household
purposes.
7. PLACE OF PAYMENT. All payments pursuant to this Promissory Note shall
be made to Holder at 13434 NE 16th Street, Bellevue, Washington 98005, or such
other address as Holder may hereafter designate from time to time.
8. STOCK OFFERING. Notwithstanding anything to the contrary in this
Promissory Note, if, at any time, the Guarantor (as defined below) completes a
public stock offering of its securities, the entire unpaid principal balance of
this Promissory Note, together with any accrued and unpaid interest thereon,
shall accelerate and become due and payable on the twentieth (20th) day
following the sale of such securities.
9. DEFAULT INTEREST. If Maker fails to make any payment when due under
this Promissory Note or under the promissory note attached as Exhibit C to the
Co-Tenancy Agreement, or if Maker fails to fully and strictly comply with their
terms and conditions, or if Maker otherwise defaults hereunder, and
notwithstanding any payment subordination applicable to Holder with respect to
the obligations herein, this Promissory Note shall bear interest from the date
of default by Maker until the default is fully cured at a default interest rate
equal to eighteen percent (18%) per annum ("Default Rate"). Notwithstanding the
foregoing, if Maker defaults as described in this paragraph or in paragraph 10,
at the option of Holder, this entire Promissory Note shall become immediately
due and payable; provided, however, Holder shall not have the right to
accelerate based on Maker's failure to pay any monthly interest payment when due
unless such failure shall continue for more than three (3) days after the due
date thereof. After acceleration, this Promissory Note shall bear interest at
the Default Rate.
10. CROSS-DEFAULT. Play By Play Toys & Novelties, Inc. ("PBYP"), Arturo
Torres ("Torres"), Maker and Holder are parties to that certain Intercreditor
Agreement dated of even date herewith. Maker and Holder agree that any default
by Maker, PBYP or Torres under that Intercreditor Agreement shall constitute a
default by Maker under this Promissory Note, thereby entitling Holder to Default
Interest and the right to accelerate payment of this Promissory Note as provided
in paragraph 9.
11. MAXIMUM INTEREST. Notwithstanding any other provision of this
Promissory Note, fees, interest and charges payable pursuant to this Promissory
Note shall not exceed the maximum, if any, permitted by governing law.
12. SECURITY. This Promissory Note is secured by a Security Agreement of
even date herewith covering certain assets of Maker and Guarantor, and by second
deeds of trust covering certain real property in Los Angeles County, California
and Cook County, Illinois.
13. APPLICABLE LAW. This Promissory Note shall be construed in accordance
with and governed by the laws of the State of Colorado.
14. SUCCESSORS AND ASSIGNS. This Promissory Note shall inure to the
benefit of Holder and any successor or assignee of Holder and shall be binding
upon Maker and Maker's successors and assignees.
15. COSTS AND EXPENSES. Maker shall pay all costs and expenses which
Holder may incur in connection with this Promissory Note because of Maker's
default, including, without limitation, reasonable attorneys' fees and costs.
Any judgment recovered by Holder shall bear interest at the Default Rate, not to
exceed the highest rate then permitted by law on such a judgment. The venue of
any action pursuant to this Promissory Note shall be had first in the Federal
District Court for the District of Colorado, and absent jurisdiction in that
Court, in the State District Court, Second District, Denver County, Colorado.
16. LIABILITY. Maker hereby waives demand, presentment for payment, notice
of intention to accelerate the maturity, protest and notice of protest and
nonpayment. Maker hereby further agrees that none of the following events (with
or without notice) shall diminish, impair or otherwise affect the liability of
Maker with respect to this Promissory Note: (a) any modification or extension of
the terms of this Note; or (b) any release of any party liable pursuant to this
Promissory Note.
17. NOTICES. Any notices or other communications required or permitted to
be given hereunder to Maker or Holder shall be sufficient if in writing and
deemed to have been duly given and received (i) if delivered by hand or telecopy
on the date of such delivery; (ii) if by overnight courier on the day of such
scheduled arrival, and (iii) if mailed by registered or certified mail with
postage prepaid three business days following deposit in the United States mail,
addressed as follows:
If to Maker: ACE NOVELTY ACQUISITION CO., INC.
4400 Tejasco
San Antonio, TX 78218
ATTN: Mark A. Gawlik, President
With a copy to: KLENDA, MITCHELL, AUSTERMAN
& ZUERCHER, L.L.C.
1600 Epic Center
301 North Main Street
Wichita, KS 67202-4888
ATTN: Gregory B. Klenda, Esq.
If to Holder: ACE NOVELTY CO., INC.
13434 N.E. 16th Street
Bellevue, WA 98005
ATTN: Ronald S. Mayers, President
With Copy to: Ronald S. Mayers
4210 134th N.E.
Bellevue, WA 98005
Karen Gamoran
8100 Evergreen Lane
Mercer Island, WA 98040
Beth Weisfield
6021 SE 22nd Street
Mercer Island, WA 98040
And to: LANE POWELL SPEARS LUBERSKY
1420 Fifth Ave., Suite 4100
Seattle, WA 98101-2338
ATTN: Michael E. Morgan, Esq.
or such substituted address as any party shall have given notice to the other in
writing.
EXECUTED as of the date and year first written above.
ACE NOVELTY ACQUISITION CO.,
INC., a Texas corporation
---------------------------
Mark A. Gawlik, President
GUARANTY
PLAY BY PLAY TOYS & NOVELTIES, INC., a Texas corporation and the parent of
Maker ("Guarantor"), hereby unconditionally and irrevocably guarantees the due
and punctual payment and performance of all of Maker's obligations under or
otherwise related to the Promissory Note. This guarantee shall continue in favor
of Holder notwithstanding any renewal, extension, modification or amendment of
the Promissory Note, and no renewal, extension, modification or amendment shall
in any manner release or discharge Guarantor. Guarantor hereby waives notice of
any consents to any such renewal, extension, modification or amendment. The
liability of Guarantor shall be primary and Holder may, at its option, proceed
against Guarantor without having commenced any action, or having obtained any
judgment, against Maker. Guarantor hereby waives notice of any demand and notice
of any default under the Promissory Note. The terms and provisions of this
guarantee shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties.
GUARANTOR:
PLAY BY PLAY TOYS & NOVELTIES,
INC., a Texas corporation
By __________________________
Its ______________________
The payment of the indebtedness evidenced hereby, as well as the liens,
security interests and assignments securing such indebtedness, has been
subordinated to the payment of certain indebtedness owing to Chemical
Bank, Agent, as well as the liens, security interests and assignments
securing the payments of such indebtedness owing to Chemical Bank, Agent
for the ratable benefit of various lenders, pursuant to the terms of that
certain Subordination Agreement dated effective June 20, 1996, between Ace
Novelty Acquisition Co., Inc., Play By Play Toys & Novelties, Inc., Newco
Novelty, Inc., Ace Novelty Co., Inc. and Chemical Bank, Agent.
