-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K++vbleP6JS3dquzpL+3TTNvYGndf7YxZGhXOXX2zoBmjsI781jVr6VPXkddsezf zX9yc5nb70AJsscdyM79yA== 0000950115-98-001650.txt : 19981029 0000950115-98-001650.hdr.sgml : 19981029 ACCESSION NUMBER: 0000950115-98-001650 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19981028 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GLOBAL MOTORSPORT GROUP INC CENTRAL INDEX KEY: 0000879360 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MOTOR VEHICLE SUPPLIES & NEW PARTS [5013] IRS NUMBER: 941716138 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-42821 FILM NUMBER: 98731708 BUSINESS ADDRESS: STREET 1: 16100 JACQUELINE COURT CITY: MORGAN HILL STATE: CA ZIP: 95037 BUSINESS PHONE: 4087780500 MAIL ADDRESS: STREET 1: 16100 JACQUELINE CT CITY: MORGAN HILL STATE: CA ZIP: 95037 FORMER COMPANY: FORMER CONFORMED NAME: CUSTOM CHROME INC /DE DATE OF NAME CHANGE: 19930328 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GOLDEN CYCLE LLC CENTRAL INDEX KEY: 0001057145 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 222943669 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 4025 CROOKED HILL ROAD CITY: HARRISBURG STATE: PA ZIP: 17110 BUSINESS PHONE: 6106428600 MAIL ADDRESS: STREET 1: 4025 CROOKED HILL ROAD CITY: HARRISBURG STATE: PA ZIP: 17110 FORMER COMPANY: FORMER CONFORMED NAME: GLOBAL CYCLE LLC DATE OF NAME CHANGE: 19980305 SC 13D/A 1 SCHEDULE 13 D/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D/A (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 4) ---------------------------------------------------- GLOBAL MOTORSPORT GROUP, INC. ----------------------------- (Name of Issuer) Common Stock, par value $0.001 per share ---------------------------------------- (Title of Class of Securities) 378937106 -------------- (CUSIP Number) Wolf, Block, Schorr and Solis-Cohen LLP 111 South 15th Street Philadelphia, PA 19102 Attention: Herbert Henryson II, Esquire (215) 977-2556 ------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 27, 1998 ------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [ ]. Golden Cycle, LLC hereby amends its Schedule 13D (the "Schedule 13D") relating to the Common Stock, par value $0.001 per share, of Global Motorsport Group, Inc. to add the following information. All capitalized terms used and not otherwise defined herein have the meanings ascribed to them in the Schedule 13D. Item 4. Purpose of Transaction. Item 4 is hereby amended to add the following: On April 13, 1998, the Reporting Person filed revised preliminary proxy materials with the Securities and Exchange Commission in connection with its proposed solicitation of written consents to replace the current Board of Directors of the Company with its own nominees committed to selling the Company for the highest price reasonably available. Such revised preliminary proxy material is hereby incorporated herein by reference. On April 14, 1998, the Reporting Person sent a letter to Mr. Joseph F. Keenan, Chairman of the Board of the Company, regarding the Reporting Person's reasons for wanting to purchase the Company. A copy of the letter was attached as an exhibit to Amendment No. 2 to the Reporting Person's Schedule 14D-1, which amendment was filed with the Securities and Exchange Commission on April 15, 1998, and is hereby incorporated herein by reference. On April 15, 1998, the Reporting Person filed definitive proxy materials with the Securities and Exchange Commission in connection with its solicitation of written consents (the "Solicitation") to replace the current Board of Directors of the Company with its own nominees committed to selling the Company for the highest price reasonably available. Such definitive proxy material is hereby incorporated herein by reference. On April 16, 1998, the Reporting Person issued a press release regarding the Reporting Person's intent to deliver, on April 20, 1998, its consent in connection with the Solicitation. The Reporting Person stated in that press release its belief that such delivery would establish the record date for the Solicitation as April 20, 1998. Pursuant to the Delaware General Corporation Law (the "DGCL"), consents must be delivered within 60 days of the record date in order to be effective. The April 16 press release also stated that the Company purported to have established the record date for the Solicitation as March 30, 1998. Such press release was attached as an exhibit to Amendment No. 3 to the Reporting Person's Schedule 14D-1, which amendment was filed with the Securities and Exchange Commission on April 17, 1998, and is hereby incorporated herein by reference. On May 4, 1998, the Reporting Person issued a press release extending the expiration date of its tender offer to purchase all the outstanding shares of Common Stock, together with the Rights (the "Tender Offer") until 12:00 midnight, New York City time, on Friday, May 29, 1998. Such press release was attached as an exhibit to Amendment No. 4 to the Page 2 Reporting Person's Schedule 14D-1, which amendment was filed with the Securities and Exchange Commission on May 5, 1998, and is hereby incorporated herein by reference. On May 20, 1998, Vice Chancellor Lamb of the Court of Chancery of the State of Delaware issued an opinion denying the Reporting Person's request for a preliminary injunction barring application to the Solicitation of the March 30, 1998 record date purportedly established by the Board of Directors of the Company, requiring the Board of Directors of the Company to redeem the Rights or, in the alternative, to exempt the Tender Offer from the effects of the Rights, and to exempt it from the provisions of Section 203 of the DGCL, requiring the Company to provide the Purchaser access to the same information being provided to other actual or potential bidders and requiring the Company to make curative disclosures in its Schedule 14D-9 filed with the Securities and Exchange Commission. The Court found that the relief requested was unwarranted and unnecessary at that time. On May 27, 1998, the Reporting Person issued a press release expressing the Reporting Person's disappointment in the Company's proposed recapitalization transaction with Fremont Partners. Such press release also extended the expiration date of the Tender Offer until 12:00 midnight, New York City time, on Tuesday, June 30, 1998. Such press release was attached as an exhibit to Amendment No. 5 to the Reporting Person's Schedule 14D-1, which amendment was filed with the Securities and Exchange Commission on May 27, 1998, and is hereby incorporated herein by reference. On June 30, 1998, the Reporting Person issued a press release expressing the Reporting Person's disappointment in the Company's refusal to negotiate with the Reporting Person before entering into an acquisition agreement with Fremont Partners. Such press release also extended the expiration date of the Tender Offer until 12:00 midnight, New York City time, on Friday, July 24, 1998. Such press release was attached as an exhibit to Amendment No. 6 to the Reporting Person's Schedule 14D-1, which amendment was filed with the Securities and Exchange Commission on July 1, 1998, and is hereby incorporated herein by reference. On July 24, 1998, the Reporting Person issued a press release extending the expiration date of the Tender Offer until 12:00 midnight, New York City time, on Friday, August 14, 1998. Such press release was attached as an exhibit to Amendment No. 7 to the Reporting Person's Schedule 14D-1, which amendment was filed with the Securities and Exchange Commission on July 24, 1998, and is hereby incorporated herein by reference. On August 14, 1998, the Reporting Person issued a press release extending the expiration date of the Tender Offer until 12:00 midnight, New York City time, on Wednesday, September 30, 1998. Such press release was attached as an exhibit to Amendment No. 8 to the Reporting Person's Schedule 14D-1, which amendment was filed with the Securities and Exchange Commission on August 14, 1998, and is hereby incorporated herein by reference. On September 25, 1998, the Reporting Person tendered all of its shares of the Common Stock, together with the Rights, in accordance with the terms of the Company's offer to purchase up to 4,820,000 shares of the Common Stock at a price of $21.75 per share in cash Page 3 (the "Fremont Offer"). The Reporting Person tendered its shares because of the risk that in the unlikely event that the Company had accepted shares for purchase pursuant to the Fremont Offer, any shares which were not purchased would, according to the Company's offer to purchase, have a value of $0.84 to $1.34. On September 28, 1998, the Company announced that the Fremont Offer had been terminated by agreement of the Company and Fremont Partners, and no shares were purchased pursuant to the Fremont Offer. The Company paid Fremont Partners $1,000,000 for expenses incurred by Fremont Partners in connection with the Fremont Offer. On September 30, 1998, the Reporting Person issued a press release extending the expiration date of the Tender Offer until 12:00 midnight, New York City time, on Friday, October 30, 1998. Such press release was attached as an exhibit to Amendment No. 9 to the Reporting Person's Schedule 14D-1, which amendment was filed with the Securities and Exchange Commission on October 2, 1998, and is hereby incorporated herein by reference. Following the September 28, 1998 announcement by the Company that the Fremont Offer had been terminated, Mr. Keenan, Chairman of the Company, stated during a conference call with analysts that the Company was prepared to execute a confidentiality agreement with the Reporting Person containing no standstill provisions. Despite Mr. Keenan's assurances, the confidentiality agreement presented to the Reporting Person by representatives of the Company continued to include such provisions. After representatives of the Reporting Person advised representatives of the Company that the Reporting Person would not agree to any standstill restrictions, the Company dropped its demand for a standstill, but continued to impose restrictions and limitations on the Reporting Person's access to information regarding the Company. Specifically, the Company informed the Reporting Person that it would not permit access to the Company's data room, or interviews with the Company's management, unless the Reporting Person first made a bid for the Company that the Company, in its sole discretion, considered sufficient. The Reporting Person concluded that such limited due diligence would not provide the Reporting Person with meaningful access to information which would permit the Reporting Person to determine if there was greater value in the Company than that reflected in public documents. On October 27, 1998, the Reporting Person issued a press release announcing that it intended to solicit consents to replace the Company's Board of Directors with nominees committed to facilitate an acquisition of the Company by the Reporting Person. Under the Reporting Person's proposal, the Company would launch a self tender offer to purchase approximately 4,600,000 shares of Common Stock, together with the Rights, representing approximately 99% of the outstanding shares not owned by the Reporting Person, for a cash price of $19 per share. Following the transaction, the Reporting Person would hold approximately 92% of the outstanding shares and the public shareholders would retain approximately 8%. The Reporting Person announced that it had entered into a binding commitment letter with NationsBank, N.A. to provide an $80 million senior bank facility the proceeds of which would be used to purchase the shares in the tender offer, pay existing indebtedness of the Company, pay fees and expenses associated with the transaction and provide working capital to the Company. The Reporting Person announced that the tender offer would Page 4 not be subject to a financing condition. The October 27, 1998 press release further stated that in order to facilitate the above-described agreement with the Company and the self tender offer, the Reporting Person intends to allow its current tender offer for the shares of Common Stock to expire on its scheduled expiration date of Friday, October 30, 1998 without the purchase of any shares thereunder. On October 27, 1998, the Reporting Person filed preliminary proxy material with the Security and Exchange Commission relating to the consent solicitation. Copies of the October 27 press release and the preliminary proxy materials are set forth in Exhibits 10 and 11 attached hereto and are hereby incorporated herein by reference. Item 7. Material to Be Filed as Exhibits. Item 7 is hereby amended to add the following: 10. Press release issued by the Reporting Person on October 27, 1998. 11. Preliminary Proxy Materials of the Reporting Person, filed with the Securities and Exchange Commission on October 27, 1998. 12. Commitment Letter, dated October 19, 1998, from NationsBank, N.A., to the Reporting Person. Page 5 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this Statement is true, complete and correct. Dated: October 27, 1998 GOLDEN CYCLE, LLC By: /s/ Roger Grass ------------------------------- Roger Grass Vice President and Treasurer Page 6 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 10 Press release issued by the Reporting Person on October 27, 1998. 11 Preliminary Proxy Materials of the Reporting Person, filed with the Securities and Exchange Commission on October 27, 1998. 12 Commitment Letter, dated October 19, 1998, from NationsBank, N.A., to the Reporting Person. Page 7 EX-99.10 2 PRESS RELEASE EXHIBIT 10 ---------- FOR IMMEDIATE RELEASE - --------------------- For further information, call: Alan Miller Innisfree M & A Incorporated (212) 750-5831 GOLDEN CYCLE PROPOSES THE ACQUISITION OF UP TO APPROXIMATELY 4,600,000 SHARES OF GLOBAL MOTORSPORT GROUP FOR $19 PER SHARE IN CASH- SEEKS CONSENTS TO REPLACE BOARD OF DIRECTORS WYNNEWOOD, PA, October 27, 1998 - Golden Cycle, LLC announced today it will solicit consents from stockholders of Global Motorsport Group, Inc. (NASDAQ: CSTM) to replace Global's Board of Directors with nominees committed to facilitate an acquisition of the company by Golden Cycle. Under the acquisition proposal, Global Motorsport would commence a self tender offer to purchase up to approximately 4,600,000 shares of its common stock for $19 per share in cash. Based upon information in Global's SEC filings, this number of shares represents approximately 99% of the outstanding shares of Global not owned by Golden Cycle. The self tender will not be subject to any financing conditions. Golden Cycle has entered into a commitment letter with NationsBank, N.A. pursuant to which NationsBank will provide an $80 million senior credit facility for the purpose of acquiring shares in the tender offer, refinancing existing indebtedness of Global, paying fees and expenses of the transaction and providing for working capital needs. Alex and Roger Grass have committed to fund an additional $30 million in subordinated debt and $60 million in equity to finance the transaction. Mr. Alex Grass, President of Golden Cycle, said that "Despite Global's refusal to negotiate with us and permit us to conduct meaningful due diligence and despite the difficult debt markets, we have obtained an $80 million senior credit facility and demonstrated our commitment to acquire Global and provide shareholders with value now. If shareholders will elect our nominees to the Board of Global, we are prepared to enter into an agreement which is not conditioned on financing and will not contain any provisions that would preclude or restrict Global from considering other offers for its shares. Golden Cycle's nominees for the Global Board are committed to conducting good faith negotiations with any person who makes a bona fide, fully financed offer to purchase substantially all of the outstanding shares of Global Motorsport for more than $19 per share." In a related matter, in order to best facilitate the above-described agreement with Global Motorsport and the self tender offer, Golden Cycle announced that it intends to allow its current tender offer for the shares of Global Motorsport to expire without the purchase of any shares thereunder on the scheduled expiration date of 12:00 midnight, New York City time, on Friday, October 30, 1998. CERTAIN INFORMATION CONCERNING PARTICIPANTS Golden Cycle, LLC ("Golden Cycle") and certain other persons named below may solicit the consent of shareholders (a) to remove the current members of the Board of Directors of Global Motorsport Group, Inc. ("Global") and elect five nominees (the "Nominees") as directors of Global pursuant to a shareholder action by written consent (the "Consent Solicitation") and (b) in favor of three proposals to amend the By-laws of Global. The participants in this solicitation may include the officers of Golden Cycle (Alex Grass and Roger Grass), each of whom is a Nominee. As of the date of this communication, Golden Cycle is the beneficial owner of 528,100 shares of Common Stock, par value $0.001 per share, of Global. Other than as set forth herein, as of the date of this communication, neither Golden Cycle nor any of its members or other representatives or employees, any Nominees or other persons known to Golden Cycle who may solicit proxies has any security holdings in Global. Golden Cycle has retained Jefferies & Company, Inc. ("Jefferies & Company") to act as its financial advisor in connection with Golden Cycle's offer to acquire Global and the Consent Solicitation, for which Jefferies & Company will receive customary fees, as well as reimbursement of reasonable out-of-pocket expenses. In addition, Golden Cycle has agreed to indemnify Jefferies & Company and certain related persons against certain liabilities, including certain liabilities under the federal securities laws, arising out of their engagement. Jefferies & Company does not admit that it or any of its shareholders, directors, officers, employees or affiliates is a "participant" as defined in Schedule 14A promulgated under the Securities Exchange Act of 1934 by the Securities and Exchange Commission, or that Schedule 14A requires the disclosure of certain information concerning Jefferies & Company. Andrew Whittaker (an executive vice president) and Louis Fienberg (a senior vice president) of Jefferies & Company may assist Golden Cycle in the solicitation of consents of shareholders. Jefferies & Company engages in a full range of investment banking, securities trading, market-making and brokerage services for institutional and individual clients. In the normal course of its business Jefferies & Company may trade securities of Global for its own account and the accounts of its customers, and accordingly, may at any time hold a long or short position in such securities. Jefferies & Company has informed Golden Cycle that as of October 26, 1998, Jefferies & Company held no shares of Global Common Stock for its own account. -2- EX-99.11 3 PROXY STATEMENT PRELIMINARY COPY SUBJECT TO COMPLETION GOLDEN CYCLE, LLC Harrisburg, Pennsylvania October __, 1998 Dear Global Motorsport Group Stockholders: On October 27, 1998, Golden Cycle, LLC presented you with an opportunity to sell up to approximately 99% of your stock for $19.00 per share in cash through our fully financed proposal. We continue to believe that we offer the stockholders of Global Motorsport Group the greatest certainty of receiving value for their shares. For that reason, we are seeking your consents to replace Global's Board with our nominees and approve certain other proposals (collectively, the "Proposals") which are described in the Consent Statement attached to this letter. All stockholders of Global Motorsport Group are being asked to express their consent to the Proposals by MARKING, SIGNING and DATING the enclosed WHITE consent card and returning it to Innisfree M&A Incorporated in accordance with the instructions set forth in the Consent Statement. As you know, at the end of March we proposed to Global Motorsport Group management that we acquire the company at a cash price of $18 per share. At that time, we stated our willingness to negotiate all terms of our offer, including the price, and requested that the company provide us with access to information which would permit us to determine the values inherent in the company. Global's Board rejected our offer and has refused to sit down with us to negotiate a transaction. On May 22, 1998, Global Motorsport announced that it had entered into a letter of intent with an entity controlled by Fremont Partners for the acquisition of the outstanding shares of Global for $23 per share in cash. The letter of intent provided that Global would not solicit, negotiate or provide information to any other potential buyers until the end of June, and also provided for a cash payment of $5 million to Fremont if the transaction were not consummated and Global entered into an alternative sale transaction at a higher price. On June 29, 1998, Global Motorsport announced that it had entered into a definitive merger agreement whereby Global would be acquired by an entity controlled by Fremont Partners. The terms of the transaction were materially different from those announced on May 22. In particular, the agreement provided that 94% of the publicly held shares of the company would be acquired, in a self-tender offer by Global, for a cash price of $21.75. Based on the valuation of the stub interest performed by Cleary Gull Reiland & McDevitt, Inc., Global's investment banker, as reported in Global's SEC filings, the blended price of the Fremont offer was approximately $20.50 per share. In addition, Global agreed to pay Fremont $1 million in expenses if the merger agreement were terminated for any reason and an additional $3.5 million breakup fee under certain conditions. Despite the fact that Fremont had backed away from its agreement to pay $23 in cash for all shares, Global never contacted us to discuss what price Golden Cycle might be willing to pay to acquire the company. On August 11, 1998, one day before Global's tender offer was scheduled to close, the company issued a press release announcing that it was extending its offer until the end of September "to provide additional time to satisfy the financing condition to the tender offer in view of current market conditions in the high yield debt securities market." On September 28, 1998, Global announced that it had agreed with Fremont to terminate its offer due to the failure to satisfy the financing condition to the tender offer. Global also paid to Fremont $1 million in expenses. Mr. Keenan, chairman of Global, stated during a conference call with analysts on September 28 that Golden Cycle would be permitted to conduct due diligence on executing a confidentiality agreement containing no standstill provisions. Despite Mr. Keenan's assurances, Global continued to insist upon a standstill from us until it became clear that we would not enter into such an agreement. At that point, Global dropped its demand for a standstill, but continued to impose restrictions and limitations that we found unacceptable. Specifically, Global informed us that it could not permit access to the data room or to management, unless we first made a bid that Global, in its sole discretion, considered sufficient. Although Global's Board refuses to negotiate a transaction with us, we are prepared to enter into an agreement with the company which would provide stockholders with $19 in cash for substantially all of their shares. In particular, if Global's stockholders approve our Proposals to remove all current members of the company's Board of Directors, amend the By-laws to set the number of directors on the Board at five and permit the company's stockholders to fill vacancies on the Board and elect our nominees to the Board, then subject to the fulfillment of their fiduciary duties as directors of the company, our nominees intend to enter into an agreement between Golden Cycle and Global providing for a transaction, structured as a tender offer by Global, in which holders of shares of Global's common stock would receive $19 in cash for approximately 4,600,000 shares, representing approximately 99% of the presently outstanding shares which are not owned by Golden Cycle. Following the closing, public stockholders would continue to own approximately 8% of the outstanding common equity of Global. In order to ensure that any sale of the Company results in maximum value to all stockholders, we have agreed that any acquisition agreement between Golden Cycle and Global will not contain any provisions that would preclude or restrict the Board from considering other offers for its shares We estimate the total amount of funds required to purchase 4,600,000 shares, refinance certain indebtedness of the company, pay costs and expenses and provide the company with sufficient working capital to be approximately $160 million. We have received a firm commitment from NationsBank, N.A. to provide $80 million in senior bank debt financing. In addition, we will raise $30 million in subordinated debt and $60 million in equity from Alex and Roger Grass or their affiliates. As a consequence, despite the difficult market conditions which gave Fremont the opportunity to terminate its agreement and walk away with $1 million, our offer is not subject to a financing condition. For that reason, we believe that there is far greater certainty that our transaction can be successfully completed. However, that can only happen if stockholders give their consents to our Proposals. You now have an opportunity to maximize the value of your investment. We urge you to read the enclosed materials, which describe our Proposals in greater detail. Then, please sign, date and return the enclosed WHITE consent card today in the envelope provided. This is your chance to tell the existing Global Motorsport directors and management that you want to realize value for your Global shares now. Sincerely, 1. If your shares of Global Common Stock are held in your own name, please sign, date and return the enclosed WHITE consent card today in the envelope provided. 2. If your shares of Global Common Stock are held in the name of a brokerage firm, bank nominee or other institution, only that entity can execute a consent with respect to your shares and only upon receipt of your specific instructions. Accordingly, you should contact the person responsible for your account and instruct him or her to vote a WHITE consent card on your behalf today. Golden Cycle urges you to confirm in writing your instructions to the person responsible for your account and provide a copy of those instructions to Golden Cycle in care of Innisfree M&A Incorporated so that Golden Cycle will be aware of all instructions given and can attempt to ensure that these instructions are followed. If you have any questions or require any assistance in executing or delivering your consent, please call: Innisfree M&A Incorporated 501 Madison Avenue, 20th Floor New York, New York 10022 Toll Free: (888) 750-5834 Banks and Brokers call collect: (212) 750-5833 2 PRELIMINARY COPY SUBJECT TO COMPLETION CONSENT STATEMENT OF GOLDEN CYCLE, LLC This Consent Solicitation Statement (the "Consent Statement") and the accompanying form of written consent are furnished by Golden Cycle, LLC ("Cycle") in connection with its solicitation of written consents from the holders of common stock, $0.001 par value per share (the "Common Stock"), of Global Motorsport Group, Inc. (the "Company") to take the following action without a meeting of the Company's stockholders, as permitted by Delaware law: 1. Remove all current members of the Company's Board of Directors (the "Board of Directors") and any other person or persons (other than the persons elected pursuant to this consent) elected or appointed to the Board of Directors prior to the effective date of this stockholder action in addition to or in lieu of any of such current members to fill any newly created directorship or vacancy on the Board of Directors, or otherwise (the "Director Removal Proposal"); 2. Amend Article III, Section 1 of the Bylaws of the Company (the "Bylaws") to set the number of directors on the Board of Directors at five (the "Board Size Proposal"); 3. Amend Article III, Section 2 of the Bylaws to permit the Company's stockholders to fill vacancies on the Board of Directors (the "Director Vacancy Proposal"); 4. Elect Aaron H. Brenner, Alexander Grass, Roger Grass, H. Irwin Levy and George Lindemann (collectively, the "Cycle Nominees" or the "Nominees") as directors of the Company to fill the newly created vacancies on the Board of Directors and to serve until their respective successors are duly elected and qualified (the "Director Election Proposal"); and 5. Repeal any Bylaws adopted by the Board of Directors since May 7, 1998 and prior to the effective date of this stockholder action other than the Bylaws adopted by this consent (the "Bylaw Proposal" and, collectively with the Director Removal Proposal, the Board Size Proposal, the Director Vacancy Proposal and the Director Election Proposal, the "Proposals"). Stockholders of the Company are being asked to express their consent to the Proposals by MARKING, SIGNING and DATING the enclosed WHITE consent card and returning it to Innisfree M&A Incorporated in accordance with the instructions set forth below. GOLDEN CYCLE, LLC RECOMMENDS THAT YOU CONSENT TO EACH OF THE PROPOSALS This Consent Statement and the enclosed WHITE consent card are first being furnished to the Company's stockholders on or about October __, 1998. SUMMARY OF CONSENT PROCEDURE Cycle believes that the Proposals will become effective on the date when the written consents of holders of a majority of the shares of the Common Stock outstanding on the record date as determined in accordance with Delaware law (the "Record Date") are delivered to the Company, so long as each of such consents is obtained within 60 days of the earliest dated consent delivered to the Company. Section 213(b) of the Delaware General Corporation Law (the "DGCL") provides that the record date for a consent solicitation shall be as established by the board of directors of the corporation (i.e., the Company) or, if no record date is established, shall be the first date on which a signed written consent is delivered to the corporation. Cycle delivered a signed written consent to the Company on ____, 1998. Accordingly, Cycle believes that the Record Date is _____, 1998. 3 CYCLE RECOMMENDS THAT YOU CONSENT TO EACH OF THE PROPOSALS. YOUR CONSENT IS IMPORTANT. PLEASE MARK, SIGN AND DATE THE ENCLOSED WHITE CONSENT CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. FAILURE TO RETURN YOUR CONSENT WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE PROPOSALS. Cycle has retained Innisfree M&A Incorporated ("Innisfree") to assist in the solicitation. If your shares are held in your name, please mark, sign, date and mail the enclosed WHITE consent card to Innisfree in the postage-paid envelope provided. If your shares are held in the name of a brokerage firm, bank nominee or other institution, you should contact the person responsible for your account and given instructions for the WHITE consent card representing your shares to be marked, dated, signed and mailed. Only that institution can execute a WHITE consent card with respect to your shares and only upon receipt of specific instructions from you. Cycle urges you to confirm in writing your instructions to the person responsible for your account and to provide a copy of those instructions to Cycle in care of Innisfree at the address set forth below so that Cycle will be aware of all instructions given and can attempt to ensure that such instructions are followed. If you have any questions about executing your consent or require assistance, please contact: INNISFREE M&A INCORPORATED 501 Madison Avenue, 20th Floor New York, NY 10022 Toll Free: (888) 750-5834 Banks and Brokers call collect: (212) 750-5833 CYCLE Cycle is a Pennsylvania limited liability company in which Alexander Grass ("Alexander Grass") and Roger L. Grass ("Roger Grass") are each 50% members. Alexander Grass serves as President and Secretary of Cycle, and Roger Grass is its Vice-President and Treasurer. As of the date of this Consent Statement, Cycle owns an aggregate of 528,100 shares of the Common Stock, representing approximately 10.2% of the 5,173,077 shares of the Common Stock currently outstanding, based on publicly available information filed by the Company with the Securities and Exchange Commission. The business address and the address of the principal executive offices of Cycle is 4025 Crooked Hill Road, Harrisburg, Pennsylvania 17110. Additional information about Cycle, its nominees and members is set forth under the heading "Certain Other Information Regarding Cycle and the Cycle Nominees" and in Exhibit A attached to this Consent Statement. BACKGROUND OF AND REASONS FOR THE CONSENT SOLICITATION On March 23, 1998, Alexander Grass telephoned Mr. Joseph Piazza, President and Chief Executive Officer of the Company, to discuss with him Cycle's interest in acquiring the Company and to request a meeting with him. Mr. Piazza did not take the call. On the same day, Cycle sent a letter to Mr. Piazza stating that Cycle was prepared to acquire the Company at a cash price of $18 per share. The letter stated that the terms of the offer, including the price, were subject to negotiation if greater value could be demonstrated. The letter requested that the Company provide Cycle with information about the Company for the purpose of completing a due diligence review of the Company to determine whether there is greater value in the Company. The letter further stated that if the Board of Directors did not wish to proceed with negotiations or to provide Cycle with an opportunity to conduct due diligence, Cycle would consider attempting to seek control of the Company through a consent solicitation to replace the Board of Directors and to elect directors committed to selling the Company for the highest price reasonably available. On March 24, Cycle filed preliminary consent solicitation materials with the Securities and Exchange 4 Commission ("Commission"). Those materials cleared the Commission on April 14, 1998. On March 27, 1998, Alexander Grass sent another letter to Mr. Piazza reiterating Cycle's interest in having an opportunity to negotiate all aspects of its offer and expressing disappointment that the Company refused to meet with Cycle to negotiate the terms of the transaction. On March 31, 1998, Joseph F. Keenan, Chairman of the Board of Directors, sent Cycle a letter acknowledging receipt of Cycle's March 23 and 27 letters and stating that before responding to the offer the Board of Directors needed to gather information. The letter further stated that the Company had retained an investment banking firm as well as a law firm in order adequately to evaluate Cycle's offer. On April 2, 1998, Alexander Grass sent a letter to Mr. Keenan confirming that Cycle was encouraged by Mr. Keenan's letter to the extent that it suggested recognition of the fact that serious discussions with Cycle are in the best interests of the Company's stockholders and that Cycle would be given equal access with all potential bidders to information regarding the Company. On April 7, 1998, Cycle commenced a tender offer to purchase all outstanding shares of the Common Stock at a cash price of $18 per share (and associated preferred share purchase right). The tender offer was conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the expiration date of the tender offer that number of shares that would, together with the shares beneficially owned by Cycle, represent a majority of the outstanding shares of the Company on a fully diluted basis, (ii) the Company's preferred share purchase rights (the "Rights") having been redeemed by the Board of Directors or Cycle being satisfied, in its sole discretion, that such Rights have been invalidated or are otherwise inapplicable to the tender offer and the proposed merger and (iii) the acquisition of shares pursuant to the tender offer and the proposed merger having been approved pursuant to Section 203 of the DGCL or Cycle being satisfied, in its sole discretion, that the provisions of Section 203 are otherwise inapplicable to the acquisition of shares pursuant to the tender offer and the proposed merger. The tender offer was also conditioned upon Cycle's having obtained sufficient financing to purchase all shares outstanding on a fully diluted basis, to refinance certain indebtedness of the Company and to pay related costs and expenses. The Board of Directors took no action to redeem the Rights, or to render the Rights Plan inapplicable to Cycle's offer. Further, the Board of Directors has taken no action to exempt Cycle's offer from the operation of Section 203 of the DGCL. On April 13, 1998, the Company announced that the Board of Directors had rejected Cycle's $18 offer as inadequate and that the Board of Directors had authorized its management and advisors to explore alternatives to maximize stockholder value "including entering into discussions with other parties who have expressed an interest in acquiring the Company at a more attractive price" than $18 per share. On May 22, 1998, the Company announced that it had entered into a letter of intent with an entity controlled by Fremont Partners for the acquisition of the outstanding shares of the Company for $23 per share in cash. The letter of intent provided that the Company would not solicit, negotiate or provide information to any other potential buyers until the end of June 1998, and also provided for a cash payment of $5 million to Fremont if the transaction were not consummated and the Company entered into an alternative sale transaction at a higher price. On June 29, 1998, the Company announced that it had entered into a definitive merger agreement whereby the Company would be acquired by an entity controlled by Fremont Partners. The terms of the transaction were materially different from those announced on May 22. In particular, the agreement provided that 94% of the publicly held shares of the Company would be acquired, in a self tender offer by Global, for a cash price of $21.75. In addition, the Company agreed to pay Fremont $1 million in expenses if the merger agreement were terminated for any reason and an additional $3.5 million breakup fee under certain conditions. Despite the fact that Fremont had backed away from its agreement to pay $23 in cash for all shares, the Company never contacted Cycle to discuss what price Cycle might be willing to pay to acquire the Company. Materials distributed by the Company to stockholders in connection with the Fremont transaction stated that Cleary Gull Reiland & McDevitt, Inc. ("Cleary Gull") had been engaged by the Company to act as its investment banker with respect to the Fremont offer and that Cleary Gull had rendered an opinion that the consideration to be received by the Company's stockholders in the transaction was fair from a financial point of view to such stockholders. The Company's tender offer materials stated that in connection with its opinion, Cleary Gull had derived an equity value range for the Company of $16.00 to $24 per fully diluted 5 share based upon a comparable public company trading analysis, $15.00 to $22 per share based upon a selected transactions analysis, $23.73 to $30.15 per share based upon a discounted cash flow analysis, and $23.52 to $23.93 per share based upon hypothetical implied trading values based upon earnings. Based on the valuation of the stub interest performed by Cleary Gull, as reported in the Company's Commission filings, the blended price of the Fremont offer was approximately $20.50 per share. Between September 29, 1998, the day after the Company announced that the Fremont agreement had been terminated, and October 26, 1998, the last trading date before Cycle announced that it would provide stockholders with $19.00 per share in cash for substantially all of their shares, the reported closing bid price of the Company's Common Stock on NASDAQ was in the range of $12.50 to $15.25. On August 11, 1998, one day before the Company's tender offer was scheduled to close, the Company issued a press release announcing that it was extending its offer until the end of September "to provide additional time to satisfy the financing condition to the tender offer in view of current market conditions in the high yield debt securities market." On September 25, 1998, Cycle tendered all of its shares of Company Common Stock in accordance with the terms of the Company's offer to purchase up to 4,820,000 shares at a price of $21.75 per share in cash. Cycle tendered its shares because of the risk that in the unlikely event that the Company accepted shares for purchase pursuant to its offer, any shares which were not purchased would, according to the Company's offer to purchase, have an estimated value of $0.84 to $1.34. On September 28, 1998, the Company announced that it had agreed with Fremont to terminate its offer due to the failure to satisfy the financing condition to the tender offer. The Company also paid to Fremont $1 million in expenses. Mr. Keenan stated during a conference call with analysts on September 28 that Cycle would be permitted to conduct due diligence upon executing a confidentiality agreement containing no standstill provisions. Despite Mr. Keenan's assurances, representatives of the Company continued to insist upon a standstill from Cycle until it became clear that Cycle would not enter into such an agreement. At that point, the Company dropped its demand for a standstill, but continued to impose restrictions and limitations that Cycle found unacceptable. Specifically, the Company informed Cycle that it could not permit access to the data room or to management unless Cycle first made a bid that the Board of Directors of the Company, in its sole discretion, considered sufficient. On October 27, 1998, Cycle announced that it was prepared to enter into an agreement with the Company which would provide stockholders with $19 in cash for up to approximately 4,600,000 shares of the Common Stock, representing approximately 99% of the Common Stock not owned by Cycle. Cycle's announcement stated that if the Company's stockholders approve the Proposals, then subject to the fulfillment of their fiduciary duties as directors of the Company, the Nominees intend to enter into an agreement between Cycle and the Company providing for a transaction, structured as a tender offer by the Company, in which holders of shares of the Company's Common Stock would receive $19 in cash for approximately 4,600,000 shares. Following the closing, public stockholders would continue to own approximately 8% of the outstanding common equity of the Company. On October 27, 1998, Cycle also announced that it had entered into a binding commitment letter with NationsBank, N.A. pursuant to which NationsBank agreed to provide an $80 million senior credit facility the proceeds of which would be used to acquire shares of Common Stock in the self tender offer as well as to refinance existing indebtedness, pay fees and expenses in connection with the transaction and provide working capital of the Company. The funds necessary to consummate the transaction proposed by Cycle include the senior credit facility, together with $30 million in subordinated debt and $60 million in equity from Cycle and its affiliates. As a consequence of the commitment letter from NationsBank, the transaction proposed by Cycle is not subject to a financing condition. Cycle's tender offer expired at 12:00 Midnight, New York City time, on Friday, October 30, 1998 without the purchase of any shares thereunder. Litigation On March 25, 1998, pursuant to Section 220 of the DGCL, Cycle requested Cede & Co., the record owner of shares of the Common Stock beneficially owned by Cycle, to demand the right to inspect certain books and records of the Company, including the stockholder lists. The Company refused that demand. On April 2, 1998, Cycle commenced litigation against the Company in the Court of Chancery of the State of Delaware seeking an order compelling the Company to produce all 6 documents requested by Cycle. An amended demand was sent to the Company on April 6, 1998. A hearing on the request to produce the stockholder lists was held on April 14, 1998 and the Court ordered the Company to produce such stockholder lists. A hearing on the request to inspect certain other books and records of the Company was held on May 22, 1998. On June 18, 1998, the Court issued its opinion denying Cycle's request for books and records and ordered the case dismissed. On April 2, 1998, the Company filed suit in the United States District Court for the Northern District of California against Cycle, Alexander Grass and Roger Grass alleging, among other things, false and misleading proxy materials and Schedule 13D filings with the Commission. The complaint sought, among other things, to enjoin the solicitation of written consents pursuant to Cycle's solicitation materials. On August 21, 1998, the suit was dismissed without prejudice pursuant to a stipulation of dismissal by the parties. On April 6, 1998, Cycle filed suit in the United States District Court for the District of Delaware, alleging that the Company and its directors were in violation of the federal securities laws in opposing Cycle's proposed acquisition of the Company. On August 31, 1998, the District Court ordered the case dismissed without prejudice pursuant to a stipulation of dismissal by the parties. On April 7, 1998, Cycle commenced litigation against the Company in the Court of Chancery of the State of Delaware seeking, among other things, an order compelling the Board of Directors to redeem the Rights or to amend the Rights Agreement dated as of November 13, 1996 between the Company and American Stock Transfer and Trust Company, as Rights Agent (the "Poison Pill"), to make the Rights inapplicable to Cycle's tender offer and to approve the tender offer for purposes of Section 203 of the DGCL on the grounds that a failure to do so would constitute a breach of fiduciary duty to the Company's stockholders. On May 20, 1998 the Court denied Cycle's request for injunctive relief stating that such relief is unwarranted and unnecessary at that time. The Chancery Court's order was not a final judgment on Cycle's claims, and the action is ongoing. Prior History In December 1995, Roger Grass proposed that the Company and an investment vehicle formed by Alexander Grass and Roger Grass engage in a joint retail marketing venture. The Company indicated an interest in a 50/50 "partnership" in which Messrs. Alexander Grass and Roger Grass would be responsible for the entire financial commitment. Roger Grass advised the Company that such a proposal was not acceptable. In the Fall of 1996, Roger Grass contacted the Company to express an interest in a strategic transaction with the Company. Shortly thereafter the Company adopted the Poison Pill. In response to Mr. Grass' inquiry, Mr. James Kelly, Executive Vice President and Chief Financial Officer of the Company, contacted Mr. John Foster, President of Biker's Depot, Inc. ("Biker's Depot") to set up a meeting for February 4, 1997 at the offices of Biker's Depot. The meeting was not held because representatives of the Company failed to arrive. Cycle's Proposals Cycle seeks to replace the current Board of Directors with its own Nominees. Cycle's primary purpose in seeking to elect the Nominees to the Company's Board is to facilitate the acquisition of the Company by Cycle. However, if elected, the Nominees would be responsible for managing the business and affairs of the Company. The Nominees understand that, as directors of the Company, each of them has an obligation under Delaware law to the most scrupulous observance of his duty of care and duty of loyalty, which requires an undivided and unselfish loyalty to the Company and demands that there be no conflict between duty and self interest. Each Nominee has undertaken personally, if elected, to be bound by and discharge his duty of care and duty of loyalty to the Company and has agreed to perform his duties in good faith, in a manner that he reasonably believes to be in the best interests of the Company and all of its stockholders. Circumstances may arise (which circumstances include the proposed agreement with Cycle, as well as any proposal a third party might make to acquire or combine with the Company) in which the interests of Cycle and its affiliates, on the one hand, and the interests of other stockholders of the Company, on the other hand, may differ. In these circumstances, while the Nominees currently do not have plans with respect 7 to actions they would take, they intend to discharge their obligations owing to the Company and its stockholders under Delaware law and in light of then prevailing circumstances, taking into account the effects of any actions taken on the Company and its stockholders. In this regard, Section 144 of the DGCL expressly provides that a contract or transaction between interested parties is not void or voidable solely for this reason if one of three tests, set forth in Section 144, is satisfied. These tests are: (i) disclosure of the material facts concerning the conflict to the company's board of directors and approval of the contract or transaction by a majority of the disinterested directors; (ii) disclosure of the material facts concerning the conflict to the company's stockholders and approval in good faith by vote of the stockholders; or (iii) the contract or transaction is fair to the company. The Nominees, if elected, intend to comply with Section 144 in all applicable circumstances. In addition, in order to ensure that any sale of the Company results in maximum value to all stockholders, Cycle has proposed that any acquisition agreement between Cycle and the Company will not contain any provisions that would preclude or restrict the Board of Directors from considering other offers for its shares. If they are elected to the Board of Directors, the Nominees will, since Alexander Grass and Roger Grass have a financial interest in Cycle, which is seeking to acquire the Company, appoint the three disinterested Nominees, Messrs. Brenner, Levy and Lindemann, as a Special Committee of the Board of Directors. The members of such Special Committee will have authority to take all actions, consistent with their fiduciary duties as directors of the Company, necessary or desirable to maximize value to all stockholders of the Company through the sale of the Company. The specific actions to be taken by the Special Committee in connection with the sale of the Company, and the timing thereof, will depend on the facts and circumstances at the time, including, without limitation, whether or not any other parties indicate an interest in acquiring the Company. The disinterested Nominees, if elected, intend to conduct good faith negotiations with any person who makes a bona fide, fully financed offer to purchase substantially all of the outstanding shares of the Company for a price of more than $19 per share. The disinterested Nominees, if elected, also intend to redeem the Poison Pill following such negotiations, which they anticipate will take no longer than 30 days. Cycle is fully prepared to acquire the Company through a negotiated acquisition agreement at a cash price of $19 per share for substantially all outstanding shares. Because the Nominees are committed to selling the Company on the terms most advantageous to the stockholders and only for a price that reflects the Company's underlying value, they will negotiate in good faith with any person who makes a bona fide, fully financed offer to purchase substantially all of the outstanding shares of the Company for more than $19 per share. The Nominees, if elected, do not intend to establish a bidding process because seven months have elapsed since Cycle first announced its interest in acquiring the Company and, to the knowledge of Cycle, there are no bidders who are currently interested in pursuing such an acquisition. Rather, the Nominees, if elected, will depend upon the fact that any agreement with Cycle would not preclude other persons from bidding for the Company. The Nominees believe that a sale of the Company for cash is the structure most likely to maximize stockholder value. However, the Nominees would consider bids involving any combination of cash and securities if it can be clearly demonstrated that such a combination would provide greater value to the Company's stockholders. Cycle believes that when a substantial offer is made to acquire the Company, the stockholders rather than the Board of Directors should have the final word on whether the offer is accepted. Today, the Poison Pill enables the Board of Directors to block a proposal to acquire control of the Company even if the acquiror is prepared to implement that proposal through a tender or exchange offer to the Company's stockholders, without making the Company a party to the transaction. A description of the Poison Pill, set forth as Item 1 of the Company's Registration Statement on Form 8-A, dated December 9, 1996, is attached hereto as Exhibit B. As a result of the Poison Pill, potential buyers do not have the option of dealing directly with stockholders if the Board of Directors opposes their acquisition proposals. If the Proposals are approved, the Cycle Nominees would constitute the entire Board of Directors and would thereby have the power to redeem the Poison Pill. The Nominees have committed to redeem the Poison Pill on the conditions described above promptly after their election to the Board of Directors, consistent with their fiduciary duties as directors of the Company. In the absence of any other antitakeover protections, the redemption of the Poison Pill could result in the Company being subject to coercive takeover tactics. Cycle believes that the redemption of the Poison Pill will not result in the Company's being subject to coercive takeover tactics since the Company continues to be subject to Section 203 of the DGCL (the "Business 8 Combination Statute"). The Business Combination Statute provides, in effect, that if any person acquires beneficial ownership of 15% or more of the Company's outstanding shares (thereby becoming an "Interested Stockholder"), the Interested Stockholder may not engage in a business combination with the Company for three years thereafter, subject to certain exceptions. Among the exceptions are (i) the Board of Directors' prior approval of such acquisition, (ii) the acquisition of at least 85% of the Company's shares (subject to certain exclusions) in the transaction in which such person becomes an Interested Stockholder and (iii) the approval of such business combination by 66 2/3% of the outstanding shares not owned by the Interested Stockholder. THE FOREGOING IS A SUMMARY OF THE BUSINESS COMBINATION STATUTE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE THERETO. Cycle seeks the amendment of the Bylaws to set the number of directors on the Board of Directors at five and to provide that the Company's stockholders may fill vacancies on the Board of Directors. The Bylaws currently authorize between three and five directors. The number may be changed from time to time within these limits by resolution of the Board of Directors. The Company has announced that the current number of directors is four. Cycle's Board Size Proposal and Director Vacancy Proposal will set the size of the Board at five directors, which vacancies will be filled by the Cycle Nominees pursuant to the Director Election Proposal. The purpose of the proposals being made by Cycle in this Consent Statement is to advance the interests of all of the Company's stockholders. Therefore, Cycle believes that its expenses in connection with the consent solicitation (including any litigation expenses) should be reimbursed by the Company. The cost of the solicitation of consents to the Proposals will be borne by Cycle. Cycle intends to seek reimbursement of its expenses from the Company if the Cycle Nominees are elected to the Board of Directors. Costs related to the solicitation of consents to the Proposals include expenditures for attorneys, accountants, investment bankers, consent solicitors, printing, postage, litigation and related expenses and filing fees and are expected to aggregate approximately $750,000 of which approximately $500,000 has been spent to date. The portion of such costs allocable solely to the solicitation of consents to the Proposals is not readily determinable. Cycle also seeks the repeal of any Bylaws adopted by the Board of Directors since May 7, 1998 (the date of the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1998, which incorporates by reference the form of the Company's Bylaws) through the date that the Bylaw Proposal is adopted so that the Board of Directors cannot use new Bylaws or Bylaws which have not heretofore been disclosed to the Company's stockholders to prevent the stockholders from accomplishing the objectives described in this Consent Statement. Cycle is not aware of any Bylaws that would be repealed by the approval of the Bylaw Proposal. The approval of the Bylaw Proposal could result in the repeal of Bylaws which may be in the best interests of the Company's stockholders, although Cycle believes such a possibility to be unlikely in view of the failure of the Board of Directors to disclose any such Bylaws. If the Company subsequently amends the Bylaws and discloses such amendment, Cycle may forward additional solicitation materials to the Company's stockholders regarding such actions. Section 109 of the DGCL provides that "the power to adopt, amend or repeal bylaws shall be in the stockholders entitled to vote. . . ; provided, however, any corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. . . . The fact that such power has been so conferred upon the directors. . . shall not divest the stockholders or members of the power, nor limit their power to adopt, amend or repeal bylaws." Cycle believes that such an unequivocal statement makes it clear that the stockholders of the Company have the power under Delaware law to repeal Bylaws as provided by the Bylaw Proposal, whether or not the Bylaws so amended or repealed are known to the stockholders. To the knowledge of Cycle, the Delaware courts have not addressed the validity of a proposal of the form of the Bylaw Proposal. The Company's certificate of incorporation confers the power to adopt, amend or repeal the Bylaws on the Board of Directors, and the Bylaws provide for such amendment or repeal by the Board of Directors without a vote of the Company's stockholders. 9 Cycle believes that passage of the Director Removal Proposal, the Board Size Proposal, the Director Election Proposal, the Director Vacancy Proposal and the Bylaw Proposal will facilitate the sale of the Company for a price that fully reflects its underlying value. If elected, the Cycle Nominees for the Board of Directors intend to facilitate the sale of the Company to Cycle. The Cycle Nominees have pledged that, if elected, any agreement between the Company and Cycle will not contain any provisions that would preclude or restrict the Company from considering other offers for its shares. The Cycle Nominees have further pledged to conduct good faith negotiations with any person who makes a bona fide, fully financed offer to purchase substantially all of the outstanding shares of the Company for more than $19 per share. Cycle believes that a sale of the Company (to Cycle or to another potential bidder for a higher price than the $19 per share offered by Cycle) will deliver to stockholders the highest price reasonably available for their shares. Accordingly, Cycle urges you to vote FOR these Proposals. THE PROPOSALS This solicitation statement and the accompanying form of written consent are first being furnished by Cycle on or about October __, 1998, in connection with the solicitation by Cycle from the holders of shares of Common Stock of written consents to take the following actions without a stockholders meeting, as permitted by Delaware law: 1. Remove the existing directors on the Board of Directors: "RESOLVED, that each current member of the Board of Directors of the Company, and any other person or persons (other than the persons elected pursuant to this consent) elected or appointed to the Board of Directors of the Company prior to the effective date of this resolution in addition to or in lieu of any of such current members to fill any newly created directorship or vacancy on the Board of Directors of the Company, or otherwise, is hereby removed and the office of each member of the Board of Directors is hereby declared vacant."; 2. Amend the Bylaws to set the number of directors at five: "RESOLVED, that the stockholders hereby amend Article III of the Bylaws by deleting Section 1(1) and by replacing it with a new Section 11, which shall read as follows: 'The authorized number of directors of this corporation shall be five (5). Except as provided in Section 2 of this Article, the directors shall be elected at the annual meeting of the stockholders, in accordance with the certificate of incorporation, and each director elected shall hold office until his or her successor is elected and qualified, unless he or she shall resign, become disqualified, disabled or otherwise removed. Directors need not be stockholders.'"; 3. Amend the Bylaws to permit stockholders to fill vacancies on the Board of Directors: - -------- (1) Cycle believes that Section 1 of Article III of the Company's Bylaws presently reads as follows: "The authorized number of directors of this corporation shall be not less than three (3) nor more than five (5), the exact number of directors to be fixed from time to time within such limit by a duly adopted resolution of the Board of Directors or stockholders. The exact number of directors presently authorized shall be five (5) until changed within the limits specified above by a duly adopted resolution of the Board of Directors or stockholders. Except as provided in Section 2 of this Article, the Directors shall be elected at the annual meeting of the stockholders, in accordance with the certificate of incorporation, and each Director elected shall hold office until his successor is elected and qualified, unless he shall resign, become disqualified, disabled or otherwise removed. Directors need not be stockholders." 10 "RESOLVED, that the stockholders hereby amend Article III of the Bylaws by deleting the first sentence of Section 2(2) and by replacing it with a new first sentence, which shall read as follows: 'Vacancies may be filled by a majority of the directors then in office, though less than a quorum, by a sole remaining director, or by a vote of the stockholders at an annual or special meeting of the stockholders or by written consent in lieu of a meeting of stockholders, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced.'"; 4. Elect the five persons listed below to fill the newly vacant directorships: "RESOLVED, that the following persons are hereby elected as directors of the Company to fill the newly created vacancies on the Board of Directors, and to serve until their respective successors are duly elected and qualified: Aaron H. Brenner, Alexander Grass, Roger Grass, H. Irwin Levy and George Lindemann."; 5. Repeal any Bylaws adopted by the Board of Directors since May 7, 1998: "RESOLVED, that any amendments to the Bylaws adopted by the Board of Directors of the Company on or after May 7, 1998 and prior to the effective date of this resolution (other than the Bylaws adopted pursuant to this consent), are hereby rescinded and shall have no further force or effect." See Exhibit A and the next section for more information about the Cycle Nominees. Cycle proposes that the nominees named above, once elected, serve until the next annual meeting of the stockholders and until their successors have been duly elected and qualified. Each of the Cycle Nominees has consented to serve as a director of the Company if elected. The effectiveness of each Proposal is subject to, and conditional upon, the adoption of all other Proposals by the holders of record, as of the close of business on the Record Date, of a majority of the shares of Common Stock then outstanding. However, if the Bylaw Proposal is not adopted, Cycle reserves the right to waive, but only with respect to the Bylaw Proposal, this condition. CERTAIN OTHER INFORMATION REGARDING CYCLE AND THE CYCLE NOMINEES The following sets forth information about the Cycle Nominees:
NAME & ADDRESS PRINCIPAL OCCUPATION AND FIVE-YEAR EMPLOYMENT HISTORY - -------------- ----------------------------------------------------- Alexander Grass Alexander Grass' principal occupation has been as a c/o Biker's Depot, Inc. director, and Chairman of the Executive Committee of the One Wynnewood Road Board of Directors of Rite Aid Corporation since March 4, 1995. Wynnewood, PA 19096 Prior to that time, he served as Rite Aid's Board Chairman and Chief Executive Officer, as well as a founder of Rite Aid. Mr. Grass served as President of
- -------- (2) Cycle believes that the first sentence of Section 2 of Article III of the Company's Bylaws presently reads as follows: "Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced." 11
Super Rite Foods, Inc. from 1965 to 1969 and as Chairman of the Board and Chief Executive Officer of Super Rite from 1969 to 1995. Alexander Grass is also a director of Hasbro, Inc. and the father of Roger Grass. His age is 71. Roger Grass Roger Grass' principal occupation since 1996 has been as c/o Biker's Depot, Inc. Chairman of the Board of Directors of Biker's Depot, One Wynnewood Road a company engaged in the sale of aftermarket parts and Wynnewood, PA 19096 accessories for Harley-Davidson motorcycles. From 1989 through 1993 he was the President and Chief Executive Officer of Reliable Drug Stores, Inc. His age is 43. George Lindemann During the last five years, George Lindemann has served c/o Southern Union Co. as Chairman of the Board of Directors of Southern Union 504 Lavaca Street Company, a gas utility company whose stock is listed on Austin, TX 78701 the New York Stock Exchange. His age is 62. H. Irwin Levy H. Irwin Levy presently serves as President and Chairman 100 Century Blvd. of the Board of Directors of Hilcoast Development Corp., W. Palm Beach, FL 33417 a real estate developer, which position he has held since August 1992. Mr. Levy also serves on the Board of Directors of CV Reit, Inc. and nStor Technologies, Inc. His age is 71. Aaron H. Brenner At present, Aaron H. Brenner is a private investor. From 1609 Appletree Road April, 1993 to the present, Mr. Brenner has served as Harrisburg, PA 17110 managing partner of ABH Partners, a real estate joint venture. Prior to April, 1993, Mr. Brenner served as President of M. Brenner & Sons, Inc., a wholesale drug, candy and tobacco distributor. His age is 66.
Of the five Nominees, except as set forth in this Consent Statement or in the Exhibits hereto, to the best knowledge of Cycle, none is employed by or affiliated with Cycle or Alexander Grass or Roger Grass. All of the Nominees are citizens of the United States. Roger Grass is Chairman of the Board of Directors of Biker's Depot, a retail seller of aftermarket parts and accessories for Harley-Davidson motorcycles. The Company is a major wholesale supplier of parts and accessories to Biker's Depot. Biker's Depot has stores in Daytona Beach, Florida and Fort Lauderdale, Florida and Lake Worth, Florida (expected to open in early December). All indebtedness of Biker's Depot to the Company since the beginning of the Company's last fiscal year is ordinary course of business purchase order indebtedness. During the period from February 1997 through January 1998 (which period corresponds to the Company's last fiscal year), Biker's Depot made purchases from the Company in the amount of $222,712. Except as set forth in this Consent Statement or in the Exhibits hereto, to the best knowledge of Cycle, none of Cycle, any of the persons participating in this solicitation on behalf of Cycle, the Cycle Nominees, and any associate or immediate family member of the foregoing persons (i) owns beneficially, directly or indirectly, or has the right to acquire, any securities of the Company or any parent or subsidiary of the Company, (ii) owns any securities of the Company of record but not beneficially, (iii) has purchased or sold any securities of the Company within the past two years, (iv) has incurred indebtedness for the purpose of acquiring or holding securities of the Company, (v) is or has been a party to any contract, arrangement or understanding with respect to any securities of the Company within the past year, (vi) has been indebted to the Company or any of its subsidiaries since the beginning of the Company's last fiscal year or (vii) has any arrangement or understanding with 12 respect to future employment by the Company or with respect to any future transactions to which the Company or any of its affiliates will or may be a party. In addition, except as set forth in this Consent Statement or in the Exhibits hereto, to the best knowledge of Cycle, none of Cycle, any of the persons participating in this solicitation on behalf of Cycle, the Cycle Nominees, and any associate or immediate family member of any of the foregoing persons has had or is to have a direct or indirect material interest in any transaction with the Company since the beginning of the Company's last fiscal year, or any proposed transaction, to which the Company or any of its affiliates was or is a party. Except as set forth in this Consent Statement or in the Exhibits hereto, to the best knowledge of Cycle, none of the Nominees, since the beginning of the Company's last fiscal year, has been affiliated with (i) any entity that made or received, or during the Company's current fiscal year proposes to make or receive, payments to or from the Company or its subsidiaries for property or services in excess of five percent of either the Company's or such entity's consolidated gross revenues for its last full fiscal year, or (ii) any entity to which the Company or its subsidiaries was indebted at the end of the Company's last full fiscal year in an aggregate amount exceeding five percent of the Company's total consolidated assets at the end of such year. None of the Nominees is or during the Company's last fiscal year has been affiliated with any law or investment banking firm that has performed or proposes to perform services for the Company. None of the corporations or organizations in which the Cycle Nominees have conducted their principal occupation or employment was a parent, subsidiary or other affiliate of the Company, and the Nominees do not hold any position or office with the Company or have any family relationship with any executive officer or director of the Company or have been involved in any proceedings, legal or otherwise, of the type required to be disclosed by the rules governing this solicitation. Cycle has agreed to indemnify each of the Nominees against all liabilities, including liabilities under the federal securities laws, in connection with this consent solicitation and such person's involvement in the operation of the Company and to reimburse such Nominee for his out-of-pocket expenses. Part of the purchase price paid by Cycle in connection with its acquisition of Common Stock was financed by borrowings from Dauphin Deposit Bank and Trust Company (the "Bank") under an unsecured loan note bearing interest at the Federal Funds Target Rate plus 90 basis points. As of October 25, 1998, Cycle was indebted to the Bank in the amount of approximately $8.1 million. The accompanying WHITE consent card will be voted in accordance with the stockholder's instruction on such WHITE consent card. As to the Proposals set forth herein, stockholders may consent to an entire Proposal or may withhold their consent by marking the proper box in the WHITE consent card. If the enclosed WHITE consent card is signed and returned and no direction is given, it will be voted in favor of all of the Proposals. CERTAIN OTHER INFORMATION REGARDING THE CONSENT SOLICITATION Cycle seeks the consent of an absolute majority of the Company's issued and outstanding Common Stock in order to act on the Proposals set forth in this Consent Statement. BROKER NON-VOTES, ABSTENTIONS AND FAILURE TO RETURN A SIGNED CONSENT WILL HAVE THE SAME EFFECT AS WITHHOLDING CONSENT TO THE PROPOSAL. Change of Control Pursuant to the Company's various stock option plans, the Director Removal and Director Election Proposals, if adopted by the stockholders of the Company, would cause certain options to purchase Common Stock, which options were granted by the Company to its officers, directors, employees and consultants, to become immediately exercisable. According to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1998 (the "Company 1998 Annual Report"), as of January 31, 1998, the Company had outstanding options to purchase 1,045,693 shares at a weighted exercise price of $12.009 per share. The Company's Schedule 14D-9, filed with the Commission on April 13, 1998, states that additional vested 13 options to purchase an aggregate of 60,000 shares of the Common Stock at $12.25 per share were granted to each of the directors of the Company, other than Mr. Kelley, on February 2, 1998, and options to purchase 25,000 shares at $12.50 per share, were granted on February 27, 1998 to Joseph Piazza, Jr., Vice President, Sales, and the son of Joseph Piazza, Sr., the President, Chief Executive Officer and a director of the Company. The Company 1998 Annual Report states that as of January 31, 1997, there were outstanding options to purchase 863,230 shares at a weighted exercise price of $18.076 per share and that during the fiscal year options to purchase 1,726,872 shares were canceled or expired and new options to purchase 1,976,939 shares were issued. According to the Company's Schedule 13E-4 filed with the Commission on July 13, 1998 (the "Schedule 13E-4"), as of June 25, 1998, there were 1,016,129 shares of Common Stock reserved under the Company's employee and director stock incentive plans in respect of outstanding awards. According to the Schedule 13E-4, the four current directors of the Company hold options to purchase at least 257,119 shares (or 25.3% of the outstanding awards under the Company's stock incentive plans) as of June 25, 1998. Pursuant to the Company's 1997 Stock Option Plan, options and stock purchase rights may be granted to employees, directors and consultants of the Company. In the event of a change of control of the Company, for a period of 15 days following the optionee's notification by the administrator of the plan, the optionee may exercise his or her options as to all of the optioned stock. Because the 1997 Stock Option Plan is not publicly available as of the date of this consent solicitation, the information herein is based on the plan summary contained in the Company's Proxy Statement for the Annual Meeting of Stockholders held on November 4, 1997 (the "Company 1997 Proxy Statement") and is qualified in its entirety by reference thereto. Pursuant to the Company's 1995 Stock Option Plan, options granted under the plan that are held by non-employee directors will be "accelerated," or become immediately exercisable, for all the option shares in the event of a change in control of the Company, whether through a successful tender offer for more than 50% of the outstanding Common Stock or a change in the majority of the Board of Directors by one or more proxy contests. The plan administrator has discretionary authority, exercisable in advance of any actually-anticipated change in control or at the time of such change in control, to provide for the automatic acceleration of one or more options held by key employees, consultants and independent contractors (and the termination of one or more of the Company's outstanding repurchase rights with respect to Common Stock acquired through the exercise of such options) upon the occurrence of the change in control. Additionally, in the case of an optionee whose service with the Company is terminated, the administrator may permit exercise of the optionee's options, within a limited time period, with respect to subsequent installments of purchasable shares for which the options would otherwise have become exercisable had such cessation of service not occurred. The 1995 Stock Option Plan is attached as an exhibit to the Company's Registration Statement on Form S-8, filed with the Commission on December 6, 1995, and this description is qualified in its entirety by reference thereto. The material provisions of the Company's 1991 Stock Option Plan, as restated on March 2, 1992, are substantially identical to those in the 1995 Stock Option Plan. The 1991 Stock Option Plan is attached as an exhibit to the Company's Registration Statement on Form S-8, filed with the Commission on April 16, 1992, and this description is qualified in its entirety by reference thereto. Additionally, the Company, in connection with its 1997 acquisition of the assets of Chrome Specialties, entered into a $73.5 million credit agreement with Bank of America National Trust and Savings Association ("Bank of America"). The credit agreement provides that the removal and replacement of a majority of the Board of Directors as contemplated by the Director Removal Proposal and the Director Election Proposal would constitute an event of default under the credit agreement permitting Bank of America to cancel its obligations to make loans to the Company and to declare the outstanding principal amount of, and the interest accrued on, the existing loans due and payable. Consents Required The written consent of an absolute majority of the outstanding Common Stock is required to adopt and approve each of the Proposals. To the knowledge of Cycle, there were 5,173,077 shares of Common Stock outstanding at September 8, 1998, based on the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1998. Each share of Common Stock entitles the Record Date holder to one vote on each of the Proposals. Accordingly, based on the information known to Cycle, 14 written consents by holders representing 2,586,539 shares of Common Stock will be required to adopt and approve each of the Proposals. Cycle intends to vote the 528,100 shares of Common Stock it owns in favor of the Proposals. Accordingly, based on the information known to Cycle, written consents by holders representing an additional 2,058,439 shares of Common Stock, or 44% of the shares not owned by Cycle, will be required to adopt and approve each of the Proposals. Each abstention and broker non-vote with respect to any of the Proposals will have the same effect as withholding consent to the adoption of such Proposal. Consent Card Special Instructions If you were a record holder as of the close of business on the Record Date, you may elect to consent to, withhold consent or abstain with respect to each Proposal by marking the "CONSENT," "CONSENT WITHHELD" or "ABSTAIN" box, as applicable, underneath each such Proposal on the accompanying WHITE consent card and signing, dating and returning it promptly in the enclosed postage-paid envelope. IF THE STOCKHOLDER WHO HAS EXECUTED AND RETURNED THE CONSENT CARD HAS FAILED TO CHECK A BOX MARKED "CONSENT," "CONSENT WITHHELD" OR "ABSTAIN" FOR ANY OR ALL OF THE PROPOSALS, SUCH STOCKHOLDER CONSENT CARD WILL BE VOTED IN FAVOR OF SUCH PROPOSAL OR PROPOSALS. CYCLE RECOMMENDS THAT YOU CONSENT TO EACH OF THE PROPOSALS. YOUR CONSENT IS IMPORTANT. PLEASE MARK, SIGN AND DATE THE ENCLOSED WHITE CONSENT CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. FAILURE TO RETURN YOUR CONSENT WILL HAVE THE SAME EFFECT AS WITHHOLDING CONSENT TO THE PROPOSALS. If your shares are held in the name of a brokerage firm, bank nominee or other institution, you should contact the person responsible for your account and give instructions for the WHITE consent card representing your shares to be marked, dated, signed and mailed. Only that institution can execute a WHITE consent card with respect to your shares and only upon receipt of specific instructions from you. Cycle urges you to confirm in writing your instructions to the person responsible for your account and to provide a copy of those instructions to Cycle in care of Innisfree at the address set forth on page 4 of this Consent Statement so that Cycle will be aware of all instructions given and can attempt to ensure that such instructions are followed. THE CONSENT PROCEDURE Section 228 of the DGCL states that, unless otherwise provided in the certificate of incorporation, any action that may be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and those consents were delivered to the corporation by delivery to its registered office in Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. In the case of this Consent Solicitation, written, unrevoked consents of the holders of a majority of the outstanding shares of Common Stock as of the Record Date must be delivered to the Company as described above to effect the actions as to which consents are being solicited hereunder. Section 228 of the DGCL further provides that no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by Section 228, written consents signed by a sufficient number of holders to take such action are delivered to the corporation in the manner required by Section 228. IT IS CURRENTLY THE INTENTION OF CYCLE TO CEASE THE SOLICITATION OF CONSENTS ONCE THE SOLICITOR HAS DETERMINED THAT VALID AND UNREVOKED CONSENTS REPRESENTING A MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK AS OF THE RECORD DATE HAVE BEEN OBTAINED AND TO DELIVER SUCH CONSENTS TO THE COMPANY IN THE MANNER REQUIRED BY 15 SECTION 228 OF THE DGCL AS SOON AS PRACTICABLE THEREAFTER. WHEN CONSENTS FOR A MAJORITY OF THE COMMON STOCK HAVE BEEN OBTAINED AND DELIVERED TO THE COMPANY, A STOCKHOLDER WILL BE UNABLE TO REVOKE HIS OR HER CONSENT. If the actions described herein are taken, the Company will promptly notify the stockholders who have not consented to the actions taken as required by the DGCL. Consents may only be executed by stockholders of record at the close of business on the Record Date. As of September 8, 1998, the Company had outstanding 5,173,077 shares of Common Stock. The number of votes necessary to effect the Proposals is 2,586,539 (an absolute majority of 5,173,077). Based on its review of publicly available information, Cycle is not aware of any material change since September 8, 1998 in the number of outstanding shares of Common Stock. Each share of Common Stock entitles the record holder thereof to cast one vote. The Company's Certificate of Incorporation and Bylaws do not provide for cumulative voting. Since Cycle must receive consents from a majority of the Company's outstanding shares in order for the Proposals to be adopted, a broker non-vote or direction to withhold authority to vote on the WHITE consent card will have the same effect as a "no" vote with respect to Cycle's solicitation. BROKER NON-VOTES, ABSTENTIONS OR FAILURE TO RETURN A SIGNED CONSENT WILL HAVE THE SAME EFFECT AS WITHHOLDING CONSENT TO THE PROPOSALS. CYCLE URGES EACH STOCKHOLDER TO ENSURE THAT THE RECORD HOLDER OF HIS OR HER SHARES MARKS, SIGNS, DATES AND RETURNS THE ENCLOSED CONSENT AS SOON AS POSSIBLE. CERTAIN OTHER INFORMATION REGARDING THE COMPANY; STOCKHOLDER PROPOSALS Stockholders are referred to the Company 1998 Annual Report and the Company 1997 Proxy Statement with respect to the compensation and remuneration paid and payable and other information related to the Company's officers and directors and to the beneficial ownership of the Company's securities. Certain information regarding beneficial ownership of the Common Stock is set forth in Exhibit C attached hereto. The Company 1997 Proxy Statement states that the deadline for stockholders to submit proposals to be considered for inclusion in the Company's Proxy Statement for the next year's Annual Meeting of Stockholders is expected to be July 8, 1998. VOTING; COSTS OF CONSENT SOLICITATION Written consents may be solicited by mail, advertisement, telephone, facsimile or in person. Solicitations may be made by officers of Cycle; however, no such person shall receive additional compensation for such solicitation other than Innisfree. Cycle has retained Innisfree to act as an advisor in the submission of this consent solicitation. Approximately 20 employees of Innisfree will engage in the solicitation. Cycle has agreed to pay Innisfree a fee estimated not to exceed $25,000 plus reasonable out-of pocket expenses. In addition, Jefferies & Company, Inc. ("Jefferies") has been engaged to act as financial advisor to Cycle and its Members in connection with a possible acquisition of the Company, including any financing or investment activities which may be undertaken in connection therewith (the "Engagement Agreement"). The Engagement Agreement provides, among other things, that in payment for services to be rendered by Jefferies, if within twelve months from the date of the Engagement Agreement any shares of Common Stock owned by Cycle or any of its affiliates are sold to any person, Jefferies will be paid a fee equal to 15% of the profit in respect of such sale. Costs related to the solicitation of consents to the Proposals include expenditures for attorneys, accountants, investment bankers, consent solicitors, printing, postage, litigation and related expenses and filing fees and are expected to aggregate approximately $750,000, of which approximately $500,000 has been spent to date. The portion of such costs allocable solely to the solicitation of consents to the Proposals is not readily determinable. Actual expenditures may vary materially from the estimate, 16 however, as many expenditures cannot be readily predicted. The entire expense of preparing, assembling, printing and mailing this Consent Statement and any other consent soliciting materials and the cost of soliciting consents will initially be borne by Cycle. If the Cycle Nominees are elected, Cycle intends to request reimbursement from the Company for these expenses. This request will not be submitted to a stockholder vote. Banks, brokerage houses and other custodians, nominees and fiduciaries may be requested to forward Cycle's solicitation materials to the beneficial owners of the shares they hold of record, and Cycle will reimburse them for their reasonable out-of-pocket expenses. If your shares are registered in your own name, you may mail or fax your consent to Cycle at the address or fax number listed below. If your shares are held in "street name" (held by your brokerage firm or bank), immediately instruct your broker or bank representative to sign Cycle's WHITE consent card and mail it to Cycle, who will promptly deliver it. Please be certain to include the name of your brokerage firm or bank. If you have additional questions, please call: INNISFREE M&A INCORPORATED 501 Madison Avenue, 20th Floor New York, NY 10022 Call Toll-Free: (888) 750-5834 Banks and Brokers call collect: (212) 750-5833 A consent executed by a stockholder may be revoked at any time before its exercise by submitting (i) a written, dated revocation of such consent or (ii) a later dated consent covering the same shares. A revocation may be in any written form validly signed by the record holder as long as it clearly states that the consent previously given is no longer effective and must be executed and delivered prior to the time that the action authorized by the executed consent is taken. The revocation may be delivered to Golden Cycle, LLC, c/o Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York, NY 10022, Attn.: Alan M. Miller. Although a revocation or later dated consent delivered only to the Company will be effective to revoke a previously executed consent, Cycle requests that if a revocation or later dated consent is delivered to the Company, a photocopy of the revocation or later dated consent also be delivered to Cycle, at the address set forth above, so that Cycle will be aware of such revocation. YOUR CONSENT IS IMPORTANT. NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN, PLEASE CONSENT TO THE REMOVAL OF THE CURRENT BOARD OF DIRECTORS, THE AMENDMENT OF THE BYLAWS TO SET THE NUMBER OF DIRECTORS AND PERMIT THE COMPANY'S STOCKHOLDERS TO FILL VACANCIES ON THE BOARD, THE ELECTION OF THE CYCLE NOMINEES, THE REIMBURSEMENT OF CYCLE'S EXPENSES INCURRED IN CONNECTION WITH THIS CONSENT SOLICITATION AND THE REPEAL OF ANY BYLAWS ADOPTED SINCE MAY 7, 1998 BY MARKING, SIGNING, DATING AND MAILING THE ENCLOSED WHITE CONSENT CARD PROMPTLY. ONLY YOUR LATEST DATED CONSENT COUNTS. 17 EXHIBIT A Golden Cycle, LLC is the beneficial owner of 528,100 shares of the Common Stock. None of the other participants in this consent solicitation or their respective associates, including the Cycle Nominees, is the beneficial owner of any shares of the Common Stock. No shares are held of record but not beneficially by the participants or their associates. The following table sets forth information with respect to all purchases of Common Stock of the Company by Cycle during the past two years. (Except as set forth below, no participant in this solicitation has purchased or sold securities of the Company within the past two years.) SHARES PURCHASED BY GOLDEN CYCLE, LLC NUMBER OF DATE SHARES PURCHASED PRICE ------- ---------------- -------- 1/20/98 24,000 $283,200 1/20/98 1,000 11,675 1/21/98 5,000 61,500 1/21/98 7,000 84,350 1/21/98 2,000 23,600 1/22/98 3,000 36,525 1/27/98 50,000 615,000 1/28/98 25,000 307,500 1/29/98 5,000 62,125 2/02/98 3,000 37,275 2/03/98 10,000 126,750 2/03/98 5,000 62,750 2/04/98 2,500 31,375 2/09/98 20,000 273,500 2/10/98 2,000 27,100 2/13/98 20,000 276,000 2/13/98 20,000 273,500 2/19/98 20,000 276,000 2/20/98 10,600 146,280 2/20/98 10,000 136,750 3/12/98 50,000 677,500 3/13/98 50,000 690,000 3/17/98 125,000 1,718,750 3/19/98 58,000 870,000 A-1 EXHIBIT B PREFERRED SHARE PURCHASE RIGHTS On November 13, 1996, pursuant to a Preferred Shares Rights Agreement (the "Rights Agreement") between Custom Chrome, Inc. (the "Company") and American Stock Transfer and Trust Company, as Rights Agent (the "Rights Agent"), the Company's Board of Directors declared a dividend of one right (a "Right") to purchase one one-thousandth of a share of the Company's Series A Participating Preferred Stock, $0.001 par value ("Series A Preferred") for each outstanding share of Common Stock, $0.001 par value ("Common Shares"), of the Company. The dividend is payable on December 13, 1996 (the "Record Date") to stockholders of record as of the close of business on that date. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred at an exercise price of $80.00 (the "Purchase Price"), subject to adjustment as provided for in the Rights Agreement. The following summary of the principal terms of the Rights Agreement is a general description only and is subject to the more detailed terms and conditions of the Rights Agreement. A copy of the Rights Agreement is attached as Exhibit 4 to [the] Registration Statement and is incorporated [therein] by reference. RIGHTS EVIDENCED BY COMMON SHARE CERTIFICATES The Rights will not be exercisable until the Distribution Date (hereinafter defined). Certificates for the Rights ("Rights Certificates") will not be sent to stockholders and the Rights will attach to and trade only together with the Common Shares. Accordingly, Common Share certificates outstanding on the Record Date will evidence the Rights related thereto, and Common Share certificates issued after the Record Date will contain a legend incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender or transfer of any certificates for Common Shares, outstanding as of the Record Date, even without notation or a copy of the Summary of Rights being attached thereto, will also constitute the transfer of the Rights associated with the Common Shares represented by such certificate. The Rights will be transferable only in connection with the transfer of Common Shares prior to the Distribution Date. DISTRIBUTION DATE The Rights will separate from the Common Shares, Rights Certificates will be issued and the Rights will become exercisable upon the date (the "Distribution Date") that is the earlier of: (i) 10 days (or such later date as may be determined by a majority of the Board of Directors, excluding directors affiliated with the Acquiring Person, as defined below (the "Continuing Directors")) following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired beneficial ownership of 15% or more of the outstanding Common Shares, including Common Shares held by affiliates or associates of the Acquiring Person, or (ii) 10 business days (or such later date as may be determined by a majority of the Continuing Directors then in office) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the outstanding Common Shares. ISSUANCE OF RIGHTS CERTIFICATES; EXPIRATION OF RIGHTS As soon as practicable following the Distribution Date, separate Rights Certificates will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date and such separate Rights Certificates alone will evidence the Rights from and after the Distribution Date. All Common Shares issued prior to the Distribution Date will be issued with Rights. As of the Distribution Date, the Rights will be evidenced solely by the Rights Certificates and may be transferred separately and apart from any transfer of one or more Common Shares. In general, Rights will be issued in respect of all Common Shares issued after the Record Date but prior to the earlier of the Distribution Date or Final Expiration Date (as hereinafter defined), unless the Board of Directors specifies to the contrary at or before the time of the issuance of the Common Shares (including issuances of Common Shares pursuant to the exercise of rights under the Company's benefit plans). The B-1 Rights will expire on the earliest of (i) November 13, 2006 (the "Final Expiration Date") or (ii) redemption or exchange of the Rights as described below. INITIAL EXERCISE OF THE RIGHTS Following the Distribution Date, and until one of the further events described below, holders of the Rights will be entitled to receive, upon exercise and the payment of $80.00 per Right, one one-thousandth share of the Series A Preferred. RIGHT TO BUY COMPANY COMMON SHARES Unless the Rights are earlier redeemed, in the event that an Acquiring Person becomes the beneficial owner of 15% or more of the Company's Common Shares then outstanding, then proper provision will be made so that each holder of a Right which has not theretofore been exercised (other than Rights beneficially owned by the Acquiring Person, which will thereafter be void) will thereafter have the right to receive, upon exercise, Common Shares having a value equal to two times the Purchase Price. In the event that the Company does not have sufficient Common Shares available for all Rights to be exercised, or the Board decides that such action is necessary or appropriate and not contrary to the interests of Rights holders, the Company may instead reduce the Purchase Price or substitute cash, assets or other securities having an aggregate value equivalent to the excess of (i) the value of the Common Shares issuable upon exercise of the Rights over (ii) the Purchase Price to be paid upon exercise of the Rights. Rights are not exercisable following the occurrence of an event as described above until such time as the Rights are no longer redeemable by the Company as set forth below. RIGHT TO BUY ACQUIRING COMPANY STOCK Similarly, unless the Rights are earlier redeemed, in the event that, after an Acquiring Person becomes the beneficial owner of 15% or more of the Company's Common Shares then outstanding, (i) the Company is acquired in a merger or other business combination transaction (whether or not the Company is the surviving entity), or (ii) 50% or more of the Company's consolidated assets or earning power are sold, proper provision must be made so that each holder of a Right which has not theretofore been exercised (other than Rights beneficially owned by the Acquiring Person, which will thereafter be void) will thereafter have the right to receive, upon exercise, shares of common stock (free of any restrictions) of the acquiring company having a value equal to two times the Purchase Price. EXCHANGE PROVISION At any time after the acquisition by an Acquiring Person of 15% or more of the Company's outstanding Common Shares and prior to the acquisition by such Acquiring Person of 50% or more of the Company's outstanding Common Shares, the Board of Directors of the Company may exchange the Rights (other than Rights owned by the Acquiring Person), in whole or in part, at an exchange ratio of one Common Share per Right. REDEMPTION At any time on or prior to the close of business on the earlier of (i) the 10th day following the first public announcement by the Company or Acquiring Person that the Acquiring Person has become such (the "Share Acquisition Date") or such later date as may be determined by a majority of the Continuing Directors and publicly announced by the Company, or (ii) the Final Expiration Date of the Rights, the Company may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (the "Redemption Price"). The Company may, at its option, pay the Redemption Price either in Common Shares or cash. If the Board of Directors authorizes the redemption of the Rights after a person becomes an Acquiring Person, then a majority of the Continuing Directors are required to authorize the redemption of the Rights. Immediately upon action by the Board of Directors redeeming the Rights as described above, the Rights will terminate and the only right thereafter of the holders of Rights is to receive the Redemption Price. B-2 ADJUSTMENTS TO PREVENT DILUTION The Purchase Price payable, the number of Rights, and the number of Series A Preferred or Common Shares or other securities or property issuable upon exercise of the Rights are subject to adjustment from time to time in connection with dilutive issuances by the Company as set forth in the Rights Agreement. With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. CASH PAID INSTEAD OF ISSUING FRACTIONAL SHARES No fractional portion less than integral multiples of one Common Share will be issued upon exercise of a Right and in lieu thereof, an adjustment in cash will be made based on the market price of the Common Shares on the last trading date prior to the date of exercise. NO STOCKHOLDERS' RIGHTS PRIOR TO EXERCISE Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company (other than any rights resulting from such stockholder's ownership of Common Shares), including, without limitation, the right to vote or to receive dividends. AMENDMENT OF RIGHTS AGREEMENT The provisions of the Rights Agreement may be supplemented or amended by the Board of Directors in any manner without the approval of the Rights holders prior to the date on which the Rights are distributed separate from the Common Shares. After such date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, defect or inconsistency, to make changes which do not adversely affect the interests of holders of Rights (excluding the interests of any Acquiring Person), or to shorten or lengthen any time period under the Rights Agreement; provided, however, that no amendment to adjust the time period governing redemption shall be made at such time as the Rights are not redeemable. RIGHTS AND PREFERENCES OF THE SERIES A PREFERRED Series A Preferred purchasable upon exercise of the Rights will not be redeemable. Each share of Series A Preferred will be entitled to an aggregate dividend of 1,000 times the aggregate per share amount of all dividends declared (including noncash dividends and other distributions) per Common Share. In the event of liquidation, the holders of each share of Series A Preferred will be entitled to receive 1,000 times the per share consideration being distributed with respect to each Common Share plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment. Each share of Series A Preferred will have 1,000 votes, voting together with the Common Shares. These rights are protected by certain anti-dilution provisions, including a proportional adjustment to the number of outstanding shares of Series A Preferred in the event the Company (i) declares a dividend on Common Shares payable in Common Shares, (ii) subdivides the outstanding Common Shares, or (iii) combines the outstanding Common Shares into a smaller number of shares. Because of the nature of the dividend, liquidation and voting rights of the shares of Series A Preferred, the value of the one one-thousandth interest in a share of Series A Preferred purchasable upon exercise of each Right should approximate the value of one Common Share. CERTAIN ANTI-TAKEOVER EFFECTS The Rights approved by the Board are designed to protect and maximize the value of the outstanding equity interests in the Company in the event of an unsolicited attempt by an acquiror to take over the Company, in a manner or on terms not approved by the Board of Directors. Takeover attempts frequently include coercive tactics to deprive the Company's Board of Directors and its stockholders of any real opportunity to determine the destiny of the Company. The Rights have been declared by the Board in order to deter such tactics, including a gradual accumulation of shares in the open market of a 15% or greater position B-3 to be followed by a merger or a partial or two-tier tender offer that does not treat all stockholders equally. These tactics unfairly pressure stockholders into making ill-advised investment decisions, squeeze them out of their investment without giving them any real choice and deprive them of the full value of their equity interest. The Rights are not intended to prevent a takeover of the Company and will not do so. The Rights may be redeemed by the Company at $0.01 per Right within ten days (or such later date as may be determined by a majority of the Continuing Directors) after the public announcement that 15% or more of the Company's shares have been acquired by a single acquiror or group. Accordingly, the Rights should not interfere with any merger or business combination approved by the Board of Directors. Issuance of the Rights does not in any way weaken the financial strength of the Company or interfere with its business plans. The issuance of the Rights themselves has no dilutive effect, will not affect reported earnings per share, should not be taxable to the Company or to its stockholders, and will not change the way in which the Company's shares are presently traded. The Company's Board of Directors believes that the Rights represent a sound and reasonable means of addressing the complex issues of corporate policy created by the current takeover environment. However, the Rights may have the effect of rendering more difficult or discouraging an acquisition of the Company deemed undesirable by the Board of Directors. The Rights may cause substantial dilution to a person or group that attempts to acquire the Company on terms or in a manner not approved by the Company's Board of Directors, except pursuant to an offer conditioned upon the negation, purchase or redemption of the Rights. B-4 EXHIBIT C SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information with respect to the beneficial ownership of the Company's Common Stock by (a) all persons who are beneficial owners of five percent or more of the Company's Common Stock, (b) directors and certain executive officers of the Company and (c) all directors and executive officers as a group. Except as otherwise set forth in the Consent Statement, no shares of Common Stock are beneficially owned by the Cycle Nominees. Except for the aggregate number of shares beneficially owned by Cycle, all of the information in the table below is based on public filings with the Securities and Exchange Commission (as more fully described in the footnotes), and such information is qualified in its entirety by reference thereto. Cycle makes no representations as to the accuracy of such information. Moreover, because changes in beneficial ownership may have occurred since the effective dates of the filings cited below, such information, even if accurate as of the time of filing, may no longer be valid.
PERCENT OF SHARES OUTSTANDING BENEFICIALLY OWNED SHARES(1) ------------------ ----------- Golden Cycle, LLC................................ 528,100 10.21% 4025 Crooked Hill Road Harrisburg, PA 17110 FMR Corp.(2)..................................... 526,100 10.17% 82 Devonshire Street Boston, MA 02109 State of Wisconsin Investment Board(3)........... 470,300 9.09% 121 E. Wilson Street Madison, WI 53702 Heartland Advisors, Inc.(4)...................... 452,000 8.74% 790 North Milwaukee Street Milwaukee, WI 53202 Dimensional Fund Advisors Inc.(5)................ 302,600 5.85% 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 Investment Counselors of Maryland, Inc.(6)....... 257,900 4.98% 803 Cathedral Street Baltimore, MD 21201-5297 R. Steven Fisk(7)................................ 77,628 1.48% James J. Kelly, Jr.(8)........................... 88,073 1.67% Lionel M. Allan(9)............................... 41,373 * Joseph F. Keenan(10)............................. 31,415 * Joseph Piazza(11)................................ 102,655 1.95% All directors and executive officers as a group (9 persons)(12)............................ 387,520 7.00%
C-1 - ---------- * Less than one percent (1%) (1) Assumes 5,173,077 shares of Common Stock outstanding, as described in the Consent Statement. (2) Based on a Schedule 13G/A, dated February 14, 1998, filed by FMR Corp. with the Commission. Represents shares beneficially owned by Fidelity Management & Research Company, a wholly owned subsidiary of FMR, as a result of its serving as an investment advisor to various investment accounts. (3) Based on a Schedule 13G, dated January 20, 1998, filed by the State of Wisconsin Investment Board with the Commission. (4) Based on a Schedule 13G, dated January 23, 1998, filed by Heartland Advisors, Inc. with the Commission. (5) Based on a Schedule 13G, dated February 6, 1998, filed by Dimensional Fund Advisors Inc. with the Commission. (6) Based on a Schedule 13G, dated March 19, 1998, filed by Investment Counselors of Maryland, Inc. with the Commission. (7) Based on the Schedule 13E-4 and includes 62,933 shares issuable upon the exercise of options which were exercisable or become exercisable within 60 days after June 28, 1998. (8) Based on the Schedule 13E-4 and includes 84,176 shares issuable upon the exercise of options which were exercisable or which become exercisable within 60 days after June 28, 1998. (9) Based on the Schedule 13E-4 and includes 41,373 shares issuable upon the exercise of options which were exercisable or which become exercisable within 60 days after June 28, 1998. (10) Based on the Schedule 13E-4 and includes 28,915 shares issuable upon the exercise of options which were exercisable or which become exercisable within 60 days after June 28, 1998. (11) Based on the Schedule 13E-4 and includes 102,655 shares issuable upon the exercise of options which were exercisable or which become exercisable within 60 days after June 28, 1998. (12) Based on the Schedule 13E-4 and includes 365,732 shares issuable upon the exercise of options which were exercisable or which become exercisable within 60 days after June 28, 1998. C-2 YOUR VOTE IS EXTREMELY IMPORTANT 1. Please SIGN, MARK, DATE and MAIL your WHITE consent card in the enclosed postage-paid envelope as soon as possible. If you wish to consent to the removal of the current Board of Directors, the amendment of the Bylaws to set the number of directors and permit stockholders to fill vacancies on the Board, the election of the Cycle Nominees and the repeal of any Bylaws adopted since May 7, 1998, you must submit the enclosed WHITE consent card, even if you have already submitted a consent card to any other person or entity (including the Company). 2. If your shares are held for you by a bank or brokerage firm, only your bank or broker can vote your shares and only after receiving instructions from you. Please call your bank or broker and instruct your representative to consent to the removal of the current Board of Directors, the amendment of the Bylaws to set the number of directors and permit stockholders to fill vacancies on the Board, the election of the Cycle Nominees and the repeal of any Bylaws adopted since May 7, 1998 on the WHITE consent card. 3. Time is short. PLEASE VOTE TODAY! If you have questions or need assistance in voting your shares or in changing your vote, please contact Cycle at the number listed below: c/o Innisfree M&A Incorporated 501 Madison Avenue, 20th Floor New York, NY 10022 Call Toll-Free: (888) 750-5834 Banks and Brokers call collect: (212) 750-5833 C-3 APPENDIX GLOBAL MOTORSPORT GROUP, INC. CONSENT OF STOCKHOLDERS TO ACTION WITHOUT A MEETING: THIS CONSENT IS SOLICITED BY GOLDEN CYCLE, LLC ("CYCLE") The undersigned, a stockholder of record of GLOBAL MOTORSPORT GROUP, INC. (the "Company"), hereby consents pursuant to Section 228 of the Delaware General Corporation Law, with respect to the number of shares of Common Stock, par value $0.001 per share, of the Company held by the undersigned, to each of the following actions without a prior notice and without a vote as more fully described in Cycle's consent statement (the "Consent Statement"), receipt of which is hereby acknowledged. CYCLE STRONGLY RECOMMENDS THAT STOCKHOLDERS CONSENT TO THE FOLLOWING PROPOSALS: 1. Director Removal Proposal: Remove the current members of the Board of Directors of the Company other than the directors elected by this consent, pursuant to the resolution set forth in the Consent Statement. / / CONSENT / / CONSENT WITHHELD / / ABSTAIN If no box is marked with respect to the Director Removal Proposal, this Consent will be voted in favor of the removal of the directors of the Company as set forth above. 2. Board Size Proposal: Amend the Bylaws to set the number of directors on the Board of Directors of the Company at five, pursuant to the resolution set forth in the Consent Statement. / / CONSENT / / CONSENT WITHHELD / / ABSTAIN If no box is marked with respect to the Board Size Proposal, this Consent will be voted in favor of the amendment of the Bylaws as set forth above. 3. Director Vacancy Proposal: Amend the Bylaws to provide that the Company's stockholders may fill vacancies on the Board of Directors of the Company, pursuant to the resolution set forth in the Consent Statement. / / CONSENT / / CONSENT WITHHELD / / ABSTAIN If no box is marked with respect to the Director Vacancy Proposal, this Consent will be voted in favor of the amendment of the Bylaws as set forth above. 4. Director Election Proposal: Elect the following five persons listed below (the "Nominees") to fill the newly vacant directorships, pursuant to the resolution set forth in the Consent Statement: Aaron H. Brenner, Alexander Grass, Roger Grass, H. Irwin Levy, George Lindemann / / CONSENT / / CONSENT WITHHELD / / ABSTAIN (continued on reverse side) C-4 (continued from previous side) To withhold consent to a proposed Nominee, specify the Nominee in the following space: ---------------------------------------------- If no box is marked above with respect to the Director Election Proposal, this Consent will be voted in favor of the election of all five Nominees. 5. Bylaw Proposal: Repeal any Bylaws adopted by the Board of Directors of the Company since May 7, 1998 (other than the Bylaws adopted by this consent), pursuant to the resolution set forth in the Consent Statement. / / CONSENT / / CONSENT WITHHELD / / ABSTAIN If no box is marked with respect to the Bylaw Proposal, this Consent will be voted in favor of the repeal of any Bylaws adopted since May 7, 1998 as set forth above. PLEASE ACT PROMPTLY. IMPORTANT: THIS CONSENT MUST BE SIGNED AND DATED TO BE VALID. Dated: ____________________________ , 1998 Signature: _______________________________ Signature (if held jointly): _______________________ Title or authority (if applicable): _________________________ Please sign exactly as name appears hereon. If shares are registered in more than one name, the signature of all such persons should be provided. A corporation should sign in its full corporate name by a duly authorized officer, stating his or her title. Trustees, guardians, executors and administrators should sign in their official capacity, giving their full title as such. If a partnership, please sign in the partnership name by authorized persons. The consent card votes all shares in all capacities. PLEASE MARK, SIGN AND DATE THIS CONSENT BEFORE MAILING THE CONSENT IN THE ENCLOSED ENVELOPE. C-5 EX-99.12 4 ACQUISITION FINANCING October 19, 1998 Golden Cycle, LLC 4025 Crooked Hill Road Harrisburg, PA 17110 Attn: Messrs. Alex Grass & Roger Grass RE: Acquisition Financing Dear Sirs: We understand that (i) Golden Cycle, LLC (the "Sponsor Company") has acquired approximately ten percent (10%) of the voting common stock of Global Motor Sports Group, Inc. (the "Subject Company"); (ii) The Sponsor Company has announced its interest in acquiring the Subject Company, but the current board and management have refused to discuss or otherwise entertain the matter; (iii) The Sponsor Company has made an unsolicited tender offer for all of the voting common stock of the Subject Company; (iv) The Sponsor Company has begun a consent solicitation from the shareholders of the Subject Company to replace a majority of the members of the board of directors of the Subject Company with directors nominated by the Sponsor Company for the purpose of considering, among other things, a self-tender of the shares by the Subject Company; and (v) The costs of the proposed self-tender and acquisition transaction (including existing indebtedness, working capital and fees and expenses relating to the subject transaction) would be approximately $160 million which is proposed to be financed along the lines of (A) approximately $80 million in senior bank debt financing, (B) $30 million in subordinated debt from you or your affiliates or other persons reasonably acceptable to you and NationsBank and (C) $60 million in equity. NationsBank, N.A. (including affiliates, "NationsBank" or the "Agent") is pleased to offer its commitment to provide the entire $80 million principal amount of the Senior Credit Facility (consisting of $40 million in revolving credit commitments and a $40 million term loan, the "Senior Credit Facility") described in the term sheet attached hereto as Annex I (the "Term Sheet"), to form a syndicate of financial institutions (the "Lenders") reasonably acceptable to you for the Senior Credit Facility. All capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Term Sheet. October 19, 1998 Page 2 The commitments of NationsBank hereunder are subject to the satisfaction of each of the following conditions precedent in a manner acceptable to NationsBank in its sole discretion: (a) each of the terms and conditions set forth herein; (b) each of the terms and conditions set forth in the Term Sheet; (c) execution of a fee letter among the Sponsor Company and NationsBank prior to or concurrently with the acceptance by the Sponsor Company of this letter; (d) the negotiation, execution and delivery of definitive documentation with respect to the Senior Credit Facility consistent with the Term Sheet and otherwise satisfactory to NationsBank; and (e) from the date hereof there not having occurred and being continuing a material adverse change in the market for a syndicated bank facility of the type contemplated or a material disruption of, or a material adverse change in, financial, banking or capital market conditions, in each case as determined by NationsBank in its sole reasonable discretion. NationsBank, or an affiliate, will act as Agent, Lead Arranger and Syndication Agent for the Senior Credit Facility. No additional agents will be appointed without the prior approval of NationsBank and the Sponsor Company. Furthermore, the commitments of NationsBank hereunder are based upon the financial and other information regarding the Sponsor Company, the Subject Company and their respective subsidiaries previously provided to NationsBank and are subject to the condition, among others, that there shall not have occurred after the date of such information, in the reasonable opinion of NationsBank, any material adverse change in the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Sponsor Company, the Subject Company and their subsidiaries taken as a whole. If the continuing review by NationsBank of the Sponsor Company or Subject Company discloses information relating to conditions or events not previously disclosed to NationsBank or relating to new information or additional developments concerning conditions or events previously disclosed to NationsBank which NationsBank in its sole reasonable discretion believe may have a material adverse effect on the condition (financial or otherwise), assets, properties, business, operations or prospects of the Sponsor Company or Subject Company and NationsBank may, in its sole reasonable discretion, suggest alternative financing amounts or structures that ensure adequate protection for the Lenders or decline to participate in the proposed financing. In addition to the forgoing conditions, as you know, neither we nor you know at this time the precise terms of the Subordinated Debt. Our commitment to provide the Senior Credit Facility is subject to the requirement that the amount, interest rates, maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other terms of the Subordinated Debt be satisfactory to the Agent and the Lenders. We understand that the covenants and defaults contained in the documentation pursuant to which the Subordinated Debt is issued would on the whole be typical and customary and covenants would be less restrictive than those contained in the definitive loan documents for the Senior Credit Facility and cross defaults to other indebtedness contained in the documentation for the Subordinated Debt will be limited to the acceleration of such other indebtedness rather than a default (monetary or otherwise) in respect of such indebtedness. You agree to actively assist NationsBank in achieving a syndication of the Senior Credit Facility that is satisfactory to NationsBank and you. In the event that such syndication cannot be achieved in a manner satisfactory to NationsBank and you under the structure outlined in the Term Sheet you agree October 19, 1998 Page 3 to cooperate with NationsBank in developing an alternative structure that will permit a satisfactory syndication of the Senior Credit Facilities. It is specifically understood and agreed that the terms of the Senior Credit Facilities may require modification (including pricing, fees, and capital structure) at the request of NationsBank to allow for a satisfactory syndication and that if the Borrower is not willing to accept modifications requested by NationsBank the commitments of NationsBank hereunder shall terminate. Syndication of the Senior Credit Facility will be accomplished by a variety of means, including direct contact during the syndication between senior management and advisors of the Sponsor Company and the Subject Company, and the proposed Lenders. To assist NationsBank in the syndication efforts, you hereby agree to (a) provide and cause your advisors to provide NationsBank and the other Lenders upon request with all information reasonably deemed necessary by NationsBank to complete syndication, including but not limited to information and evaluations prepared by the Sponsor Company and the Subject Company and their advisors, or on their behalf, relating to the Acquisition, (b) assist NationsBank upon its reasonable request in the preparation of an Information Memorandum to be used in connection with the syndication of the Senior Credit Facility and (c) otherwise assist NationsBank in its syndication efforts, including by making available officers and advisors of the Sponsor Company and the Subject Company and their subsidiaries from time to time to attend and make presentations regarding the business and prospects of the Sponsor Company and the Subject Company and their subsidiaries, as appropriate, at a meeting or meetings of prospective Lenders. You further agree to refrain from engaging in any additional financings for the Subject Company (except as described in this letter and except for the Subordinated Debt issue described in the Term Sheet) during such syndication process unless otherwise agreed to by NationsBank. It is understood and agreed that NationsBank, after consultation with you, will manage and control all aspects of the syndication, including decisions as to the selection of proposed Lenders reasonably acceptable to you and any titles offered to proposed Lenders, when commitments will be accepted and the final allocations of the commitments among the Lenders. It is understood that no Lender participating in the Senior Credit Facility will receive compensation from you outside the terms contained herein and in the Term Sheet in order to obtain its commitment. It is also understood and agreed that the amount and distribution of the fees among the Lenders will be at the sole discretion of NationsBank and that any syndication prior to execution of definitive documentation will reduce the commitment of NationsBank. You hereby represent, warrant and covenant that (i) all information, other than Projections (as defined below), which has been or is hereafter made available to NationsBank or the Lenders by you or any of your representatives in connection with the transactions contemplated hereby ("Information") is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading and (ii) all financial projections concerning the Sponsor Company and the Subject Company that have been or are hereafter made available to NationsBank or the Lenders by you or any of your representatives (the "Projections") have been or will be prepared in good faith based upon reasonable assumptions. You agree to furnish us with such Information and Projections as we may reasonably request and to supplement the Information and the Projections from time to time until the closing date for the Senior Credit Facility so that the representation and warranty in the preceding sentence is correct on the such date. In arranging and syndicating the Senior Credit Facility, NationsBank will be using and relying on the Information and the Projections without independent verification thereof. By executing this letter agreement, you agree to reimburse NationsBank from time to time for all reasonable out-of-pocket fees and expenses (including, but not limited to, the reasonable fees, disbursements and other charges of Moore & Van Allen, PLLC, as counsel to NationsBank and the other Lenders) incurred in connection with the Senior Credit Facility and the preparation of the definitive documentation for the Senior Credit Facility and the other transactions contemplated hereby. October 19, 1998 Page 4 In the event that NationsBank becomes involved in any capacity in any action, proceeding or investigation in connection with any matter contemplated by this letter, the Sponsor Company will reimburse NationsBank for its legal and other expenses (including the cost of any investigation and preparation) as they are incurred by NationsBank. The Sponsor Company also agrees to indemnify and hold harmless NationsBank and its affiliates and its respective directors, officers, employees and agents (the "Indemnified Parties") from and against any and all losses, claims, damages and liabilities, joint or several, related to or arising out of any matters contemplated by this letter, unless and only to the extent that it shall be finally judicially determined that such losses, claims, damages or liabilities resulted primarily from the gross negligence or willful misconduct of NationsBank. The provisions of the immediately preceding two paragraphs shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and notwithstanding the termination of this letter agreement or the commitment of NationsBank hereunder, provided, however, that the Sponsor Company shall be deemed released of its obligations under the immediately preceding two paragraphs upon the execution of definitive financing documentation. As described herein and in the Term Sheet, NationsBank or an affiliate will act as Lead Arranger and Syndication Agent for the Senior Credit Facility. NationsBank reserves the right to allocate, in whole or in part, to any affiliate certain fees payable to NationsBank in such manner in its sole discretion. You acknowledge and agree that NationsBank may, subject to the confidentiality provisions hereafter provided, share with any of its affiliates any information relating to the Senior Credit Facility, the Subject Company, the Sponsor Company and their subsidiaries and affiliates. This letter agreement may not be assigned by the Sponsor Company (except to the Subject Company after satisfaction of the conditions in clauses (i) and (ii) of the Conditions Precedent in the Term Sheet) without the prior written consent of NationsBank. If you are in agreement with the foregoing, please execute and return the enclosed copy of this letter agreement no later than the close of business on October 31, 1998. This letter agreement will become effective upon your delivery to us of executed counterparts of this letter agreement and the fee letter of even date herewith (the "Fee Letter") and, without limiting the more specific terms hereof and of the Term Sheet, you agree upon acceptance of this commitment to pay the fees set forth in the Term Sheet and in the Fee Letter unless the loan is not closed because of a material breach by NationsBank. This commitment shall terminate if not so accepted by you prior to that time. Following acceptance by you, this commitment will terminate on December 31, 1998, unless the Facilities are closed by such time. Except as required by applicable law, court order or connection with any enforcement hereof, this letter and the Fee Letter and the contents hereof and thereof shall not be disclosed by you to any third party (including the Subject Company) without the prior consent of NationsBank, other than to your attorneys, financial advisors and accountants, in each case to the extent necessary in your reasonable judgment; provided, however, it is understood and agreed that, after acceptance of this letter by you by execution in the space provided below and execution by you of the Fee Letter, you may disclose the terms of this letter to the Subject Company in connection with the Offer. Without limiting the foregoing, in the event that you disclose the contents of this letter in contravention of the preceding sentence, you shall be deemed to have accepted the terms of this letter and the Fee Letter. October 19, 1998 Page 5 This letter may be executed in counterparts which, taken together, shall constitute an original. This letter, together with the Term Sheet and the Fee Letter, embodies the entire agreement and understanding among NationsBank and the Sponsor Company with respect to the specific matters set forth herein and supersedes all prior agreements and understandings relating to the subject matter hereof. No party has been authorized by NationsBank to make any oral or written statements inconsistent with this letter. THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW. Very truly yours, NATIONSBANK, N.A. By: ------------------------------------ Title: NATIONSBANC MONTGOMERY SECURITIES LLC By: ------------------------------------ Title: ACCEPTED AND AGREED TO: Golden Cycle, LLC By: ------------------------- Title: Date: ANNEX I SUMMARY OF TERMS & CONDITIONS October 1998 ================================================================================ BORROWER: Global Motorsports Group, Inc. (the "Borrower" or "Subject Company") which will engage in a self-tender for shares of its common voting stock (collectively, the "Acquisition"). GUARANTORS: The Senior Credit Facility shall be guaranteed by Golden Cycle, LLC (the "Parent" or "Sponsor Company") and all existing and hereafter acquired domestic subsidiaries of the Borrower and the Parent (the "Guarantors") upon consummation of the Acquisition. All guarantees shall be guarantees of payment and not of collection. AGENT: NationsBank, N.A. (the "Agent" or "NationsBank") will act as sole and exclusive administrative and collateral agent. As such, NationsBank will negotiate with the Borrower, act as the primary contact for the Borrower and perform all other duties associated with the role of exclusive administrative agent. No other agents or co-agents may be appointed without the prior written consent of NationsBank. LEAD ARRANGER: NationsBanc Montgomery Securities LLC LENDERS: A syndicate of financial institutions (including NationsBank), which institutions shall be acceptable to the Borrower and the Agent (collectively, the "Lenders"). SENIOR CREDIT FACILITY: An aggregate principal amount of up to $80 million will be available under the conditions hereinafter set forth: Revolving Credit Facility: Up to $40 million revolving credit facility ("Revolving Credit Facility"). Term Loan Facility: $40 million term loan facility (the "Term Loan") to refinance existing indebtedness, to finance the purchase of stock pursuant to a self tender of shares and the subsequent merger, and to pay fees and expenses in connection with the Acquisition; provided, however, advances under the Term Loan shall be made only after application of the proceeds of additional subordinated debt and equity required in connection herewith for the purchase of shares of the Borrower. PURPOSE: The proceeds of the Senior Credit Facility shall be used: (i) to refinance the outstanding principal balance of existing indebtedness of the Subject Company (ii) finance a self tender of common voting stock of the Subject Company (iii) to pay fees and expenses incurred in connection with the Acquisition and (iv) to provide for working capital and general corporate purposes of the Borrower. 1 INTEREST RATES: The Senior Credit Facility shall bear interest as set forth on Addendum I hereto. AVAILABILITY/SCHEDULED AMORTIZATION: Revolving Credit Facility: Loans under the Revolving Credit Facility (including Swingline Loans) may be made, and Letters of Credit may be issued, in each case subject to availability. Availability shall be determined by a Borrowing Base equal to the sum of (i) 85% of eligible receivables of the Borrower and its subsidiaries and (ii) 50% of eligible inventory of the Borrower and its subsidiaries valued at the lesser of cost or fair market value. The Revolving Credit Facility shall terminate and all amounts outstanding thereunder shall be due and payable in full 5 years from Closing. Term Loan Facility: Loans made under the Term Facility will be available in a single borrowing at Closing. The Term Loan Facility will be subject to quarterly amortization of principal, based upon the annual amounts set forth below (the "Scheduled Amortization"). Loan Year 1 $ 5 million Loan Year 2 $ 5 million Loan Year 3 $10 million Loan Year 4 $10 million Loan Year 5 $10 million SECURITY: Concurrently with the Acquisition, the Agent (on behalf of the Lenders) shall receive a first priority perfected security interest in all of the capital stock of the Borrower owned by the Sponsor Company and each of the domestic subsidiaries (direct or indirect) of the Borrower and 65% of the capital stock of each foreign subsidiary (direct or indirect) of the Borrower, which capital stock shall not be subject to any other lien or encumbrance. The Agent (on behalf of the Lenders) shall also receive a first priority perfected security interest (subject to permitted liens to be determined) in all other present and future assets and properties of the Borrower and its subsidiaries (including, without limitation, accounts receivable, inventory, real property (except real property subject to mortgages which will not be satisfied at closing to be determined), machinery, equipment, contracts, trademarks, copyrights, patents, license agreements, and general intangibles except for rights under agreements which are not material and which may not be assigned without the consent of the other party thereto). The foregoing security shall ratably secure the Senior Credit Facility and any interest rate swap/foreign currency swap or similar agreements with a Lender under the Senior Credit Facility. MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS: In addition to the amortization set forth above, the Senior Credit Facility will be prepaid, and the commitments shall be permanently reduced, by an amount equal to (a) 100% of the net cash proceeds of all asset sales 2 by the Parent, the Borrower or any subsidiary of the Borrower (including stock of subsidiaries), subject to de minimus baskets and reinvestment provisions to be agreed upon and net of selling expenses and taxes to the extent such taxes are paid or payable; (b) 75% of Excess Cash Flow (to be defined) pursuant to an annual cash sweep arrangement; (c) 100% of the net cash proceeds from the issuance of any debt (excluding certain permitted debt) by the Parent, the Borrower or any subsidiary; and (d) 100% of the net cash proceeds from the issuance of equity by the Parent, the Borrower or any subsidiary. OPTIONAL PREPAYMENTS AND COMMITMENT REDUCTIONS: The Borrower may prepay the Senior Credit Facility in whole or in part at any time without penalty, subject to reimbursement of the Lenders' breakage and redeployment costs in the case of prepayment of LIBOR borrowings. The commitments under the Revolving Credit Facility may permanently reduced at any time after the Closing Date in such minimum as may be mutually agreed. CONDITIONS PRECEDENT TO CLOSING: The initial funding of the Senior Credit Facility will be subject to satisfaction of the following conditions precedent: (i) Successful completion by the Sponsor Company of the consent solicitation and replacement of a majority of the board members of the Subject Company with nominees of the Sponsor Company. (ii) Acquisition through a self-tender of shares of common voting stock of the Subject Company for a price of up to $19 per share (assuming total shares outstanding on a fully diluted basis do not exceed 6,189,206 shares) so that the Sponsor Company obtains ownership of at least 51% of such common voting stock (including shares currently owned by the Sponsor Company). The terms of such self-tender shall be acceptable to NationsBank and the Board of Directors of the Subject Company. (iii) The negotiation, execution and delivery of definitive documentation with respect to the Senior Credit Facility satisfactory to the Agent and the Lenders. (iv) Formulation of capital structure (and allocation of financing sources between senior bank debt and subordinated debt, or other capital arrangements) acceptable to the Agent in its reasonable discretion, which shall include approximately $30 million in subordinated debt from the Sponsor Company and its affiliates or other persons reasonably acceptable to the Sponsor Company and NationsBank and $60 million in equity. The subordinated debt shall pay interest in kind ("PIK") until the latter to occur of (a) twelve (12) months and (b) total debt to EBITDA is less than 4.0:1.0. 3 (v) The corporate capital and ownership structure (including articles of incorporation and by-laws), shareholders agreements and management of the Sponsor Company, the Borrower and its subsidiaries (after giving effect to the Acquisition) shall be satisfactory to the Agent. (vi) There shall not have occurred a material adverse change since January 31, 1998 in the business, assets, operations, condition (financial or otherwise) or prospects of the Sponsor Company and its subsidiaries or the Subject Company and its subsidiaries or in the facts and information regarding such entities as represented to date. (vii) The information in SEC required disclosures have been made and the information therein is accurate and true and correct in all material respects. (viii) The Agent shall have received (a) satisfactory opinions of counsel to the Borrower and Guarantors (which shall cover, among other things, authority, legality, validity, binding effect and enforceability of the documents for the Senior Credit Facility and compliance with applicable laws, including securities laws and Reg U) and such corporate resolutions, certificates and other documents as the Agent shall reasonably require and (b) satisfactory evidence that the Agent (on behalf of the Lenders) holds a perfected, first priority lien in all collateral for the Senior Credit Facility, subject to no other liens except for permitted liens to be determined. (ix) Receipt of all governmental, shareholder and third party consents (including Hart-Scott Rodino clearance) and approvals necessary or, in the opinion of the Agent, desirable in connection with Acquisition and the related financings and other transactions contemplated hereby and expiration of all applicable waiting periods without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on the Acquisition or such other transactions or that could seek or threaten any of the foregoing, and no law or regulation shall be applicable which in the reasonable judgment of the Agent could have such effect. (x) The absence of any action, suit, investigation or proceeding pending or threatened in any court or before any arbitrator or governmental authority that purports to affect the Borrower or its subsidiaries or any transaction contemplated hereby, or that could have a material adverse effect on the Borrower or its subsidiaries or any transaction contemplated hereby or on the ability of the Borrower and its subsidiaries to perform its obligations under the documents to be executed in connection with the Senior Credit Facility. (xi) After giving effect to the Acquisition and there shall be no less than $10 million of availability under the Revolving Credit 4 Facility at Closing after giving effect to the Acquisition and all borrowings under the Revolving Credit Facility on such date. REPRESENTATIONS & WARRANTIES: Usual and customary for transactions of this type, to include without limitation: (i) corporate status; (ii) corporate power and authority/enforceability; (iii) no violation of law or contracts or organizational documents; (iv) no material litigation; (v) correctness of specified financial statements and no material adverse change; (vi) no required governmental or third party approvals; (vii) use of proceeds/compliance with margin regulations; (viii) status under Investment Company Act; (ix) ERISA; (x) environmental matters; (xi) perfected liens and security interests; (xiii) payment of taxes, (xiv) consummation of the Acquisition, and (xv) Y2K compliance. COVENANTS: Usual and customary for transactions of this type, to include without limitation: (i) delivery of financial statements and other reports; (ii) delivery of compliance and borrowing base certificates: (iii) notices of default, material litigation and material governmental and environmental proceedings; (iv) compliance with laws; (v) payment of taxes; (vi) maintenance of insurance; (vii) limitation on liens; (viii) limitations on mergers, consolidations and sales of assets; (ix) limitations on incurrence of debt; (x) limitations on dividends and stock redemptions and the redemption and/or prepayment of other debt; (xi) limitations on investments; (xii) ERISA; (xiii) limitation on transactions with affiliates; (xiv) limitation on capital expenditures; (xv) Y2K compliance; (xvi) within 30 days following completion of the self-tender, if necessary to reduce the holdings of non-affiliated stockholders to 10% or less of the outstanding equity of the Sponsor Company, the Borrower will consummate a merger with the Sponsor Company or a special purpose subsidiary formed for such purpose on terms and conditions reasonably acceptable to NationsBank; and (xvii) financial covenants, with initial levels TBD, with step ups and step downs as appropriate, as set forth below: o EBITDA - Capex/Interest + CMLTD + Dividends; o EBITDA/Interest; o MTNW; o Total Debt/EBITDA; o Sr. Debt/EBITDA. The Sponsor Company shall have agreed that it will not engage in any business, activity or operations other than owning and holding the capital stock of the Borrower and other subsidiaries and activities directly related thereto. The Sponsor Company shall not be permitted to merge with or into any of its subsidiaries either now owned or hereafter created. The loan documents shall provide for a requirement to enter into interest protection agreements managed by and acceptable to the Agent. 5 EVENTS OF DEFAULT: Usual and customary in transactions of this nature, (including reasonable grace periods) and to include, without limitation, (i) nonpayment of principal, interest, fees or other amounts, (ii) violation of covenants, (iii) inaccuracy of representations and warranties in any material respect, (iii) cross-default to other material agreements and indebtedness, (iv) bankruptcy, (v) material judgments, (vi) ERISA, (vii) actual or asserted invalidity of any loan documents or security interests, (viii) Parent engaging in any business or activity other than owning and holding common stock of Borrower and other subsidiaries, or (ix) Change in Control of the Borrower after the Acquisition, which shall occur if (a) a person or any group, and any affiliate of any such person other than the Sponsor Company shall beneficially own, directly or indirectly, an amount of the outstanding capital stock of the Subject Company entitled to 30% or more of the voting power of all the outstanding capital stock of the Subject Company or (b) the Sponsor Company shall own beneficially, directly or indirectly, an amount of the outstanding capital stock of the Subject Company entitled to less than 51% of the voting power of all the outstanding capital stock of the Subject Company. ASSIGNMENTS/ PARTICIPATIONS: Each Lender will be permitted to make assignments to other financial institutions approved by the Borrower and the Agent, which approval shall not be unreasonably withheld. Lenders will be permitted to sell participations with voting rights limited to significant matters such as changes in amount, rate, and maturity date. An assignment fee of $3,500 is payable by the Lender to the Agent upon any such assignment occurring (including, but not limited to an assignment by a Lender to another Lender). WAIVERS & AMENDMENTS: Amendments and waivers of the provisions of the loan agreement and other definitive credit documentation will require the approval of Lenders holding loans and commitments representing more than 66.67% of the aggregate amount of loans and commitments under the Senior Credit Facility, except that (a) the consent of all the Lenders affected thereby shall be required with respect to (i) increases in commitment amounts, (ii) reductions of principal, interest, or fees, (iii) extensions of scheduled maturities or times for payment, (iv) releases of all or substantially all collateral and (v) releases of all or substantially all guarantors. INDEMNIFICATION: The Borrower shall indemnify the Lenders from and against all losses, liabilities, claims, damages or expenses not covered by insurance relating to their loans, the Borrower's use of loan proceeds or the commitments, including but not limited to reasonable attorneys' fees and settlements costs. This indemnification shall survive and continue for the benefit of the Lenders at all times after the Borrower's acceptance of the Lenders' commitment for the Senior Credit Facility, notwithstanding any failure of the Senior Credit Facility to close. CLOSING: On or before December 31, 1998. GOVERNING LAW: North Carolina. 6 FEES/EXPENSES: As outlined in ADDENDUM I. OTHER: This term sheet is intended as an outline only and does not purport to summarize all the conditions, covenants, representations, warranties and other provisions which would be contained in definitive legal documentation for the Senior Credit Facility contemplated hereby. The Borrower shall waive its right to a trial by jury. 7 ADDENDUM I FEES AND EXPENSES ================================================================================ COMMITMENT FEE: A 50 basis points per annum (calculated on the basis of actual number of days elapsed in a year of 360 days) Commitment Fee calculated on the unused portion of the Senior Credit Facility. The Borrower shall have the option to reduce the size of the Revolving Credit Facility at any time after the Closing Date. INTEREST RATES: The Facilities shall initially bear interest at a rate equal to LIBOR plus 300 bps or the Alternate Base Rate (defined as the higher of (i) the NationsBank prime rate and (ii) the Federal Funds rate plus 1/2%) plus 200 bps; provided, that if during the 90 day period following the Closing, any breakage costs, charges or fees are incurred with respect to LIBOR loans on account of the syndication of the Senior Credit Facility, the Borrower shall immediately reimburse the Agent for any such costs, charges or fees. Such right of reimbursement to be in addition to and not in limitation of customary cost and yield protection. The Borrower may select interest periods of 1, 2, 3 or 6 months for LIBOR loans, subject to availability. A penalty rate shall apply on all loans in the event of default at a rate per annum of 2% above the applicable interest rate. PERFORMANCE PRICING: The LIBOR and Alternate Base Rate margins for the Senior Credit Facility will be subject to performance pricing step-downs commencing twelve months from closing, based upon the Borrowers Funded Debt to EBITDA, as set forth in the table below: Funded Debt to Applicable Margin Applicable Margin EBITDA Ratio for LIBOR Loans for Base Rate Loans - -------------- ----------------- ------------------- Less than or equal to 200 bps 100 bps 3.0:1.0 Less than or equal to 250 bps 150 bps 3.5:1.0 Less than or equal to 300 bps 200 bps 4.0:1.0 Greater than 4.0:1.0 350 bps 250 bps 8 COST AND YIELD PROTECTION: The usual for transactions and facilities of this type, including, without limitation, in respect of prepayments, changes in capital adequacy and capital requirements or their interpretation, illegality, unavailability, reserves without proration or offset. LETTER OF CREDIT FEES: Letter of credit fees are due quarterly in arrears to be shared proportionately by the Lenders. Fees will be equal to the interest rate spread on LIBOR loans on a per annum basis plus a fronting fee of 1/8% per annum to be paid to Fronting Bank for its own account. Fees will be calculated on the aggregate stated amount for each letter of credit for the stated duration thereof. EXPENSES: Borrower will pay all reasonable costs and expenses associated with the preparation, due diligence, administration, syndication and enforcement of all documents executed in connection with the Senior Credit Facility, including without limitation, the legal fees of the Agent's counsel regardless of whether or not the Senior Credit Facility are closed. 9 -----END PRIVACY-ENHANCED MESSAGE-----