FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "First Amendment") dated as
---------------
of August 30, 1999, 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", and 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 hereunder (in such capacity, the "Administrative Agent").
--------------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Lenders have established a $175,000,000 secured credit
facility for the benefit of the Borrowers pursuant to the terms of the Credit
Agreement;
WHEREAS, the Borrowers wish to amend the Credit Agreement to modify certain
provisions contained therein;
WHEREAS, the Required Lenders have agreed to the requested amendment on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A. The Credit Agreement is amended in the following respects:
1. (a) The pricing grid in the definition of "Applicable
Percentage" is deleted in its entirety and following substituted therefor:
Alternate LIBOR Rate Margin for
Base Rate U.S. Revolving Loans, U.K.
Margin for Revolving Loans, Term Loans
Leverage U.S. Revolving Loans and Letter of Commitment
Level Ratio and Term Loans Credit Fee Fee
I greater than or equal
to 3.25 to 1.0 1.25% 2.25% .400%
--------------------- --------------------- ---------------------------- -----------
II less than 3.25 to 1.0
but greater than 3.00
to 1.00 1.00% 2.00% .375%
--------------------- --------------------- ---------------------------- -----------
III less than 3.00 to 1.0
but greater than or
equal to 2.50 to 1.0 .50% 1.50% .300%
--------------------- --------------------- ---------------------------- -----------
IV less than 2.50 to 1.0
but greater than or
equal to 2.00 to 1.0 .25% 1.25% .275%
--------------------- --------------------- ---------------------------- -----------
V less than 2.00 to 1.0
but greater than or
equal to 1.50 to 1.0 .00% 1.00% .250%
--------------------- --------------------- ---------------------------- -----------
VI less than 1.50 to 1.0 .00% .75% .225%
----- --------------------- --------------------- ---------------------------- -----------
(b) From the date of this First Amendment written above through the
next Interest Determination Date, the Applicable Percentage shall be based on
Level II. On such next Interest Determination Date, the Applicable Percentage
shall be based on the Level set forth above that correlates with the Leverage
Ratio demonstrated in the compliance certificate delivered by the Company for
the quarter ended September 30, 1999 and shall remain at least equal to or
greater than such Applicable Margin through the quarter ended March 31, 2000.
2. Section 5.9(a) of the Credit Agreement is hereby amended by deleting
subsection (a) in its entirety and the following substituted therefor:
(a) Leverage Ratio. The Leverage Ratio, as of the last day of each
---------------
fiscal quarter of the Company and its Subsidiaries occurring during each of the
periods set forth below shall be less than or equal to the following:
2
Period Ratio
----------------------------------------- ------------
Closing Date through June 30, 1999 3.00 to 1.00
July 1, 1999 through December 31, 1999 3.50 to 1.00
January 1, 2000 through March 31, 2000 3.25 to 1.00
April 1, 2000 through June 30, 2000 3.00 to 1.00
July 1, 2000 through September 30, 2000 2.75 to 1.00
October 1, 2000 through December 31, 2001 2.50 to 1.00
January 1, 2002 through December 31, 2002 2.25 to 1.00
January 1, 2003 and thereafter 2.00 to 1.00
3. Section 5.9(b) of the Credit Agreement is hereby amended by deleting
subsection (b) in its entirety and the following substituted therefor:
(b) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, as
-----------------------------
of the last day of each fiscal quarter of the Company and its Subsidiaries
occurring during each of the periods set forth below shall be greater than or
equal to the following:
Period Ratio
----------------------------------------- ------------
Closing Date through December 31, 1999 1.25 to 1.00
January 1, 2000 through December 31, 2000 1.10 to 1.00
January 1, 2001 through March 31, 2001 1.15 to 1.00
April 1, 2001 and thereafter 1.25 to 1.00
4. Section 5.9(c) of the Credit Agreement is hereby amended by deleting
subsection (c) in its entirety and the following substituted therefor:
(c) The Interest Coverage Ratio as of the last day of each fiscal
quarter of the Company and its Subsidiaries occurring during the periods set
forth below shall be greater than or equal to the following:
Period Ratio
--------------------------------------- ------------
Closing Date until June 30, 1999 3.50 to 1.00
July 1, 1999 through March 31, 2000 2.50 to 1.00
April 1, 2000 through June 30, 2000 2.75 to 1.00
July 1, 2000 through September 30, 2000 3.25 to 1.00
October 1, 2000 and thereafter 4.00 to 1.00
5. Section 5.9 of the Credit Agreement is hereby amended by adding the
following clause (d) thereto immediately following clause (c):
3
(d) Limitation on Consolidated Capital Expenditures. Consolidated
---------------------------------------------------
Capital Expenditures as of the last day of each fiscal year of the Company and
its Subsidiaries occurring during the periods set forth below shall be less than
or equal to the following:
July 1, 1999 through December 31, 1999 $ 6,000,000
January 1, 2000 and thereafter $12,000,000
6. (a) The definition of "Consolidated EBIT" is hereby deleted in its
entirety and the following substituted therefor:
"Consolidated EBIT" means, 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) cost savings add-backs resulting from
non-recurring charges related to acquisitions as set forth on Schedule 1.1(c)
attached hereto, and (D) other adjustments to Consolidated EBIT reasonably
acceptable to the Required Lenders.
(b) The Schedules to the Credit Agreement are hereby amended by adding
Annex I attached hereto as Schedule 1.1(c) to the Credit Agreement and the
add-backs set forth therein are hereby approved by the Administrative Agent and
the Lenders party hereto. It is further agreed, that the delivery by the Company
of its compliance certificate for the quarter ended June 30, 1999 may have
resulted in an Event of Default for non-compliance with certain financial
covenants if the Company were unable to include the foregoing approved add-backs
in its calculations. Therefore, the Administrative Agent and the Lenders party
hereto hereby waive any such Event of Default relating to the Company's
inclusion of those certain add-backs set forth on Annex I hereto prior to the
approval of such add-backs by the Administrative Agent and the Required Lenders
herein and consent to the inclusion of such add-backs in the compliance
certificate for the quarter ended June 30, 1999.
7. The definition of "Consolidated EBITDA" is hereby deleted in its
entirety and the following substituted therefor:
"Consolidated EBITDA" means, 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, (C) depreciation, amortization expense and other
non-cash charges, (D) cost savings add-backs resulting from non-recurring
charges related to acquisitions as set forth on Schedule 1.1(c) attached hereto,
and (E) other adjustments to Consolidated EBITDA reasonably acceptable to the
Required Lenders.
4
8. The definition of "Fixed Charge Coverage Ratio" is hereby amended by
deleting the parenthetical in the third line of the definition and replacing it
with the following:
"(or the twelve month period beginning with the first day of the fiscal
quarter then ended with respect to subsection (b)(ii) below)".
9. (a) Section 6.11 of the Credit Agreement is hereby deleted in
its entirety and the following substituted 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, except (a) to make dividends payable solely in the same class of
Capital Stock of such Person, (b) to make dividends or other distributions
payable to any Credit Party (directly or indirectly through Subsidiaries), (c)
as permitted by Section 6.12 and (d) provided that (i) no Default or Event of
Default has occurred and is continuing at such time or would be directly or
indirectly caused as a result thereof on an actual or pro forma basis, and (ii)
prior to effecting such repurchase, the Company shall have delivered to the
Administrative Agent, a certificate in the form attached hereto as Schedule
--------
6.11, demonstrating that, after giving effect to such contemplated repurchase,
the Company will have minimum liquidity of at least $25 million, then the
Company may repurchase shares of its Capital Stock on the open market in an
aggregate amount not to exceed (a) $10,000,000 in the aggregate from the Closing
Date until April 15, 2000 and (b) $20,000,000 in the aggregate during the term
of this Agreement. Notwithstanding the foregoing, after June 30, 2000, the
Company shall no longer be required to deliver the liquidity certificate
provided for in subclause (d) (ii)."
(b) The Schedules to the Credit Agreement are hereby amended by
adding Annex II attached hereto as Schedule 6.11 to the Credit Agreement.
10. The following definition is added to Section 1.1 of the Credit
Agreement.
"Security Agreement" means the Security Agreement dated as of August 30,
-------------------
1999 given by the Borrowers and the Guarantors to the Administrative Agent, as
amended, modified or supplemented from time to time in accordance with its
terms.
11. The definition of "Security Documents" in the Credit Agreement is
amended by adding the phrase ", the Security Agreement" immediately after the
words "Pledge Agreement" therein.
12. Section 6.1(h) of the Credit Agreement is hereby deleted in its
entirety.
5
13. Section 6.3 of the Credit Agreement is hereby deleted in its
entirety and the following substituted therefor:
"The Company will not, nor will it permit any Subsidiary to, enter into or
otherwise become or be liable in respect of any Guaranty Obligations (excluding
specifically therefrom endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) other than (i) those in favor
of the Lenders in connection herewith and (ii) Guaranty Obligations by the
Company or its Subsidiaries of Indebtedness permitted under Section 6.1(b) (to
the extent existing on the Closing Date or as set forth on Schedule 6.1(b), as
---------------
it may be amended from time to time) and under Section 6.1 (f)."
14. Schedule 6.1(b) to the Credit Agreement is hereby deleted in its
----------------
entirety and replaced with Annex III attached hereto.
B. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and Exhibits) remain in full force and effect.
C. 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) no Default or Event of Default exists under
the Credit Agreement on and as of the date hereof and after giving effect to the
amendments contained herein.
D. This First Amendment shall become effective upon the satisfaction of
the following conditions precedent:
(a) Execution of First Amendment. The Administrative Agent shall have
-----------------------------
received counterparts of this First Amendment, executed by a duly authorized
officer of each party thereto.
(b) Execution of the Security Agreement. The Administrative Agent
---------------------------------------
shall have received counterparts of the Security Agreement executed by a duly
authorized officer of each party thereto.
(c) Legal Opinion of Counsel. The Administrative Agent shall have
---------------------------
received an opinion of Reinhart, Boerner, XxxXxxxxx, Xxxxxx & Xxxxxxxxxx, 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.
(d) Personal Property Collateral. The Administrative Agent shall have
-----------------------------
received, in form and substance satisfactory to the Administrative Agent:
6
(i) searches of Uniform Commercial Code filings in the jurisdiction of
the chief executive office of each Credit Party and each jurisdiction where any
Collateral is located or where a filing would need to be made in order to
perfect the Administrative Agent's security in trust in the Collateral, copies
of the financing statements on file in such jurisdictions and evidence that no
Liens exist other than Permitted Liens.
(ii) duly executed UCC financing statements for each appropriate
jurisdiction as necessary, in Administrative Agent's sole discretion, to perfect
the Administrative Agent's security interest in the Collateral.
(e) The Borrowers shall have paid to the Administrative Agent and the
Lenders all amendment and related fees including an amendment fee to all Lenders
party to this First Amendment in the amount of $100,000 on a pro rata basis
among such Lenders.
E. 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 Borrowers' obligations under the Credit Agreement and the Guarantors
obligations under the Credit Agreement.
F. The Company agrees to pay all reasonable costs and expenses in
connection with the preparation, execution and delivery of this First Amendment,
including the reasonable fees and expenses of the Administrative Agent's legal
counsel, Xxxxx & Xxx Xxxxx, PLLC.
G. This First 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 First Amendment to produce or
account for more than one such counterpart.
H. This First 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.
[Remainder of page intentionally left blank]
7
IN WITNESS WHEREOF, each of the parties hereto 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/ Xxxxxx X. Xxxxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxxxx
---------------------
Title: Executive Vice President
---------------------------
RACING CHAMPIONS SOUTH, INC.,
a North Carolina corporation
By:/s/ Xxxxxx X. Xxxxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxxxx
---------------------
Title: Executive Vice President
---------------------------
U.K. BORROWER: RACING CHAMPIONS WORLDWIDE
--------------
LIMITED,
a United Kingdom corporation
By:/s/ Xxxxxx X. Xxxxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxxxx
---------------------
Title: Director
---------------------------
8
GUARANTORS: RACING CHAMPIONS CORPORATION,
----------
a Delaware corporation
GREEN'S RACING SOUVENIRS, INC.,
a Virginia corporation
RCNA HOLDINGS, INC.,
a Delaware corporation
THE ERTL COMPANY, INC.,
a Delaware corporation
ERTL DIRECT, INC.,
a Delaware corporation
By:/s/ Xxxxxx X. Xxxxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxxxx
---------------------
Title: Executive Vice President
---------------------------
9
ADMINISTRATIVE AGENT
---------------------
AND LENDERS: FIRST UNION NATIONAL BANK,
-------------
as Administrative Agent and as a Lender
By:/s/ Xxxx X. Xxxxx
--------------------
Name:Xxxx X. Xxxxx
---------------
Title:
10
THE FIRST NATIONAL BANK OF CHICAGO
By:/s/ Xxxxx X. Xxxxxx
----------------------
Name:Xxxxx X. Xxxxxx
-----------------
Title:
11
NORTHERN TRUST COMPANY
By:/s/ Xxxxx Xxxxxxxx
--------------------
Name:Xxxxx Xxxxxxxx
---------------
Title:
12
COMERICA BANK
By:/s/ Xxxxxx X. Xxxxx
----------------------
Name:Xxxxxx X. Xxxxx
-----------------
Title:
13
MICHIGAN NATIONAL BANK
By:/s/ Xxxx Xxxxx
----------------------
Name: Xxxx Xxxxx
-----------------
Title:
14
