THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Third Amendment") dated as
of August 31, 2000, is to that Credit Agreement dated as of April 13, 1999 (as
amended and modified from time to time, the "Credit Agreement"; terms used but
not otherwise defined herein shall have the meanings provided in the Credit
Agreement), by and among RACING CHAMPIONS, INC., an Illinois corporation
("RCI"), and RACING CHAMPIONS SOUTH, INC., a North Carolina corporation ("RCS"),
(each of RCI and RCS individually a "U.S. Borrower", collectively, the "U.S.
Borrowers"), RACING CHAMPIONS WORLDWIDE LIMITED, a corporation organized under
the laws of the United Kingdom (the "U.K. Borrower"; together with the U.S.
Borrowers, the "Borrowers"), the Guarantors identified therein, the several
banks and other financial institutions identified therein (the "Lenders") and
FIRST UNION NATIONAL BANK, a national banking association, as administrative
agent for the Lenders thereunder (in such capacity, the "Administrative Agent").
WITNESSETH:
WHEREAS, the Lenders and Borrowers wish to amend the Credit Agreement to
modify certain provisions contained therein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A. Amendments. The Credit Agreement is amended in the following
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respects:
1. Section 1.1 is amended to (a) delete the definitions of
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"Applicable Percentage", "Business Day", "Consolidated EBITDA", "LIBOR", "Loan",
"Note", "Notes", "Participation Interest", "Required Lenders", "Revolving
Commitment Termination Date", "Revolving Loans", "Security Documents", and
substitute the following therefor:
"Applicable Percentage" shall mean, for any day, the rate per annum
----------------------
set forth below opposite the applicable Level then in effect, it being
understood that the Applicable Percentage for (i) U.S. Revolving Loans and Term
Loans which are Alternate Base Rate Loans shall be the percentage set forth
under the column "Alternate Base Rate Margin for U.S. Revolving Loans and Term
Loans", (ii) the U.S. Revolving Loans and Term Loans which are LIBOR Rate Loans
shall be the percentage set forth under the column "LIBOR Rate Margin for U.S.
Revolving Loans, Term Loans and Letter of Credit Fee", (iii) the Letter of
Credit Fee shall be the percentage set forth under the
column "LIBOR Rate Margin for U.S. Revolving Loans, Term Loans and Letter of
Credit Fee" and (iv) the Commitment Fee shall be the percentage set forth under
the column "Commitment Fee":
LIBOR Rate
Alternate Margin for
Base Rate U.S. Revolving Loans
Margin for Term Loans
Leverage U.S. Revolving Loans And Letter of Commitment
Level Ratio And Term Loans Credit Fee Fee
----- ---------------- --------------------- --------------------- -----------
I . . >3.50 to 1.0 1.75% 3.50% 0.50%
---------------- --------------------- --------------------- -----------
<3.50 to 1.0 but
II. . >3.00 to 1.00 1.50% 3.25% 0.40%
---------------- --------------------- --------------------- -----------
<3.00 to 1.0 but
III . >2.50 to 1.0 1.00% 2.75% 0.375%
---------------- --------------------- --------------------- -----------
<2.50 to 1.0 but
IV. . >2.00 to 1.0 .75% 2.50% 0.30%
---------------- --------------------- --------------------- -----------
<2.00 to 1.0 but
V . . >1.50 to 1.0 .50% 1.75% 0.25%
---------------- --------------------- --------------------- -----------
VI. . <1.50 to 1.0 .15% 0.90% 0.225%
----- ---------------- --------------------- --------------------- -----------
The Applicable Percentage shall, in each case, be determined and
adjusted quarterly on the date ten (10) Business Days after the date on which
the Administrative Agent has received from the Borrowers the quarterly financial
information and certifications required to be delivered to the Administrative
Agent and the Lenders in accordance with the provisions of Sections 5.1(b) and
5.2(b) (each an "Interest Determination Date"). Such Applicable Percentage
shall be effective from such Interest Determination Date until the next such
Interest Determination Date. If the Borrowers shall fail to provide the
quarterly financial information and certifications in accordance with the
provisions of Sections 5.1(b) and 5.2(b), the Applicable Percentage from such
Interest Determination Date shall, on the date ten (10) Business Days after the
date by which the Borrowers were so required to provide such financial
information and certifications to the Administrative Agent and the Lenders, be
based on Level I until such time as such information and certifications are
provided, whereupon the Level shall be determined by the then current Leverage
Ratio.
"Business Day" shall mean a day other than a Saturday, Sunday or other
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day on which commercial banks in Charlotte, North Carolina or New York, New York
are authorized or required by law to close; provided, however, that when used in
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connection with a rate determination, borrowing or payment in respect of a LIBOR
Rate Loan, the term "Business Day" shall also exclude any day on which banks in
London, England are not open for dealings in Dollar deposits in the London
interbank market.
"Consolidated EBITDA" shall mean, for any period, the sum of (i)
--------------------
Consolidated Net Income for such period, plus (ii) an amount which, in the
determination of Consolidated Net Income for such period, has been deducted for
(A) Consolidated Interest Expense, (B) total federal, state, local and foreign
income, value added and similar taxes, and (C) depreciation and amortization
expense, and (D) non-cash losses, and minus (iii) non-cash gains.
"LIBOR" shall mean, for any LIBOR Rate Loan for any Interest Period
-----
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3740 or 3750 (or any successor pages) as
the London interbank offered rate for deposits in Dollars at approximately 11:00
A.M. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "LIBOR" shall mean, for any LIBOR Rate Loan for
any Interest Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates (rounded upwards, if necessary, to the
nearest 1/100 of 1%). If, for any reason, neither of such rates is available,
then "LIBOR" shall mean the rate per annum at which, as determined by the
Administrative Agent, Dollars in an amount comparable to the Loans then
requested are being offered to leading banks at approximately 11:00 A.M. London
time, two (2) Business Days prior to the commencement of the applicable Interest
Period for settlement in immediately available funds by leading banks in the
London interbank market for a period equal to the Interest Period selected.
"Loan" shall mean a U.S. Revolving Loan, a Swingline Loan, and/or a
----
Term Loan, as appropriate.
"Note" or "Notes" shall mean the U.S. Revolving Notes, the Swingline
---- -----
Note and/or the Term Notes, collectively, separately or individually, as
appropriate.
"Participation Interest" shall mean the purchase by a Lender of a
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participation interest in (i) Swingline Loans as provided in Section 2.2(b) or
(ii) Letters of Credit as provided in Section 2.3.
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"Required Lenders" shall mean (i) Lenders holding in the aggregate not
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less than 51% of all Revolving Loans and LOC Obligations then outstanding at
such time plus the aggregate unused Revolving Commitment at such time (treating
for purposes hereof in the case of Swingline Loans and LOC Obligations, in the
case of the Swingline Lender and the Issuing Lender, only the portion of the
Swingline Loans and the LOC Obligations of the Swingline Lender and the Issuing
Lender, respectively, which is not subject to the Participation Interests of the
other Lenders and, in the case of the Lenders other than the Swingline Lender
and the Issuing Lender, the Participation Interests of such Lenders in Swingline
Loans and LOC Obligations hereunder as direct Obligations) and (ii) Lenders
holding in the aggregate not less than 51% of all Term Loans then outstanding at
such time; provided, however, that if any Lender shall be a Defaulting Lender at
such time, then there shall be excluded from the determination of Required
Lenders, Obligations (including Participation Interests) owing to such
Defaulting Lender and such Defaulting Lender's Commitments, or after termination
of the Commitments, the principal balance of the Obligations owing to such
Defaulting Lender.
"Revolving Commitment Termination Date" shall mean April 1, 2003.
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"Revolving Loans" shall mean the U.S. Revolving Loans as set forth in
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Section 2.1.
"Security Documents" shall mean the Pledge Agreement, the Security
-------------------
Agreement, the Mortgage and such other documents executed and delivered in
connection with the attachment and perfection of the Agent's security interests
and liens arising thereunder, including, without limitation, UCC financing
statements.
(b) delete the definitions of "British Pounds Sterling", "Dollar Equivalent",
"Interest Coverage Ratio", "MLA Cost", "U.K. Lender", "U.K. Revolving
Commitment", "U.K. Revolving Committed Amount", and "U.K. Revolving Loans"
therefrom in their entirety, and (c) add the following definitions thereto:
"Borrowing Base" shall mean, as of any date of determination, an
---------------
amount equal to the sum of (i) up to seventy-five percent (75%) of the face
amount of Eligible Receivables (net of maximum discounts, allowances, retainage
and any other amounts deferred with respect thereto) plus (ii) up to fifty
percent (50%) of the value (determined at factory cost) of Eligible Inventory.
For purposes of this definition, Eligible Receivables and Eligible Inventory, as
of any date of determination, shall be determined after deduction of all
Eligibility Reserves then effective with respect to such items.
"Borrowing Base Certificate" shall mean a certificate, in
----------------------------
substantially the form of Exhibit X attached hereto and made a part hereof,
setting forth Eligible Receivables and Eligible Inventory, advance rates with
respect thereto, and the resultant Borrowing Base, in each instance as of the
date of such certificate.
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"Eligibility Reserves" means, as of five (5) Business Days after the
---------------------
date of written notice of any determination thereof to the Borrowers by the
Administrative Agent, or to the Borrowers and the Administrative Agent by the
Requisite Lenders, such amounts as the Administrative Agent, or the Requisite
Lenders, as the case may be, in the exercise of its or their reasonable credit
judgment and consistent with its or their customary practices, may from time to
time establish against the gross amounts of Eligible Receivables and the value
of Eligible Inventory to reflect risks or contingencies which could reasonably
be expected to adversely affect the collectibility or timing of collectibility
of such items and have not otherwise been taken into account in determination of
which Receivables are Eligible Receivables or the value of such Eligible
Inventory.
"Eligible Accounts" shall mean each account receivable of the
------------------
Borrowers which, when scheduled to the Administrative Agent and at all times
thereafter, is not of any of the following types:
(i) it arises out of a sale not made in the ordinary course
of the Borrowers' business or a sale to a Person which is an Affiliate of the
Borrowers or controlled by an Affiliate of the Borrowers; or
(ii) it fails to meet or violates any warranty,
representation or covenant contained in this Agreement or any of the other
Credit Documents relating directly or indirectly to the accounts receivable of
the Borrowers; or
(iii) the account debtor is also a Borrower's supplier or
creditor and the account receivable is or may become subject to any right of
setoff by the account debtor, and such account debtor has not entered into an
agreement with the Administrative Agent with respect to the waiver of rights of
setoff which is in form and substance satisfactory to the Administrative Agent;
or the account debtor has disputed liability with respect to such account
receivable, or made any claim with respect to any other account receivable due
from such account debtor to a Borrower, in each of which cases such account
receivable shall be ineligible to the extent of such dispute, claim or setoff;
or
(iv) the account debtor has filed a petition for bankruptcy
or any other petition for relief under the Bankruptcy Code or any similar
statute (unless the account debtor is a debtor-in-possession in a Chapter 11
case and has available debtor-in-possession financing from sources and under
terms reasonably acceptable to the Administrative Agent and the account
receivable is entitled to priority under Section 507 of the Bankruptcy Code as
an administrative expense allowed under Section 503(b) of the Bankruptcy Code),
made an assignment for the benefit of creditors, or if any petition or other
application for relief under the Bankruptcy Code or any similar statute has been
filed against the account debtor, or if the account debtor has failed, suspended
its business operations, become insolvent, suffered a receiver or a trustee to
be appointed for any of its assets or affairs, or is generally failing to pay
its debts as they become due; or
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(v) the sale is on any repurchase or return basis; or
(vi) the Administrative Agent believes, in the exercise of
its reasonable credit judgment, or the Requisite Lenders believe, in the
exercise of their reasonable credit judgment, that collection of such account
receivable is insecure or that such account receivable may not be paid by reason
of the account debtor's financial inability to pay; or
(vii) the account debtor is the United States of America or
any department, agency or instrumentally thereof, unless the applicable Borrower
assigns its right to payment of such account receivable to the Administrative
Agent pursuant to the Assignment of Claims Act of 1940, as amended, (31 U.S.C.
3727); or
(viii) the Administrative Agent does not have a senior,
perfected security interest in such account receivable; or
(ix) the account debtor is located in the state of New Jersey
or Minnesota and the applicable Borrower has not filed and maintained effective
(unless exempt from the requirements for filing) a current Business Activity
Report with the appropriate Governmental Authority in the states of Minnesota
and/or New Jersey, as applicable.
"Eligible Inventory" shall mean, as of the date of determination
-------------------
therefor, all Inventory of the Borrowers which, when scheduled to the
Administrative Agent on a Borrowing Base Certificate and at all times
thereafter, (i) is in the required quantity and in the required condition as set
forth on such Borrowing Base Certificate, (ii) is located at a Borrower's owned
or leased Properties in the United States, (iii) subject to a first priority
perfected Lien in favor of the Administrative Agent for the benefit of the
Lenders, and (iv) does NOT consist of: (a) goods in transit (other than goods in
transit to the United States from China); or (b) goods held on consignment or
any similar arrangement, including, without limitation, goods held by a Borrower
but owned by a customer of a Borrower; or (c) goods which are subject to a Lien
in favor of a bailee or landlord, except goods located on premises with respect
to which the Administrative Agent has received a landlord's or bailee's waiver
in form and substance satisfactory to the Administrative Agent.
"Excess Cash Flow" shall mean, for any fiscal year of the Company
------------------
ending in 2000 and thereafter, an amount equal to the greater of (i) zero of
(ii) the amount for such fiscal year equal to (a) Consolidated EBITDA minus (b)
cash interest paid, minus (c) taxes paid in cash (minus the amount of tax
refunds due), minus (d) the sum of all repayments and voluntary prepayments of
principal of the Term Loan, minus (e) Consolidated Capital Expenditures paid in
cash.
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"Mortgage" shall mean the Mortgage dated as of August 31, 2000
--------
executed and delivered by The Ertl Company, Inc., a Delaware corporation, in
favor of the Administrative Agent with respect to the Properties located in the
City of Dyersville, Dubuque County, Iowa, as amended, modified or supplemented
from time to time in accordance with its terms.
2. Section 2.1(a) is amended to delete the provisions thereof in
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their entirety and substitute the following therefor:
(a) U.S. Revolving Commitment. During the Commitment Period,
-------------------------
subject to the terms and conditions hereof, each Lender severally agrees to make
revolving credit loans ("U.S. Revolving Loans") to the U.S. Borrowers from time
to time for the purposes hereinafter set forth; provided, however, that (i) with
regard to each Lender individually, the sum of such Lender's share of
outstanding U.S. Revolving Loans plus such Lender's Revolving Commitment
----
Percentage of Swingline Loans plus such Lender's LOC Commitment Percentage of
----
LOC Obligations shall not exceed such Lender's Revolving Commitment Percentage
of the aggregate Revolving Committed Amount, and (ii) with regard to the Lenders
collectively, the sum of the aggregate amount of outstanding U.S. Revolving
Loans plus Swingline Loans plus LOC Obligations shall not exceed the lesser of
(A) the Revolving Committed Amount and (B) the amount of the Borrowing Base as
of the date on which the applicable Notice or Borrowing is delivered. For
purposes hereof, the aggregate amount available hereunder shall be TWENTY
MILLION DOLLARS ($20,000,000) as such aggregate maximum amount may be reduced
from time to time as provided in Section 2.7, the "Revolving Committed Amount").
U.S. Revolving Loans may consist of Alternate Base Rate Loans or LIBOR Rate
Loans, or a combination thereof, as the U.S. Borrowers may request, and may be
repaid and reborrowed in accordance with the provisions hereof. LIBOR Rate
Loans shall be made by each Lender at its LIBOR Lending Office and Alternate
Base Rate Loans at its Domestic Lending Office. Notwithstanding anything to the
contrary in this Agreement, in each calendar year, for a period of thirty (30)
consecutive days commencing on the date in such calendar year of which written
notice shall have been given by the U.S. Borrowers at least ten (10) days prior
thereto, the sum of the aggregate amount of outstanding U.S. Revolving Loans
plus Swingline Loans plus LOC Obligations shall not exceed thirty-seven and
one-half percent (37.5%) of the Revolving Committed Amount then in effect.
3. Section 2.2(a) is amended to delete the provisions thereof in
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their entirety and substitute the following therefor:
(a) Swingline Commitment. During the Commitment Period,
---------------------
subject to the terms and conditions hereof, the Swingline Lender, in its
individual capacity, agrees to make certain revolving credit loans to the U.S.
Borrowers (each a "Swingline Loan" and, collectively, the "Swingline Loans") for
the purposes hereinafter
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set forth; provided, however, (i) the aggregate amount of Swingline Loans
outstanding at any time shall not exceed THREE MILLION DOLLARS ($3,000,000) (the
"Swingline Committed Amount"), and (ii) the sum of the aggregate amount of
outstanding U.S. Revolving Loans plus Swingline Loans plus LOC Obligations shall
exceed the Revolving Committed Amount. Swingline Loans hereunder may be repaid
and reborrowed in accordance with the provisions hereof.
4. Section 2.3(a) is amended to delete the provisions thereof in
---------------
their entirety and substitute the following therefor:
(a) Issuance. Subject to the terms and conditions hereof and
--------
of the LOC Documents, if any, and any other terms and conditions which the
Issuing Lender may reasonably require, during the Commitment Period the Issuing
Lender shall issue, and the Lenders shall participate in, Letters of Credit for
the account of the U.S. Borrowers from time to time upon request in a form
acceptable to the Issuing Lender; provided, however, that (i) the aggregate
amount of LOC Obligations shall not at any time exceed FIVE MILLION DOLLARS
($5,000,000) (the "LOC Committed Amount"), (ii) the sum of the aggregate amount
of U.S. Revolving Loans plus Swingline Loans plus LOC Obligations shall not at
any time exceed the Revolving Committed Amount, (iii) all Letters of Credit
shall be denominated in Dollars and (iv) Letters of Credit shall be issued for
the purpose of supporting tax-advantaged variable rate demand note financing and
for other lawful corporate purposes and may be issued as standby letters of
credit, including in connection with workers' compensation and other insurance
programs, and trade letters of credit. Except as otherwise expressly agreed
upon by all the Lenders, no Letter of Credit shall have an original expiry date
more than twelve (12) months from the date of issuance or later than March 21,
2003; provided, however, so long as no Default or Event of Default has occurred
and is continuing and subject to the other terms and conditions to the issuance
of Letters of Credit hereunder, the expiry dates of Letters of Credit may be
extended annually or periodically from time to time on the request of the U.S.
Borrowers or by operation of the terms of the applicable Letter of Credit to a
date not more than twelve (12) months from the date of expiration; provided,
further, that no Letter of Credit, as originally issued or as extended, shall
have an expiry date extending beyond the Revolving Commitment Termination Date.
Each Letter of Credit shall comply with the related LOC Documents. The issuance
and expiry date of each Letter of Credit shall be a Business Day. Any Letters
of Credit issued hereunder shall be in a minimum original face amount of
$150,000. There will be no more than 10 Letters of Credit outstanding at any
time. First Union shall be the Issuing Lender on all Letters of Credit issued
after the Closing Date.
5. Section 2.4 is amended to delete the provisions thereof in
------------
their entirety.
8
6. Section 2.5(b) is amended to delete the terms thereof in their
---------------
entirety and substitute the following therfor:
(b) Repayment of Term Loan. The principal amount of the Term
----------------------
Loan shall be repaid in fifteen (15) consecutive fiscal quarterly installments
as follows, unless accelerated sooner pursuant to Section 7.2:
Principal Term Loan Principal
Amortization Amortization
Payment Dates Payment
------------------ --------------------
June 30, 1999. . . $ 0
--------------------
September 30, 1999 $ 0
--------------------
December 31, 1999. $ 0
--------------------
March 31, 2000 . . $ 0
--------------------
June 30, 2000. . . $ 5,750,000
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September 30, 2000 $ 3,125,000
--------------------
December 31, 2000. $ 3,125,000
--------------------
March 31, 2001 . . $ 3,500,000
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June 30, 2001. . . $ 3,500,000
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September 30, 2001 $ 3,500,000
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December 31, 2001. $ 3,500,000
--------------------
March 31, 2002 . . $ 4,000,000
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June 30, 2002. . . $ 4,000,000
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September 30, 2002 $ 4,000,000
--------------------
December 31, 2002. $ 4,000,000
--------------------
April 1, 2003. . . $ 73,000,00
------------------ --------------------
7. Section 2.6(a) is amended to delete the provisions in their
--------------------------------
entirety and substitute the following therefor:
(a) Commitment Fee. In consideration of the Revolving
---------------
Commitment, the Borrowers jointly and severally agree to pay to the
Administrative Agent for the ratable benefit of the Lenders a commitment fee
(the "Commitment Fee") in an amount equal to the Applicable Percentage per annum
on the average daily unused amount of the aggregate Revolving Committed Amount.
For purposes of computing the Commitment Fee hereunder, Swingline Loans and
Letters of Credit shall be considered usage under the aggregate Revolving
Committed Amount. The Commitment Fee shall be payable quarterly in arrears on
the 15th day following the last day of each calendar quarter for the prior
calendar quarter and on the Revolving Commitment Termination Date.
9
8. Section 2.7(a) is amended to delete the provisions thereof in
---------------
their entirety and substitute the following therefor:
(a) Voluntary Reductions. The Borrowers shall have the right
--------------------
to terminate or permanently reduce the unused portion of the Revolving Committed
Amount at any time or from time to time upon not less than five Business Days'
prior notice to the Administrative Agent (which shall notify the Lenders thereof
as soon as practicable) of each such termination or reduction, which notice
shall specify the effective date thereof and the amount of any such reduction
which shall be in a minimum amount of $3,000,000 or a whole multiple of
$1,000,000 in excess thereof and shall be irrevocable and effective upon receipt
by the Administrative Agent, provided that no such reduction or termination
shall be permitted if after giving effect thereto, and to any prepayments of the
Revolving Loans made on the effective date thereof, the sum of the then
outstanding aggregate principal amount of the U.S. Revolving Loans plus
Swingline Loans plus LOC Obligations would exceed the Revolving Committed
Amount.
9. Section 2.8 is amended to (a) delete the provisions of clause
------------
(a) thereof in their entirety and substitute the following therefor:
(a) Optional Prepayments. The Borrowers shall have the right
--------------------
to repay Loans in whole or in part from time to time; provided, however, that
each partial prepayment of U.S. Revolving Loans and Term Loans shall be in a
minimum principal amount of $3,000,000 and integral multiples of $1,000,000 in
excess thereof and each prepayment of Swingline Loans shall be in a minimum
principal amount of $100,000 and integral multiples of $100,000 in excess
thereof. The Borrowers shall give three Business Days' irrevocable notice (a
"Notice of Payment") in the case of LIBOR Rate Loans and one Business Day's
irrevocable notice in the case of Alternate Base Rate Loans to the
Administrative Agent (which shall notify the Lenders thereof as soon as
practicable). A form of such Notice of Prepayment is attached as Schedule 2.8.
Subject to the foregoing terms, that amounts prepaid under this Section 2.8(a)
shall be applied as the Borrowers may elect; provided that if the Borrowers fail
to specify the application of an optional prepayment then such prepayment shall
be applied first to Revolving Loans and then pro rata to the remaining principal
installments of the Term Loans, in each case first to Alternate Base Rate Loans
and then to LIBOR Rate Loans in direct order of Interest Period maturities. All
prepayments under this Section 2.8(a) shall be subject to Section 2.18, but
otherwise without premium or penalty. Interest on the principal amount prepaid
shall be payable on the next occurring Interest Payment Date that would have
occurred had such loan not been prepaid or, at the request of the Administrative
Agent, interest on the principal amount prepaid shall be payable on any date
that a prepayment is made hereunder to the date of prepayment. Amounts prepaid
on the Swingline Loan and the Revolving Loans may be reborrowed in accordance
with the terms hereof. Amounts prepaid on the Term Loans may not be reborrowed.
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(b) delete the provisions of clauses (b)(ii)-(vi) thereof in
their entirety and substitute the following therefor:
(ii) Asset Dispositions. Within sixty (60) days after
-------------------
the consummation of any Asset Disposition, the Borrowers shall prepay the Loans
in an aggregate amount equal to one hundred percent (100%) of the Net Cash
Proceeds derived from such Asset Disposition (such prepayment to be applied as
set forth in clause (vii) below); provided that the Borrowers may apply that
portion of such Net Cash Proceeds which does not exceed $500,000 in the
aggregate for all such Asset Dispositions occurring during a given calendar year
to repair or replace damaged property or to purchase or otherwise acquire new
assets or property.
(iii) Debt Issuances. Immediately upon receipt by any
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Credit Party of proceeds from any Debt Issuance (other than the issuance of
Subordinated Debt), the Borrowers shall prepay the Loans in an aggregate amount
equal to one hundred percent (100%) of the Net Cash Proceeds of such Debt
Issuance to the Lenders (such prepayment to be applied as set forth in clause
(vii) below).
(iv) Equity Issuances. Immediately upon receipt by any
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Credit Party of proceeds from any Equity Issuance (excluding capital stock
issued for acquisitions permitted under Section 6.5(b) or employee stock
programs), the Borrowers shall prepay the Loans in an aggregate amount equal to
one hundred percent (100%) of such cash proceeds to the Lenders (such prepayment
to be applied as set forth in clause (vii) below).
(v) Recovery Event. To the extent cash proceeds
---------------
received in connection with a Recovery Event are not applied to repair or
replace damaged property or to purchase or otherwise acquire new assets or
property within 180 days after the receipt by a Credit Party of such cash
proceeds, the Borrowers shall prepay the Loans in an aggregate amount equal to
one hundred percent (100%) of such cash proceeds to the Lenders (such prepayment
to be applied as set forth in clause (vii) below) on the 180th day after the
applicable Credit Party's receipt of such cash proceeds.
(vi) Excess Cash Flow. On the date of delivery of the
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financial statements required to be delivered under Section 5.1(a) for the
fiscal years of the Borrowers ending in 2000 and 2001 (which date, for purposes
of this Section 2.8(b)(vi), shall not extend beyond the 95th day after the end
of each such fiscal year), the Borrowers shall make a mandatory prepayment of
the Term Loans in an amount equal to seventy-five percent (75%) of the then
applicable Excess Cash Flow for the fiscal year then most recently ended, which
prepayment shall be applied to the installments of the Term Loans in the inverse
order of maturity until paid in full.
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(vii) Application of Mandatory Prepayments. All amounts
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required to be paid pursuant to this Section 2.8(b)(i)-(v) shall be applied as
follows: (A) with respect to all amounts prepaid pursuant to Section 2.8(b)(i),
to Revolving Loans and (after all Revolving Loans have been repaid) to a cash
collateral account in respect of LOC Obligations and (B) with respect to all
amounts prepaid pursuant to Sections 2.8(b)(ii) through (v), (1) first pro rata
--- ----
to the Term Loans (ratably to the remaining principal installments thereof) and
(2) second to the Revolving Loans and (after all Revolving Loans have been
repaid) to a cash collateral account in respect of LOC Obligations. Within the
parameters of the applications set forth above, prepayments shall be applied
first to Alternate Base Rate Loans and then to LIBOR Rate Loans in direct order
of Interest Period maturities. All prepayments under this Section 2.8(b) shall
be subject to Section 2.18 and be accompanied by interest on the principal
amount prepaid to the date of prepayment.
and (c) delete clause (c) thereof in its entirety.
10. Section 2.9 is amended to delete the provisions thereof in
------------
their entirety and substitute the following therefor:
All borrowings, payments and prepayments in respect of U.S. Revolving
Loans and Term Loans shall be in such amounts and be made pursuant to such
election so that after giving effect thereto the aggregate principal amount of
the U.S. Revolving Loans and Term Loans comprising any Tranche shall not be less
than $3,000,000 or a whole multiple of $1,000,000 in excess thereof.
11. Section 2.10 is amended to delete the provisions thereof in
-------------
their entirety and substitute the following therefor:
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate 2% greater than the
Alternate Base Rate plus the Applicable Percentage then in effect.
12. Section 2.11(a) is amended to delete the provisions thereof in
---------------
their entirety and substitute the following therefor:
(a) The Borrowers may, in the case of Revolving Loans and the
Term Loans, elect from time to time to convert Alternate Base Rate Loans to
LIBOR Rate Loans, by giving the Administrative Agent at least three Business
Days' prior irrevocable written notice of such election. A form of Notice of
Conversion/Extension is attached as Schedule 2.11. If the date upon which an
Alternate Base Rate Loan is to be converted to a LIBOR Rate Loan is not a
Business Day, then such conversion shall be
12
made on the next succeeding Business Day and during the period from such last
day of an Interest Period to such succeeding Business Day such Loan shall bear
interest as if it were an Alternate Base Rate Loan. All or any part of
outstanding Alternate Base Rate Loans may be converted as provided herein,
provided that (i) no Loan may be converted into a LIBOR Rate Loan when any
Default or Event of Default has occurred and is continuing and (ii) partial
conversions shall be in aggregate principal amount of $3,000,000 or a whole
multiple of $1,000,000 in excess thereof with respect to U.S. Revolving Loans
and Term Loans.
13. Section 2.14(a) is amended to delete the provisions thereof in
---------------
their entirety and substitute the following therefor:
(a) Unless the Administrative Agent shall have been notified
in writing by a Lender prior to the date a Loan is to be made by such Lender
(which notice shall be effective upon receipt) that such Lender does not intend
to make the proceeds of such Loan available to the Administrative Agent, the
Administrative Agent may assume that such Lender has made such proceeds
available to the Administrative Agent on such date, and the Administrative Agent
may in reliance upon such assumption (but shall not be required to) make
available to the applicable Borrowers a corresponding amount on the date when
due. If such corresponding amount is not in fact made available to the
Administrative Agent, the Administrative Agent shall be able to recover such
corresponding amount from such Lender. If such Lender does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the
Administrative Agent will promptly notify the Borrowers, and the Borrowers, on a
joint and several basis, shall immediately pay such corresponding amount to the
Administrative Agent. The Administrative Agent shall also be entitled to
recover from the Lender or the Borrowers, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to the applicable Borrower
to the date such corresponding amount is recovered by the Administrative Agent
at a per annum rate equal to (i) from the Borrowers at the applicable rate for
the applicable borrowing pursuant to the Notice of Borrowing and (ii) from a
Lender at the Federal Effective Funds Rate.
14. Section 2.21 is amended to delete the provisions thereof in
-------------
their entirety.
15. Section 4.2 is amended to (a) delete the provisions of clause
------------
(c) thereof in their entirety and substitute the following therefor:
(c) Delivery of Borrowing Base Certificate; Compliance with
---------------------------------------------------------
Commitments. The Borrowers shall have delivered a Borrowing Base Certificate
----------
dated as of the date of the Notice of Borrowing or request for Letter of Credit
-
applicable to such Extension of Credit attached to such Notice of Borrowing or
request for Letter of
13
Credit and, immediately after giving effect to the making of any such Extension
of Credit (and the application of proceeds thereof), (i) the sum of the
aggregate principal amount of outstanding U.S. Revolving Loans plus Swingline
Loans plus LOC Obligations shall not exceed the then applicable limitation
thereon set forth in Section 2.1(a), (ii) the LOC Obligations shall not exceed
the LOC Committed Amount, and (iii) the Swingline Loans shall not exceed the
Swingline Commitment.
and (b) delete the provisions of clause (g) thereof in its
entirety.
16. Section 5.1 is amended to delete the provisions immediately
------------
following clause (c) thereof in their entirety and substitute the following
therefor:
(d) Monthly Reporting. As soon as available and in any event
-----------------
within 25 days after the end of each calendar month, (i) a company-prepared
consolidated balance sheet of the Company and its consolidated Subsidiaries as
at the end of such period and related company-prepared statements for the
Company and its consolidated Subsidiaries of (A) income for such month and the
fiscal year to date, (B) retained earnings for such period and the fiscal year
to date in the event such period ends at fiscal quarter end, and (C) cash flows
for the fiscal year to date, in each case setting forth in comparative form
consolidated figures for the corresponding period or periods of the proceeding
fiscal year (subject to normal recurring year-end audit adjustments), together
with a management discussion of such results; provided, however, that the
requirements of this clause (i) shall terminate as of such time as the Leverage
Ratio is less than 2.50 to 1.00, as determined based upon the then most recently
prepared audited financial statements delivered pursuant to Section 5.1(a) and
the requirements of clause (i)(C) shall commence with the period ending January
31, 2001; (ii) a TRSTS report; (iii) a report of the status of the Credit
Parties' open orders as of month-end for such month and the calendar year to
date, in each case setting forth in comparative form the figures for the
corresponding period or periods of the preceding calendar year and for the
current periods included in such report; and (iv) a forecast of the Borrowers'
cash flow for the then immediately succeeding six (6) calendar months, in each
instance, substantially in the form of such reports attached hereto as Exhibit
5.1-D and made a part hereof.
(e) Borrowing Base Reporting. Within 15 days after the end
--------------------------
of each calendar month, written confirmation of the Borrowing Base as of the end
of such month and, concurrently with the submission of any Notice of Borrowing
as provided in Section 2.1(b)(i) and any request for Letter of Credit as
provided in Section 2.3(b), a Borrowing Base Certificate dated as of the date of
such notice or request, as applicable.
All such financial statements to be complete and correct in all
material respects (subject, in the case of interim statements, to normal
recurring year-end audit adjustments) and to be prepared in reasonable detail
and, in the case of the annual,
14
quarterly and monthly financial statements provided in accordance with
subsections (a), (b), and (d) above, in accordance with GAAP applied
consistently throughout the periods reflected therein and further accompanied by
a description of, and an estimation of the effect on the financial statements on
account of, a change, if any, in the application of accounting principles as
provided in Section 1.3.
17. Section 5.9 is amended to delete the provisions thereof in
------------
their entirety and substitute the following therefor:
The Company shall, and shall cause each of its Subsidiaries to, comply
with the following financial covenants:
(a) Leverage Ratio. The Leverage Ratio, as of the last day
---------------
of each fiscal quarter of the Company and its Subsidiaries set forth below for
the four fiscal quarters then ended, shall be less than or equal to that set
forth opposite such date:
Period Ending Ratio
------------- ------------
9/30/2000 . . 4.00 to 1.00
12/31/2000. . 3.75 to 1.00
3/31/2001 . . 3.75 to 1.00
6/30/2001 . . 3.50 to 1.00
9/30/2001 . . 3.25 to 1.00
12/31/2001. . 3.25 to 1.00
3/31/2002 . . 3.00 to 1.00
6/30/2002 . . 3.00 to 1.00
9/30/2002 . . 2.75 to 1.00
12/31/2002. . 2.75 to 1.00
3/31/2003 . . 2.75 to 1.00
(b) Minimum Consolidated EBITDA. Consolidated EBITDA, as of
---------------------------------------------------
the last day of each fiscal quarter of the Company and its Subsidiaries set
forth below for the four fiscal quarters then ended, shall not be less than the
amount set forth opposite such date:
Minimum
Consolidated
Period Ending EBITDA
------------- -------------
9/30/2000 . . $ 27,900,000
12/31/2000. . $ 32,490,000
3/31/2001 . . $ 33,100,000
6/30/2001 . . $ 34,500,000
9/30/2001 . . $ 34,500,000
12/31/2001. . $ 36,200,000
Minimum
Consolidated
Period Ending EBITDA
------------- -------------
3/31/2002 . . $ 36,500,000
6/30/2002 . . $ 37,400,000
9/30/2002 . . $ 39,773,000
12/31/2002. . $ 42,000,000
3/31/2003 . . $ 42,000,000
15
(c) Consolidated Capital Expenditures. Consolidated Capital
----------------------------------
Expenditures as of the last day of each fiscal quarter of the Company and its
Subsidiaries set forth below for the four fiscal quarters then ended shall
exceed the amount set forth opposite such date:
Maximum Capital
Period Ending Expenditures
------------------------- ----------------
6/30/2000 . . . . . . . . $ 11,300,000
9/30/2000 . . . . . . . . $ 11,100,000
12/31/2000. . . . . . . . $ 10,900,000
3/31/2001 . . . . . . . . $ 11,250,000
6/30/2001 . . . . . . . . $ 11,500,000
9/30/2001 . . . . . . . . $ 11,750,000
12/31/2001 thru 3/31/2003 $ 12,000,000
For purposes of this Section 5.9, Consolidated EBITDA shall exclude
any non-recurring or special charges related to legal settlements and license
guarantees for calendar year 2000 in an aggregate amount not to exceed the
lesser of (i) $2,500,000 or (ii) the actual amount of such special charges
incurred in calendar year 2000 which are required to meet the projected EBITDA
for the fiscal year ending December 31, 2000 reflected in the financial
projections attached hereto as Exhibit 5.9 and made a part hereof.
18. Section 6.5 is amended to delete the provisions (i) of the
proviso in clause (a)(ii) thereof in their entirety and substitute the following
therefor:
provided that such purchase or acquisition is committed to within
60 days of receipt of the net proceeds and such purchase or acquisition is
included within the amount set forth in Section 2.8(b)(ii).
and (ii) of clause (b) thereof in their entirety and
substitute the following therefor:
(b) purchase, lease or otherwise acquire (in a single
transaction or a series of related transactions) the property or assets of any
Person (other than purchases or other acquisitions of inventory, leases,
materials, property and equipment in the ordinary course of business).
19. Section 6.6 is amended to add the following provision at the
------------
end thereof:
16
Notwithstanding the foregoing, in no event shall the Company or any of
its Subsidiaries make any Permitted Investment described in clause (vii) of the
definition of such term.
20. Section 6.11 is amended to delete the provisions thereof in
-------------
their entirety and substitute the following therefor:
The Company will not, nor will it permit any Subsidiary to, directly
or indirectly, declare, order, make or set apart any sum for or pay any
Restricted Payment.
21. Schedule 1.1(b) is deleted in its entirety and Schedule 2.1(a)
--------------- ---------------
is deleted in its entirety and Schedule 2.1(a) attached hereto substituted
---------------
therefor.
B. No Other Amendments. Except as modified hereby, all of the terms
---------------------
and provisions of the Credit Documents remain in full force and effect.
C. Waiver. The Lenders hereby waive their rights and remedies arising
------
with respect to the occurrence of those Defaults and Events identified in that
certain Second Amendment to Credit Agreement dated as of May 15, 2000 and that
certain letter dated July 14, 2000 addressed to the Credit Parties, executed by
the Lenders, and agreed and acknowledged by the Credit Parties.
D. Representations and Warrants. The Credit Parties hereby represent
------------------------------
and warrant that (a) the representations and warranties contained in Article III
of the Credit Agreement, as amended hereby are correct in all material respects
on and as of the date hereof as though made on and as of such date and after
giving effect to the amendments contained herein and (b) except as specifically
referenced in C above, no Default or Event of Default exists under the Credit
Agreement on and as of the date hereof and after giving effect to the amendment
contained herein.
E. Conditions Precedent. This Third Amendment shall become effective
---------------------
upon the satisfaction of the following conditions precedent:
1. Execution of Third Amendment and Security Documents. The
---------------------------------------------------------
Administrative Agent shall have received counterparts of (a) this Third
Amendment, executed by a duly authorized offer of each party hereto and (b) the
Security Documents and third-party agreements identified on Schedule I attached
hereto and made a part hereof, in form and substance satisfactory to the
Administrative Agent and its counsel.
2. Legal Opinion of Counsel. The Administrative Agent shall have
-------------------------
received an opinion of Reinhart, Boerner, Van Deuren, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, s.c.,
counsel for the Credit Parties, dated as of the date hereof and addressed to the
Administrative Agent and the Lenders, in form and substance satisfactory to the
Administrative Agent.
17
3. Restructuring Fee. The Administrative Agent shall have
------------------
received, for the account of the Lenders in accordance with their respective
Commitment Percentage, payment of a fee in the amount of $328,125, in addition
to, and not in lieu of, other amounts paid or payable by the Borrowers under the
Credit Documents or amendments thereto or agreements entered into in connection
therewith.
4. Management Letter. The Borrowers shall have delivered to the
------------------
Administrative Agent and the Lenders a copy of the management letter of its
independent accountants prepared with respect to the audited financial
statements for the fiscal year ended December 31, 1999.
5. Expenses. The Administrative Agent shall have received payment
--------
on August 31, 2000 of all expenses incurred by it and payable or reimbursable by
the Borrowers pursuant to Section 9.5 of the Credit Agreement which are then
unpaid or unreimbursed.
F. Reaffirmation. Each of the Credit Parties hereby reaffirms all of
-------------
its obligations and duties under the Credit Documents as amended including but
not limited to the Borrower's obligations under the Credit Agreement and the
Guarantors obligations under the Credit Agreement.
G. Execution in Counterparts. This Third Amendment may be executed in
--------------------------
any number of counterparts, each of which when so executed and delivered shall
be deemed an original and it shall not be necessary in making proof of this
Third Amendment to produce or account for more than one such counterpart.
H. Governing Law. This Third Amendment and the Credit Agreement, as
--------------
amended hereby, shall be deemed to be contracts made under, and for all purposes
shall be construed in accordance with the laws of the State of North Carolina.
18
IN WITNESS WHEREOF, each of the parties has caused a counterpart of this
First Amendment to be duly executed and delivered as of the date and year first
above written.
U.S. BORROWERS : RACING CHAMPIONS, INC.
an Illinois corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Title:
RACING CHAMPIONS SOUTH, INC.
a North Carolina corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Title:
U.K. BORROWER: RACING CHAMPIONS WORLDWIDE LIMITED,
a United Kingdom corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Title:
GUARANTORS: RACING CHAMPIONS CORPORATION,
a Delaware corporation
GREEN'S RACING SOUVENIRS, INC.
a Virginia corporation
RCNA HOLDINGS, INC.,
a Delaware corporation
RACING CHAMPIONS ERTL, INC.,
f/k/a THE ERTL COMPANY, INC.,
a Delaware corporation
DIECAST ▇▇▇▇▇▇▇.▇▇▇, INC.
a Delaware corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Title:
19
ADMINISTRATIVE AGENT
AND LENDERS: FIRST UNION NATIONAL BANK,
as Administrative Agent and as
a Lender
By /s/ ▇▇▇▇ ▇. ▇▇▇▇
-------------------
Title: Senior Vice President & Director
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Title: Vice President
BANK ONE, N.A., f/k/a THE FIRST
NATIONAL BANK OF CHICAGO
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------
Title: Senior Vice President
NORTHERN TRUST COMPANY
By /s/ ▇.▇. ▇▇▇▇▇ Delanois
--------------------------
Title: Vice President
BANK OF AMERICA, N.A.
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------
Title: Vice President
COMERICA BANK
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------
Title: Assistant Vice President
20
NATIONAL CITY BANK
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Title: Senior Vice President
MICHIGAN NATIONAL BANK
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------
Title: Controller, Asset Structuring
21