1
Exhibit 10.9
==================================================================
RACING CHAMPIONS CORPORATION
RACING CHAMPIONS, INC.
AMENDED AND RESTATED GUARANTEE AND SECURITY AGREEMENT
Dated as of April 30, 1996
As Amended and Restated as of June 17, 1997
BANKBOSTON, N.A., as Agent
==================================================================
2
TABLE OF CONTENTS
Page
1. Reference to Credit Agreement; Definitions; Certain Rules of Construction
1.1. "Accounts"..................................................1
--------
1.2 "Agreement".................................................1
---------
1.3. "Pledged Indebtedness"......................................1
--------------------
1.4. "Pledged Rights"............................................1
--------------
1.5. "Pledged Securities"........................................2
------------------
1.6. "Pledged Stock".............................................2
-------------
1.7. "UCC".......................................................2
---
2. Guarantee.................................................................2
---------
2.1. Guarantee of Credit Obligations.............................2
-------------------------------
2.2. Continuing Obligation.......................................2
---------------------
2.3. Waivers with Respect to Credit Obligations..................3
------------------------------------------
2.4. Lenders' Power to Waive, etc................................4
----------------------------
2.5. Information Regarding the Borrower, etc.....................5
---------------------------------------
2.6. Certain Guarantor Representations...........................6
---------------------------------
2.7. Subrogation.................................................6
-----------
2.8. Subordination...............................................7
-------------
2.9. Future Subsidiaries; Further Assurances.....................7
---------------------------------------
2.10. Contribution Among Guarantors...............................7
-----------------------------
3. Security..................................................................8
3.1. Credit Security.............................................8
3.1.1. Tangible Personal Property.......................8
--------------------------
3.1.2. Rights to Payment of Money.......................8
--------------------------
3.1.3. Intangibles......................................8
-----------
3.1.4. Pledged Stock....................................8
-------------
3.1.5. Pledged Rights...................................9
--------------
3.1.6. Pledged Indebtedness.............................9
--------------------
3.1.7. Chattel Paper, Instruments and Documents.........9
----------------------------------------
3.1.8. Leases...........................................9
------
3.1.9. Deposit Accounts.................................9
----------------
3.1.10. Collateral.........................................9
----------
3.1.11. Books and Records..................................9
-----------------
3.1.12. Insurance..........................................9
---------
3.1.13. All Other Property.................................9
------------------
3.1.14. Proceeds and Products..............................9
---------------------
3.1.15. Excluded Property ................................10
-----------------
ii
3
3.2. Additional Credit Security...................................10
3.2.1. Real Property.....................................10
3.2.2. Motor Vehicles and Aircraft.......................11
3.3. Representations, Warranties and Covenants with Respect to
Credit Security..............................................11
3.3.1. Pledged Stock.....................................11
3.3.2. Accounts and Pledged Indebtedness.................11
3.3.3. No Liens or Restrictions on Transfer or Change of
Control...........................................11
-------
3.3.4. Location of Credit Security.......................12
---------------------------
3.3.5. Trade Names.......................................12
-----------
3.3.6. Insurance.........................................12
---------
3.3.7. Modifications to Credit Security..................13
--------------------------------
3.3.8. Delivery of Documents.............................13
---------------------
3.4. Administration of Credit Security............................13
3.4.1. Use of Credit Security............................13
3.4.2. Deposits..........................................14
4. Special Provision Concerning Cash Collateral........................18
5. General.............................................................18
iii
4
EXHIBITS
3.3 - Obligors; Office and Principal Place of Business; Permitted
Jurisdiction for Personal Tangible Property; Trade Names;
Depository Institutions
iv
5
RACING CHAMPIONS CORPORATION
RACING CHAMPIONS, INC.
AMENDED AND RESTATED GUARANTEE AND SECURITY AGREEMENT
This Agreement, dated as of June 17, 1997, is among Racing Champions
Corporation, formerly known as Collectible Champions, Inc., a Delaware
corporation (the "Company"), the Subsidiaries of the Company from time to time
party hereto and BankBoston, N.A., formerly known as The First National Bank of
Boston, as agent (the "Agent") for itself and the other Lenders under the Credit
Agreement (as defined below). The parties agree as follows:
1. Reference to Credit Agreement; Definitions; Certain Rules of Construction.
Effective as of the date hereof, this Agreement amends and restates in its
entirety the Guarantee and Security Agreement dated as of April 30, 1996 among
the Company, its Subsidiaries and the Agent. Reference is made to the Amended
and Restated Credit Agreement dated as of the date hereof as from time to time
in effect (the "Credit Agreement"), among the Company, the Subsidiaries of the
Company from time to time party thereto, the Lenders and the Agent. Capitalized
terms defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined. Certain other capitalized terms are used in
this Agreement as specifically defined below in this Section 1. Except as the
context otherwise explicitly requires, (a) the capitalized term "Section" refers
to sections of this Agreement, (b) the capitalized term "Exhibit" refers to
exhibits to this Agreement, (c) references to a particular Section shall include
all subsections thereof, (d) the word "including" shall be construed as
"including without limitation", (e) terms defined in the UCC and not otherwise
defined herein have the meaning provided under the UCC, (f) references to a
particular statute or regulation include all rules and regulations thereunder
and any successor statute, regulation or rules, in each case as from time to
time in effect and (g) references to a particular Person include such Person's
successors and assigns to the extent not prohibited by this Agreemento and the
other Credit Documents. References to "the date hereof" mean the date first set
forth above.
1.1. "Accounts" is defined in Section 3.1.2.
1.2. "Agreement" means this Guarantee and Security Agreement as from
time to time in effect.
1
6
1.3. "Pledged Indebtedness" is defined in Section 3.1.6.
1.4. "Pledged Rights" is defined in Section 3.1.5.
1.5. "Pledged Security" means the Pledged Stock, the Pledged
Rights and the Pledged Indebtedness, collectively.
1.6. "Pledged Stock" is defined in Section 3.1.4.
1.7. "UCC" means the Uniform Commercial Code as in effect in
Massachusetts on the date hereof; provided, however, that with respect to the
perfection of the Agent's Lien in the Credit Security and the effect of
nonperfection thereof, the term "UCC" means the Uniform Commercial Code as in
effect in any jurisdiction the laws of which are made applicable by section
9-103 of the Uniform Commercial Code as in effect in Massachusetts.
2. Guarantee.
2.1. Guarantee of Credit Obligation. Each Guarantor unconditionally
guarantees that the Credit Obligations will be performed and paid in full in
cash when due and payable, whether at the stated or accelerated maturity thereof
or otherwise, this guarantee being a guarantee of payment and not of
collectability and being absolute and in no way conditional or contingent. In
the event any part of the Credit Obligations shall not have been so paid in full
when due and payable, each Guarantor will, immediately upon notice by the Agent
or, without notice, immediately upon the occurrence of a Bankruptcy Default, pay
or cause to be paid to the Agent for the account of each Lender in accordance
with the Lenders' respective Percentage Interests therein the amount of such
Credit Obligations which are then due and payable and unpaid. The obligations of
each Guarantor hereunder shall not be affected by the invalidity,
unenforceability or irrecoverability of any of the Credit Obligations as against
any other Obligor, any other guarantor thereof or any other Person. For purposes
hereof, the Credit Obligations shall be due and payable when and as the same
shall be due and payable under the terms of the Credit Agreement or any other
Credit Document notwithstanding the fact that the collection or enforcement
thereof may be stayed or enjoined under the Bankruptcy Code or other applicable
law.
2.2. Continuing Obligation. Each Guarantor acknowledges that the
Lenders have entered into the Credit Agreement (and, to the extent that the
Lenders or the Agent may enter into any future Credit Document, will have
entered into such agreement) in reliance on this Section 2 being a continuing
irrevocable agreement, and such Guarantor agrees that its guarantee may not be
2
7
revoked in whole or in part. The obligations of the Guarantors hereunder shall
terminate when the commitment of the Lenders to extend credit under the Credit
Agreement shall have terminated and all of the Credit Obligations have been
indefeasibly paid in full in cash and discharged; provided, however, that:
(a) if a claim is made upon the Lenders at any time for
repayment or recovery of any amounts or any property received by the
Lenders from any source on account of any of the Credit Obligations and
the Lenders repay or return any amounts or property so received
(including interest thereon to the extent required to be paid by the
Lenders) or
(b) if the Lenders become liable for any part of such claim by
reason of (i) any judgment or order of any court or administrative
authority having competent jurisdiction or (ii) any settlement or
compromise of any such claim,
then the Guarantors shall remain liable under this Agreement for the amounts so
repaid or property so returned or the amounts for which the Lenders become
liable (such amounts being deemed part of the Credit Obligations) to the same
extent as if such amounts or property had never been received by the Lenders,
notwithstanding any termination hereof or the cancellation of any instrument or
agreement evidencing any of the Credit Obligations. Not later than five days
after receipt of notice from the Agent, the Guarantors shall pay to the Agent an
amount equal to the amount of such repayment or return for which the Lenders
have so become liable. Payments hereunder by a Guarantor may be required by the
Agent on any number of occasions.
2.3. Waivers with Respect to Credit Obligations. Except to the extent
expressly required by the Credit Agreement or any other Credit Document, each
Guarantor waives, to the fullest extent permitted by the provisions of
applicable law, all of the following (including all defenses, counterclaims and
other rights of any nature based upon any of the following):
(a) presentment, demand for payment and protest of nonpayment
of any of the Credit Obligations, and notice of protest, dishonor or
nonperformance;
(b) notice of acceptance of this guarantee and notice that
credit has been extended in reliance on such Guarantor's guarantee of
the Credit Obligations;
3
8
(c) notice of any Default or of any inability to enforce
performance of the obligations of the Borrower or any other Person with
respect to any Credit Document, or notice of any acceleration of
maturity of any Credit Obligations;
(d) demand for performance or observance of, and any
enforcement of any provision of the Credit Agreement, the Credit
Obligations or any other Credit Document or any pursuit or exhaustion
of rights or remedies with respect to any Credit Security or against
the Borrower or any other Person in respect of the Credit Obligations
or any requirement of diligence or promptness on the part of the Agent
or the Lenders in connection with any of the foregoing;
(e) any act or omission on the part of the Agent or the
Lenders which may impair or prejudice the rights of such Guarantor,
including rights to obtain subrogation, exoneration, contribution,
indemnification or any other reimbursement from the Borrower or any
other Person, or otherwise operate as a deemed release or discharge;
(f) failure or delay to perfect or continue the perfection of
any security interest in any Credit Security or any other action which
xxxxx or impairs the value of, or any failure to preserve or protect
the value of, any Credit Security;
(g) any statute of limitations or any statute or rule of law
which provides that the obligation of a surety must be neither larger
in amount nor in other respects more burdensome than the obligation of
the principal;
(h) any "single action" or "anti-deficiency" law which would
otherwise prevent the Lenders from bringing any action, including any
claim for a deficiency, against such Guarantor before or after the
Agent's or the Lenders' commencement or completion of any foreclosure
action, whether judicially, by exercise of power of sale or otherwise,
or any other law which would otherwise require any election of remedies
by the Agent or the Lenders;
(i) all demands and notices of every kind with respect to the
foregoing; and
(j) to the extent not referred to above, all defenses (other
than payment) which the Borrower may now or hereafter have to the
payment of
4
9
the Credit Obligations, together with all suretyship defenses, which
could otherwise be asserted by such Guarantor.
Each Guarantor represents that it has obtained the advice of counsel as to the
extent to which suretyship and other defenses may be available to it with
respect to its obligations hereunder in the absence of the waivers contained in
this Section 2.3.
No delay or omission on the part of the Agent or the Lenders in
exercising any right under this Agreement or any other Credit Document or under
any guarantee of the Credit Obligations or with respect to the Credit Security
shall operate as a waiver or relinquishment of such right. No action which the
Agent or the Lenders or the Borrower may take or refrain from taking with
respect to the Credit Obligations, including any amendments thereto or
modifications thereof or waivers with respect thereto, shall affect the
provisions of this Agreement or the obligations of each Guarantor hereunder.
None of the Lenders' or the Agent's rights shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Obligor,
or by any noncompliance by the Borrower with the terms, provisions and covenants
of the Credit Agreement, regardless of any knowledge thereof which the Agent or
the Lenders may have or otherwise be charged with.
2.4. Lenders' Power to Waive, etc. Each Guarantor grants to the Agent
and the Lenders full power in their discretion, without notice to or consent of
such Guarantor, such notice and consent being expressly waived to the fullest
extent permitted by applicable law, and without in any way affecting the
liability of such Guarantor under its guarantee hereunder:
(a) To waive compliance with, and any Default under, and to
consent to any amendment to or modification or termination of any terms
or provisions of, or to give any waiver in respect of, the Credit
Agreement, any other Credit Document, the Credit Security, the Credit
Obligations or any guarantee thereof (each as from time to time in
effect);
(b) To grant any extensions of the Credit Obligations (for any
duration), and any other indulgence with respect thereto, and to effect
any total or partial release (by operation of law or otherwise),
discharge, compromise or settlement with respect to the obligations of
the Obligors or any other Person in respect of the Credit Obligations,
whether or not rights against such Guarantor under this Agreement are
reserved in connection therewith;
5
10
(c) To take security in any form for the Credit Obligations,
and to consent to the addition to or the substitution, exchange,
release or other disposition of, or to deal in any other manner with,
any part of any property contained in the Credit Security whether or
not the property, if any, received upon the exercise of such power
shall be of a character or value the same as or different from the
character or value of any property disposed of, and to obtain, modify
or release any present or future guarantees of the Credit Obligations
and to proceed against any of the Credit Security or such guarantees in
any order;
(d) To collect or liquidate or realize upon any of the Credit
Obligations or the Credit Security in any manner or to refrain from
collecting or liquidating or realizing upon any of the Credit
Obligations or the Credit Security; and
(e) To extend credit under the Credit Agreement, any other
Credit Document or otherwise in such amount as the Lenders may
determine, including increasing the amount of credit and the interest
rate and fees with respect thereto, even though the condition of the
Obligors (financial or otherwise, on an individual or Consolidated
basis) may have deteriorated since the date hereof.
2.5. Information Regarding the Borrower, etc. Each Guarantor has made
such investigation as it deems desirable of the risks undertaken by it in
entering into this Agreement and is fully satisfied that it understands all such
risks. Each Guarantor waives any obligation which may now or hereafter exist on
the part of the Agent or the Lenders to inform it of the risks being undertaken
by entering into this Agreement or of any changes in such risks and, from and
after the date hereof, each Guarantor undertakes to keep itself informed of such
risks and any changes therein. Each Guarantor expressly waives any duty which
may now or hereafter exist on the part of the Agent or the Lenders to disclose
to such Guarantor any matter related to the business, operations, character,
collateral, credit, condition (financial or otherwise), income or prospects of
the Borrower or its Affiliates or their properties or management, whether now or
hereafter known by the Agent or the Lenders. Each Guarantor represents warrants
and agrees that it assumes sole responsibility for obtaining from the Borrower
all information concerning the Credit Agreement and all other Credit Document
and all other information as to the Borrower and its Affiliates or their
properties or management as such Guarantor deems necessary or desirable.
7
11
2.6. Certain Guarantor Representation. Each Guarantor represents that:
(a) it is in its best interest and in pursuit of the purposes
for which it was organized as an integral part of the business
conducted and proposed to be conducted by the Company and its
Subsidiaries, and reasonably necessary and convenient in connection
with the conduct of the business conducted and proposed to be conducted
by them, to induce the Lenders to enter into the Credit Agreement and
to extend credit to the Borrower by making the Guarantee contemplated
by this Section 2;
(b) the credit available hereunder will directly or indirectly
inure to its benefit;
(c) by virtue of the foregoing it is receiving at least
reasonably equivalent value from the Lenders for its Guarantee;
(d) it will not be rendered insolvent as a result of entering
into this Agreement;
(e) after giving effect to the transactions contemplated by
this Agreement, it will have assets having a fair salable value in
excess of the amount required to pay its probable liability on its
existing debts as they become absolute and matured;
(f) it has, and will have, access to adequate capital for the
conduct of its business;
(g) it has the ability to pay its debts from time to time
incurred in connection therewith as such debts mature; and
(h) it has been advised by the Agent that the Lenders are
unwilling to enter into the Credit Agreement unless the Guarantee
contemplated by this Section 2 is given by it.
2.7. Subrogation. Each Guarantor agrees that, until the Credit
Obligations are paid in full, it will not exercise any right of reimbursement,
subrogation, contribution, offset or other claims against the other Obligors
arising by contract or operation of law in connection with ally payment made or
required to be made by such Guarantor under this Agreement. After the Payment in
full of the Credit Obligations, each Guarantor shall be entitled to exercise
against the Borrower and the other Obligors all such rights of reimbursement,
subrogation,
12
contribution and offset, and all such other claims, to the fullest extent
permitted by law.
2.8. Subordination. Each Guarantor covenants and agrees that, after the
occurrence of an Event of Default, all Indebtedness, claims and liabilities then
or thereafter owing by the Borrower or any other Obligor to such Guarantor
whether arising hereunder or otherwise are subordinated to the prior payment in
full of the Credit Obligations and are so subordinated as a claim against such
Obligor or any of its assets, whether such claim be in the ordinary course of
business or in the event of voluntary or involuntary liquidation, dissolution,
insolvency or bankruptcy, so that no payment with respect to any such
Indebtedness, claim or liability will be made or received while any Event of
Default exists.
2.9. Future Subsidiaries; Further Assurances. The Company will from
time to time cause (a) any present Wholly Owned Subsidiary that is not a
Guarantor within 30 days after notice from the Agent or (b) any future Wholly
Owned Subsidiary within 30 days after any such Person becomes a Wholly Owned
Subsidiary, to join this Agreement as a Guarantor pursuant to a joinder
agreement in form and substance satisfactory to the Agent; provided, however,
that in the event such a Wholly Owned Subsidiary is prohibited by any valid law,
statute, rule or regulation from guaranteeing the Credit Obligations, such
guarantee will be limited to the extent necessary to comply with such
prohibition. Each Guarantor will, promptly upon the request of the Agent from
time to time, execute, acknowledge and deliver, and file and record, all such
instruments, and take all such action, as the Agent deems necessary or advisable
to carry out the intent and purpose of this Section 2.
2.10. Contribution Among Guarantors. The Guarantors agree that, as
among themselves in their capacity as guarantors of the Credit Obligations, the
ultimate responsibility for repayment of the Credit Obligations, in the event
that the Borrower fails to pay when due its Credit Obligations, shall be
equitably apportioned, to the extent consistent with the Credit Documents, among
the respective Guarantors (a) in the proportion that each, in its capacity as a
guarantor, has benefited from the extensions of credit to the Borrower by the
Lenders under the Credit Agreement, or (b) if such equitable apportionment
cannot reasonably be determined or agreed upon among the affected Guarantors, in
proportion to their respective net worths determined on or about the date hereof
(or such later date as such Guarantor becomes party hereto). In the event that
any Guarantor, in its capacity as a guarantor, pays an amount with respect to
the Credit Obligations in excess of its proportionate share as set forth in this
Section 2.10, each other Guarantor shall, to the extent consistent with the
Credit Documents, make a contribution payment to such Guarantor in an amount
such that the aggregate
8
13
amount paid by each Guarantor reflects its proportionate share of the Credit
Obligations. In the event of any default by any Guarantor under this Section
2.10, each other Guarantor will bear, to the extent consistent with the Credit
Documents, its proportionate share of the defaulting Guarantor's Obligation
under this Section 2.10. This Section 2.10 is intended to set forth only the
rights and obligations of the Guarantors among themselves and shall not in any
way affect the obligations of any Guarantor to the Lenders under the Credit
Documents (which obligations shall at all times constitute the joint and several
obligations of all the Guarantors).
3. Security.
3.1. Credit Security. As security for the payment and performance of
the Credit Obligations, each Obligor mortgages, pledges and collaterally grants
and assigns to the Agent for the benefit of the Lenders and the holders from
time to time of any Credit Obligation, and a security interest in favor of the
Agent for the benefit of the Lenders and such holders in, all of such Obligor's
right, title and interest in and to (but none of its obligations or liabilities
with respect to) the items and types of present and future property described in
sections 3.1.1 through 3.1.14 (subject, however, to Section 3.1.15), whether now
owned or hereafter acquired, all of which shall be included in the term "Credit
Security":
3.1.1. Tangible Personal Property. All goods, machinery,
equipment, inventory and all other tangible personal property of any
nature whatsoever, wherever located, including raw materials, work in
process, finished parts and products, supplies, spare parts,
replacement parts, merchandise for resale, dies, molds, tools,
computers, tapes, disks and computer equipment.
3.1.2. Rights to Payment of Money. All rights to receive the
payment of money, including accounts and receivables, rights to receive
the payment of money under contracts, franchises, licenses, permits,
subscriptions or other agreements (whether or not earned by
performance), and rights to receive payments from any other source (all
such rights, other than Financing Debt, being referred to herein as
"Accounts").
3.1.3. Intangibles. All of the following (to the extent not
included in Section 3.1.2): (a) contracts, franchises, licenses,
permits, subscriptions and other agreements and all other rights
thereunder; (b) rights granted by others which permit such Obligor to
sell or market items of personal property; (c) United States and
foreign common law and statutory copyrights and rights in literary
property and rights and licenses thereunder;
9
00
(x) xxxxx xxxxx, Xxxxxx Xxxxxx and foreign trademarks, service marks,
any registrations thereof and any related good will; (e) United States
and foreign patents and patent applications; (f) computer software,
designs, models, know-how, trade secrets, rights in proprietary
information, formulas, customer lists, backlog, orders, subscriptions,
royalties, catalogues, sales material, documents, good will, inventions
and processes; (g) judgments, causes in action and claims, whether or
not inchoate, and (h) all other general intangibles and intangible
property and all rights thereunder.
3.1.4. Pledged Stock. (a) All shares of capital stock or other
evidence of beneficial interest in any corporation, business trust or
limited liability company, (b) all limited partnership interests in any
limited partnership, (c) all general partnership interests in any
general partnership, (d) all joint venture interests in any joint
venture and (e) all options, warrants and similar rights to acquire
such capital stock or such interests. All such capital stock,
interests, options, warrants and other rights are collectively referred
to as the "Pledged Stock".
3.1.5. Pledged Rights. All rights to receive profits or
surplus of, or other Distributions (including income, return of capital
and liquidating distributions) from, any partnership, joint venture or
limited liability company; including any distributions by any such
Person to partners, joint venturers or members. All such rights are
collectively referred to as the "Pledged Rights".
3.1.6. Pledged Indebtedness. All Financing Debt from time to
time owing to such Obligor from any Person (all such Financing Debt
being referred to as the "Pledged Indebtedness").
3.1.7. Chattel Paper, Instruments and Documents. All chattel
paper, non-negotiable instruments, negotiable instruments and
documents.
3.1.8. Leases. All leases of personal property, whether such
Obligor is the lessor or the lessee thereunder.
3.1.9. Deposit Accounts. All general or special deposit
accounts, including any demand, time, savings, passbook or similar
account maintained by such Obligor with any bank, trust company,
savings and loan association, credit union or similar organization, and
all money, cash and cash equivalents of such Obligor, whether or not
deposited in any such deposit account.
10
15
3.1.10. Collateral. All collateral granted by third party
Obligors to, or held by, such Obligor with respect to the Accounts,
Pledged Securities, chattel paper, instruments, leases and other items
of Credit Security.
3.1.11. Books and Records. All books and records, including
books of account and ledgers of every kind and nature, all
electronically recorded data (including all computer programs, disks,
tapes, electronic data processing media and software used in connection
with maintaining such Obligor's books and records), all files and
correspondence and all receptacles and containers for the foregoing.
3.1.12. Insurance. All insurance policies which insure against
any loss or damage to any other Credit Security.
3.1.13. All Other Property. All other property, assets and
items of value of every kind and nature, tangible or intangible,
absolute or contingent, legal or equitable.
3.1.14. Proceeds and Products. All proceeds, including
insurance proceeds, and products of the items of Credit Security
described or referred to in Sections 3.1.1 through 3.1.13 and, to the
extent not included in the foregoing, all Distributions with respect to
the Pledged Securities.
3.1.15. Excluded Property. Notwithstanding Sections 3.1.1
through 3.1.14, the payment and performance of the Credit Obligations
shall not be secured by:
(a) any contract, license, permit or franchise that validly
prohibits the creation by such Obligor of a security interest in such
contract, license, permit or franchise (or in any rights or property
obtained by such Obligor under such contract, license, permit or
franchise); provided, however, that the provisions of this Section
3.1.15 shall not prohibit the security interests created by this
Agreement from extending to the proceeds of such contract, license,
permit or franchise (or such rights or property) or to the monetary
value of the good will and other general intangibles of the Obligors
relating thereto;
(b) any rights or property to the extent that any valid and
enforceable law or regulation applicable to such rights or property
prohibits the creation of a security interest therein; provided,
however, that the provisions of this Section 3.1.15 shall not prohibit
the security interests created by this Agreement from extending to the
proceeds of such rights or
11
16
property or to the monetary value of the good will and other general
intangibles of the Obligors relating thereto; or
(c) the items described in Section 3.2 (but only in the event
and to the extent the Agent has not specified that such items be
included in the Credit Security pursuant thereto).
In addition, in the event any Obligor disposes of assets to third
parties in a transaction permitted by section 6.11 of the Credit Agreement, such
assets, but not the proceeds or products thereof, shall be released from the
Lien of the Credit Security.
3.2. Additional Credit Security. As additional Credit Security, each
Obligor covenants that it will mortgage, pledge and collaterally grant and
assign to the Agent for the benefit of the Lenders and the holders from time to
time of any Credit Obligation, and will create a security interest in favor of
the Agent for the benefit of the Lenders and such holders in, all of its right,
title and interest in and to (but none of its obligations with respect to) such
of the following present or future items as the Agent may from time to time
specify by notice to such Obligor, whether now owned or hereafter acquired, and
the proceeds and products thereof, except to the extent consisting of rights or
property of the types referred to in Section 3.1.15(a) through (b), subject only
to Liens permitted by Section 3.3.3, all of which shall thereupon be included in
the term "Credit Security":
3.2.1. Real Property. All real property and immovable property
and fixtures, leasehold interests and easements wherever located,
together with any and all estates and interests of such Obligor
therein, including lands, buildings, stores, manufacturing facilities
and other structures erected on such property, fixed plant, fixed
equipment and all permits, rights, licenses, benefits and other
interests of any kind or nature whatsoever in respect of such real and
immovable property
3.2.2. Motor Vehicles and Aircraft. All motor vehicles and
aircraft.
3.3. Representations, Warranties and Covenants with Respect to Credit
Security. Each Obligor severally represents, warrants and covenants with respect
to itself and its respective Credit Security that:
3.3.1. Pledged Stock. All shares of capital stock, limited
partnership interests and similar securities included in the Pledged
Stock are and shall be at all times duly authorized, validly issued,
fully paid and (in the case of capital stock and limited partnership
interests) nonassessable. Each Obligor
12
17
will deliver to the Agent certificates representing the Pledged Stock,
registered, if the Agent so requests, in the name of the Agent or its
nominee, as pledgee, or accompanied by a stock transfer power executed
in blank and, if the Agent so requests, with the signature guaranteed,
all in form and manner satisfactory to the Agent. Pledged Stock that is
not evidenced by a certificate will be registered in the Agent's name
as pledgee on the issuer's records, all in form and substance
satisfactory to the Agent. The Agent may at any time after the
occurrence of an Event of Default transfer into its name or the name of
its nominee, as pledgee, any Pledged Stock. In the event the Pledged
Stock includes any Margin Stock, the Obligors will furnish to the
Lenders Federal Reserve Form U-1 and take such other action as the
Agent may request to ensure compliance with applicable laws.
3.3.2. Accounts and Pledged Indebtedness. All Accounts and
Pledged Indebtedness owed by an Affiliate of any Obligor shall be on
open account and shall not be evidenced by any note or other
instrument; provided, however, that all Pledged Indebtedness owed by an
Affiliate of any Obligor shall, if the Agent requests, be evidenced by
a promissory note, which note shall be delivered to the Agent after
having been endorsed in blank. Each Obligor will, immediately upon the
receipt thereof, deliver to the Agent any promissory note or similar
instrument representing any Account or Pledged Indebtedness, after
having endorsed such promissory note or instrument in blank.
3.3.3. No Liens or Restrictions on Transfer or Change of
Control. All Credit Security shall be free and clear of any Liens and
restrictions on the transfer thereof, including contractual provisions
which prohibit the assignment of rights under contracts except for
Liens permitted by section 6.8 of the Credit Agreement. Without
limiting the generality of the foregoing, each Obligor will in good
faith attempt to exclude from contracts to which it becomes a party
after the date hereof provisions that would prevent such Obligor from
creating a security interest in such contract or any property acquired
thereunder as contemplated hereby. None of the Pledged Stock is subject
to any option to purchase or similar rights of any Person. Except with
the written consent of the Agent, each Obligor will in good faith
attempt to exclude from any agreement, instrument, deed or lease
provisions that would restrict the change of control or ownership of
the Company or any of its Subsidiaries, or create a security interest
in the ownership of the Company or any of its Subsidiaries.
3.3.4. Location of Credit Security. Each Obligor shall at all
times keep its records concerning the Accounts at its chief executive
office and
13
00
xxxxxxxxx xxxxx xx xxxxxxxx, xxxxx office and place of business shall
be set forth in Exhibit 3.3 or, so long as such Obligor shall have
taken all steps reasonably necessary to perfect the Lenders' security
interest in the Credit Security with respect to such new address, at
such other address as such Obligor may specify by notice actually
received by the Agent not less than 10 Banking Days prior to such
change of address. No Obligor shall at any time keep tangible personal
property of the type referred to in Section 3.1.1 in any jurisdiction
other than the jurisdictions specified in Exhibit 3.3 or, so long as
such Obligor shall have taken all steps reasonably necessary to perfect
the Lenders' security interest in the Credit Security with respect to
such other jurisdiction, other jurisdictions as such Obligor may
specify by notice actually received by the Agent not less than 10 days
prior to moving such tangible personal property into such other
jurisdiction.
3.3.5. Trade Names. No Obligor will adopt or do business under
any name other than its name or names designated in Exhibit 3.3 or any
other name specified by notice actually received by the Agent not less
than 10 Banking Days prior to the conduct of business under such
additional name. Since its incorporation, no Obligor has changed its
corporate name or adopted or conducted business under any trade name
other than a name specified on Exhibit 3.3 (as from time to time
supplemented in accordance with sections 6.4.1 and 6.4.2 of the Credit
Agreement).
3.3.6. Insurance. Each insurance policy included in, or
insuring against loss or damage to, the Credit Security shall name the
Agent as additional insured party or as loss payee. No such insurance
policy shall be cancelable or subject to termination or reduction in
amount or scope of coverage until after at least 30 days' prior written
notice from the insurer to the Agent. At least 10 days prior to the
expiration of any such insurance policy for any reason, each Obligor
shall furnish the Agent with a renewal or replacement policy and
evidence of payment of the premiums therefor when due. Each Obligor
grants to the Agent full power and authority as its attorney-in-fact,
effective upon notice to such Obligor after the occurrence of an Event
of Default, to obtain, cancel, transfer, adjust and settle any such
insurance policy and to endorse any drafts thereon. Any amounts that
the Agent receives under any such policy (including return of unearned
premiums) insuring against loss or damage to the Credit Security prior
to the occurrence of an Event of Default shall be delivered to the
Obligors for the replacement, restoration and maintenance of the Credit
14
19
Security. Any such amounts that the Agent receives after the occurrence
of an Event of Default shall, at the Agent's option, be applied to
payment of the Credit Obligations or to the replacement, restoration
and maintenance of the Credit Security. If any Obligor fails to provide
insurance as required by this Agreement, the Agent may, at its option,
purchase such insurance and such Obligor will on demand pay to the
Agent the amount of any payments made by the Agent or the Lenders for
such purpose, together with interest on the amounts so disbursed from
five Banking Days after the date demanded until payment in full thereof
at the Overdue Reimbursement Rate.
3.3.7. Modifications to Credit Security. Except with the prior
written consent of the Agent, no Obligor shall amend or modify, or
waive any of its rights under or with respect to, any material
Accounts, general intangibles, Pledged Securities or leases if the
effect of such amendment, modification or waiver would be to reduce the
amount of any such items or to extend the time of payment thereof, to
waive any default by any other party thereto, or to waive or impair any
remedies of the Obligors or the Lenders under or with respect to any
such Accounts, general intangibles, Pledged Securities or leases, in
each case other than consistent with past practice in the ordinary
course of business and on an arm's-length basis. Each Obligor will
promptly give the Agent written notice of any request by any Person for
any material credit or adjustment with respect to any Account, general
intangible, Pledged Securities or leases.
3.3.8. Delivery of Documents. Upon the Agent's request, each
Obligor shall deliver to the Agent, promptly upon such Obligor's
receipt thereof, copies of any agreements, instruments, documents or
invoices comprising or relating to the Credit Security. Pending such
request, such Obligor shall keep such items at its chief executive
office and principal place of business (as specified pursuant to
Section 3.3.4).
3.3.9. Perfection of Credit Security. Upon the Agent's request
from time to time, subject to Section 5 hereof, the Obligors will
execute and deliver, and file and record in the proper filing and
recording places, all such instruments, including financing statements,
collateral assignments of copyrights, trademarks and patents, mortgages
or deeds of trust and notations on certificates of title, and will take
all such other action, as the Agent reasonably deems advisable for
confirming to it the Credit Security or to carry out any other purpose
of this Agreement or any other Credit Document.
3.4. Administration of Credit Security. The Credit Security shall be
administered as follows, and if an Event of Default shall have occurred, Section
3.5 shall also apply.
15
20
3.4.1. Use of Credit Security. Until the Agent provides
written notice to the contrary upon an Event of Default, each Obligor
may use, commingle and dispose of any part of the Credit Security in
the ordinary course of its business, all subject to section 6.11 of the
Credit Agreement.
3.4.2. Deposits. Each Obligor shall keep all its bank and
deposit accounts only with such financial institutions listed on
Exhibit 3.3 (as from time to time supplemented in accordance with
sections 6.4.1 and 6.4.2 of the Credit Agreement).
3.4.3. Distributions on Pledged Securities.
(a) Until an Event of Default shall occur, the respective
Obligors shall be entitled, to the extent permitted by the Credit
Documents, to receive and retain all Distributions on or with respect
to the Pledged Securities (other than Distributions constituting
additional Pledged Securities). All Distributions constituting
additional Pledged Securities will be retained by the Agent (or if
received by any Obligor shall be held by such Person in trust and shall
be immediately delivered by such Person to the Agent in the original
form received, endorsed in blank) and held by the Agent as part of the
Credit Security.
(b) If an Event of Default shall have occurred, all
Distributions on or with respect to the Pledged Securities shall be
retained by the Agent (or if received by any Obligor shall be held by
such Person in trust and shall be immediately delivered by it to the
Agent in the original form received, endorsed in blank) and held by the
Agent as part of the Credit Security or applied by the Agent to the
payment of the Credit Obligations in accordance with Section 3.5.6.
3.4.4. Voting Pledged Securities.
(a) Until an Event of Default shall occur, the respective
Obligors shall be entitled to vote or consent with respect to the
Pledged Securities in any manner not inconsistent with the terms of any
Credit Document, and the Agent will, if so requested, execute
appropriate revocable proxies therefor.
(b) If an Event of Default shall have occurred, if and to the
extent that the Agent shall so notify in writing the Obligor pledging
the Pledged Securities in question, only the Agent shall be entitled to
vote or consent or
16
21
take any other action with respect to the Pledged Securities (and any
Obligor will, if so requested, execute appropriate proxies therefor).
3.5. Right to Realize upon Credit Security. Except to the extent
prohibited by applicable law that cannot be waived, this Section 3.5 shall
govern the Lender' s and the Agent' s rights to realize upon the Credit Security
if any Event of Default shall have occurred. The provisions of this Section 3.5
are in addition to any rights and remedies available at law or in equity and in
addition to the provisions of any other Credit Document. In the case of a
conflict between this Section 3.5 and any other Credit Document, this Section
3.5 shall govern.
3.5.1. Assembly of Credit Security; Receiver. Each Obligor
shall, upon the Agent's request, assemble the Credit Security and
otherwise make it available to the Agent. The Agent may have a receiver
appointed for all or any portion of the Obligors' assets or business
which constitutes the Credit Security in order to manage, protect,
preserve, sell and otherwise dispose of all or any portion of the
Credit Security in accordance with the terms of the Credit Documents,
to continue the operations of the Obligors and to collect all revenues
and profits therefrom to be applied to the payment of the Credit
Obligations, including the compensation and expenses of such receiver.
3.5.2. General Authority. To the extent specified in written
notice from the Agent to the Obligor in question, each Obligor grants
the Agent full and exclusive power and authority, subject to the other
terms hereof and applicable law, to take any of the following actions
(for the sole benefit of the Agent on behalf of the Lenders and the
holders from time to time of any Credit Obligations, but at such
Obligor's expense):
(a) To ask for, demand, take, collect, xxx for and receive all
payments in respect of any Accounts, general intangibles, Pledged
Securities or leases which such Obligor could otherwise ask for,
demand, take, collect, xxx for and receive for its own use.
(b) To extend the time of payment of any Accounts, general
intangibles, Pledged Securities or leases and to make any allowance or
other adjustment with respect thereto.
(c) To settle, compromise, prosecute or defend any action or
proceeding with respect to any Accounts, general intangibles, Pledged
Securities or leases and to enforce all rights and remedies thereunder
which such Obligor could otherwise enforce.
17
22
(d) To enforce the payment of any Accounts, general
intangibles, Pledged Securities or leases, either in the name of such
Obligor or in its own name, and to endorse the name of such Obligor on
all checks, drafts, money orders and other instruments tendered to or
received in payment of any Credit Security.
(e) To notify the third party payor with respect to any
Accounts, general intangibles, Pledged Securities or leases of the
existence of the security interest created hereby and to cause all
payments in respect thereof thereafter to be made directly to the
Agent; provided, however, that whether or not the Agent shall have so
notified such payor, such Obligor will at its expense render all
reasonable assistance to the Agent in collecting such items and in
enforcing claims thereon.
(f) To sell, transfer, assign or otherwise deal in or with any
Credit Security or the proceeds thereof, as fully as such Obligor
otherwise could do.
3.5.3. Marshaling, etc. Neither the Agent nor the Lenders
shall be required to make any demand upon, or pursue or exhaust any of
their rights or remedies against, any Obligor or any other guarantor,
pledgor or any other Person with respect to the payment of the Credit
Obligations or to pursue or exhaust any of their rights or remedies
with respect to any collateral therefor or any direct or indirect
guarantee thereof. Neither the Agent nor the Lenders shall be required
to marshal the Credit Security or any guarantee of the Credit
Obligations or to resort to the Credit Security or any such guarantee
in any particular order, and all of its and their rights hereunder or
under any other Credit Document shall be cumulative. To the extent it
may lawfully do so, each Obligor absolutely and irrevocably waives and
relinquishes the benefit and advantage of, and covenants not to assert
against the Agent or the Lenders, any valuation, stay, appraisement,
extension, redemption or similar laws now or hereafter existing which,
but for this provision, might be applicable to the sale of any Credit
Security made under the judgment, order or decree of any court, or
privately under the power of sale conferred by this Agreement, or
otherwise. Without limiting the generality of the foregoing, each
Obligor (a) agrees that it will not invoke or utilize any law which
might prevent, cause a delay in or otherwise impede the enforcement of
the rights of the Agent or any Lender in the Credit Security, (b)
waives all such laws, and (c) agrees that it will not invoke or raise
as a defense to any enforcement by the Agent or any Lender of any
rights and remedies relating to the Credit Security or the
18
23
Credit Obligations any legal or contractual requirement with which the
Agent or any Lender may have in good faith failed to comply. In
addition, each Obligor waives any right to prior notice (except to the
extent expressly required by this Agreement or by law) or judicial
hearing in connection with foreclosure on or disposition of any Credit
Security, including any such right which such Obligor would otherwise
have under the Constitution of the United States of America, any state
or territory thereof or any other jurisdiction.
3.5.4. Sales of Credit Security. All or any part of the Credit
Security may be sold for cash or other value in any number of lots at
public or private sale, without demand, advertisement or notice;
provided, however, that unless the Credit Security to be sold threatens
to decline speedily in value or is of a type customarily sold on a
recognized market, the Agent shall give the Obligor granting the
security interest in such Credit Security 10 days' prior written notice
of the time and place of any public sale, or the time after which a
private sale may be made, which notice each of the Obligors and the
Agent agrees to be reasonable. At any sale or sales of Credit Security,
any Lender or any of its respective officers acting on its behalf, or
such Lender's assigns, may bid for and purchase all or any part of the
property and rights so sold, may use all or any portion of the Credit
Obligations owed to such Lender as payment for the property or rights
so purchased, and upon compliance with the terms of such sale may hold
and dispose of such property and rights without further accountability
to the respective Obligors, except for the proceeds of such sale or
sales pursuant to Section 3.5.6. The Obligors acknowledge that any such
sale will be made by the Agent on an "as is" basis with disclaimers of
all warranties, whether express or implied. The respective Obligors
will execute and deliver or cause to be executed and delivered such
instruments, documents, assignments, waivers, certificates and
affidavits, will supply or cause to be supplied such further
information and will take such further action, as the Agent shall
reasonably request in connection with any such sale.
3.5.5. Sale without Registration. If, at any time when the
Agent shall determine to exercise its rights hereunder to sell all or
part of the securities included in the Credit Security, the securities
in question shall not be effectively registered under the Securities
Act (or other applicable law), the Agent may, in its sole discretion,
sell such securities by private or other sale not requiring such
registration in such manner and in such circumstances as the Agent may
deem necessary or advisable in order that such sale may be effected in
accordance with applicable securities laws without such registration
and the related delays, uncertainty and expense.
19
24
Without limiting the generality of the foregoing, in any event the
Agent may, in its sole discretion, (a) approach and negotiate with a
single purchaser or one or more possible purchasers to effect such
sale, (b) restrict such sale to one or more purchasers each of whom
will represent and agree that such purchaser is purchasing for its own
account, for investment and not with a view to the distribution or sale
of such securities and (c) cause to be placed on certificates
representing the securities in question a legend to the effect that
such securities have not been registered under the Securities Act (or
other applicable law) and may not be disposed of in violation of the
provisions thereof. Each Obligor agrees that such manner of disposition
is commercially reasonable, that it will upon the Agent's request give
any such purchaser access to such information regarding the issuer of
the securities in question as the Agent may reasonably request and that
the Agent and the Lenders shall not incur any responsibility for
selling all or part of the securities included in the Credit Security
at any private or other sale not requiring such registration,
notwithstanding the possibility that a substantially higher price might
be realized if the sale were deferred until after registration under
the Securities Act (or other applicable law) or until made in
compliance with certain other rules or exemptions from the registration
provisions under the Securities Act (or other applicable law). Each
Obligor acknowledges that no adequate remedy at law exists for breach
by it of this Section 3.5.5 and that such breach would not be
adequately compensable in damages and therefore agrees that this
Section 3.5.5 may be specifically enforced.
3.5.6. Application of Proceeds. The proceeds of all sales and
collections in respect of any Credit Security or other assets of any
Obligor, all funds collected from the Obligors and any cash contained
in the Credit Security, the application of which is not otherwise
specifically provided for herein, shall be applied as follows:
First, to the payment of the costs and expenses of such sales
and collections, the reasonable expenses of the Agent and the
reasonable fees and expenses of its special counsel;
Second, any surplus then remaining to the payment of the
Credit Obligations in such order and manner as the Agent may in its
sole discretion determine; provided, however, that any such payment of
Credit Obligations owed to all Lenders shall be proposed Policy rata in
accordance with the respective Percentage Interests of the Lenders in
such Credit Obligations; and
20
25
Third, any surplus then remaining shall be paid to the
Obligors, subject, however, to the rights of the holder of any then
existing Lien of which the Agent has actual notice.
3.6. Custody of Credit Security. Except as provided by applicable law
that cannot be waived, the Agent will have no duty as to the custody and
protection of the Credit Security, the collection of any part thereof or of any
income thereon or the preservation or exercise of any rights pertaining thereto,
including rights against prior parties, except for the use of reasonable care in
the custody and physical preservation of any Credit Security in its possession.
The Lenders will not be liable or responsible for any loss or damage to any
Credit Security, or for any diminution in the value thereof, by reason of the
act or omission of any agent selected by the Agent acting in good faith.
4. Special Provision Concerning Cash Collateral. Notwithstanding anything to the
contrary contained herein (including, without limitation, pursuant to Section
3.3.9 hereof), until the Agent shall exercise its remedies upon an Event of
Default, no Obligor shall be obligated to perform any act or execute or deliver
any document or instrument which conveys control over such Obligor's cash, Cash
Equivalents or deposit or similar depository accounts.
5. General. Addresses for notices, consent to jurisdiction, jury trial waiver,
defeasance and numerous other provisions applicable to this Agreement are
contained in the Credit Agreement. The invalidity or unenforceability of any
term or provision hereof shall not affect the validity or enforceability of any
other term or provision hereof. The headings in this Agreement are for
convenience of reference only and shall not limit, alter or otherwise affect the
meaning hereof. This Agreement and the other Credit Documents constitute the
entire Understanding of the parties with respect to the subject matter hereof
and thereof and supersede all prior and current understandings and agreements,
whether written or oral. This Agreement is a Credit Document and may be executed
in any number of counterparts, which together shall constitute one instrument.
This Agreement shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of the Commonwealth of Massachusetts
except as may be required by the UCC or other applicable laws of other
jurisdictions with respect to matters involving the perfection of the Agent's
Lien on the Credit Security located in such other jurisdictions.
21
26
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
dated first written above.
RACING CHAMPIONS CORPORATION
By /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Title: Vice President-Finance and
Operations and Secretary
RACING CHAMPIONS, INC.
By /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Title: Vice President-Finance and
Operations and Secretary
BANKBOSTON, N.A.
as Agent under the Credit Agreement
By
-------------------------------------
Title: Vice President
22
