<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 18, 2000
Commission File Number 0-6966
ESCALADE, INCORPORATED
----------------------
(exact name of registrant as specified in its charter)
Indiana 13-2739290
------- ----------
(State of incorporation) (I.R.S. EIN)
817 Maxwell Avenue, Evansville, Indiana 47717
---------------------------------------------
(Address of principal executive offices)
812-467-1200
------------
Securities registered pursuant to Section 12(b) of the Act
NONE
----
Securities registered pursuant to section 12(g) of the Act:
Common Stock, No Par Value
--------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of Registrant's common stock (no par value)
outstanding as of April 5, 2000 : 2,159,866
<PAGE> 2
INDEX
Page No.
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheet (Unaudited)
March 18, 2000, March 20, 1999, and
December 25, 1999 3
Consolidated Condensed Statement of Income (Unaudited)
Three Months Ended March 18, 2000 and March 20,1999 4
Consolidated Condensed Statement of Cash Flows (Unaudited)
Three Months Ended March 18, 2000 and March 20, 1999 5
Notes to Consolidated Condensed Financial Statements 6-8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations: 9-10
Part II. Other Information 10
Signatures 10
Exhibit 10.21 11-16
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in Thousands) March 18, March 20, December 25,
2000 1999 1999
-------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 7 $ 689 $ 1,756
Receivables, less allowances of
$811, $695 and $761 13,609 11,857 24,773
Inventories 13,926 11,758 12,432
Prepaid expense 59 148 126
Deferred income tax benefit 1,248 1,057 1,248
-------- -------- --------
TOTAL CURRENT ASSETS 28,849 25,509 40,335
Property, plant, and equipment 34,785 35,678 33,516
Accum. depr. and amortization (24,716) (25,922) (24,126)
-------- -------- --------
10,069 9,756 9,390
Other assets 5,274 2,904 5,396
Goodwill 11,537 5,539 11,729
-------- -------- --------
$ 55,729 $ 43,708 $ 66,850
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 1,000 $ -- $ 9,570
Current portion of long-term debt 2,000 2,300 2,000
Trade accounts payable 3,742 1,957 2,967
Accrued liabilities 9,081 9,310 9,590
Federal income tax payable 544 267 1,310
-------- -------- --------
TOTAL CURRENT LIABILITIES 16,367 13,834 25,437
Other Liabilities:
Long-term debt 7,700 2,400 10,700
Deferred compensation 1,304 1,190 1,275
Deferred income tax liability -- 6 --
-------- -------- --------
9,004 3,596 11,975
Stockholders' equity:
Preferred stock:
Authorized 1,000,000 shares;
no par value, none issued
Common stock:
Authorized 10,000,000 shares;
no par value,Issued and
outstanding - 2,918,178,
3,066,655, and 2,918,178 at
3-18-00, 3-20-99, and 12-25-99 2,918 5,226 2,918
Retained earnings 27,238 20,822 26,319
Accumulated other comprehensive
income 202 230 201
-------- -------- --------
30,358 26,278 29,438
-------- -------- --------
$ 55,729 $ 43,708 $ 66,850
======== ======== ========
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE> 4
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 18, 2000 March 20, 1999
-------------- --------------
<S> <C> <C>
Net sales $17,575 $12,978
Costs, expenses and other income:
Cost of products sold 11,578 8,893
Selling, administrative and
general expenses 3,858 3,103
Interest 234 144
Amortization of goodwill 192 91
Other (income) expense 118 (24)
------- -------
15,980 12,207
INCOME BEFORE INCOME TAXES 1,595 771
Provision for income taxes 676 337
------- -------
NET INCOME $ 919 $ 434
======= =======
Per share data:
Basic earnings per share $ .31 $ .14
Diluted earnings per share $ .31 $ .14
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
NET INCOME $ 919 $ 434
UNREALIZED GAIN (LOSS)ON SECURITIES,
NET OF TAX 1 (11)
------- -------
COMPREHENSIVE INCOME $ 920 $ 423
======= =======
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE> 5
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 18, 2000 March 20, 1999
Operating Activities: --------------------------------
<S> <C> <C>
Net Income $ 919 $ 434
Depreciation and amortization 782 674
Adjustments necessary to reconcile
net income to net cash provided by
operating activities 9,389 15,245
-------- --------
Net cash provided by operating
activities 11,090 16,353
-------- --------
Investing Activities:
Purchase of property and equipment (169) (235)
Purchase of certain assets of
Lifetime Products, Inc. (1,100) --
-------- --------
Net cash used by investing activities (1,269) (235)
-------- --------
Financing Activities:
Net decrease in notes payable- bank (11,570) (11,800)
Purchase of common stock -- (1,032)
Proceeds from exercise of stock options -- 185
Payment of cash dividend -- (3,122)
-------- --------
Net cash used by financing activities (11,570) (15,769)
-------- --------
Increase (Decrease) in cash (1,749) 349
Cash, beginning of period 1,756 340
-------- --------
Cash, end of period $ 7 $ 689
======== ========
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE> 6
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note A - Basis of Presentation
- ------------------------------
The significant accounting policies followed by the Company and its
wholly owned subsidiaries for interim financial reporting are consistent with
the accounting policies followed for annual financial reporting. All adjustments
which are of a normal recurring nature and are in the opinion of management
necessary for a fair statement of the results for the periods reported have been
included in the accompanying consolidated condensed financial statements.
Note B - Seasonal Aspects
- -------------------------
The results of operations for the three month periods ended March 18,
2000 and March 20, 1999 are not necessarily indicative of the results to be
expected for the full year.
Note C - Inventories (Dollars in Thousands)
- -------------------------------------------
<TABLE>
<CAPTION>
3-18-00 3-20-99 12-25-99
------- ------- --------
<S> <C> <C> <C>
Raw Materials $ 4,311 $ 3,226 $ 4,063
Work In Process 2,906 3,161 3,184
Finished Goods 6,709 5,371 5,185
------- ------- -------
$13,926 $11,758 $12,432
======= ======= =======
</TABLE>
Note D - Income Taxes
- ---------------------
The provision for income taxes was computed based on financial
statement income.
<PAGE> 7
Note E - Earnings Per Share
- -----------------------------
Earnings per share (EPS) were computed as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 18, 2000
-------------------------------------------------------
Weighted
Average Per Share
Income Shares Amount
------- --------- ----------
<S> <C> <C> <C>
Net Income $ 919
-------
Basic Earnings per Share
Income available to common
stockholders 919 2,918 $.31
=======
Effect of Dilutive Securities
Stock options 5
------- -------
Diluted Earnings Per Share
Income available to common
stockholders and assumed
conversions $ 919 2,923 $.31
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 20, 1999
-------------------------------------------------------
Weighted
Average Per Share
Income Shares Amount
------- --------- ----------
<S> <C> <C> <C>
Net Income $ 434
-------
Basic Earnings per Share
Income available to common
stockholders 434 3,114 $.14
=======
Effect of Dilutive Securities
Stock options 3
------- -------
Diluted Earnings Per Share
Income available to common
stockholders and assumed
conversions $ 434 3,117 $.14
======= ======= =======
</TABLE>
<PAGE> 8
Note F - Segment Information
- -----------------------------
<TABLE>
<CAPTION>
As of and for the Three Months Ended
March 18, 2000
-------------------------------------------------------------
Office and
Sporting Graphic
Goods Arts Corporate Total
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Revenues from external customers $ 9,023 $ 8,552 $ -- $ 17,575
Net income (31) 1,015 (65) 919
Assets $28,301 $23,239 $4,189 $ 55,729
</TABLE>
<TABLE>
<CAPTION>
As of and for the Three Months Ended
March 20, 1999
-------------------------------------------------------------
Office and
Sporting Graphic
Goods Arts Corporate Total
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Revenues from external customers $ 5,602 $ 7,376 $ -- $ 12,978
Net income (425) 858 1 434
Assets $19,745 $20,656 $3,307 $ 43,708
</TABLE>
<PAGE> 9
ESCALADE, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's earnings during the
periods included in the accompanying consolidated condensed statements of
income.
RESULTS OF OPERATIONS
FIRST QUARTER COMPARISON 2000 vs. 1999
Net sales were $17,575,000 in the first quarter of 2000 as compared to
$12,978,000 in the first quarter of 1999 an increase of $4,597,000 or 35.4%. Net
sales of sporting goods increased $3,421,000 or 61.1% and net sales of office
and graphic arts products increased $ 1,176,000 or 15.9%.
The increase in sporting goods net sales was about 1/3 due to the Zue
acquisition products (upper end basketball systems) and 2/3 due to some sales
increases this year and prior year sales being adversely impacted by excess
inventory carryover by a major customer which reduced first quarter requirements
mainly in game parlor products. The increase in office and graphic arts machines
and equipment net sales was mainly due to the Mead Hatcher acquisition products
which were not in last year's first quarter.
Cost of sales was $11,578,000 in the first quarter of 2000 as compared
to $8,893,000 in the first quarter of 1999, an increase of $2,685,000 or 30.2%.
Cost of sales as a percentage of net sales was 65.9% in the first
quarter of 2000 as compared to 68.5% in the first quarter of 1999. Sporting
goods cost of sales as a percentage of net sales decreased 10.2% and office and
graphic arts machines and equipment cost of sales as a percentage of net sales
decreased 1.2%. Sporting goods cost of sales decrease was mainly due to the
increased volume resulting in higher factory expense absorption. Office and
graphic arts machines and equipment cost of sales decrease was mainly in factory
expense.
Selling, general, and administrative expenses were $3,858,000 in the
first quarter of 2000 as compared to $3,103,000 in the first quarter of 1999, an
increase of $755,000 or 24.3%.
Selling, general and administrative expenses as a percentage of net
sales was 21.9% in the first quarter of 2000 as compared to 23.9% in the first
quarter of 1999. This decrease as a percentage of net sales was mainly due to
the higher sales volume.
Interest expense increased $90,000 to $234,000 in 2000 from $144,000
in 1999, an increase of 62.5% due to higher average borrowing levels and higher
interest rates.
The effective income tax rate for the first quarter of 2000 was 42.4%
as compared to 43.7% in 1999.
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operating activities was
$11,090,000 in the first quarter of 2000 as compared to $16,353,000 in the first
quarter of 1999. Most of the cash provided by operating activities was from
collection of the year end accounts receivable during the first quarter. The net
accounts receivable balance at the end of the year was $24,773,000 and at the
end of the first quarter the net accounts receivable balance was $13,609,000.
The Company's net cash used for investing activities was $1,269,000 in the first
quarter of 2000 as compared to $235,000 in the first quarter of 1999. $1,100,000
of this increase was due to the purchase of Lifetime table tennis assets. The
Company's net cash used by financing activities was $11,570,000 in the first
quarter of 2000 as compared to $15,769,000 in the first quarter of 1999. The
cash used by financing activities was for the pay down of bank debt. At the end
of the year, the bank debt was $22,270,000 and at the end of the first quarter
the bank debt bank was $10,700.000.
The Company's working capital requirements are currently funded by
cash flow from operations and a domestic line of credit in the amount of
$12,000,000 which includes letters of credit. The outstanding loans under the
domestic line of credit bear interest at either of the following rates, as
selected by the Company from time to time; the bank's prime lending rate or the
London Inter-Bank Offered Rate plus 1.00%. There was $1,000,000 borrowed under
this domestic line of credit at the end of the first quarter.
On March 31,2000 the Company completed its Dutch Auction with the
purchase of 758,312 shares of its Common stock from its stockholders at a price
of $18.00 per share. This transaction was financed by additional term debt from
Bank One in the amount of $13.5 million. This increased the Company's long term
bank debt with Bank One to $20.5 million payable over a 5-year period in annual
installments of $4.1 million on March 31.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for the
three months ended March 18, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ESCALADE, INCORPORATED
Date: April 5, 2000 C. W. (Bill) Reed
-------------- ----------------------------
C. W. (Bill) Reed
President and Chief Executive Officer
Date: April 5, 2000 John R. Wilson
-------------- ----------------------------
John R. Wilson
Vice President and
Chief Financial Officer
<PAGE> 1
Exhibit 10.21
NINTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
ESCALADE, INCORPORATED, an Indiana corporation (the "Company"), and
BANK ONE, INDIANA, National Association, a national banking association (the
"Bank") being parties to that certain Amended and Restated Credit Agreement
dated as of May 31, 1996 as amended from time to time through the date hereof
(collectively the "Agreement"), hereby agree to amend the Agreement by this
Ninth Amendment to Amended and Restated Credit Agreement (the "Ninth
Amendment"), on the terms and subject to the conditions set forth as follows:
1. DEFINITIONS
a. Terms used in this Ninth Amendment with their initial letter
capitalized which are not defined herein shall have the meanings
ascribed to them in the Agreement.
b. The following definitions set forth in Section 1 of the Agreement
are hereby amended and restated in their entirety to read as follows:
o "Applicable Rate" means that number of percentage points to be taken
into account in determining the Applicable Spread which is used in
computing the rate at which interest accrues on the Loans, the
Applicable Unused Fee Rate which is used in calculating the Unused Fee,
the Applicable Commission Rate which is used in calculating the amount
of Commission which is payable with respect to Standby Letters of
Credit, and the Applicable Issuance Fee Rate which is used in
calculating the amount of Issuance Fees payable with respect to
Commercial Letters of Credit. Initially, from the date of the Ninth
Amendment and until receipt by the Bank of the Company's first fiscal
quarter end financial statements furnished after such date to the Bank
pursuant to the requirements of Section 5.b(ii), the Applicable Rate
shall be determined by reference to the Company's Leverage Ratio in
accordance with the following table:
Applicable Rate
<TABLE>
<CAPTION>
Applicable Spread*
------------------------------- Applicable Applicable Applicable
Prime-based LIBOR-based Unused Fee Commission Issuance
Leverage Ratio Rate Rate Rate Rate Fee Rate
- -------------- ----------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
greater than or
equal to 0.00% RL 1.75% RL .375% 1.375% .625%
2.50:1.00 0.00% TL 2.00% TL
- -------------------------------------------------------------------------------------------------------
less than or
equal to
2.49:1.00, but
greater than or
equal to 0.00% RL 1.50% RL .25% 1.25% .50%
2.00:1.00 0.00% TL 1.75% TL
- -------------------------------------------------------------------------------------------------------
less than or
equal to
1.99:1.00, but
greater than or
equal to 0.00% RL 1.25% RL .25% 1.125% .375%
1.50:1.00 0.00% TL 1.50% TL
- -------------------------------------------------------------------------------------------------------
less than 1.50:1.00 0.00% RL 1.00% RL .25% 1.00% .25%
0.00% TL 1.25% TL
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
* Where "RL" means Revolving Loan and "TL" means Term Loan.
Such determination and resulting rate change will be effective as of
the first day of the month following the receipt of the financial
statements.
Thereafter, the Applicable Rate shall be determined on the basis of the
financial statements of the Company for each fiscal quarter end
furnished to the Bank pursuant to the requirements of Section 5.b(ii),
and shall be effective as of the first day of the month following the
receipt of the financial statements. Commissions and Issuance Fees with
respect to Letters of Credit shall be determined from the Applicable
Rate in effect when the related Letter of Credit is issued or renewed,
and will thereafter adjust quarterly after receipt of the financial
statements and determination of the Applicable Rate. It is noted that
the above table provides an Applicable Rate for a Leverage Ratio
greater than that which will be permissible under the terms of Section
5.g(ii). For the avoidance of doubt, it is agreed that it is the intent
of the parties that the Bank shall be free to exercise all remedies
otherwise provided for in this Agreement in the event of the violation
by the Company of the covenant stated in Section 5.g(ii),
notwithstanding the accrual of interest upon the Loan at a rate
determined in accordance with this definition.
2. TERM LOAN. Section 2.c. of the Agreement is hereby amended and
restated in its entirety, to read as follows:
c. The Term Loan. The Bank will make a term loan (the "Term Loan") to
the Company contemporaneously with the execution of this Agreement on
the following terms and subject to the following conditions:
(i) Amount. The principal amount of the Term Loan shall be
Twenty Million Five Hundred Thousand and No/100 Dollars
($20,500,000) or so much thereof as shall be advanced for the
purposes set forth herein.
(ii) The Term Note. The obligation of the Company to repay the
Term Loan shall be evidenced by a promissory note (the "Term
Note") in the form of Exhibit A. The principal of the Term
Loan shall be repayable in equal annual installments of
$4,100,000 each, due and payable on the last day of each
March, commencing March 31, 2001, provided that if the full
amount set forth above is not advanced at closing, the annual
installments shall be reduced proportionately. On March 31,
2005, the entire remaining principal amount of the Term Loan
shall be due and payable, together with all accrued and unpaid
interest. Subject to the contemporaneous payment of any
Prepayment Premium which would become due on account of any
proposed prepayment, the principal of the Term Loan may be
prepaid at any time in whole or in part, provided that any
partial prepayment shall be in an amount which is an integral
multiple of $250,000.00. Further, any partial prepayment up to
the amount of the next scheduled principal installment, shall
be applied to that installment but prepayments in excess of
the next scheduled installment shall be applied to the
principal installments payable on the Term Loan in the inverse
order of their maturities.
(iii) Interest on the Term Loan. The unpaid principal balance
from time to time of the Term Loan shall bear interest from
the date the Loan is made prior to the maturity of the Term
Note at a rate per annum equal to the Prime Rate plus the
Applicable Spread, except that at the option of the Company
exercised from time to time as provided in
<PAGE> 3
Section 2.d(i) of the Agreement, interest may accrue prior to
maturity on the entire outstanding balance of the Term Loan or
on any portion thereof which is in excess of $1,000,000.00 and
as to which no Optional Rate previously selected remains in
effect at a LIBOR-based Rate for a period of 30, 60, 90 or 180
days; provided that no Optional Rate may be elected for a
period extending beyond the scheduled final maturity of the
Term Loan. Those elections of a "LIBOR-based Rate" which have
been made under the "Term Loan" as outstanding prior to the
Ninth Amendment and which remain in effect on the date of the
Ninth Amendment, shall continue, under this Agreement, to be
in effect through the end of the interest period for which
elected. After maturity, whether scheduled maturity or
maturity by virtue of acceleration on account of the
occurrence of an Event of Default, interest will accrue on the
Term Loan at a rate per annum equal to the Prime Rate plus the
Applicable Spread plus two percent (2%), except that as to any
portion of the Loan for which the Company may have elected an
Optional Rate for a period of time that has not expired at
maturity, such portion shall, during the remainder of such
period, bear interest at the greater of the Prime Rate plus
the Applicable Spread plus two percent (2%) per annum or the
Optional Rate then in effect plus two percent (2%) per annum.
Prior to maturity, interest shall be due and payable on the
last Banking Day of each month in addition to any installment
of principal which may be due and payable on such date. After
maturity, interest shall be payable as accrued and without
demand.
(iv) Use of Proceeds of the Term Loan; Reduction of Principal
Amount. The proceeds of the Term Loan shall be used to finance
the repurchase of stock by the Company from existing
shareholders in a tender offer filed with and in compliance
with the applicable regulations of the Securities and Exchange
Commission, through open-market purchases and to repurchase
outstanding warrants for stock in an aggregate amount not to
exceed Thirteen Million Five Hundred Thousand and No/100
Dollars ($13,500,000) on or prior to March 31, 2000 and to
refinance the Company's existing Term Loan in the amount of
Seven Million and No/100 Dollars ($7,000,000.00). On or before
March 31, 2000, the Company shall deliver to the Bank a
Certificate of an Authorized Officer certifying that the
Company has used $13,500,000 of the Term Loan proceeds, or
such lesser amount as actually used, to repurchase the common
stock of the Company through the tender offer, open-market
purchases or through the purchase of warrants. In the event
that the Company has not fully utilized the $13,500,000 for
such purpose by March 31, 2000, the remaining unused proceeds
of the Term Loan, to the extent advanced, shall be immediately
repaid by the Company as a prepayment of the Term Loan and
shall be applied against the latest maturing installment of
principal; and if not previously advanced, shall be cancelled,
and in either event the annual principal payments shall be
adjusted proportionately to reflect the actual principal
amount outstanding.
(v) Commitment Fee. In consideration of the Bank's agreement
to advance new funds to the Company and refinance the balance
of the Company's existing term loan, the Company shall pay a
Commitment Fee equal to 1/4% of the amount of the increase in
the Term Loan with the fee not to exceed $33,750.00, which
shall be due and payable at Closing.
3. AFFIRMATIVE COVENANTS. Sections 5.g(i), (ii) and (iii) of the
Agreement are hereby amended to read in their entirety as follows:
(i) Tangible Net Worth. The Company shall maintain its
Tangible Net Worth,
<PAGE> 4
determined on a consolidated basis, of not less than an amount
equal to 95% of the Company's consolidated Tangible Net Worth
as of the date of funding of the tender offer (after giving
effect to the tender offer and its related transactional
expenses) until June 30, 2000. At June 30, 2000 and at the
last day of each fiscal quarter end thereafter, the Tangible
Net Worth to be maintained by the Company on that date and at
all times thereafter until the last day of the next quarter
shall be increased by an amount equal to seventy-five percent
(75%) of the Company's consolidated net profit for the fiscal
quarter then ended.
(ii) Leverage Ratio. For each period of four consecutive
fiscal quarters of the Company ending during the periods
indicated in the table below, the Company shall maintain a
Leverage Ratio, at levels not greater than those shown in the
following table:
Period Ratio
------ -----
from the date of this Ninth Amendment 3.00 to 1.0
and until March 31, 2001
At April 1, 2001 and at all 2.50 to 1.0
times thereafter
(iii) Debt Service Coverage. For each period of four
consecutive fiscal quarters ending during the periods
indicated in the table below, the Company shall maintain a
debt service coverage ratio (hereinafter defined), determined
on a consolidated basis, of not less than that indicated in
the table below.
Period Ratio
------ -----
from the date of this Ninth Amendment and
until December 30, 2000 1.05 to 1.0
from December 31, 2000 and until
December 29, 2001 1.10 to 1.0
at December 30 , 2001 and at all
times thereafter 1.20 to 1.0
For purposes of this covenant, the phrase "debt service
coverage ratio" means the ratio of (A) the sum of consolidated
net income before taxes plus interest expense plus
depreciation and amortization expense plus non-recurring and
extraordinary charges, all for the period for which the ratio
is being determined, over (B) the sum of scheduled Term Loan
and other debt payments plus interest expense plus cash income
taxes plus capital expenditures which were not financed plus
stock repurchased and cash dividends made, but excluding the
stock repurchase under the tender offer and related activities
referred to in Section 2(c)(iv) above, all for the period for
which such ratio is being determined.
<PAGE> 5
4. NEGATIVE COVENANT. Section 6.a. of the Agreement is hereby amended and
restated in its entirety to read as follows:
a. Restricted Payments. If an Event of Default has occurred and is
continuing or would occur as a result of any of the following, the
Company shall not purchase or redeem any shares of the capital stock of
the Company or declare or pay any dividends thereon except for
dividends payable entirely in capital stock; and the Company shall not
make any other distributions to shareholders as shareholders, or set
aside any funds for any such purpose, or prepay, purchase or redeem any
subordinated indebtedness of the Company.
5. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this Ninth Amendment, the Company represents and warrants to the Bank that:
a. The execution and delivery of this Ninth Amendment, the execution
and delivery of all of the other documents executed in connection
herewith, and the performance by the Company of its obligations under
this Ninth Amendment and all of the documents executed in connection
herewith are within the corporate power of the Company, have been duly
authorized by all necessary corporate action, have received any
required governmental or regulatory agency approvals and do not and
will not contravene or conflict with any provision of law or of the
Articles of Incorporation or Bylaws of the Company or of any agreement
binding upon the Company or any of its property.
b. This Ninth Amendment and all of the documents executed by the
Company in connection herewith are the legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws enacted for the relief of
debtors generally and other similar laws affecting the enforcement of
creditors' rights generally or by equitable principles which may affect
the availability of specific performance and other equitable remedies.
c. The representations and warranties contained in Section 3 of the
Agreement are true and correct as of the date hereof except that the
representations contained in Section 3.d. of the Agreement shall be
deemed to refer to the latest financial statements furnished by the
Company to the Bank.
d. No Event of Default or Unmatured Event of Default has occurred and
is continuing as of the date of this Ninth Amendment.
6. CONDITIONS PRECEDENT. This Ninth Amendment shall become effective upon
the Bank's receipt of the following, contemporaneously with the execution of
this Ninth Amendment, each duly executed, dated and in form and substance
satisfactory to the Bank:
a. This Ninth Amendment;
b. The replacement Term Loan Note;
c. Certified copies of Resolutions of the Board of Directors of the
Company, authorizing the execution, delivery and performance,
respectively of this Ninth Amendment and the Term Loan Note, and the
other Loan Documents to which such entity is a party;
<PAGE> 6
d. Certificate of the Secretary of the Company certifying the name of
the officer or officers authorized to sign each document to which the
Company is a party, together with a sample of the true signature of
each such officer;
e. Copies of the Articles of Incorporation and Bylaws of the Company
certified by the Secretary of such entity or a Certificate of No Change
to such documents if previously delivered to the Bank;
f. An opinion of counsel for the Company in form and substance
acceptable to the Bank and its counsel;
g. Receipt of payment of the reasonable legal fees and expenses of
Bank's counsel at closing or immediately upon receipt by Borrower of an
invoice therefor.
h. Payment of the Commitment Fee due at closing.
i. Such other documents as the Bank may reasonably request, including
but not limited to all documents filed with the Securities and Exchange
Commission regarding the tender offer.
7. PRIOR AGREEMENTS. The Agreement, as amended by this Ninth Amendment,
supersedes all previous agreements and commitments made or issued by the Bank,
related to all of the subjects of the Agreement, as amended by this Ninth
Amendment, and any oral or written proposals or commitments made or issued by
the Bank.
8. AFFIRMATION. Except as expressly amended by this Ninth Amendment, all
of the terms and conditions of the Agreement and each of the Loan Documents
remains in full force and effect.
Executed on March 28, 2000.
ESCALADE, INCORPORATED
By John R. Wilson
--------------------------------------
John R. Wilson, Secretary
BANK ONE, INDIANA, NATIONAL ASSOCIATION
By Steven J. Krakoski
--------------------------------------
Steven J. Krakoski, Vice President and
Senior Relationship Manager
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