SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarterly period ended March 30, 1996
---------------------------
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------- ---------------------
Commission file number 0-19873
BELL SPORTS CORP.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3671789
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
10601 N. Hayden Rd. Suite I-100, Scottsdale, Arizona 85260
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(602) 951-0033
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(Registrant's telephone number, including area code)
N/A
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Former name, former address and former fiscal year, if changed since last
report.
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) Yes X No and (2) has been
--- ---
subject to such filing requirements for the past 90 days. Yes X No .
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Common Stock, $.01 par value May 1, 1996 13,652,350
- - ---------------------------- ------------------ ----------
Class Date Number of shares
1
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BELL SPORTS CORP.
INDEX TO FORM 10-Q
PART I
Page
Number
Bell Sports Corp. and Subsidiaries Consolidated Balance Sheets
as of March 30, 1996, July 1, 1995 and July 1, 1995 on a pro
forma basis 3
Bell Sports Corp. and Subsidiaries Consolidated Statements of
Operations for the three months and nine months ended March
30, 1996, April 1, 1995 and April 1, 1995 on a pro forma
basis 4
Bell Sports Corp. and Subsidiaries Consolidated Condensed
Statements of Cash Flows for the nine months ended March 30,
1996 and April 1, 1995 5
Notes to Consolidated Financial Statements 6 - 10
Management's Discussion and Analysis of Financial Condition
and Results of Operations 11 - 13
PART II
Items 1 to 6 14
Signatures 15
2
<PAGE>
PART 1. Financial Information
Item 1. Financial Statements
BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
<TABLE>
<CAPTION>
Pro forma
March 30, July 1, July 1,
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
ASSETS
- - ------
Cash and cash equivalents $ 19,668 $ 72,018 $ 65,765
Marketable securities, current 12,304 11,062 11,062
Accounts receivable, net 89,186 22,262 60,075
Inventories 77,158 15,184 68,777
Other current assets 25,565 8,243 22,542
--------- --------- ---------
Total current assets 223,881 128,769 228,221
Marketable securities, noncurrent -- 25,893 25,893
Property, plant and equipment, net 29,525 16,292 26,711
Goodwill, net 64,468 11,539 57,160
Intangibles and other assets, net 8,111 3,941 6,748
--------- --------- ---------
Total assets $ 325,985 $ 186,434 $ 344,733
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Accounts payable $ 12,239 $ 8,604 $ 10,028
Accrued expenses 15,036 6,463 19,542
Accrued compensation and employee benefits 3,898 1,780 4,761
Notes payable and current maturities of long-
term debt and capital lease obligations 3,203 3,101 3,555
--------- --------- ---------
Total current liabilities 34,376 19,948 37,886
Long-term debt and capital lease obligations 152,346 89,833 152,046
Other liabilities 4,609 837 2,937
--------- --------- ---------
Total liabilities 191,331 110,618 192,869
--------- --------- ---------
Stockholders' equity:
Preferred stock; $.01 par value; authorized
1,000,000 shares, none issued
Common stock; $.01 par value; authorized
25,000,000 shares; issued 14,175,750 and
8,165,812 shares, respectively, outstanding
13,652,350 and 8,165,812 shares, respectively 142 82 142
Additional paid-in capital 140,388 64,320 140,308
Unrealized holding losses on marketable securities (565) (1,283) (1,283)
Foreign currency translation adjustments 67 173 173
Retained earnings 139 12,524 12,524
--------- --------- ---------
140,171 75,816 151,864
Less-523,400 shares of common stock in treasury,
at cost (5,517) -- --
--------- --------- ---------
Total stockholders' equity 134,654 75,816 151,864
--------- --------- ---------
Total liabilities and stockholders' equity $ 325,985 $ 186,434 $ 344,733
========= ========= =========
</TABLE>
See accompanying notes to these consolidated financial statements.
3
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BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
----------------- ------------------
Pro forma Pro forma
March 30, April 1, April 1, March 30, April 1, April 1,
1996 1995 1995 1996 1995 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net sales $181,331 $74,187 $176,945 $67,442 $26,843 $62,349
Cost of sales 128,731 50,633 127,860 46,510 18,900 45,640
Inventory write-up 14,107 -- -- 1,016 -- --
-------- ------- -------- ------- ------- -------
Gross profit 38,493 23,554 49,085 19,916 7,943 16,709
Selling, general and
administrative expenses 47,428 21,695 43,026 17,069 7,725 14,932
Amortization of goodwill and
intangible assets 1,915 721 1,718 736 240 572
Consolidation costs 1,894 -- -- 836 -- --
Net investment income (2,419) (3,526) (3,292) (455) (1,243) (1,165)
Interest expense 6,636 3,451 7,047 2,308 1,183 2,590
-------- ------- -------- ------- ------- -------
(Loss) income before
income taxes (16,961) 1,213 586 (578) 38 (220)
(Benefit) provision for
income taxes (4,579) 454 702 (1,291) 16 11
-------- ------- -------- ------- ------- -------
Net (loss) income $(12,382) $ 759 $ (116) $ 713 $ 22 ($231)
======== ======= ======== ======= ======= =======
Net (loss) income per common
and common equivalent share $ (0.90) $ 0.09 $ (0.01) $ 0.05 $ 0.00 ($0.02)
======= ======= ======== ====== ======= =======
Weighted average number of
common and common
equivalent shares outstanding 13,764 8,184 14,288 13,645 8,179 14,285
====== ======= ======== ====== ===== ======
</TABLE>
See accompanying notes to these consolidated financial statements.
4
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 30, April 1,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net cash used in operating activities $(49,443) $ (6,809)
-------- --------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Capital expenditures (5,641) (3,502)
Net sale of marketable securities 24,897 15,927
Cash expended related to business acquisition activities (16,789) --
Other -- 3
-------- --------
Net cash provided by investing activities 2,467 12,428
-------- --------
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Proceeds from issuance of stock 79 24
Treasury stock purchases (5,517) --
Net payments on notes payable, long-term debt and capital leases 169 739
-------- --------
Net cash (used in) provided by financing activities (5,269) 763
-------- --------
Effect of exchange rate changes on cash and cash equivalents (105) 185
-------- --------
Net (decrease) increase in cash and cash equivalents (52,350) 6,567
Cash and cash equivalents at beginning of period 72,018 46,756
-------- --------
Cash and cash equivalents at end of period $ 19,668 $ 53,323
======== ========
</TABLE>
See accompanying notes to these consolidated financial statements.
5
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
Bell Sports Corp. and its wholly-owned subsidiaries (collectively, the Company)
design, manufacture and market bicycles, related bicycle parts and accessories,
bicycle helmets and automotive racing helmets.
Consolidation
- - -------------
The consolidated financial statements include the accounts of Bell Sports Corp.
and its wholly-owned subsidiaries. All material intercompany transactions and
balances have been eliminated in consolidation.
Accounting Period
- - -----------------
The Company's fiscal year is either a fifty-two or fifty-three week accounting
period ending on the Saturday that is nearest to the last day of June.
Unaudited Information and Basis of Presentation
- - -----------------------------------------------
The consolidated balance sheet as of March 30, 1996 and statements of operations
and condensed cash flows for all periods included in the accompanying financial
statements have not been audited. In the opinion of management these financial
statements include all normal and recurring adjustments necessary for a fair
presentation of such financial information. The results of operations for the
interim periods are not necessarily indicative of the results of operations to
be expected for the full year.
The financial information included herein has been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The interim financial
information and the notes thereto should be read in conjunction with the audited
financial statements for the fiscal years ended July 1, 1995, July 2, 1994 and
July 3, 1993 which are included in the Company's 1995 annual report to
stockholders.
The Company completed a merger with American Recreation Company Holdings, Inc. (
"AMRE" ) on July 3, 1995. Accordingly, the accounts and results of operations of
American Recreation are included in the Company's March 30, 1996 consolidated
financial statements but were not included in the comparable period ended April
1, 1995 or the fiscal year end balances at July 1, 1995. Pro forma financial
statements for the periods ended April 1, 1995 and at July 1, 1995 reflect the
merger as if it occurred at the beginning of fiscal 1995 and are for
illustrative purposes only. See Note 6.
Income Per Share Information
- - ----------------------------
Income per common and common equivalent share is computed using the weighted
average number of common stock and common stock equivalent shares outstanding
during the periods, using the treasury stock method for stock options and
warrants. Common equivalent shares are excluded from the computation if their
effect is anti-dilutive except that, pursuant to Staff Accounting Bulletin No.
83 of the Securities and Exchange Commission, certain stock options that were
granted at prices below the initial public offering price during the twelve
month period immediately preceding the April 1992 initial public stock offering
have been treated as common stock equivalents for all periods presented. Fully
diluted net income per common share for all periods included in the accompanying
financial statements has not been presented since an assumed conversion (using
the if converted method, which includes the
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adjustment of reported net income for interest charges on a net-of-tax basis) of
the Company's 4 1/4% convertible debentures (see Note 4) would be anti-dilutive.
Marketable Securities
- - ---------------------
All marketable securities, consisting of preferred equity securities and U.S.
Government Agency instruments have been classified as available-for-sale
securities and are reported at fair value with unrealized holding gains and
losses reported in stockholders' equity. The fair value of the marketable
securities was obtained from published market quotes or outside professional
pricing sources. The cost of the Company's marketable securities available for
sale exceeded the fair market value of such securities by approximately $565,000
and $1.3 million at March 30, 1996 and July 1, 1995, respectively, and such
excess was recorded as a reduction to the Company's stockholders' equity.
Scheduled maturities of marketable debt securities are approximately seven
years, on a weighted average basis.
Accounts Receivable
- - -------------------
Accounts receivable at March 30, 1996 and July 1, 1995 are net of allowances for
doubtful accounts of $2,129,000 and $647,000, respectively.
Property, Plant and Equipment
- - -----------------------------
Property, plant and equipment at March 30, 1996 and July 1, 1995 are net of
accumulated depreciation of $13,893,000 and $9,942,000, respectively.
NOTE 2 - INVENTORIES
Inventories consist of the following:
March 30, July 1,
(in thousands) 1996 1995
---- ----
Raw materials $ 6,162 $ 2,912
Work in process 2,830 2,424
Finished goods 68,166 9,848
------- -------
$77,158 $15,184
======= =======
In purchase accounting, as such term is used under generally accepted accounting
principles, inventories of an acquired business are generally required to be
written-up from cost to estimated selling price less disposal costs. As the
acquired inventory is sold, the related inventory write-up is charged against
cost of sales.
As a result of the acquisition of SportRack in May 1995, the merger with AMRE in
July 1995 and the acquisition of Giro in January 1996, inventories were
written-up $14.1 million, which amount has been fully charged against cost of
sales during the nine months ended March 30, 1996.
7
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NOTE 3 - PRODUCT LIABILITY AND CONTINGENCIES
Product Liability
- - -----------------
On February 2, 1996, a Toronto, Canada jury returned a verdict against Bell
based on injuries arising out of a 1986 motorcycle accident. The jury found that
Bell was 25% responsible for the injuries with the remaining 75% of the fault
assigned to the plaintiff and the other defendant. If the judgment is upheld,
the amount of the claim for which Bell would be responsible and the legal fees
and tax implications associated therewith are estimated to be between $3.0 and
$4.0 million. The Company sold its motorcycle helmet manufacturing business in
June 1991 in a transaction in which the purchaser assumed all responsibility for
product liability claims arising out of helmets manufactured prior to the date
of disposition and the Company agreed to use its in-house defense team to defend
these claims at the purchaser's expense. If the purchaser is for any reason
unable to pay the judgment, settlement amount or defense costs arising out of
this or any other claim, the Company could be held responsible for the payment
of such amounts or costs. The Company believes that the purchaser does not have
the financial resources to pay any significant judgment, settlement amount, or
defense costs arising out of this or any other claim.
The Company has filed an appeal of the Canadian verdict. Although the Company
cannot predict the outcome of an appeal, the Company currently has adequate cash
balances and sources of capital available to satisfy the judgment if Bell is
unsuccessful in the appeal. Accordingly, the Company currently does not believe
the claim will have a material adverse effect on liquidity or the financial
condition of the Company. Although the Company maintains product liability
insurance, this claim arose during a period in which the Company was
self-insured. The Company currently does not have a reserve for this judgment.
The Company is subject to various other product liability claims and/or suits
brought against it for claims involving damages for personal injuries or deaths.
Allegedly, these injuries or deaths relate to the use by claimants of products
manufactured by the Company and, in certain cases, products manufactured by
others. The ultimate outcome of these existing claims and any potential future
claims cannot presently be determined. Management believes that existing product
liability claims/suits are defensible and that, based on the Company's past
experience and assessment of current claims, the aggregate of defense costs and
any uninsured losses will not have a material adverse impact on the Company's
financial position or results of operations.
The cost of product liability insurance had fluctuated greatly in past years and
the Company opted to self-insure claims for certain periods. The Company has
been covered by product liability insurance since July 1, 1991. This insurance
is subject to a self-insured retention. There is no assurance that insurance
coverage will be available or economical in the future.
Environmental Issues
- - --------------------
In the ordinary course of its business, the Company is required to dispose of
certain waste at off-site locations. During 1993, the Company became aware of an
investigation by the Illinois Environmental Protection Agency (the "Illinois
Agency") of a waste disposal site, owned by a third party, which was previously
utilized by the Company. As a result of that investigation, the Illinois Agency
informed the Company that certain of the Company's practices with respect to the
identification, storage and disposal of hazardous waste and related reporting
requirements may not have complied with the applicable law. On March 14, 1995,
the State of Illinois filed a complaint with the Illinois Pollution Control
Board against the Company and the disposal site owner based on the same
allegations. The complaint seeks penalties not exceeding statutory maximums and
such other relief as the Pollution Control Board determines appropriate. The
disposal site owner filed a cross-claim against the Company that seeks to have
penalties assessed against the Company and not against the disposal site owner.
Any penalties as a result of the cross-claim would be payable to the State. The
State and the Company have agreed in principle to a settlement in which the
Company will pay $69,000 to the State and will dispose of certain
8
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materials in a container at the waste disposal site at an authorized hazardous
waste disposal facility. The Company is seeking dismissal of the cross-claim on
several grounds.
Additionally, the Illinois Agency has been negotiating with the disposal site
owner with respect to the procedures and actions necessary to close the disposal
site. The extent and nature of any actions which may be taken against the
Company with respect to this matter can not presently be determined.
Shareholder Litigation
- - ----------------------
On February 16, 1995, an AMRE shareholder filed a lawsuit, on his own behalf,
and a purported class action, against AMRE and its directors in the Chancery
Court of the State of Delaware, alleging various breaches of fiduciary and
common law duties and requesting both monetary and injunctive relief. The
alleged basis for the claims are the action of AMRE and its directors in
connection with the authorization and approval of the AMRE Merger with Bell
Sports Corp. The AMRE Merger was consummated on July 3, 1995 and the case has
been inactive since that date. On October 2, 1995, the Company filed a motion to
dismiss the case.
NOTE 4 - NOTES PAYABLE, LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS
The Company has approximately $155.5 million in notes payable, long term debt
and capital lease obligations outstanding at March 30, 1996. A significant
portion of this amount relates to $86.25 million outstanding on its 4 1/4%
convertible subordinated debentures. Maturing November 15, 2000, the debentures
are convertible into common stock at any time prior to maturity at a conversion
price of $54.06 per share. Interest on the debentures is payable semi-annually.
The debentures are redeemable at the Company's option at any time on or after
November 15, 1996, at specified redemption prices.
In February 1996, the Company entered into a $100 million multicurrency,
unsecured revolving line of credit (the "Revolving Credit") with a syndicated
bank group. This facility replaces prior revolving credit facilities that were
used by the Company's North American operations. At March 30, 1996, a total of
$63.0 million was outstanding under the credit facility.
The Revolving Credit, which expires in December 1999, provides the Company with
several interest rate options, including U.S. prime, LIBOR plus a margin,
Canadian prime plus the applicable LIBOR margin less 0.50%, the Canadian
banker's acceptance plus the LIBOR margin plus 0.125%, and short-term fixed
rates offered by the agent bank in the loan syndication. The LIBOR margin is
currently 1.25% per annum, but it can range between 0.75% and 1.25% depending on
the Company's interest coverage ratio. Under the Revolving Credit, the Company
is required to pay a quarterly commitment fee on the unused portion of the
facility at a rate that ranges from 0.15% to 0.25% per annum, depending on the
prevailing interest coverage ratio.
The Revolving Credit contains certain financial covenants, the most restrictive
of which are a minimum interest coverage ratio, a maximum funded debt ratio and
a minimum consolidated tangible net worth amount. As of March 30, 1996, the
Company was in compliance with all the covenants. The Revolving Credit also
contains covenants that restrict the amount of cash dividends as well as the
amount that the Company can repurchase of its subordinated debt and common
stock.
NOTE 5 - COMMON STOCK
From time to time, the Company has granted to its executive officers,
non-employee directors and certain other employees options to purchase shares of
the Company's Common Stock. At March 30, 1996 options to purchase approximately
1,918,000 shares of Common Stock were outstanding.
On August 24, 1995, the Company announced a stock repurchase program authorizing
the repurchase of up to 10% of the outstanding shares of the Company's Common
Stock from time to time in open market or private transactions. The timing of
any repurchase and the price and number of shares repurchased
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will depend on market conditions and other factors. As of March 30, 1996 and May
1, 1996, the Company had repurchased a total of 523,400 shares at an aggregate
purchase price of approximately $5.5 million. Shares repurchased may be retired
or used for general corporate purposes.
NOTE 6 - MERGER WITH AMERICAN RECREATION COMPANY HOLDINGS, INC.
On July 3, 1995, the Company completed a merger with AMRE, a designer, marketer
and distributor of bicycles, related bicycle parts and accessories and bicycle
helmets in the United States and Canada.
The unaudited pro forma financial information contained in the statement of
operations for the periods ended April 1, 1995 and the balance sheet as of July
1, 1995 are presented for illustrative purposes only, giving effect to the
Merger of Bell and AMRE, accounted for as a "purchase", as such term is used
under generally accepted accounting principles.
Certain amounts reported in AMRE's historical financial information have been
reclassified to conform with the Bell presentation.
NOTE 7 - CONSOLIDATION COSTS
Included in fiscal 1996 pre-tax income is $1.9 million related to the
consolidation of organizations, facilities and product lines subsequent to the
merger with AMRE. Two sales and marketing offices have been closed and a third
office in Commack, New York is in the process of being closed and consolidated
into the Company's San Jose, California operation. The Company estimates that
future consolidation costs under these programs will approximate $2.5 million
and will be incurred in the fourth quarter of fiscal 1996 and the first half of
fiscal 1997.
The following table sets forth the details of activity during fiscal 1996 for
consolidation costs:
<TABLE>
<CAPTION>
(in thousands) Accrual at 1996 Cash Accrual at
July 1, 1995 Accrual Payments March 30, 1996
--------------- ---------- ----------- ---------------
<S> <C> <C> <C> <C>
Lease payments and other facility expenses $ 769 $ 173 ($366) $576
Severance and other related benefits 453 357 (729) 81
Relocation and other -- 1,364 (1,364) --
--------------- ---------- ----------- ---------------
Total $1,222 $1,894 ($2,459) $657
=============== ========== =========== ===============
</TABLE>
NOTE 8 - GIRO SPORTS DESIGN ACQUISITION
On January 22, 1996, the Company acquired substantially all of the assets of
privately-owned, Giro Sport Design, Inc. of California and all outstanding
shares of Giro Sport Design International, Inc., the holding company which owns
Giro's Ireland operation ("The Giro Acquisition"). Giro designs, manufactures
and markets premium bicycle helmets in North America, Europe and other parts of
the world.
The transaction was treated as a "purchase" transaction for accounting and
financial reporting purposes. Giro's results of operations and financial
information were included in the Company's fiscal 1996 third quarter ending
March 30, 1996, from the date of acquisition.
10
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL POSITION AND LIQUIDITY
The Company's current ratio increased to 6.5 to 1 at March 30, 1996 from 6.0 to
1 at July 1, 1995 stated on a pro forma basis. Cash and current and noncurrent
marketable securities decreased to $32.0 million at March 30, 1996 from $102.7
million at July 1, 1995 stated on a pro forma basis. The decline relates to cash
utilized in the acquisition of Giro of $18.1 million, repurchase of $5.5 million
of the Company's Common Stock in connection with the Company's stock repurchase
program, capital expenditures of $5.6 million and cash used in the seasonal
build up of accounts receivable and inventories.
Accounts receivable at March 30, 1996 increased 48% from July 1, 1995 stated on
a pro forma basis due to the acquisition of Giro and the use of extended dating
programs for sales to independent bicycle dealers. Inventories increased in
fiscal 1996 third quarter due to the production of finished goods in preparation
for anticipated fourth quarter sales demand, coupled with the acquisition of
Giro.
In February 1996, the Company entered into a $100 million multicurrency,
unsecured revolving line of credit (the "Revolving Credit") with a syndicated
bank group. This facility replaces prior revolving credit facilities that were
used by the Company's North American operations. At March 30, 1996, a total of
$63.0 million was outstanding under the credit facility.
The Revolving Credit, which expires in December 1999, provides the Company with
several interest rate options, including U.S. prime, LIBOR plus a margin,
Canadian prime plus the applicable LIBOR margin less 0.50%, Canadian banker's
acceptance plus the LIBOR margin plus 0.125%, and short-term fixed rates offered
by the agent bank in the loan syndication. The LIBOR margin is currently 1.25%
per annum, but it can range between 0.75% and 1.25% depending on the Company's
interest coverage ratio. Under the Revolving Credit, the Company is required to
pay a quarterly commitment fee on the unused portion of the facility at a rate
that ranges from 0.15% to 0.25% per annum, depending on the prevailing interest
coverage ratio.
The Revolving Credit contains certain financial covenants, the most restrictive
of which are a minimum interest coverage ratio, a maximum funded debt ratio and
a minimum consolidated tangible net worth amount. As of March 30, 1996, the
Company was in compliance with all the covenants. The Revolving Credit also
contains covenants that restrict the amount of cash dividends as well as the
amount that the Company can repurchase of its subordinated debt and common
stock.
A principal business strategy of the Company has been to pursue acquisitions of
businesses, products or technologies that will complement its current business.
The Company has identified the bicycle and sporting goods industries as possible
areas of focus. Such acquisitions may be funded with available cash, debt
financing, issuance of common stock or a combination thereof. The Giro
acquisition completed in January 1996 was funded with available cash.
Capital expenditures were $5.6 million for the first nine months of fiscal 1996.
The Company expects to spend approximately $11 million on capital expenditures
in fiscal 1996. The largest planned expenditures are for computer systems and
new product tooling.
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<PAGE>
RESULTS OF OPERATIONS
Net Sales. Net sales increased by 8% to $67.4 million during the three
months ended March 30, 1996 as compared to $62.3 million in the same period of
1995 stated on a pro forma basis. The overall increase is attributed to
inclusion of Giro and SportRack sales which were not included in the comparable
prior year period. Sales increases were experienced in all product categories,
except for auto racing helmets. On a year-to-date basis net sales increased 2%
to $181.3 million from $176.9 million in the previous year presented on a pro
forma basis. The year-to-date increase is attributable to higher Mongoose
bicycle sales and the inclusion of Giro and SportRack sales results which were
not included in last year's results.
These increases were partially offset by lower bicycle helmet sales.
The product line sales mix for the nine month and three month periods are as
follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
----------------- ------------------
Pro forma Pro forma
March 30, April 1, March 30, April 1,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Product Line Sales Mix:
Bicycle accessories 48% 48% 45% 45%
Bicycle helmets 31% 32% 38% 37%
Bicycles 20% 19% 15% 16%
Auto Racing helmets 1% 1% 2% 2%
</TABLE>
The Company's sales outlook for the last quarter of fiscal 1996 remains cautious
due to the weak retail environment for bicycle products and higher than normal
retail inventory levels caused by poor Christmas sales and harsh winter weather
conditions around many parts of the country.
Gross Margin. Gross margins increased to 31% of net sales in the third
quarter of fiscal 1996, excluding the impact of the inventory write-up, compared
to 27% in the comparable prior year period, stated on a pro forma basis. This
increase is due to improvement in the Bell brand helmet and Mongoose bicycle
margins from the prior year and the inclusion of Giro during the quarter. For
the first nine months of fiscal 1996, gross margins increased to 29% of net
sales, excluding the impact of the inventory write-up, compared to 28% in the
prior comparable period, stated on a pro forma basis. Gross margins for the
third quarter and fiscal 1996 year-to-date were 30% and 21%, respectively,
including the impact of the inventory write-up.
The inventory write-up, related to the acquisition of SportRack, the merger with
AMRE and the acquisition of Giro, has been fully charged against cost of sales
during the first nine months of fiscal 1996.
Selling, General and Administrative. Selling, general and
administrative costs increased to 25% of net sales in the third quarter of
fiscal 1996 from 24% in fiscal 1995 stated on a pro forma basis and to 26% of
net sales for the nine month period of fiscal 1996 from 24% in fiscal 1995
stated on a pro forma basis. Year-to-date selling, general and administrative
costs increased $4.4 million to $47.4 million in the first nine months of fiscal
1996 due to a $3.9 million investment in a Bell brand television advertising
campaign and the incremental selling, general and administrative expenses
related to SportRack and Giro which were acquired in May 1995 and January 1996,
respectively, offset by general and administrative expense savings resulting
from the merger with AMRE.
As a result of the timing of the Company's spring selling season, sales are
normally higher in the second half of the fiscal year than the first half.
Although some selling, general and administrative expenses are variable with
sales, many expenses are incurred evenly throughout the year.
12
<PAGE>
Amortization of intangibles. Amortization of goodwill and intangible
assets increased to $736,000 in the third quarter of 1996 from $572,000 in the
third quarter of 1995 , stated on a pro forma basis, and to $1.9 million in the
first nine months of fiscal 1996 from $1.7 million in the first nine months of
fiscal 1995, stated on a pro forma basis. These increases are due to the
acquisition of SportRack in May 1995 and Giro in January 1996.
Consolidation costs. Consolidation costs were $0.8 million in the third
quarter of fiscal 1996 and $1.9 million on a year-to-date basis. These costs
relate to the consolidation of organizations, facilities and product lines
subsequent to the merger with AMRE. Two sales and marketing offices have been
closed and a third office in Commack, New York is in the process of being closed
and consolidated into the Company's San Jose, California operation. The Company
estimates that future consolidation costs under these programs will approximate
$2.5 million and will be incurred in the fourth quarter of fiscal 1996 and the
first half of fiscal 1997.
Net investment income and interest expense. Net investment income
decreased to $0.5 million in the third quarter of fiscal 1996 from the $1.2
million in the third quarter of fiscal 1995, stated on a pro forma basis. On a
year-to-date basis, net investment income decreased to $2.4 million in fiscal
1996 from $3.3 million in the comparable period of fiscal 1995, stated on a pro
forma basis. Interest expense decreased to $2.3 million in the third quarter of
fiscal 1996 from $2.6 million in the third quarter of fiscal 1995, stated on a
pro forma basis. For the nine month period, interest expense decreased to $6.6
million in fiscal 1996 from $7.0 million in the comparable period of fiscal
1995, stated on a pro forma basis. These declines are due to lower available
levels of cash and marketable securities being invested and due to lower debt
balances outstanding during fiscal 1996.
Income taxes. The effective tax rate was 51% for the quarter and 42%
for the nine month period of fiscal 1996, before consolidation charges and the
effect of the inventory write-up compared to 37% for the comparable quarter and
nine month period of fiscal 1995. The effective rate, including consolidation
costs and the impact of the inventory step-up, was 27% for the quarter and the
nine month period in fiscal 1996. The current year's effective rates differ
significantly from the federal statutory rate of 34% due primarily to several
large expense items which are not deductible for federal or state income tax
purposes.
Net income and weighted average shares. Results from operations for
fiscal 1996 third quarter, before consolidation costs and the effect of the
inventory write-up, were net income of $624,000, or $0.05 cents per share
compared to a net loss of $231,000, or $0.02 cent per share, in the previous
year presented on a pro forma basis. For the first nine months of fiscal 1996,
the net loss increased to $560,000, or $0.04 cents per share, before
consolidation charges and the effect of the inventory write-up from a net loss
of $116,000 or $0.01 cent per share in the previous year presented on a pro
forma basis. Results from operations including the effects of the inventory
write-up and consolidation costs were net income of $0.7 million or $0.05 per
share for the third quarter of fiscal 1996 and a net loss of $12.4 million or
$0.90 per share for the first nine months of fiscal 1996.
Weighted average shares outstanding for the third quarter were 13.6 million in
fiscal 1996 as compared to 14.3 million in fiscal 1995 stated on a pro forma
basis. Weighted average shares outstanding in the fiscal nine month period were
13.8 million compared to 14.3 million in the fiscal 1995 period stated on a pro
forma basis. The decrease in weighted average shares outstanding was primarily
due to the Company's repurchase of 523,400 shares of its outstanding Common
Stock during the year.
13
<PAGE>
BELL SPORTS CORP.
PART II
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit Index - Page 16
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: May 10, 1996
----------------
BELL SPORTS CORP.
/s/ Howard A. Kosick Executive Vice President and Chief Financial Officer
- - ---------------------- ----------------------------------------------------
Howard A. Kosick (Principal financial officer)
/s/ Linda K. Bounds Vice President and Corporate Controller
- - --------------------- ---------------------------------------
Linda K. Bounds (Principal accounting officer)
15
<PAGE>
BELL SPORTS CORP.
INDEX TO EXHIBITS
Exhibit
Number Description Page
- - --------------------------------------------------------------------------------
10 U.S. $100,000,000 Mulitcurrency Credit Agreement
Dated As Of February 15, 1996 Among Bell Sports Corp.,
The Guarantors Party Hereto, The Banks Party Hereto, And
Harris Trust And Savings Bank As Agent Page 17
11 Statement re: computation of per share earnings Page 142
16
================================================================================
U.S. $100,000,000
MULTICURRENCY CREDIT AGREEMENT
DATED AS OF
FEBRUARY 15, 1996
AMONG
BELL SPORTS CORP.,
THE GUARANTORS PARTY HERETO,
THE BANKS PARTY HERETO,
AND
HARRIS TRUST AND SAVINGS BANK
AS AGENT
================================================================================
<PAGE>
TABLE OF CONTENTS
(THIS TABLE OF CONTENTS IS NOT PART OF THE AGREEMENT)
<TABLE>
<CAPTION>
<S> <C>
SECTION 1. THE REVOLVING CREDIT..............................................................................
Section 1.1. The Loan Commitment...........................................................................
Section 1.2. Letters of Credit.............................................................................
Section 1.3. Applicable Interest Rates.....................................................................
Section 1.4. Minimum Borrowing Amount for Committed Loans..................................................
Section 1.5. Manner of Borrowing Committed Loans and Designating Interest Rates
Applicable to Committed Loans.................................................................
Section 1.6. Default Rate on Committed Loans...............................................................
Section 1.7. Notes for Committed Loans.....................................................................
SECTION 2. THE SWING LINE....................................................................................
Section 2.1. Swing Loans...................................................................................
Section 2.2. Interest on Swing Loans.......................................................................
Section 2.3. Requests for Swing Loans......................................................................
Section 2.4. Refunding Loans...............................................................................
Section 2.5. Participations................................................................................
SECTION 3. GENERAL PROVISIONS APPLICABLE TO LOANS; REDUCTION OF COMMITMENTS..................................
Section 3.1. Interest Periods..............................................................................
Section 3.2. Maturity of Loans.............................................................................
Section 3.3. Prepayments...................................................................................
Section 3.4. Funding Indemnity for Fixed Rate Loans........................................................
Section 3.5. Commitment Terminations.......................................................................
SECTION 4. FEES AND EXTENSIONS...............................................................................
Section 4.1. Fees..........................................................................................
Section 4.2. Extension of Termination Date.................................................................
SECTION 5. PLACE AND APPLICATION OF PAYMENTS.................................................................
Section 5.1. Place and Application of Payments.............................................................
SECTION 6. DEFINITIONS; INTERPRETATION.......................................................................
Section 6.1. Definitions...................................................................................
Section 6.2. Interpretation................................................................................
SECTION 7. REPRESENTATIONS AND WARRANTIES....................................................................
Section 7.1. Corporate Organization and Authority..........................................................
<PAGE>
Section 7.2. Subsidiaries..................................................................................
Section 7.3. Corporate Authority and Validity of Obligations...............................................
Section 7.4. Financial Statements..........................................................................
Section 7.5. No Litigation; No Labor Controversies.........................................................
Section 7.6. Taxes.........................................................................................
Section 7.7. Approvals.....................................................................................
Section 7.8. ERISA.........................................................................................
Section 7.9. Government Regulation.........................................................................
Section 7.10. Margin Stock..................................................................................
Section 7.11. Licenses and Authorizations; Compliance with Environmental and
Health Laws...................................................................................
Section 7.12. Ownership of Property; Liens..................................................................
Section 7.13. No Burdensome Restrictions; Compliance with Agreements........................................
Section 7.14. Full Disclosure...............................................................................
Section 7.15. No Other Domestic Bank Debt At Closing........................................................
SECTION 8. CONDITIONS PRECEDENT..............................................................................
Section 8.1. Initial Credit Event..........................................................................
Section 8.2. All Credit Events.............................................................................
SECTION 9. COVENANTS.........................................................................................
Section 9.1. Corporate Existence; Subsidiaries.............................................................
Section 9.2. Maintenance...................................................................................
Section 9.3. Taxes.........................................................................................
Section 9.4. ERISA.........................................................................................
Section 9.5. Insurance.....................................................................................
Section 9.6. Financial Reports and Other Information.......................................................
Section 9.7. Bank Inspection Rights........................................................................
Section 9.8. Conduct of Business...........................................................................
Section 9.9. Liens.........................................................................................
Section 9.10. Use of Proceeds; Regulation U.................................................................
Section 9.11. Sales and Leasebacks..........................................................................
Section 9.12. Mergers, Consolidations and Sales of Assets...................................................
Section 9.13. Use of Property and Facilities; Environmental and Health and Safety
Laws..........................................................................................
Section 9.14. Investments, Acquisitions, Loans, Advances and Guaranties.....................................
Section 9.15. Consolidated Tangible Net Worth...............................................................
Section 9.16. Funded Debt Ratio.............................................................................
Section 9.17. Interest Coverage Ratio.......................................................................
Section 9.18. Capital Expenditures..........................................................................
Section 9.19. Dividends and Certain Other Restricted Payments...............................................
Section 9.20. North American Company........................................................................
Section 9.21. Transactions with Affiliates..................................................................
Section 9.22. Compliance with Laws..........................................................................
-4-
<PAGE>
Section 9.23. No Changes in Fiscal Year.....................................................................
SECTION 10. EVENTS OF DEFAULT AND REMEDIES....................................................................
Section 10.1. Events of Default.............................................................................
Section 10.2. Non-Bankruptcy Defaults.......................................................................
Section 10.3. Bankruptcy Defaults...........................................................................
Section 10.4. Collateral for Undrawn Letters of Credit......................................................
Section 10.5. Notice of Default.............................................................................
Section 10.6. Expenses......................................................................................
SECTION 11. CHANGE IN CIRCUMSTANCES...........................................................................
Section 11.1. Change of Law.................................................................................
Section 11.2. Unavailability of Deposits or Inability to Ascertain, or Inadequacy
of, LIBOR.....................................................................................
Section 11.3. Increased Cost and Reduced Return.............................................................
Section 11.4. Lending Offices...............................................................................
Section 11.5. Discretion of Bank as to Manner of Funding....................................................
SECTION 12. THE AGENT.........................................................................................
Section 12.1. Appointment and Authorization of Agent........................................................
Section 12.2. Agent and its Affiliates......................................................................
Section 12.3. Action by Agent...............................................................................
Section 12.4. Consultation with Experts.....................................................................
Section 12.5. Liability of Agent; Credit Decision...........................................................
Section 12.6. Indemnity.....................................................................................
Section 12.7. Resignation of Agent and Successor Agent......................................................
SECTION 13. THE GUARANTEES....................................................................................
Section 13.1. The Guarantees................................................................................
Section 13.2. Guarantee Unconditional.......................................................................
Section 13.3. Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances.................................................................................
Section 13.4. Waivers.......................................................................................
Section 13.5. Limit on Recovery.............................................................................
Section 13.6. Stay of Acceleration..........................................................................
Section 13.7. Benefit to Guarantors.........................................................................
SECTION 14. MISCELLANEOUS.....................................................................................
Section 14.1. Withholding Taxes.............................................................................
Section 14.2. No Waiver of Rights...........................................................................
Section 14.3. Non-Business Day..............................................................................
Section 14.4. Documentary Taxes.............................................................................
Section 14.5. Survival of Representations...................................................................
Section 14.6. Survival of Indemnities.......................................................................
Section 14.7. Sharing of Set-Off............................................................................
-5-
<PAGE>
Section 14.8. Notices.......................................................................................
Section 14.9. Counterparts..................................................................................
Section 14.10. Successors and Assigns........................................................................
Section 14.11. Participants and Note Assignees...............................................................
Section 14.12. Assignment Agreements.........................................................................
Section 14.13. Amendments....................................................................................
Section 14.14. Headings......................................................................................
Section 14.15. Legal Fees, Other Costs and Indemnification...................................................
Section 14.16. Set Off.......................................................................................
Section 14.17. Currency......................................................................................
Section 14.18. Entire Agreement..............................................................................
Section 14.19. Governing Law.................................................................................
Section 14.20. Submission to Jurisdiction; Waiver of Jury Trial..............................................
</TABLE>
SIGNATURE....................................................................
SIGNATURE....................................................................
SIGNATURE....................................................................
SIGNATURE....................................................................
SIGNATURE....................................................................
SIGNATURE....................................................................
SIGNATURE....................................................................
SIGNATURE....................................................................
SIGNATURE....................................................................
EXHIBITS
A - Form of Notice of Payment Request
B - Form of Revolving Credit Note
C - Form of Swingline Note
D - Form of Compliance Certificate
E - Subsidiary Guarantee Agreement
F-1 - Opinion of Counsel
F-2 - Opinion of Counsel
F-3 - Opinion of Counsel
G - Assignment Agreement
SCHEDULE 1.2
(Standby) Form of Application for Standby Letters of Credit
SCHEDULE 1.2
(Commercial) Form of Application for Commercial Letter of Credit
SCHEDULE 7.2 Schedule of Existing Subsidiaries
SCHEDULE 7.5 Litigation and Labor Controversies
-6-
<PAGE>
SCHEDULE 7.11 Environmental Matters
SCHEDULE 7.12 Real Property
SCHEDULE 9.9 Existing Liens
SCHEDULE 9.21 Contracts with Affiliates
-7-
<PAGE>
CREDIT AGREEMENT
To each of the Banks signatory hereto
Ladies and Gentlemen:
The undersigned, Bell Sports Corp., a Delaware corporation (the
"Borrower"), applies to you for your several commitments, subject to all the
terms and conditions hereof and on the basis of the representations and
warranties hereinafter set forth, to make available a revolving credit for loans
and letters of credit (the "Revolving Credit") and a swing line (the "Swing
Line") for loans only, in each case as described herein. Each of you is
hereinafter referred to individually as a "Bank," all of you are hereinafter
referred to collectively as the "Banks," and Harris Trust and Savings Bank in
its capacity as agent for the Banks hereunder is hereinafter referred to as the
"Agent."
SECTION 1. THE REVOLVING CREDIT.
Section 1.1. The Loan Commitment. Subject to the terms and
conditions hereof, each Bank, by its acceptance hereof, severally agrees to make
a loan or loans (individually a "Committed Loan" and collectively "Committed
Loans") to the Borrower from time to time on a revolving basis in U.S. Dollars
and the Alternative Currency in an aggregate outstanding Original Dollar Amount
up to the amount of its revolving credit commitment set forth on the applicable
signature page hereof (its "Revolving Credit Commitment" and, cumulatively for
all the Banks, the "Revolving Credit Commitments"), subject to any reductions
thereof pursuant to the terms hereof, before the Termination Date. The sum of
the aggregate Original Dollar Amount of Loans (whether Committed Loans or Swing
Loans) and of L/C Obligations at any time outstanding shall not exceed the
Revolving Credit Commitments in effect at such time, and the sum of the
aggregate Original Dollar Amount of Committed Loans denominated in the
Alternative Currency shall not exceed $20,000,000. Each Borrowing of Committed
Loans shall be made ratably from the Banks in proportion to their respective
Percentages. As provided in Section 1.5(a) hereof, the Borrower may elect that
each Borrowing of Committed Loans denominated in U.S. Dollars be either Domestic
Rate Loans or Eurocurrency Loans. All Committed Loans denominated in the
Alternative Currency shall be Eurocurrency Loans. Committed Loans may be repaid
and the principal amount thereof reborrowed before the Termination Date, subject
to all the terms and conditions hereof.
<PAGE>
Section 1.2. Letters of Credit. (a) General Terms. Subject to the
terms and conditions hereof, as part of the Revolving Credit, the Agent shall
issue standby or commercial letters of credit (each a "Letter of Credit") for
the Borrower's account in U.S. Dollars in an aggregate undrawn face amount up to
the amount of the L/C Commitment, provided that the aggregate L/C Obligations at
any time outstanding shall not exceed the difference between the Revolving
Credit Commitments in effect at such time and the aggregate Original Dollar
Amount of Loans (whether Committed Loans or Swing Loans) then outstanding. Each
Letter of Credit shall be issued by the Agent, but each Bank shall be obligated
to reimburse the Agent for its Percentage of the amount of each drawing
thereunder and, accordingly, the undrawn face amount of each Letter of Credit
shall constitute usage of the Revolving Credit Commitment of each Bank pro rata
in accordance with each Bank's Percentage.
(b) Applications. At any time before the Termination Date, the Agent
shall, at the request of the Borrower, issue one or more Letters of Credit, in a
form satisfactory to the Agent and the Borrower, with expiration dates no later
than the Termination Date, in an aggregate face amount as set forth above, upon
the receipt of a duly executed application for the relevant Letter of Credit in
the form customarily prescribed by the Agent for the type of Letter of Credit,
whether standby or commercial, requested (each an "Application"). The current
form of the Agent's Applications are attached as Schedule 1.2 (Standby) and
Schedule 1.2 (Commercial) hereto. The Agent shall provide the Borrower and each
Bank with copies of any new form of Application that may, from time to time, be
adopted by the Agent. Notwithstanding anything contained in any Application to
the contrary (i) the Borrower's obligation to pay fees in connection with each
Letter of Credit shall be as exclusively set forth in Section 4.1(b) hereof,
(ii) except during the continuance of an Event of Default or with respect to
Letters of Credit with expiration dates later than the Termination Date, the
Agent will not call for the funding by the Borrower of any amount under a Letter
of Credit, or any other form of collateral security for the Borrower's
obligations in connection with such Letter of Credit, before being presented
with a drawing thereunder, and (iii) if the Agent is not timely reimbursed for
the amount of any drawing under a Letter of Credit on the date such drawing is
paid, the Borrower's obligation to reimburse the Agent for the amount of such
drawing shall bear interest (which the Borrower hereby promises to pay) from and
after the date such drawing is paid at a rate per annum equal to the Domestic
Rate for three (3) Business Days and thereafter at a rate per annum equal to the
sum of 2% plus the Domestic Rate from time to time in effect. The Agent will
promptly notify the Banks of each issuance by it of a Letter of Credit. If the
Agent issues any Letters of Credit with expiration dates that are automatically
extended unless the Agent gives notice that the expiration date will not so
extend beyond its then scheduled expiration date, the Agent will give such
-9-
<PAGE>
notice of non-renewal before the time necessary to prevent such automatic
extension if before such required notice date (i) the expiration date of such
Letter of Credit if so extended would be later than the Termination Date, (ii)
the Commitments have been terminated or (iii) an Event of Default exists and the
Required Banks have given the Agent instructions not to so permit the extension
of the expiration date of such Letter of Credit. The Agent agrees to issue
amendments to the Letter(s) of Credit increasing the amount, or extending the
expiration date, thereof at the request of the Borrower subject to the
conditions of Section 8.2 and the other terms of this Section 1.2. Without
limiting the generality of the foregoing, the Agent's obligation to issue, amend
or extend the expiration date of a Letter of Credit is subject to the conditions
of Section 8.2 and the other terms of this Section 1.2 and the Agent will not
issue, amend or extend the expiration date of any Letter of Credit if any Bank
notifies the Agent of any failure to satisfy or otherwise comply with such
conditions and terms and directs the Agent not to take such action.
(c) The Reimbursement Obligations. Subject to Section 1.2(b) hereof,
the obligation of the Borrower to reimburse the Agent for all drawings under a
Letter of Credit (a "Reimbursement Obligation") shall be governed by the
Application related to such Letter of Credit, except that, if and as long as no
Default or Event of Default exists and the other conditions in Section 8.2
hereof are satisfied, any Reimbursement Obligation outstanding on account of a
drawing under a Letter of Credit shall automatically convert into a Borrowing of
Domestic Rate Loans in an amount equal to such Reimbursement Obligation on the
date such drawing occurs and the Agent shall notify each Bank thereof, and each
Bank shall thereupon fund its Domestic Rate Loan in such Borrowing in accordance
with Sections 1.1 and 1.5 (except for any requirement that a Borrowing of
Domestic Rate Loans be in a certain amount). If the conditions in Section 8.2
cannot be satisfied with respect to any drawing, then reimbursement of such
drawing shall be made in immediately available funds at the Agent's principal
office in Chicago, Illinois by no later than 2:00 p.m. (Chicago time) on the
date when such drawing is paid or, if such drawing was paid after 12:00 Noon
(Chicago time), by 12:00 Noon (Chicago time) on the next Business Day. If the
Borrower does not make any such reimbursement payment on the date due and the
Participating Banks fund their participations therein in the manner set forth in
Section 1.2(d) below, then all payments thereafter received by the Agent in
discharge of any of the relevant Reimbursement Obligations shall be distributed
in accordance with Section 1.2(d) below.
(d) The Participating Interests. Each Bank (other than the Bank then
acting as Agent in issuing Letters of Credit), by its acceptance hereof,
severally agrees to purchase from the Agent, and the Agent hereby agrees to sell
to each such Bank (a "Participating Bank"), an undivided percentage
participating
-10-
<PAGE>
interest (a "Participating Interest"), to the extent of its Percentage, in each
Letter of Credit issued by, and each Reimbursement Obligation owed to, the
Agent. Upon any failure by the Borrower to pay any Reimbursement Obligation at
the time required on the date the related drawing is paid, as set forth in
Section 1.2(c) above, or if the Agent is required at any time to return to the
Borrower or to a trustee, receiver, liquidator, custodian or other Person any
portion of any payment of any Reimbursement Obligation, each Participating Bank
shall, not later than the Business Day it receives a certificate in the form of
Exhibit A hereto from the Agent to such effect, if such certificate is received
before 1:00 p.m. (Chicago time), or not later than the following Business Day,
if such certificate is received after such time, pay to the Agent an amount
equal to its Percentage of such unpaid or recaptured Reimbursement Obligation
together with interest on such amount accrued from the date the related payment
was made by the Agent to the date of such payment by such Participating Bank at
a rate per annum equal to (i) from the date the related payment was made by the
Agent to the date two (2) Business Days after payment by such Participating Bank
is due hereunder, the Federal Funds Rate for each such day and (ii) from the
date two (2) Business Days after the date such payment is due from such
Participating Bank to the date such payment is made by such Participating Bank,
the Domestic Rate in effect for each such day. Each such Participating Bank
shall thereafter be entitled to receive its Percentage of each payment received
in respect of the relevant Reimbursement Obligation and of interest paid
thereon, with the Agent retaining its Percentage as a Bank hereunder.
The several obligations of the Participating Banks to the Agent under
this Section 1.2 shall be absolute, irrevocable and unconditional under any and
all circumstances whatsoever (except, without limiting the Borrower's
obligations under each Application, to the extent the Borrower is relieved from
its obligation to reimburse the Agent for a drawing under a Letter of Credit
because of the Agent's gross negligence or willful misconduct in determining
that documents received under the Letter of Credit comply with the terms
thereof) and shall not be subject to any set-off, counterclaim or defense to
payment which any Participating Bank may have or have had against the Borrower,
the Agent, any other Bank or any other Person whatsoever. Without limiting the
generality of the foregoing, such obligations shall not be affected by any
Default or Event of Default or by any reduction or termination of any Commitment
of any Bank, and each payment by a Participating Bank under this Section 1.2
shall be made without any offset, abatement, withholding or reduction
whatsoever. The Agent shall be entitled to offset amounts received for the
account of a Bank under this Agreement against unpaid amounts due from such Bank
to the Agent hereunder (whether as fundings of participations, indemnities or
otherwise), but shall not be entitled to offset against amounts owed to the
Agent by any Bank arising outside this Agreement.
-11-
<PAGE>
(e) Indemnification. The Participating Banks shall, to the extent of
their respective Percentages, indemnify the Agent (to the extent not reimbursed
by the Borrower) against any cost, expense (including reasonable counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from the Agent's gross negligence or willful misconduct) that the Agent
may suffer or incur in connection with any Letter of Credit. The obligations of
the Participating Banks under this Section 1.2(e) and all other parts of this
Section 1.2 shall survive termination of this Agreement and of all other L/C
Documents.
Section 1.3. Applicable Interest Rates. (a) Domestic Rate Loans. Each
Domestic Rate Loan made or maintained by a Bank shall bear interest during each
Interest Period it is outstanding (computed on the basis of a year of 365 or 366
days, as applicable, and actual days elapsed) on the unpaid principal amount
thereof from the date such Loan is advanced, continued or created by conversion
from a Eurocurrency Loan until maturity (whether by acceleration or otherwise)
at a rate per annum equal to the Domestic Rate from time to time in effect,
payable on the last day of its Interest Period and at maturity (whether by
acceleration or otherwise).
"Domestic Rate" means for any day the greater of:
(i) the rate of interest announced by the Agent from time to
time as its prime commercial rate, or equivalent, as in effect on such
day, with any change in the Domestic Rate resulting from a change in
said prime commercial rate to be effective as of the date of the
relevant change in said prime commercial rate; or
(ii) the sum of (x) the rate determined by the Agent to be the
prevailing rate per annum (rounded upwards, if necessary, to the
nearest one hundred-thousandth of a percentage point) at approximately
10:00 a.m. (Chicago time) (or as soon thereafter as is practicable) on
such day (or, if such day is not a Business Day, on the immediately
preceding Business Day) for the purchase at face value of overnight
Federal funds in an amount comparable to the principal amount owed to
the Agent for which such rate is being determined, plus (y) 1/2 of 1%
(0.50%).
(b) Eurocurrency Loans. Each Eurocurrency Loan made or maintained by
a Bank shall bear interest during each Interest Period it is outstanding
(computed on the basis of a year of 360 days and actual days elapsed) on the
unpaid principal amount thereof from the date such Loan is advanced, continued,
or created by conversion from a Domestic Rate until maturity (whether by
acceleration or otherwise) at a rate per annum equal to the sum of the
Eurocurrency Margin plus LIBOR applicable for
-12-
<PAGE>
such Interest Period, payable on the last day of the Interest Period and at
maturity (whether by acceleration or otherwise), and, if the applicable Interest
Period is longer than three months, on each day occurring every three months
after the commencement of such Interest Period.
"LIBOR" means, for an Interest Period for a Borrowing of Eurocurrency
Loans, (a) the LIBOR Index Rate for such Interest Period, if such rate is
available, and (b) if the LIBOR Index Rate cannot be determined, the average
rate of interest per annum (rounded upwards, if necessary, to the nearest one
hundred-thousandth of a percentage point) at which deposits in U.S. Dollars or
the Alternative Currency, as appropriate, in immediately available funds are
offered to the Agent at 11:00 a.m. (London, England time) two (2) Business Days
before the beginning of such Interest Period by major banks in the interbank
eurocurrency market for delivery on the first day of and for a period equal to
such Interest Period in an amount equal or comparable to the principal amount of
the Eurocurrency Loan scheduled to be made by the Agent as part of such
Borrowing.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one hundred-thousandth of a
percentage point) for deposits in U.S. Dollars or the Alternative Currency, as
appropriate, for a period equal to such Interest Period, which appears on the
Telerate Page 3740 or 3750, as appropriate for such currency, as of 11:00 a.m.
(London, England time) on the day two (2) Business Days before the commencement
of such Interest Period.
"Telerate Page 3740" or "3750" means the display designated as "Page
3740" or "Page 3750", as appropriate, on the Telerate Service (or such other
page as may replace Page 3740 or 3750, as appropriate, on that service or such
other service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers' Association
Interest Settlement Rates for Canadian Dollar (in the case of Telerate Page
3740) and U.S. Dollar (in the case of Telerate Page 3750) deposits).
"Eurocurrency Reserve Percentage" means, for any Borrowing of
Eurocurrency Loans, the daily average for the applicable Interest Period of the
maximum rate, expressed as a decimal, at which reserves (including, without
limitation, any supplemental, marginal and emergency reserves) are imposed
during such Interest Period by the Board of Governors of the Federal Reserve
System (or any successor) on "eurocurrency liabilities", as defined in such
Board's Regulation D (or in respect of any other category of liabilities that
includes deposits by reference to which the interest rate on Eurocurrency Loans
is determined or any category of extensions of credit or other assets that
include loans by non-United States offices of any Bank to United States
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residents), subject to any amendments of such reserve requirement by such Board
or its successor, taking into account any transitional adjustments thereto. For
purposes of this definition, the Eurocurrency Loans shall be deemed to be
"eurocurrency liabilities" as defined in Regulation D without benefit or credit
for any prorations, exemptions or offsets under Regulation D.
"Eurocurrency Margin" means 1.25% per annum until February 15, 1997 and
from and after such date, from such Pricing Date to the next Pricing Date, a
rate per annum determined in accordance with the following schedule:
INTEREST COVERAGE RATIO FOR SUCH
PRICING DATE: EUROCURRENCY MARGIN:
1. Greater than or equal to 3.25 to 1.0 0.75%
2. Greater than or equal to 2.75 to 1.0,
but less than 3.25 to 1.0 1.00%
3. Less than 2.75 to 1.0 1.25%
(c) Alternative Currency. On the date the Borrower requests a
Borrowing of Eurocurrency Loans in the Alternative Currency, as provided in
Section 1.5(a) below, the Agent shall promptly notify each Bank. If a Bank
determines that the Alternative Currency is not available to it in sufficient
amount and for a sufficient term to enable it to advance or continue the Loan
requested of it as part of such Eurocurrency Borrowing and so notifies the Agent
no later than 1:00 p.m. (Chicago time) on the same day it receives notice from
the Agent of such requested Loan, the Agent shall so notify the Borrower by 1:45
p.m. (Chicago time). If the Borrower nevertheless desires such Borrowing, it
must notify the Agent by no later than 3:00 p.m. (Chicago time) on such day. If
the Agent does not receive such notice from the Borrower by 3:00 p.m. (Chicago
time), the Borrower shall automatically be deemed to have revoked its request
for the Eurocurrency Borrowing and the Agent will promptly notify the Banks of
such revocation. If the Borrower does give such notice by 3:00 p.m. (Chicago
time), each Bank that did not notify the Agent by 2:00 p.m. (Chicago time) that
the Alternative Currency is unavailable to it to fund the requested Loan shall,
subject to Section 6 hereof, make its Loan in the Alternative Currency in
accordance with Section 1.5(d) hereof. Each Bank that did so notify the Agent by
2:00 p.m. (Chicago time) that it would not be able to make the Loan requested
from it shall, subject to Section 6 hereof, make a Eurocurrency Loan denominated
in U.S. Dollars in the Original Dollar Amount of, and with the same Interest
Period as, the Eurocurrency Loan such Bank was originally requested to make.
Such Eurocurrency or Domestic Rate Loan denominated in U.S. Dollars shall be
made by the
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affected Bank on the same day as the other Banks make their Eurocurrency Loans
denominated in the Alternative Currency as part of the relevant Borrowing of
Eurocurrency Loans, but shall bear interest with reference to the LIBOR
applicable to U.S. Dollars rather than the Alternative Currency for the
applicable Interest Period and shall be made available in accordance with the
procedures for disbursing U.S. Dollar Loans under Section 1.5(d) hereof. Any
Committed Loan made in the Alternative Currency shall be advanced in such
currency, and all payments of principal and interest thereon shall be made in
such Alternative Currency.
(d) Rate Determinations. The Agent shall determine each interest rate
applicable to Obligations and the Original Dollar Amount of Committed Loans
denominated in the Alternative Currency, and a reasonable determination thereof
by the Agent shall be conclusive and binding except in the case of manifest
error or willful misconduct. The Original Dollar Amount of each Eurocurrency
Loan denominated in the Alternative Currency shall be determined or
redetermined, as applicable, effective as of the first day of each Interest
Period applicable to such Loan.
(e) Additional Interest on Eurocurrency Loans. The Borrower shall pay
to each Bank, so long as and to the extent such Bank shall be required under
regulations of the Board of Governors of the Federal Reserve System to maintain
reserves with respect to liabilities or assets consisting of or including
"eurocurrency liabilities" as defined in Regulation D, additional interest on
the unpaid principal amount of each Eurocurrency Loan of such Bank (whether
denominated in U.S. or Canadian Dollars), from the date of such Loan until such
principal amount is paid in full, at an interest rate per annum equal at all
times to the remainder obtained by subtracting (a) LIBOR for the applicable
Interest Period for such Eurocurrency Loan from (b) the rate obtained by
dividing such LIBOR by a percentage equal to 100% minus the Eurocurrency Reserve
Percentage of such Bank for such Interest Period, payable on each date on which
interest is payable on such Eurocurrency Loan. Such Bank shall as soon as
practicable provide notice to the Agent and the Borrower of any such additional
interest arising in connection with such Eurocurrency Loan, which notice shall
be conclusive and binding, absent demonstrable error.
Section 1.4. Minimum Borrowing Amount for Committed Loans. Each
Borrowing of Domestic Rate Loans shall be in an amount not less than $500,000
and in integral multiples of $100,000, provided that a Borrowing of Domestic
Rate Loans applied to pay a Reimbursement Obligation pursuant to Section 1.2(c)
hereof shall be in an amount equal to such Reimbursement Obligation. Each
Borrowing of Eurocurrency Loans shall be in an amount not less than an Original
Dollar Amount of $1,000,000 and in such integral multiple of 100,000 units of
the relevant currency as would have
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the Original Dollar Amount most closely approximating $100,000 or an integral
multiple thereof.
Section 1.5. Manner of Borrowing Committed Loans and Designating
Interest Rates Applicable to Committed Loans. (a) Notice to the Agent. The
Borrower shall give notice to the Agent by no later than 11:00 a.m. (Chicago
time) (i) at least four (4) Business Days before the date on which the Borrower
requests the Banks to advance a Borrowing of Eurocurrency Loans denominated in
the Alternative Currency, (ii) at least three (3) Business Days before the date
on which the Borrower requests the Banks to advance a Borrowing of Eurocurrency
Loans denominated in U.S. Dollars and (iii) on the date the Borrower requests
the Banks to advance a Borrowing of Domestic Rate Loans. The Loans included in
each Borrowing shall bear interest initially at the type of rate specified in
such notice of a new Borrowing. Thereafter, the Borrower may from time to time
elect to change or continue the type of interest rate borne by each Borrowing
or, subject to Section 1.4's minimum amount requirement for each outstanding
Borrowing, a portion thereof, as follows: (i) if such Borrowing is of
Eurocurrency Loans, on the last day of the Interest Period applicable thereto,
the Borrower may continue part or all of such Borrowing as Eurocurrency Loans
for an Interest Period or Interest Periods specified by the Borrower or, if such
Eurocurrency Loan is denominated in U.S. Dollars, convert all or part of such
Borrowing into Domestic Rate Loans and (ii) if such Borrowing is of Domestic
Rate Loans, on any Business Day, the Borrower may convert all or part of such
Borrowing into Eurocurrency Loans denominated in U.S. Dollars for an Interest
Period or Interest Periods specified by the Borrower. The Borrower shall give
all such notices requesting the advance, continuation, or conversion of a
Borrowing to the Agent by telephone or telecopy (which notice shall be
irrevocable once given and, if by telephone, shall be promptly confirmed in
writing). Notices of the continuation of a Borrowing of Eurocurrency Loans for
an additional Interest Period or of the conversion of part or all of a Borrowing
of Eurocurrency Loans denominated in U.S. Dollars into Domestic Rate Loans or of
Domestic Rate Loans into Eurocurrency Loans denominated in U.S. Dollars must be
given by no later than 11:00 a.m. (Chicago time) at least three (3) Business
Days before the date of the requested continuation or conversion. Notices of the
continuation of a Borrowing of Eurocurrency Loans denominated in the Alternative
Currency for an additional Interest Period must be given no later than 11:00
a.m. (Chicago time) at least four (4) Business Days before the requested
continuation. All such notices concerning the advance, continuation, or
conversion of a Borrowing shall specify the date of the requested advance,
continuation or conversion of a Borrowing (which shall be a Business Day), the
amount of the requested Borrowing to be advanced, continued, or converted, the
type of Loans to comprise such new, continued or converted Borrowing and, if
such Borrowing is to be comprised of Eurocurrency Loans, the currency and
Interest Period applicable
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thereto. Provided that the proceeds of the applicable Loan are disbursed to a
bank account of the Borrower or any Subsidiary, the Borrower agrees that the
Agent may rely on any such telephonic or telecopy notice given by any person it
in good faith believes is an Authorized Representative without the necessity of
independent investigation, and in the event any such notice by telephone
conflicts with any written confirmation, such telephonic notice shall govern if
the Agent has acted in reliance thereon.
(b) Notice to the Banks. The Agent shall give prompt telephonic or
telecopy notice to each Bank of any notice from the Borrower received pursuant
to Section 1.5.(a) above. The Agent shall give notice to the Borrower and each
Bank by like means of the interest rate applicable to each Borrowing of
Eurocurrency Loans and, if such Borrowing is denominated in the Alternative
Currency, shall give notice by such means to the Borrower and each Bank of the
Original Dollar Amount thereof.
(c) Borrower's Failure to Notify. Any outstanding Borrowing of
Domestic Rate Loans shall, subject to Section 8.2 hereof, automatically be
continued for an additional Interest Period on the last day of its then current
Interest Period unless the Borrower has notified the Agent within the period
required by Section 1.5(a) that it intends to convert such Borrowing into a
Borrowing of Eurocurrency Loans or notifies the Agent within the period required
by Section 3.3(a) that it intends to prepay such Borrowing. If the Borrower
fails to give notice pursuant to Section 1.5(a) above of the continuation or
conversion of any outstanding principal amount of a Borrowing of Eurocurrency
Loans denominated in U.S. Dollars before the last day of its then current
Interest Period within the period required by Section 1.5(a) and has not
notified the Agent within the period required by Section 3.3(a) that it intends
to prepay such Borrowing, such Borrowing shall automatically be converted into a
Borrowing of Domestic Rate Loans, subject to Section 8.2 hereof. If the Borrower
fails to give notice pursuant to Section 1.5(a) above of the continuation of any
outstanding principal amount of a Borrowing of Eurocurrency Loans denominated in
the Alternative Currency before the last day of its then current Interest Period
within the period required by Section 1.5(a) and has not notified the Agent
within the period required by Section 3.3(a) that it intends to prepay such
Borrowing, such Borrowing shall automatically be continued as a Borrowing of
Eurocurrency Loans in the Alternative Currency with an Interest Period of one
month, subject to Section 8.2 hereof, including the application of Section 1.4
and of the restrictions contained in the definition of Interest Period.
(d) Disbursement of Committed Loans. Not later than 12:00 Noon
(Chicago time) on the date of any requested advance of a new Borrowing of
Eurocurrency Loans, and not later than 1:00 p.m.
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(Chicago time) on the date of any requested advance of a new Borrowing of
Domestic Rate Loans, subject to Section 8 hereof, each Bank shall make available
its Loan comprising part of such Borrowing in funds immediately available at the
principal office of the Agent in Chicago, Illinois, except that if such
Borrowing is denominated in the Alternative Currency each Bank shall, subject to
Section 1.3(c) and Section 8, make available its Loan comprising part of such
Borrowing at such office as the Agent has previously specified in a notice to
each Bank, in such funds as are then customary for the settlement of
international transactions in such currency and no later than such local time as
is necessary for such funds to be received and transferred to the Borrower for
same day value on the date of the Borrowing. The Agent shall make available to
the Borrower Loans denominated in U.S. Dollars at the Agent's principal office
in Chicago, Illinois and Loans denominated in the Alternative Currency at such
office as the Agent has previously agreed to with the Borrower, in each case in
the type of funds received by the Agent from the Banks.
(e) Agent Reliance on Bank Funding. Unless the Agent shall have been
notified by a Bank before the date on which such Bank is scheduled to make
payment to the Agent of the proceeds of a Committed Loan (which notice shall be
effective upon receipt) that such Bank does not intend to make such payment, the
Agent may assume that such Bank has made such payment when due and the Agent may
in reliance upon such assumption (but shall not be required to) make available
to the Borrower the proceeds of the Loan to be made by such Bank and, if any
Bank has not in fact made such payment to the Agent, such Bank shall, on demand,
pay to the Agent the amount made available to the Borrower attributable to such
Bank together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to the Borrower and ending
on (but excluding) the date such Bank pays such amount to the Agent at a rate
per annum equal to the Federal Funds Rate or, in the case of a Loan denominated
in the Alternative Currency, the cost to the Agent of funding the amount it
advanced to fund such Bank's Loan, as determined by the Agent. If such amount is
not received from such Bank by the Agent immediately upon demand, the Borrower
will, on demand, repay to the Agent the proceeds of the Loan attributable to
such Bank with interest thereon at a rate per annum equal to the interest rate
applicable to the relevant Loan, but without such payment being considered a
payment or prepayment of a Loan under Section 3.4 hereof, so that the Borrower
will have no liability under such Section with respect to such payment.
Section 1.6. Default Rate on Committed Loans. If any payment of
principal on any Committed Loan is not made when due (whether by acceleration or
otherwise), the overdue amount of such Loan shall bear interest (computed on the
basis of a year of 360 days and actual days elapsed or, if based on the Domestic
Rate on the
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basis of a year of 365 or 366 days, as applicable, and the actual number of days
elapsed) from the date such payment was due until paid in full, payable on
demand, at a rate per annum equal to:
(a) for any Domestic Rate Loan, the sum of two percent (2%)
plus the Domestic Rate from time to time in effect; and
(b) for any Eurocurrency Loan, the sum of two percent (2%)
plus the rate of interest in effect thereon at the time of such default
until the end of the Interest Period applicable thereto and,
thereafter, if such Loan is denominated in U.S. Dollars, at a rate per
annum equal to the sum of two percent (2%) plus the Domestic Rate from
time to time in effect or, if such Loan is denominated in the
Alternative Currency, at a rate per annum equal to the sum of the
Eurocurrency Margin, plus two percent (2%) plus the rate of interest
per annum as determined by the Agent (rounded upwards, if necessary, to
the nearest whole multiple of one-sixteenth of one percent (1/16%) at
which overnight or weekend deposits of the appropriate currency (or, if
such amount due remains unpaid more than three Business Days, then for
such other period of time not longer than six months as the Agent may
elect in its absolute discretion) for delivery in immediately available
and freely transferable funds would be offered by the Agent to major
banks in the interbank market upon request of such major banks for the
applicable period as determined above and in an amount comparable to
the unpaid principal amount of any such Eurocurrency Loan (or, if the
Agent is not placing deposits in such currency in the interbank market
, then the Agent's cost of funds in such currency for such period).
Section 1.7. Notes for Committed Loans. (a) The Committed Loans
made to the Borrower by a Bank shall be evidenced by a single promissory note of
the Borrower issued to such Bank in the form of Exhibit B hereto. Each such
promissory note is hereinafter referred to as a "Revolving Credit Note" and
collectively such promissory notes are referred to as the "Revolving Credit
Notes."
(b) Each Bank shall record on its books and records or on a schedule
to its Revolving Credit Note the amount of each Committed Loan advanced,
continued, or converted by it, all payments of principal and interest and the
principal balance from time to time outstanding thereon, the type of such
Committed Loan, and, for any Eurocurrency Loan, the Interest Period, the
currency in which such Committed Loan is denominated, and the interest rate
applicable thereto. The record thereof, whether shown on such books and records
of a Bank or on a schedule to any
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Revolving Credit Note, shall be prima facie evidence as to all such matters;
provided, however, that the failure of any Bank to record any of the foregoing
or any error in any such record shall not limit or otherwise affect the
obligation of the Borrower to repay all Committed Loans made to it hereunder
together with accrued interest thereon. At the request of any Bank and upon such
Bank tendering to the Borrower the Revolving Credit Note to be replaced, the
Borrower shall furnish a new Revolving Credit Note to such Bank to replace any
outstanding Revolving Credit Note, and at such time the first notation appearing
on a schedule on the reverse side of, or attached to, such Revolving Credit Note
shall set forth the aggregate unpaid principal amount of all Committed Loans, if
any, then outstanding thereon.
SECTION 2. THE SWING LINE.
Section 2.1. Swing Loans. Subject to all of the terms and
conditions hereof, Harris Trust and Savings Bank ("Harris") agrees to make loans
in U.S. Dollars to the Borrower under the Swing Line ("Swing Loans") which shall
not in the aggregate at any time outstanding exceed the lesser of (i) the Swing
Line Commitment or (ii) the difference between the Revolving Credit Commitments
in effect at such time and the Original Dollar Amount of all Committed Loans and
L/C Obligations outstanding at the time of computation. The Swing Line
Commitment shall be available to the Borrower and may be availed of by the
Borrower from time to time and borrowings thereunder may be repaid and used
again during the period ending on the Termination Date; provided that each Swing
Loan must be repaid on the last day of the Interest Period applicable thereto.
All Swing Loans shall be evidenced by a single promissory note of the Borrower
issued to Harris in the form of Exhibit C hereto (the "Swing Line Note").
Without regard to the face principal amount of the Swing Line Note, the actual
principal amount at any time outstanding and owing by the Borrower on account of
the Swing Line Note during the period ending on the Termination Date shall be
the sum of all Swing Loans then or theretofore made thereon less all payments
actually received thereon during such period. Harris shall record on its books
and records or on a schedule to the Swing Line Note the amount of each Swing
Loan made by it, all payments of principal and interest and the principal
balance from time to time outstanding thereon, and, for any Swing Loan bearing
interest at Harris' Quoted Rate, the Interest Period and the interest rate
applicable thereto. The record thereof, whether shown on such books and records
of Harris or on a schedule to the Swing Line Note, shall be prima facie evidence
as to all such matters; provided, however, that Harris' failure to record any of
the foregoing or any error in any such record shall not limit or otherwise
affect the obligation of the Borrower to repay all Swing Loans made to it
hereunder together with accrued interest thereon.
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Section 2.2. Interest on Swing Loans. Each Swing Loan shall bear
interest at the Domestic Rate or the Harris' Quoted Rate, provided that if any
Swing Loan is not paid when due (whether by lapse of time, acceleration or
otherwise) such Swing Loan shall bear interest, whether before or after
judgment, until payment in full thereof through the end of the Interest Period
then applicable thereto at a rate per annum equal to the sum of two percent (2%)
plus the interest rate which would otherwise be applicable thereto and,
thereafter, at a rate per annum equal to the sum of two percent (2%) plus the
Domestic Rate from time to time in effect. Interest on each Swing Loan shall be
due and payable on the last day of each Interest Period applicable thereto, and
interest after maturity (whether by lapse of time, acceleration or otherwise)
shall be due and payable upon demand.
Section 2.3. Requests for Swing Loans. The Borrower shall give
Harris prior notice (which may be written or oral) no later than 12:00 Noon
(Chicago time) on the date upon which the Borrower requests that any Swing Loan
be made, of the amount and date of such Swing Loan and the Interest Period
selected therefor. Within thirty (30) minutes after receiving such notice,
Harris shall in its discretion quote an interest rate to the Borrower at which
Harris would be willing to make such Swing Loan available to the Borrower for a
given Interest Period (the rate so quoted for a given Interest Period being
herein referred to as "Harris' Quoted Rate"). The Borrower acknowledges and
agrees that the interest rate quote is given for immediate and irrevocable
acceptance, and if the Borrower does not so immediately accept Harris' Quoted
Rate for the full amount requested by the Borrower for such Swing Loan, the
Harris' Quoted Rate shall be deemed immediately withdrawn and such Swing Loan
shall bear interest at the Domestic Rate. Subject to all of the terms and
conditions hereof, the proceeds of such Swing Loan shall be made available to
the Borrower on the date so requested at the offices of the Agent in Chicago,
Illinois. Anything contained in the foregoing to the contrary notwithstanding
(i) the obligation of Harris to make Swing Loans shall be subject to all of the
terms and conditions of this Agreement and (ii) Harris shall not be obligated to
make more than one Swing Loan during any one day.
Section 2.4. Refunding Loans. In its sole and absolute discretion,
Harris may at any time, on behalf of the Borrower (which hereby irrevocably
authorizes Harris to act on its behalf for such purpose) and with notice to the
Borrower, request each Bank to make a Domestic Rate Loan under the Revolving
Credit in an amount equal to such Bank's Percentage of the amount of the Swing
Loans outstanding on the date such notice is given. Unless any of the conditions
of Section 8.2 are not fulfilled on such date, each Bank shall make the proceeds
of its requested Committed Loan available to Harris, in immediately available
funds, at Harris' principal office in Chicago, Illinois, before 12:00 Noon
(Chicago time) on the Business Day following the day
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such notice is given. The proceeds of such Committed Loans shall be immediately
applied to repay the outstanding Swing Loans.
Section 2.5. Participations. If any Bank refuses or otherwise fails
to make a Committed Loan when requested by Harris pursuant to Section 2.4 above
(because the conditions in Section 8.2 are not satisfied or otherwise), such
Bank will, by the time and in the manner such Committed Loan was to have been
funded to Harris, purchase from Harris an undivided participating interest in
the outstanding Swing Loans in an amount equal to its Percentage of the
aggregate principal amount of Swing Loans that were to have been repaid with
such Committed Loans, provided no purchase of a participation in a Swing Loan
bearing interest at Harris' Quoted Rate need be made until after expiration of
the Interest Period applicable thereto. Each Bank that so purchases a
participation in a Swing Loan shall thereafter be entitled to receive its
Percentage of each payment of principal received on the Swing Loan and of
interest received thereon accruing from the date such Bank funded to Harris its
participation in such Loan. The several obligations of the Banks under this
Section 2.5 shall be absolute, irrevocable and unconditional under any and all
circumstances whatsoever and shall not be subject to any set-off, counterclaim
or defense to payment which any Bank may have or have had against the Borrower,
any other Bank or any other Person whatever. Without limiting the generality of
the foregoing, such obligations shall not be affected by any Default or Event of
Default or by any reduction or termination of the Commitments of any Bank, and
each payment made by an Bank under this Section 2.5 shall be made without any
offset, abatement, withholding or reduction whatsoever.
SECTION 3. GENERAL PROVISIONS APPLICABLE TO LOANS; REDUCTION OF
COMMITMENTS.
Section 3.1. Interest Periods. As provided in Section 1.5(a)
hereof, at the time of each request to advance, continue, or create by
conversion a Borrowing of Eurocurrency Loans, or as provided in Section 2.3
hereof, at the time of the each request to make a Swing Loan, the Borrower shall
select an Interest Period applicable to such Loans from among the available
options. The term "Interest Period" means the period commencing on the date a
Borrowing of Loans is advanced, continued, or created by conversion and ending:
(a) in the case of Domestic Rate Loans, on the last day of the calendar month in
which such Borrowing is advanced, continued, or created by conversion (or on the
last day of the following month if such Loan is advanced, continued or created
by conversion on the last day of a calendar month), (b) in the case of
Eurocurrency Loans, 1, 2, 3, or 6 months thereafter, and (c) in the case of
Swing Loans, on the date one (1) to seven (7) days thereafter as mutually agreed
by the Agent and the Borrower; provided, however, that:
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(a) any Interest Period for a Borrowing of Domestic Rate
Loans that otherwise would end after the Termination Date shall end on
the Termination Date;
(b) for any Borrowing of Eurocurrency Loans or any Swing
Loan, the Borrower may not select an Interest Period that extends
beyond the Termination Date;
(c) whenever the last day of any Interest Period would
otherwise be a day that is not a Business Day, the last day of such
Interest Period shall be extended to the next succeeding Business Day,
provided that, if such extension would cause the last day of an
Interest Period for a Borrowing of Eurocurrency Loans to occur in the
following calendar month, the last day of such Interest Period shall be
the immediately preceding Business Day; and
(d) for purposes of determining an Interest Period for a
Borrowing of Eurocurrency Loans, a month means a period starting on one
day in a calendar month and ending on the numerically corresponding day
in the next calendar month; provided, however, that if there is no
numerically corresponding day in the month in which such an Interest
Period is to end or if such an Interest Period begins on the last
Business Day of a calendar month, then such Interest Period shall end
on the last Business Day of the calendar month in which such Interest
Period is to end.
Section 3.2. Maturity of Loans. Each Committed Loan shall mature
and become due and payable by the Borrower on the Termination Date. Each Swing
Loan shall mature and become due and payable by the Borrower on the last day of
the Interest Period applicable thereto.
Section 3.3. Prepayments. (a) Optional. The Borrower may prepay
without premium or penalty and in whole or in part (but, if in part, then: (i)
if such Borrowing is of Domestic Rate Loans, in an amount not less than
$500,000, (ii) if such Borrowing is of Eurocurrency Loans denominated in U.S.
Dollars, in an amount not less than $1,000,000, (iii) if such Borrowing is
denominated in the Alternative Currency, an amount for which the U.S. Dollar
Equivalent is not less than $1,000,000 and (iv) in an amount such that the
minimum amount required for a Borrowing pursuant to Section 1.4 hereof remains
outstanding) any Borrowing of Eurocurrency Loans upon three Business Days' prior
notice to the Agent or, in the case of a Borrowing of Domestic Rate Loans,
notice delivered to the Agent no later than 11:00 a.m. (Chicago time) on the
date of prepayment, such prepayment to be made by the payment of the principal
amount to be prepaid and accrued interest thereon to the date fixed for
prepayment and, in the
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case of Eurocurrency Loans, any compensation required by Section 3.4 hereof.
Swing Loans bearing interest at Harris' Quoted Rate may only be paid on the last
day of the Interest Period then applicable to such Loans. The Agent will
promptly advise each Bank of any such prepayment notice it receives from the
Borrower. Any amount paid or prepaid before the Termination Date may, subject to
the terms and conditions of this Agreement, be borrowed, repaid and borrowed
again.
(b) Mandatory. If, within 30 days after receiving notice under
Section 9.6(c) of a Change of Control Event, the Required Banks notify the
Borrower that they require prepayment of the Notes, on the date set forth in
such notice (which date shall be no earlier than (x) thirty (30) days (or in the
event of a Change of Control Event described in clause (i) of the definition of
such term, ninety (90) days) after such notice is given or (y) the day on which
the Borrower repays any other Debt aggregating $10,000,000 or more before its
original scheduled due date, whichever day is earlier), the Borrower shall pay
in full all Obligations then outstanding, including the prepayment of L/C
Obligations in the manner contemplated by Section 10.4 hereof, and the
Commitments shall terminate in full.
Section 3.4. Funding Indemnity for Fixed Rate Loans. If any Bank
shall incur any loss, cost or expense (including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by such Bank to fund or maintain any Fixed Rate
Loan or the relending or reinvesting of such deposits or amounts paid or prepaid
to such Bank, but in any event excluding any loss of profit) as a result of:
(a) any payment, prepayment or conversion of a Fixed Rate
Loan on a date other than the last day of its Interest Period,
(b) any failure (because of a failure to meet the conditions
of Section 8 or otherwise) by the Borrower to borrow or continue a
Fixed Rate Loan, or to convert a Domestic Rate Loan into a Fixed Rate
Loan, on the date specified in a notice given pursuant to Section
1.5(a) or 2.3 or established pursuant to Section 1.5(c) hereof,
(c) any failure by the Borrower to make any payment of
principal on any Fixed Rate Loan when due (whether by acceleration or
otherwise), or
(d) any acceleration of the maturity of a Fixed Rate Loan as
a result of the occurrence of any Event of Default hereunder,
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then, upon the demand of such Bank, the Borrower shall pay to such Bank such
amount as will reimburse such Bank for such loss, cost or expense. If any Bank
makes such a claim for compensation, it shall provide to the Borrower, with a
copy to the Agent, a certificate executed by an officer of such Bank setting
forth the amount of such loss, cost or expense in reasonable detail (including
an explanation of the basis for and the computation of such loss, cost or
expense) and the amounts shown on such certificate if reasonably calculated
shall be conclusive absent demonstrable error.
Section 3.5. Commitment Terminations. The Borrower shall have the
right at any time and from time to time, upon five (5) Business Days' prior
written notice to the Agent, to terminate the Revolving Credit Commitments
without premium or penalty, in whole or in part, any partial termination to be
(i) in an amount not less than $5,000,000, and (ii) allocated ratably among the
Banks in proportion to their respective Percentages, provided that (x) the
Revolving Credit Commitments may not be reduced to an amount less than the sum
of the Original Dollar Amount of all Loans (whether Committed Loans or Swing
Loans) and all L/C Obligations then outstanding and (y) any reduction of the
Revolving Credit Commitments to an amount less than the Swing Line Commitment or
L/C Commitment shall automatically reduce the Swing Line Commitment or L/C
Commitment, as the case may be, to such amount as well. The Borrower shall have
the right at any time and from time to time, by notice to the Agent, to
terminate the Letter of Credit Commitment without premium or penalty, in whole
or in part. Any such termination of the Letter of Credit Commitment shall not
reduce the Revolving Credit Commitments unless the Borrower elects to do so in
the manner provided in the preceding sentence. The Agent shall give prompt
notice to each Bank of any such termination of Commitments. Any termination of
Commitments pursuant to this Section 3.5 may not be reinstated.
SECTION 4. FEES AND EXTENSIONS.
Section 4.1. Fees. (a) Commitment Fee. For the period from the
Effective Date to and including the Termination Date, the Borrower shall pay to
the Agent for the ratable account of the Banks in accordance with their
Percentages a commitment fee accruing at the Commitment Fee Rate on the average
daily Unused Commitments. Such commitment fee is payable in arrears on March 31,
1996, on the last day of each calendar quarter thereafter and on the Termination
Date, unless the Revolving Credit Commitments are terminated in whole on an
earlier date, in which event the fee for the period to but not including the
date of such termination shall be paid in whole on the date of such termination.
"Commitment Fee Rate" means 0.25% per annum through February 15, 1997 and from
and after such date, from such Pricing Date to the next Pricing Date, a rate per
annum determined in accordance with the following schedule:
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INTEREST COVERAGE RATIO FOR
SUCH PRICING DATE COMMITMENT FEE RATE:
1. Greater than or equal to 3.25 to 1.0 0.15%
2. Greater than or equal to 2.75 to 1.0,
but less than 3.25 to 1.0 0.20%
3. Less than 2.75 to 1.0 0.25%
(b) Letter of Credit Fees. (i) Standby. On the date of issuance or
extension, or increase in the amount, of any Standby Letter of Credit pursuant
to Section 1.2 hereof, the Borrower shall pay to the Agent an issuance fee equal
to 1/8 of 1% (0.125) of the face amount of (or of the increase in the face
amount of) such Letter of Credit. Quarterly in arrears, on the last day of each
calendar quarter, commencing on March 31, 1996, the Borrower shall pay to the
Agent, for the ratable benefit of the Banks in accordance with their
Percentages, a letter of credit fee at a rate per annum equal to the Eurodollar
Margin in effect during each day of such quarter applied to the daily average
face amount of Standby Letters of Credit outstanding during such quarter.
(ii) Commercial. On the date of issuance or extension, or increase in
the amount, of any Commercial Letter of Credit pursuant to Section 1.2 hereof,
the Borrower shall pay to the Agent, for the benefit of the Banks, an issuance
fee of 1/4 of 1% (0.25%) per annum based on the number of days until such
Commercial Letter of Credit by its terms expires (or in the case of a Commercial
Letter of Credit with no expiration date, is next cancellable by the Agent);
provided, however, that (i) the Agent shall retain for its own account one-half
of such fee, with the balance of such fee to be shared ratably by the Banks
(including the Bank then acting as Agent) in accordance with their Percentages,
and (ii) in no event shall such fee for an individual Letter of Credit amount to
less than $100 payable to the Agent, and $40 payable to each Bank (including the
Bank then acting as Agent).
(iii) Generally. In addition, the Borrower shall pay to the Agent for
its own account (i) the Agent's standard issuance fee for each Commercial Letter
of Credit and (ii) the Agent's standard drawing, negotiation, amendment, and
other administrative fees for each Letter of Credit (whether a Commercial Letter
of Credit or Standby Letter of Credit). All the foregoing standard fees shall be
retained by the Agent for its own account. Such standard fees referred to in the
preceding clauses (i) and (ii) may be established by the Agent from time to
time. The Agent shall upon the Borrower's reasonable request furnish the
Borrower with a current schedule of such standard fees.
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(c) Closing Fees. On the Effective Date, the Borrower shall pay to
the Agent for the benefit of the Banks (to be allocated among the Banks as the
Agent in its discretion deems appropriate) a closing fee equal to $190,000.
(d) Agent Fees. The Borrower shall pay to the Agent the fees agreed
to between the Agent and the Borrower.
(e) Fee Calculations. All fees payable under this Section 4.1 shall
be computed on the basis of a year of 365 or 366 days, as the case may be, for
the actual number of days elapsed.
Section 4.2. Extension of Termination Date. No later than ninety
(90) days before any or all of the second, third and fourth anniversary dates of
this Agreement the Borrower may make a request for a one year extension of the
Termination Date in a written notice to the Agent. The Agent will promptly
inform the Banks of any such request, and each Bank shall notify the Agent in
writing within thirty (30) days before the anniversary date following such
request whether it agrees to the requested extension. If a Bank fails to so
notify the Agent whether it agrees to such extension, such Bank shall be deemed
to have refused to grant the requested extension. Upon receipt by the Agent of
the written consent of all the Banks, the Termination Date shall be
automatically extended an additional year. Otherwise, the Termination Date will
remain as then scheduled.
SECTION 5. PLACE AND APPLICATION OF PAYMENTS.
Section 5.1. Place and Application of Payments. All payments of
principal of and interest on the Loans and the Reimbursement Obligations, and of
all other amounts payable by the Borrower under this Agreement, shall be made by
the Borrower to the Agent by no later than 1:00 p.m. (Chicago time) on the due
date thereof at the principal office of the Agent in Chicago, Illinois (or such
other location in the State of Illinois as the Agent may designate to the
Borrower) or, if such payment is on a Reimbursement Obligation, no later than
provided by Section 1.2(c) hereof or, if such payment is to be made in the
Alternative Currency, no later than 1:00 p.m. local time at the place of payment
to such office as the Agent has previously specified in a notice to the Borrower
for the benefit of the Person or Persons entitled thereto. Any payments received
after such time shall be deemed to have been received by the Agent on the next
Business Day. All such payments shall be made (i) in U.S. Dollars, in
immediately available funds at the place of payment, or (ii) in the case of
amounts payable hereunder in the Alternative Currency, in such Alternative
Currency in such funds then customary for the settlement of international
transactions in such currency, in each case without setoff or counterclaim. The
Agent will promptly thereafter cause to be distributed like
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funds relating to the payment of principal or interest on Loans or commitment
fees ratably to the Banks in each case to be applied in accordance with the
terms of this Agreement.
SECTION 6. DEFINITIONS; INTERPRETATION.
Section 6.1. Definitions. The following terms when used herein
have the following meanings:
"Account" is defined in Section 10.4(b) hereof.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with their correlative
meanings, "controlled by" and "under common control with") means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies of a Person (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event for purposes of this definition: (i) any Person which owns directly or
indirectly 15% or more of the securities having ordinary voting power for the
election of directors or other governing body of a corporation or 15% or more of
the partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person; and (ii) each director and executive officer of the
Borrower or any Subsidiary shall be deemed an Affiliate of the Borrower and such
Subsidiary.
"Agent" means Harris Trust and Savings Bank and any successor pursuant
to Section 12.7 hereof.
"Alternative Currency" means Canadian Dollars.
"Application" is defined in Section 1.2(b) hereof.
"Authorized Representative" means those persons shown on the list of
officers provided by the Borrower pursuant to Section 8.1(f) hereof, or on any
updated such list provided by the Borrower to the Agent, or any further or
different officer of the Borrower so named by any Authorized Representative of
the Borrower in a written notice to the Agent.
"Bank" is defined in the first paragraph of this Agreement and includes
the Agent in its capacity as issuer of Letters of Credit and holder of L/C
Obligations after giving effect to each Participating Bank's interest therein.
"Borrower" means Bell Sports Corp., a Delaware corporation.
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"Borrowing" means the total of Committed Loans of a single type
advanced, continued for an additional Interest Period, or converted from a
different type into such type by the Banks on a single date and for a single
Interest Period. Borrowings of Loans are made and maintained ratably from each
of the Banks according to their Percentages. A Borrowing is "advanced" on the
day Banks advance funds comprising such Borrowing to the Borrower, is
"continued" on the date a new Interest Period for the same type of Loans
commences for such Borrowing, and is "converted" when such Borrowing is changed
from one type of Loan to the other, all as requested by the Borrower pursuant to
Section 1.5(a).
"Business Day" means any day other than a Saturday or Sunday on which
Banks are not authorized or required to close in Chicago, Illinois and, if the
applicable Business Day relates to the borrowing or payment of a Eurocurrency
Loan, on which banks are dealing in U.S. Dollar deposits or the Alternative
Currency in the interbank market in London, England and, if the applicable
Business Day relates to the borrowing or payment of a Eurocurrency Loan
denominated in the Alternative Currency on which banks and foreign exchange
markets are open for business in the city where disbursements of or payments on
such Loan are to be made.
"Canadian Dollar" means the lawful currency of Canada.
"Capital Lease" means at any date any lease of Property which, in
accordance with GAAP, would be required to be capitalized on the balance sheet
of the lessee.
"Capitalized Lease Obligations" means, for any Person, the amount of
such Person's liabilities under Capital Leases determined at any date in
accordance with GAAP.
"Change of Control Event" means at any time:
(i) any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) shall have acquired beneficial ownership (within the meaning
of Rule 13d-3 promulgated by the SEC under said Act) of 25% or more in
voting power of the outstanding Voting Stock of the Borrower;
(ii) during any period of twenty-four consecutive
months beginning after the date of this Agreement, individuals who at
the beginning of such period constitute the Board of Directors of the
Borrower (the "Board") and any new director (other than a director
designated by a person who has entered into an agreement with the
Borrower to effect a transaction described in clause (i), (iii) or (iv)
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of this Change of Control Event definition) whose election or
nomination for election was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved cease for any reason to constitute a
majority of the Board;
(iii) the stockholders of the Borrower approve a
merger or consolidation of the Borrower with any other corporation
(other than a merger or consolidation which would result in the Voting
Stock of the Borrower outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted
into voting securities of the entity surviving such merger or
consolidation), at least 51% of the Voting Stock of the Borrower or
such surviving entity outstanding immediately after such merger or
consolidation); or
(iv) the stockholders of the Borrower approve a plan
of complete liquidation or dissolution of the Borrower or an agreement
for the sale or disposition by the Borrower of all or substantially all
of the Borrower's assets.
For purposes of the definition of Change of Control Event, "Person" shall have
the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act as
supplemented by Section 13(d)(3) of the Exchange Act; provided, however, that
Person shall not include the Borrower or any Wholly-Owned Subsidiary.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Letter of Credit" means a Letter of Credit that finances a
commercial transaction by paying part or all of the purchase price for goods
against delivery of a document of title covering such goods and any other
required documentation.
"Commitment Fee Rate" is defined in Section 4.1(a) hereof.
"Commitments" means the Revolving Credit Commitments, the Swing Line
Commitment and the L/C Commitment.
"Committed Loan" is defined in Section 1.1(a) hereof.
"Compliance Certificate" means a certificate in the form of Exhibit D
hereto.
"Consolidated Intangible Assets" means, as of the date of any
determination thereof, without duplication, the total amount of all such assets
of the Borrower and its Subsidiaries that
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constitute patents, tradenames, trademarks, copyrights, franchises, organization
expense, unamortized debt discount and expense, deferred assets (other than
deferred income taxes, prepaid insurance and prepaid taxes), the excess of fair
value of acquired net assets over cost, and any other assets as are properly
classified as "intangible assets" in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income (or net
loss) of the Borrower and its Subsidiaries for such period computed on a
consolidated basis in accordance with GAAP, but excluding (i) any income
recognized from the retirement of Indebtedness at a discount and (ii) any gain
recognized from the settlement or successful appeal of the Canadian products
liability case described on Schedule 7.5 as of the date hereof.
"Consolidated Stockholders' Equity" means, as of the date of any
determination thereof, the amount reflected as stockholders' equity upon a
consolidated balance sheet of the Borrower and its Subsidiaries in accordance
with GAAP.
"Consolidated Tangible Assets" means, as of the date of any
determination thereof, the total amount of all assets of the Borrower and its
Subsidiaries less Consolidated Intangible Assets.
"Consolidated Tangible Net Worth" means, as of the date of any
determination thereof, Consolidated Stockholders' Equity less Consolidated
Intangible Assets.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its Property is bound.
"Controlled Group" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control that, together with the Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Credit Documents" means this Agreement, the Notes, the Applications,
the Letters of Credit, and each Subsidiary Guarantee Agreement delivered to the
Agent pursuant to Section 9.1 hereof.
"Credit Event" means the advancing of any Loan, the continuation of or
conversion into a Eurocurrency Loan, or the issuance of, or extension of the
expiration date or increase in the amount of, any Letter of Credit.
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"Debt" means, for any Person, any Indebtedness of such Person only of
the types described in clauses (i) through (iv) and clause (vi) of the
definition of such term, other than reimbursement obligations in respect of
commercial letters of credit and obligations under leases that are not Capital
Leases.
"Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.
"Domestic Rate" is defined in Section 1.3(a) hereof.
"Domestic Rate Loan" means a Loan bearing interest prior to maturity
at a rate specified in Section 1.3(a) hereof.
"EBITA" means, for any period, Consolidated Net Income for such period
plus all amounts deducted in arriving at such Consolidated Net Income amount for
such period for (v) Interest Expense, (w) federal, state and local income tax
expense, (x) amortization of intangible assets, (y) increases in costs of goods
sold arising from write-ups of inventory acquired in a business combination
accounted for as a purchase in accordance with GAAP and (z) the lesser of (i)
$3,500,000 or (ii) charges taken against earnings for amounts accrued as a
liability in respect of the Canadian products liability case described on
Schedule 7.5 hereto as of the date hereof.
"EBITDA" means, for any period, EBITA for such period plus all amounts
deducted in arriving at such EBITA amount for such period for depreciation of
property, plant and equipment in accordance with GAAP.
"Effective Date" means the date on which the Agent has received signed
counterpart signature pages of this Agreement from each of the signatories (or,
in the case of a Bank, confirmation that such Bank has executed such a
counterpart and dispatched it for delivery to the Agent) and the documents
required by Section 8.1 hereof.
"Environmental and Health Laws" means any and all federal, state, local
and foreign statutes, laws, regulations, ordinances, judgments (to the extent
enforceable against the Borrower or any Subsidiary), permits and other
governmental rules or restrictions relating to human health, safety (including
without limitation occupational safety and health standards), or the environment
or to emissions, discharges or releases of pollutants, contaminants, hazardous
or toxic substances, wastes or any other controlled or regulated substance into
the environment, including without limitation ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
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pollutants, contaminants, hazardous or toxic substances, wastes or any other
controlled or regulated substance or the clean-up or other remediation thereof.
"ERISA" is defined in Section 7.8 hereof.
"Eurocurrency Loan" means a Loan bearing interest prior to maturity at
the rate specified in Section 1.3(b) hereof.
"Eurocurrency Margin" is defined in Section 1.3(b) hereof.
"Eurocurrency Reserve Percentage" is defined in Section 1.3(b) hereof.
"Event of Default" means any of the events or circumstances specified
in Section 10.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Domestic Rate in
Section 1.3(a) hereof.
"Fixed Rate Loans" shall mean Eurocurrency Loans and Swing Loans
bearing interest at Harris' Quoted Rate, unless context in which such term is
used shall otherwise require.
"GAAP" means subject to Section 6.2 hereof accounting principles as in
effect from time to time generally accepted in the United States, applied by the
Borrower and its Subsidiaries on a basis consistent with the preparation of the
Borrower's consolidated financial statements furnished to the Banks as described
in Section 7.4 hereof.
"Guarantor" means each Subsidiary of the Borrower that is a signatory
hereto or that executes and delivers to the Agent a Subsidiary Guarantee
Agreement in the form of Exhibit E hereto along with the accompanying closing
documents required by Section 9.1 hereof.
"Guaranty" by any Person means all obligations (other than endorsements
in the ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation (including, without limitation,
limited or full recourse obligations in connection with sales of receivables or
any other Property) of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, all obligations
incurred through
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an agreement, contingent or otherwise, by such Person: (i) to purchase such
Indebtedness or obligation or any Property or assets constituting security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of
such Indebtedness or obligation, or (y) to maintain working capital or other
balance sheet condition, or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation, or (iii) to lease
property or to purchase Securities or other property or services primarily for
the purpose of assuring the owner of such Indebtedness or obligation of the
ability of the primary obligor to make payment of the Indebtedness or
obligation, or (iv) otherwise to assure the owner of the Indebtedness or
obligation of the primary obligor against loss in respect thereof. For the
purpose of all computations made under this Agreement, the amount of a Guaranty
in respect of any obligation shall be deemed to be equal to the maximum
aggregate amount of such obligation or, if the Guaranty is limited to less than
the full amount of such obligation, the maximum aggregate potential liability
under the terms of the Guaranty.
"Harris" is defined in Section 2.1 hereof.
"Hazardous Material" means any substance or material which is hazardous
or toxic, and includes, without limitation, (a) asbestos, polychlorinated
biphenyls, dioxins and petroleum or its by-products or derivatives (including
crude oil or any fraction thereof) and (b) any other material or substance
regulated as "hazardous" or "toxic" pursuant to any Environmental and Health
Law.
"Indebtedness" means and includes, for any Person, all obligations of
such Person, without duplication, which are required by GAAP to be shown as
liabilities on its balance sheet, and in any event shall include all of the
following whether or not so shown as liabilities (i) obligations of such Person
for borrowed money, (ii) obligations of such Person representing the deferred
purchase price of property or services other than accounts payable or accruals
arising in the ordinary course of business on terms customary in the trade,
(iii) obligations of such Person evidenced by notes, acceptances, or other
instruments of such Person or arising out of standby letters of credit issued
for such Person's account, (iv) obligations (if assumed by such Person) secured
by Liens or payable out of the proceeds or production from Property now or
hereafter owned or acquired by such Person, (v) obligations (if not assumed by
such Person) secured by Liens or payable out of the proceeds or production from
Property now or hereafter owned or acquired by such Person, (vi) Capitalized
Lease Obligations of such Person and (vii) obligations for which such Person is
obligated pursuant to a Guaranty.
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"Interest Coverage Ratio" means, for any period of four consecutive
fiscal quarters of the Borrower ending with the most recently completed such
fiscal quarter, the ratio of EBITA to Interest Expense for such period;
provided, however, that for the fiscal quarters ending March 30, 1996, June 29,
1996 and September 28, 1996, the Interest Coverage Ratio shall be determined for
the period commencing December 31, 1995 through the end of the
most-recently-ended fiscal quarter.
"Interest Expense" means, for any period, the sum of all interest
charges of the Borrower and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP.
"Interest Period" is defined in Section 3.1 hereof.
"L/C Commitment" means $20,000,000, as reduced pursuant to the terms
hereof.
"L/C Documents" means the Letters of Credit, any draft or other
document presented in connection with a drawing thereunder, the Applications and
this Agreement.
"L/C Obligations" means the aggregate undrawn face amounts of all
outstanding Letters of Credit and all unpaid Reimbursement Obligations.
"Lending Office" is defined in Section 11.4 hereof.
"Letter of Credit" is defined in Section 1.2(a) hereof.
"LIBOR" is defined in Section 1.3(b) hereof.
"Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, including, but not
limited to, the security interest or lien arising from a mortgage, encumbrance,
pledge, conditional sale, security agreement or trust receipt, or a lease,
consignment or bailment for security purposes. The term "Lien" shall also
include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purposes of this definition, a Person
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement, Capital Lease or other arrangement
pursuant to which title to the Property has been retained by or vested in some
other Person for security purposes, and such retention of title shall constitute
a "Lien."
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"Loan" means and includes Committed Loans and Swing Loans, and each of
them singly, and the term "type" of Loan refers to its status as a Revolving
Loan or a Swing Loan, or if a Revolving Loan, to its status as a Domestic Rate
Loan or Eurocurrency Loan.
"Material Subsidiary" shall mean, at any particular time, any
Subsidiary of the Borrower whose assets (including the consolidated assets of
Subsidiaries of such Subsidiary) represent more than five percent (5%) of the
total assets of the Borrower and its Subsidiaries, on a consolidated basis, at
such time.
"North American Subsidiary" means (i) each Subsidiary of the Borrower
which is organized under the laws of the United States or any State thereof,
(ii) each Subsidiary of the Borrower which is organized under the laws of Canada
or any Province thereof and (iii) each Subsidiary of the Borrower of which
66-2/3% of the annual gross revenues for the current or any subsequent fiscal
year of the Borrower or total assets as of the close of any such year (in each
case determined on a consolidated basis with that Subsidiary's Subsidiaries) are
located or derived from operations within the United States and Canada.
"Note" means and includes Revolving Credit Notes and the Swing Line
Note, unless the context in which such term is used shall otherwise require.
"Obligations" means all fees payable hereunder, all obligations of the
Borrower to pay principal or interest on Loans and L/C Obligations, and all
other payment obligations of the Borrower arising under or in relation to any
Credit Document.
"Original Dollar Amount" means the amount of any Obligation denominated
in U.S. Dollars and, in relation to any Loan denominated in the Alternative
Currency, the U.S. Dollar Equivalent of such Loan on the day it is advanced or
continued for an Interest Period.
"Overseas Subsidiary" means each Subsidiary that is not a North
American Subsidiary.
"Participating Bank" is defined in Section 1.2(d) hereof.
"Percentage" means, for each Bank, the percentage of the Revolving
Credit Commitments represented by such Bank's Revolving Credit Commitment or, if
the Revolving Credit Commitments have been terminated, the percentage held by
such Bank (including through participation interests in L/C Obligations) of the
aggregate principal amount of all outstanding Obligations.
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"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization or any other
entity or organization, including a government or any agency or political
subdivision thereof.
"Plan" means at any time an employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code that is either (i) maintained by a member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"PBGC" is defined in Section 7.8 hereof.
"Pricing Date" means, for any fiscal quarter of the Borrower ended
after the date hereof, the thirtieth day of the calendar month (or last day of
such calendar month if such month has no thirtieth day) most closely
corresponding to the latest date by which the Borrower is required to deliver a
Compliance Certificate for such fiscal quarter (and in the case of the fourth
such fiscal quarter, such latest date for the first such Compliance Certificate)
pursuant to Section 9.6(b); provided, however, that the first Pricing Date shall
be February 15, 1997. The Eurodollar Margin and Commitment Fee Rate established
on a Pricing Date shall remain in effect until the next Pricing Date. If the
Borrower has not delivered a Compliance Certificate by the date such Compliance
Certificate is required to be delivered under Section 9.6(b), until a Compliance
Certificate is delivered before the next Pricing Date, the Eurodollar Margin
shall be 1.25% per annum and the Commitment Fee Rate shall be 0.25% per annum.
If the Borrower subsequently delivers such a Compliance Certificate before the
next Pricing Date, the Eurodollar Margin and Commitment Fee Rate established by
such late delivered Compliance Certificate shall take effect from the date of
delivery until the next Pricing Date. In all other circumstances, the Eurodollar
Margin and Commitment Fee Rate established by a Compliance Certificate shall be
in effect from the Pricing Date that occurs immediately after the end of the
Borrower's fiscal quarter covered by such Compliance Certificate until the next
Pricing Date.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, whether now owned or
hereafter acquired.
"Reimbursement Obligation" is defined in Section 1.2(c) hereof.
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"Required Banks" means, as of the date of determination thereof, Banks
holding at least 61% of the Percentages.
"Revolving Credit Note" is defined in Section 1.7(a) hereof.
"SEC" means the Securities and Exchange Commission.
"Security" has the same meaning as in Section 2(l) of the Securities
Act of 1933, as amended.
"Set-Off" is defined in Section 14.7 hereof.
"Standby Letter of Credit" means a Letter of Credit that is not a
Commercial Letter of Credit.
"Sub Debt" means the $86,250,000 in 4 1/4% subordinated convertible
debentures issued and sold by the Borrower pursuant to its Indenture dated
November 15, 1993 with Harris as trustee.
"Subsidiary" means, as to the Borrower, any corporation or other entity
of which more than fifty percent (50%) of the outstanding stock or comparable
equity interests having ordinary voting power for the election of the Board of
Directors of such corporation or similar governing body in the case of a
non-corporation (irrespective of whether or not, at the time, stock or other
equity interests of any other class or classes of such corporation or other
entity shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned by the Borrower or by
one or more of its Subsidiaries.
"Subsidiary Guarantee Agreement" means a letter to the Agent in the
form of Exhibit E hereto executed by a Subsidiary whereby it acknowledges it is
party hereto as a Guarantor under Section 9.1 hereof and also in the case of any
North American Subsidiary not organized under the laws of the United States or
any State thereof, such other form of Guaranty as shall be reasonably acceptable
to the Required Banks.
"Swing Line Commitment" means $5,000,000, as reduced pursuant to the
terms hereof.
"Termination Date" means December 31, 1999, subject to any extension of
such date pursuant to Section 4.2 hereof.
"Total Funded Debt" means all Debt of the Borrower and its Subsidiaries
determined without duplication on a consolidated basis.
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"Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable accrued benefits under such Plan exceeds (ii) the fair market
value of all Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the Controlled Group to
the PBGC or the Plan under Title IV of ERISA.
"U.S. Dollars" and "$" each means the lawful currency of the United
States of America.
"U.S. Dollar Equivalent" means the amount of U.S. Dollars which would
be realized by converting the Alternative Currency into U.S. Dollars in the spot
market at the exchange rate quoted by the Agent, at approximately 11:00 a.m.
(London time) two Business Days prior to the date on which a computation thereof
is required to be made, to major banks in the interbank foreign exchange market
for the purchase of U.S. Dollars for such Alternative Currency.
"Unused Commitments" means, at any time, the difference between the
Revolving Credit Commitments then in effect and the aggregate outstanding
principal amount of Loans (whether Committed Loans or Swing Loans) and L/C
Obligations.
"Voting Stock" of any Person means capital stock of any class or
classes or other equity interests (however designated) having ordinary voting
power for the election of directors or similar governing body of such Person,
other than stock or other equity interests having such power only by reason of
the happening of a contingency.
"Welfare Plan" means a "welfare plan", as defined in Section 3(1) of
ERISA.
"Wholly-Owned" when used in connection with any Subsidiary of the
Borrower means a Subsidiary of which all of the issued and outstanding shares of
stock or other equity interests (other than directors' qualifying shares as
required by law) shall be owned by the Borrower and/or one or more of its
Wholly-Owned Subsidiaries.
Section 6.2. Interpretation. The foregoing definitions shall be
equally applicable to both the singular and plural forms of the terms defined.
All references to times of day in this Agreement shall be references to Chicago,
Illinois time unless otherwise specifically provided. Where the character or
amount of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of
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this Agreement, the same shall be done in accordance with GAAP, to the extent
applicable, except where such principles are inconsistent with the specific
provisions of this Agreement; provided, however, that if any change in GAAP
would affect (or would result in a change in the method of calculation of) any
of the covenants set forth in Section 9 or any definition related thereto, then
the Borrower, the Agent and the Banks will negotiate in good faith to amend in
accordance with the terms of this Agreement all such covenants and definitions
as would be affected by such change in GAAP to the extent necessary to maintain
the economic terms of such covenants as in effect under this Agreement
immediately prior to giving effect to such changes in GAAP; provided further,
however, that until the amendment of such covenants and definitions shall have
been agreed upon by the Borrower and the Required Banks, the covenants and
definitions in effect immediately prior to such amendment shall remain in effect
and any determination of compliance with any such covenant shall be construed in
accordance with GAAP as in effect immediately prior to such change in GAAP and
consistently applied.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
The Borrower hereby represents and warrants to each Bank as to itself
and, where the following representations and warranties apply to Subsidiaries,
as to each of its Subsidiaries, as follows:
Section 7.1. Corporate Organization and Authority. The Borrower is
duly organized and existing in good standing under the laws of the State of
Delaware; has all necessary corporate power to carry on its present business;
and is duly licensed or qualified and in good standing in each jurisdiction in
which the nature of the business transacted by it or the nature of the Property
owned or leased by it makes such licensing, qualification or good standing
necessary and in which the failure to be so licensed, qualified or in good
standing would materially and adversely affect the business, operations,
Property or financial condition of the Borrower and its Subsidiaries taken as a
whole.
Section 7.2. Subsidiaries. Schedule 7.2 (as updated from time to
time pursuant to Section 9.1) hereto identifies each Subsidiary, the
jurisdiction of its incorporation, whether it is a North American or Overseas
Subsidiary, the percentage of issued and outstanding shares of each class of its
capital stock owned by the Borrower and the Subsidiaries and, if such percentage
is not 100% (excluding directors' qualifying shares as required by law), a
description of each class of its authorized capital stock and the number of
shares of each class issued and outstanding. Each Subsidiary is duly
incorporated and existing in good standing as a corporation under the laws of
the jurisdiction of its incorporation, has all necessary corporate power to
carry on
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its present business, and if applicable, is duly licensed or qualified and in
good standing in each jurisdiction in which the nature of the business
transacted by it or the nature of the Property owned or leased by it makes such
licensing or qualification necessary and in which the failure to be so licensed
or qualified would have a material adverse effect on the business, operations,
Property or financial condition of the Borrower and its Subsidiaries taken as a
whole. All of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and outstanding and fully paid and nonassessable
except as set forth on Schedule 7.2 hereto. All such shares owned by the
Borrower are owned beneficially, and of record, free of any Lien. Each
Subsidiary is a Guarantor except (i) Overseas Subsidiaries and (ii) those
Subsidiaries established or acquired after the date hereof that the Required
Banks agree pursuant to Section 9.1 hereof need not be Guarantors.
Section 7.3. Corporate Authority and Validity of Obligations. The
Borrower has full corporate power and authority to enter into this Agreement and
the other Credit Documents to which it is a party, to make the borrowings herein
provided for, to issue its Notes in evidence thereof, to apply for the issuance
of the Letters of Credit, and to perform all of its obligations under the Credit
Documents to which it is a party. Each Guarantor has full right and authority to
enter into this Agreement as a signatory hereto or pursuant to a Subsidiary
Guarantee Agreement and to perform all of its obligations hereunder. Each Credit
Document to which it is a party has been duly authorized, executed and delivered
by the Borrower and each Guarantor and constitutes valid and binding obligations
of the Borrower and each Guarantor enforceable in accordance with its terms,
subject to general principles of equity and bankruptcy, reorganization,
insolvency and similar laws of general application to enforcement of creditors'
rights. No Credit Document, nor the performance or observance by the Borrower or
any Guarantor of any of the matters or things therein provided for, contravenes
any provision of law or any charter or by-law provision of the Borrower or any
Guarantor or (individually or in the aggregate) any material Contractual
Obligation of or affecting the Borrower or any Guarantor or any of their
respective Properties or results in or requires the creation or imposition of
any Lien on any of the Properties or revenues of the Borrower or any Guarantor.
Section 7.4. Financial Statements. All financial statements
heretofore delivered to the Banks showing historical performance of the Borrower
for each of the Borrower's fiscal years ending on or before July 1, 1995, and
the interim financial statements heretofore delivered to the Banks showing
historical performance of the Borrower for the six months ending on December 30,
1995, have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent, except as otherwise noted therein,
with that of the previous fiscal year. Each of such financial statements fairly
presents on a
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consolidated basis the financial condition of the Borrower and its Subsidiaries
as of the dates thereof and the results of operations for the periods covered
thereby. The Borrower and its Subsidiaries have no contingent liabilities
reasonably expected to be material other than those disclosed in such financial
statements referred to in this Section 7.4 or in comments or footnotes thereto,
or in any report supplementary thereto, heretofore furnished to the Banks. Since
December 30, 1995, there has been no material adverse change in the business,
operations, Property or financial condition of the Borrower and its Subsidiaries
on a consolidated basis.
Section 7.5. No Litigation; No Labor Controversies. (a) Except as
set forth on Schedule 7.5 (as amended from time to time in accordance with the
provisions hereof) or in the Borrower's Forms 10-Q and 10-K filed with the SEC
or its other filings with the SEC, there is no litigation or governmental
proceeding pending, or to the knowledge of the Borrower or any Guarantor
threatened, against the Borrower or any Subsidiary which could be reasonably
expected to be adversely determined and if adversely determined, would
(individually or in the aggregate) materially adversely affect the business,
operations, Property or financial condition of the Borrower and its Subsidiaries
taken as a whole.
(b) Except as set forth in the Borrower's Forms 10-Q and 10-K filed
with the SEC or its other filings with the SEC, there are no labor controversies
pending or, to the best knowledge of the Borrower or any Guarantor, threatened
against the Borrower or any Subsidiary which could (insofar as the Borrower may
reasonably foresee) materially adversely affect the business, operations,
Property or financial condition of the Borrower and its Subsidiaries taken as a
whole.
Section 7.6. Taxes. The Borrower and its Subsidiaries have filed
all United States federal tax returns, and all other tax returns, required to be
filed and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower or any Subsidiary, except such taxes, if
any, as are being contested in good faith and for which adequate reserves have
been provided and except where the failure to file is being promptly remedied
and is not reasonably expected to result in any liability (other than the
liability recognized as of the date hereof on the most recent financial
statements of the Borrower referred to in Section 7.4 hereof for tax liability
on account of currently unfiled tax returns of American Recreation Company, Inc.
and its Affiliates) material in any respect to the Borrower and its Subsidiaries
taken as a whole. No notices of tax liens have been filed and no claims are
being asserted concerning any such taxes, which liens or claims are material to
the financial condition of the Borrower and its Subsidiaries on a consolidated
basis taken as a whole. To the Borrower's knowledge, the charges, accruals and
reserves on the books of the Borrower and
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its Subsidiaries for any taxes or other governmental charges are adequate.
Section 7.7. Approvals. No authorization, consent, license,
exemption, filing or registration with any court or governmental department,
agency or instrumentality, nor any approval or consent of the stockholders of
the Borrower or any Subsidiary or from any other Person, is necessary for the
valid execution, delivery or performance by the Borrower or any Subsidiary of
any Credit Document to which it is a party.
Section 7.8. ERISA. With respect to each Plan, the Borrower and
each other member of the Controlled Group has fulfilled its obligations under
the minimum funding standards of and is in compliance in all material respects
with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and with the Code to the extent applicable to it and has not incurred any
liability to the Pension Benefit Guaranty Corporation ("PBGC") or a Plan under
Title IV of ERISA other than a liability to the PBGC for premiums under Section
4007 of ERISA. Neither the Borrower nor any Subsidiary has any contingent
liabilities for any post-retirement benefits under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of Title I of ERISA.
Section 7.9. Government Regulation. Neither the Borrower nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company", or a "Subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "Subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 7.10. Margin Stock. Neither the Borrower nor any Subsidiary
is engaged principally, or as one of its primary activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock ("margin
stock" to have the same meaning herein as in Regulation U of the Board of
Governors of the Federal Reserve System). The Borrower will not use the proceeds
of any Loan or Letter of Credit in a manner that violates any provision of
Regulation U or X of the Board of Governors of the Federal Reserve System.
Section 7.11. Licenses and Authorizations; Compliance with
Environmental and Health Laws. (a) Except as set forth on Schedule 7.11 (as
amended from time to time in accordance with the provisions hereof), to the
Borrower's knowledge, the Borrower and each of its Subsidiaries has all
necessary licenses, permits and governmental authorizations to own and operate
its Properties and to carry on its business as currently conducted except to the
extent the failure to maintain such licenses, permits and authorizations would
not have a material adverse effect on the
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Property, business or operations of the Borrower and its Subsidiaries taken as a
whole.
(b) To the best of the Borrower's and each Guarantor's knowledge, the
business and operations of the Borrower and each Subsidiary comply in all
respects with all applicable Environmental and Health Laws, except where the
failure to so comply would not (individually or in the aggregate) have a
material adverse effect on the Property, business or operations of the Borrower
and its Subsidiaries taken as a whole.
(c) Except as set forth on Schedule 7.11 (as amended from time to
time in accordance with the provisions hereof), neither the Borrower nor any
Subsidiary has received any written notice, citation, order, complaint, claim or
demand from any governmental entity or in connection with any court proceeding
which could reasonably be expected to have a material adverse effect on the
Property, business or operations of the Borrower and its Subsidiaries taken as a
whole claiming that: (i) the Borrower or any Subsidiary has violated, or is
about to violate, any Environmental and Health Law; (ii) there has been a
release, or there is a threat of release, into the environment of Hazardous
Materials from the Borrower's or any Subsidiary's Property; (iii) the Borrower
or any Subsidiary may be or is liable, in whole or in part, for the costs of
cleaning up, remediating or responding to a release of Hazardous Materials; or
(iv) any of the Borrower's or any Subsidiary's Property are subject to a Lien in
favor of any governmental entity for any liability, costs or damages, under any
Environmental and Health Law arising from, or costs incurred by such
governmental entity in response to, a release of a Hazardous Materials.
Section 7.12. Ownership of Property; Liens. The attached Schedule
7.12 (as the Borrower may supplement or amend it from time to time) lists all
principal real property locations used by the Borrower or any Subsidiary in the
conduct of their respective businesses. The Borrower and each Subsidiary has
good record and marketable title in fee simple to, or valid leasehold interests
in, all such real property, as specified in Schedule 7.12, and good title to or
valid leasehold interests in all its other Property. The Borrower's interest in
the real property listed on Schedule 7.12 is not subject to any Lien or
Capitalized Lease Obligation except as set forth therein, and none of the
Borrower's or any Subsidiary's other Property is subject to any Lien, except as
permitted in Section 9.9.
Section 7.13. No Burdensome Restrictions; Compliance with
Agreements. Neither the Borrower nor any Subsidiary is (a) party or subject to
any law, regulation, rule or order, or any Contractual Obligation that
(individually or in the aggregate) materially adversely affects the business,
operations, Property or financial condition of the Borrower and its Subsidiaries
taken
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as a whole or (b) in default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any agreement to
which it is a party, which default materially adversely affects the business,
operations, Property or financial condition of the Borrower and its Subsidiaries
taken as a whole.
Section 7.14. Full Disclosure. Taken as a whole, all written
information heretofore furnished by the Borrower or any Guarantor to the Agent
or any Bank for purposes of or in connection with the Credit Documents or any
transaction contemplated thereby is, and all such written information hereafter
furnished by the Borrower or any Guarantor to the Agent or any Bank will be,
true and accurate in all material respects and not misleading on the date as of
which such information is stated or certified; provided, however, that the
projections and pro forma financial information contained in such materials are,
and will be, based on good faith estimates and assumptions believed by the
Borrower to be reasonable as of the date such projections and pro forma
financial information are stated. To the Borrower's knowledge, the Borrower has
disclosed to the Banks in writing any and all facts that materially and
adversely affect the business, operations, or financial condition of the
Borrower and its Subsidiaries taken as a whole or the ability of the Borrower or
any Guarantor to perform its obligations under the Credit Documents.
Section 7.15. No Other Domestic Bank Debt At Closing. After
disbursement of the initial Borrowing of Committed Loans hereunder, the Borrower
and its North American Subsidiaries will not as of the date of such disbursement
be directly obligated as borrower on any Indebtedness for working capital
purposes of the type described in clause (i) of the definition of such term
aggregating in excess of $1,500,000.
SECTION 8. CONDITIONS PRECEDENT.
The obligation of each Bank to advance, continue, or convert any Loan
(whether a Committed Loan or Swing Loan, but in any event other than the
continuation of, or conversion into, a Domestic Rate Loan), or of the Agent to
issue, extend the expiration date (including by not giving notice of
non-renewal) of or increase the amount of any Letter of Credit, shall be subject
to the following conditions precedent:
Section 8.1. Initial Credit Event. Before or concurrently with
the initial Credit Event:
(a) The Agent shall have received for each Bank the favorable
written opinion of Sidley & Austin, counsel to the Borrower and each
North American Subsidiary, in
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substantially the form attached hereto as Exhibit F-1 and the favorable
written opinion of Goodman, Phillips & Vineberg in substantially the
form attached hereto as Exhibit F-2 as to certain matters of Canadian
law and the favorable written opinion of David Rowley, Esq., in-house
general counsel to the Borrower, in substantially the form attached
hereto as Exhibit F-3;
(b) The Agent shall have received for each Bank copies of (i)
the Certificate of Incorporation, together with all amendments, and a
certificate of good standing, for the Borrower, both certified as of a
date not earlier than 20 days prior to the date hereof by the
appropriate governmental officer of the Borrower's jurisdiction of
incorporation and (ii) the Borrower's bylaws (or comparable constituent
documents) and any amendments thereto, certified in each instance by
its Secretary or an Assistant Secretary;
(c) The Agent shall receive for each Bank copies of each
Guarantor's Certificate of Incorporation and bylaws (or comparable
constituent documents) and any amendments thereto, certified in each
instance by its Secretary or Assistant Secretary;
(d) The Agent shall have received for each Bank copies of
resolutions of the Borrower's and each Guarantor's Board of Directors
authorizing the execution and delivery of the Credit Documents to which
it is a party on the Effective Date and the consummation of the
transactions contemplated thereby together with specimen signatures of
the persons authorized to execute such documents on the Borrower's or
such Guarantor's behalf, all certified in each instance by its
Secretary or Assistant Secretary;
(e) The Agent shall have received for each Bank such Bank's
duly executed Revolving Note of the Borrower dated the date hereof and
otherwise in compliance with the provisions of Section 1.7(a) hereof
and also received Harris' duly executed Swing Line Note of the Borrower
dated the date hereof;
(f) The Agent shall have received for each Bank a list of the
Borrower's Authorized Representatives;
(g) All legal matters incident to the execution and delivery
of the Credit Documents shall be satisfactory to the Banks; and
(h) The Agent shall have received a certificate by the chief
financial officer or corporate controller of the Borrower, stating that
on the date of such initial Credit
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Event no Default or Event of Default has occurred and is continuing.
Section 8.2. All Credit Events. As of the time of each Credit
Event hereunder:
(a) In the case of a Borrowing, the Agent shall have received
the notice required by Section 1.5 hereof (including any deemed notice
under Section 1.5(c)), in the case of a Swing Loan, Harris shall have
received the notice required in Section 2.3 hereof, in the case of the
issuance of any Letter of Credit the Agent shall have received a duly
completed Application for a Letter of Credit and, in the case of an
extension or increase in the amount of a Letter of Credit, a written
request therefor, in a form acceptable to the Agent;
(b) Each of the representations and warranties set forth in
Section 7 hereof shall be and remain true and correct in all material
respects as of said time, taking into account any amendments to such
Section (including without limitation any amendments to the Schedules
referenced therein) made after the date of this Agreement in accordance
with its provisions, except that if any such representation or warranty
relates solely to an earlier date it need only remain true as of such
date;
(c) The Borrower's request for such Credit Event shall be in
full compliance with all of the relevant terms and conditions of
Sections 1, 2 and 3 hereof, and no Default or Event of Default shall
have occurred and be continuing or would occur as a result of such
Credit Event; and
(d) Such Credit Event shall not violate any order, judgment
or decree of any court or other authority or any provision of law or
regulation applicable to any Bank (including, without limitation,
Regulation U of the Board of Governors of the Federal Reserve System).
Each request for a Borrowing hereunder and each request for the
issuance of, increase in the amount of, or extension of the expiration date of,
a Letter of Credit shall be deemed to be a representation and warranty by the
Borrower on the date of such Credit Event as to the facts specified in
paragraphs (b) and (c) of this Section 8.2.
SECTION 9. COVENANTS.
The Borrower covenants and agrees that, so long as any Loan or any L/C
Obligation is outstanding hereunder, or any Commitment
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is available to or in use by the Borrower hereunder, except to the extent
compliance in any case is waived in writing by the Required Banks:
Section 9.1. Corporate Existence; Subsidiaries. The Borrower shall,
and shall cause each of its Subsidiaries to, preserve and maintain its corporate
existence, subject to the provisions of Section 9.12 hereof. As a condition to
establishing or acquiring or maintaining any North American Subsidiary, unless
the Required Banks otherwise agree, the Borrower shall (i) cause such Subsidiary
to execute a Subsidiary Guarantee Agreement, (ii) cause such Subsidiary to
deliver documentation similar to that described in Section 8.1(a), Section
8.1(c) and Section 8.1(d) hereof relating to the authorization for, execution
and delivery of, and validity of such Subsidiary's obligations as a Guarantor
hereunder and under the Subsidiary Guarantee Agreement in form and substance
satisfactory to the Required Banks and (iii) deliver an updated Schedule 7.2 to
reflect the new Subsidiary.
Section 9.2. Maintenance. The Borrower will maintain, preserve and
keep its plants, properties and equipment deemed by it necessary to the proper
conduct of its business in reasonably good repair, working order and condition
(ordinary wear and tear excepted) and will from time to time make all reasonably
necessary repairs, renewals, replacements, additions and betterments thereto so
that at all times such plants, properties and equipment shall be reasonably
preserved and maintained, and the Borrower will cause each of its Subsidiaries
to do so in respect of Property owned or used by it; provided, however, that
nothing in this Section 9.2 shall prevent the Borrower or a Subsidiary from
discontinuing the operation or maintenance of any such Properties if such
discontinuance is, in the reasonable judgment of the Borrower, desirable in the
conduct of its business or the business of its Subsidiary.
Section 9.3. Taxes. The Borrower will duly pay and discharge, and
will cause each of its Subsidiaries duly to pay and discharge, all material
taxes, rates, assessments, fees and governmental charges upon or against it or
against its Properties, in each case before the same becomes delinquent and
before penalties accrue thereon, unless and to the extent that the same is being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP have been provided therefor on the books of the Borrower.
Section 9.4. ERISA. The Borrower will, and will cause each of its
Subsidiaries to, promptly pay and discharge all obligations and liabilities
arising under ERISA of a character which if unpaid or unperformed might result
in the imposition of a Lien against any of its properties or assets and will
promptly notify the Agent of (i) the occurrence of any Reportable Event
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(as defined in Section 4043 of ERISA) affecting a Plan, other than any such
event of which the PBGC has waived notice by regulation, (ii) receipt of any
notice from PBGC of its intention to seek termination of any Plan or appointment
of a trustee therefor, (iii) its or any of its Subsidiaries' intention to
terminate or withdraw from any Plan, and (iv) the occurrence of any event
affecting any Plan which could result in the incurrence by the Borrower or any
of its Subsidiaries of any material liability, fine or penalty, or any material
increase in the contingent liability of the Borrower or any of its Subsidiaries
under any post-retirement Welfare Plan benefit. The Agent will promptly
distribute to each Bank any notice it receives from the Borrower pursuant to
this Section 9.4.
Section 9.5. Insurance. The Borrower will maintain, and will cause
each of its Subsidiaries to maintain, insurance with reputable and responsible
insurance companies, in each case in such amounts and covering such risks as are
necessary or appropriate for the business and operations of the Borrower and its
Subsidiaries from time to time, as determined in good faith by the management of
the Borrower or such Subsidiary in its prudent business judgment; provided,
however, that the insurance so maintained is in no event less extensive in any
material respect in amount or scope of coverage than the insurance so maintained
by the Borrower and its Subsidiaries as of the date hereof to the extent
insurance of at least comparable coverage to that currently in place is then
available at reasonable rates. The Borrower will upon request of any Bank
furnish to such Bank a summary setting forth the nature and extent of the
insurance maintained pursuant to this Section 9.5.
Section 9.6. Financial Reports and Other Information. (a) The
Borrower will maintain a system of accounting in accordance with GAAP and will
furnish to the Banks and their respective duly authorized representatives such
information respecting the business and financial condition of the Borrower and
its Subsidiaries as the Agent may reasonably request (each Bank to have the
right to require the Agent make such request); and without any request, the
Borrower will furnish each of the following to the Agent, with sufficient copies
for each Bank, (which the Agent shall promptly distribute to each Bank):
(i) within 50 days after the end of each of the first three
quarterly fiscal periods of the Borrower, a copy of the Borrower's Form
10-Q Report filed with the SEC;
(ii) within 95 days after the end of each fiscal year of the
Borrower, a copy of the Borrower's Form 10-K Report filed with the SEC,
prepared by the Borrower and containing as an Exhibit thereto the
Borrower's financial statements for such fiscal year as certified
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by independent public accountants of recognized national standing
selected by the Borrower with such accountants' unqualified opinion to
the effect that the financial statements have been prepared in
accordance with GAAP and present fairly in all material respects in
accordance with GAAP the consolidated financial position of the
Borrower and its Subsidiaries as of the close of such fiscal year and
the results of their operations and cash flows for the fiscal year then
ended and that an examination of such accounts in connection with such
financial statements has been made in accordance with generally
accepted auditing standards and, accordingly, such examination included
such tests of the accounting records and such other auditing procedures
as were considered necessary in the circumstances;
(iii) within 60 days after the end of each fourth quarterly
fiscal period of the Borrower, copies of the consolidated balance sheet
of the Borrower and its Subsidiaries as of the close of such period and
the consolidated statement of income of the Borrower and its
Subsidiaries for such period, all of the foregoing prepared by the
Borrower in reasonable detail generally in accordance with GAAP and
certified by the Borrower's chief financial officer or corporate
controller as fairly presenting the financial condition as at the dates
thereof and the results of operations for the periods covered thereby;
(iv) not later than 10 days after the receipt thereof, a copy
of any management letters on internal accounting controls for the
Borrower prepared by its independent public accountants; and
(v) promptly after the sending or filing thereof, copies of
all proxy statements, financial statements and reports the Borrower
sends to its shareholders, and copies of all other regular, periodic
and special reports (other than SEC Form 3, Form 4, Form 5, Form S-8 or
similar administrative reports) and all registration statements the
Borrower files with the SEC or any successor thereto, or with any
national securities exchanges; and
(vi) updated Schedules 7.2, 7.5 and 7.11 along with the
financial statements delivered under subsection (i) or (ii) above, as
applicable, for any calendar quarter during which there is a change in
any of the facts specified in such Schedules 7.2, 7.5 and 7.11 hereto,
as then most recently updated.
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(b) Each financial statement furnished to the Agent pursuant to
subsection (i), (ii) or (iii) of this Section 9.6 shall be accompanied by (A) a
written certificate signed by the Borrower's chief financial officer or
corporate controller to the effect that no Default or Event of Default has
occurred during the period covered by such statements or, if any such Default or
Event of Default has occurred during such period, setting forth a description of
such Default or Event of Default and specifying the action, if any, taken by the
Borrower to remedy the same and containing a description of new Debt (other than
credit extended under this Agreement) aggregating in excess of $10,000,000
incurred by the Borrower or any Subsidiary during any such period; and (B) a
Compliance Certificate in the form of Exhibit D hereto showing the Borrower's
compliance with the covenants set forth in Sections 9.14(k), 9.15, 9.16 and 9.17
hereof. The Agent shall promptly after its receipt furnish copies of such
certificates to each Bank. In the event the Borrower is no longer required to
file Form 10-Q and 10-K Reports with the SEC, the Borrower will nevertheless
furnish to the Banks at the time hereinabove set forth all the financial and
other information that would have comprised such filings.
(c) The Borrower will promptly (and in any event within three
Business Days after an executive officer of the Borrower has knowledge thereof)
give notice to the Agent (which shall in turn provide a copy thereof to each
Bank):
(i) of the occurrence of any Change of Control Event, Default
or Event of Default;
(ii) of any default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries, except for a
default or event of default which is not reasonably expected to have a
material adverse effect on the business, operations, Property or
financial or other condition of the Borrower and its Subsidiaries on a
consolidated basis;
(iii) of a material adverse change in the business,
operations, Property or financial condition of the Borrower and its
Subsidiaries on a consolidated basis; and
(iv) of any litigation or governmental proceeding of the type
described in Section 7.5 hereof.
Section 9.7. Bank Inspection Rights. Upon reasonable notice from
the Agent, the Borrower will permit the Agent (and such Persons as the Agent may
designate, which may include representatives of any one or more Banks if they
accompany the Agent) during normal business hours to visit and inspect, under
the Borrower's guidance, any of the properties of the Borrower or
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any of its Subsidiaries, to examine all of their books of account, records,
reports and other papers, to make copies and extracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective officers,
employees and, with the consent of Borrower (which consent shall not be
unreasonably withheld), independent public accountants (and by this provision
the Borrower authorizes such accountants to discuss with the Banks (and such
Persons as any Bank may designate) the finances and affairs of the Borrower and
its Subsidiaries) all at such reasonable times and as often as may be reasonably
requested. The exercise of rights under this Section shall be at the Borrower's
expense only to the extent taken after an Event of Default. Nothing contained in
this Section 9.7 shall be construed as an express or implied waiver or
forfeiture by the Borrower of any accountant-client or other privilege belonging
to or accruing to the Borrower and all information disclosed to any Bank
pursuant to this Section or inspected by any such Bank shall be subject to the
provisions of Section 14.21 of this Agreement.
Section 9.8. Conduct of Business. Neither the Borrower nor any
Subsidiary will engage in any line of business if, as a result, the general
nature of the business (that is, the manufacture or sale of sporting goods) of
the Borrower and its Subsidiaries taken as a whole would be substantially
changed from that conducted on the date hereof.
Section 9.9. Liens. The Borrower will not, and will not permit any
of its North American Subsidiaries to, create, incur, permit to exist or to be
incurred any Lien of any kind on any Property owned by the Borrower or any North
American Subsidiary; provided, however, that this Section 9.9 shall not apply to
nor operate to prevent:
(a) Liens arising by operation of law in connection with
worker's compensation, unemployment insurance, social security
obligations, taxes, assessments, statutory obligations or other similar
charges, good faith deposits, pledges or Liens in connection with bids,
tenders, contracts or leases to which the Borrower or any Subsidiary is
a party (other than contracts for borrowed money), or other deposits
required to be made in the ordinary course of business; provided that
in each case the obligation secured is not overdue or, if overdue, is
being contested in good faith by appropriate proceedings and for which
reserves in conformity with GAAP have been provided on the books of the
Borrower;
(b) mechanics', workmen's, materialmen's, landlords',
carriers' or other similar Liens arising in the ordinary course of
business (or deposits to obtain the release of such Liens) securing
obligations not due or, if due, being contested in good faith by
appropriate proceedings and for
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which reserves in conformity with GAAP have been provided on the books
of the Borrower;
(c) Liens for taxes or assessments or other government
charges or levies on the Borrower or any Subsidiary of the Borrower or
their respective Properties, not yet due or delinquent, or which can
thereafter be paid without penalty, or which are being contested in
good faith by appropriate proceedings and for which reserves in
conformity with GAAP have been provided on the books of the Borrower;
(d) Liens arising out of judgments or awards against the
Borrower or any Subsidiary of the Borrower, or in connection with
surety or appeal bonds in connection with bonding such judgments or
awards, the time for appeal from which or petition for rehearing of
which shall not have expired or with respect to which the Borrower or
such Subsidiary shall be prosecuting an appeal or proceeding for
review, and with respect to which it shall have obtained a stay of
execution pending such appeal or proceeding for review, provided that
the aggregate amount of liabilities (including interest and penalties,
if any) of the Borrower and its Subsidiaries at any time outstanding
secured by such Liens shall not exceed $10,000,000; and
(e) Liens upon any Property acquired by the Borrower or any
Subsidiary of the Borrower to secure any Indebtedness of the Borrower
or any Subsidiary incurred at the time of the acquisition of such
Property to finance the purchase price of such Property, provided that
any such Lien shall apply only to the Property that was so acquired and
the aggregate principal amount of Indebtedness at any time outstanding,
secured by such Liens, when taken together with the aggregate amount of
liabilities and indebtedness secured by Liens as permitted under
Sections 9.9(h) and (k), shall not exceed 10% of the Borrower's
Consolidated Stockholder's Equity; and
(f) minor survey exceptions or minor encumbrances, easements
or reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties which are necessary for the conduct of the
activities of the Borrower and any Subsidiary ofs8 the Borrower or
which customarily exist on properties of corporations engaged in
similar activities and similarly situated and which do not in any event
materially impair their use in the operation of the business of the
Borrower or any Subsidiary of the Borrower;
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(g) Liens existing on the date hereof and listed on Schedule
9.9 hereto;
(h) any Lien existing on any Property prior to the
acquisition thereof by the Borrower or any Subsidiary, provided that
such Lien is not created in contemplation of or in connection with such
acquisition and the aggregate principal amount of Indebtedness at any
time outstanding, secured by such Liens, when taken together with the
aggregate amount of liabilities and indebtedness secured by Liens as
permitted under Sections 9.9(e) and 9.9(k), shall not exceed 10% of the
Borrower's Consolidated Stockholders' Equity;
(i) any Lien created pursuant to a Capitalized Lease
Obligation, provided that (i) the Indebtedness represented by such
Capitalized Lease Obligation does not exceed 100% of the lesser of the
cost or fair market value of the leased property at the time of such
lease and (ii) such Lien does not apply to any other Property of the
Borrower or its Subsidiaries (other than proceeds (including insurance
proceeds) of the Property subject to such Lien);
(j) any extension, renewal or replacement (or successive
extensions, renewals or replacements) in whole or in part of any Lien
referred to in the foregoing paragraphs (a) through (i), inclusive,
provided, however, that the principal amount of Debt secured thereby
shall not exceed the principal amount of Debt so secured at the time of
such extension, renewal or replacement, and that such extension,
renewal or replacement shall be limited to the Property which was
subject to the Lien so extended, renewed or replaced; and
(k) Liens not otherwise permitted under this Section 9.9 on
Property (other than (i) shares of stock in any Wholly-Owned
Subsidiary, (ii) receivables, inventory and similar working capital
assets and (iii) patents, trademarks and similar intangibles) securing
Indebtedness that, when taken together with the aggregate amount of
liabilities and indebtedness secured by Lien as permitted under
Sections 9.9(e) and (h), is in an aggregate outstanding principal
amount not exceeding 10% of the Borrower's Consolidated Stockholder's
Equity.
Without limiting the generality of the foregoing, the Borrower shall
not subject to any Lien, other than involuntary Liens described in Section
9.9(a) - (d) hereof, sell, transfer or otherwise dispose of any shares of
capital stock in any Guarantor, or any Indebtedness of any Guarantor.
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Section 9.10. Use of Proceeds; Regulation U. The proceeds of each
Borrowing, and the credit provided by Letters of Credit, will be used by the
Borrower for working capital, repayment of other Debt, and other general
corporate purposes including acquisitions of businesses and other investments
permitted by Section 9.14. The Borrower will not use any part of the proceeds of
any of the Borrowings or of the Letters of Credit directly or indirectly to
purchase or carry any margin stock (as defined in Section 7.10 hereof) or to
extend credit to others for the purpose of purchasing or carrying any such
margin stock.
Section 9.11. Sales and Leasebacks. The Borrower will not, nor will
it permit any North American Subsidiary to, enter into any arrangement with any
bank, insurance company or other lender or investor providing for the leasing by
the Borrower or any Subsidiary of any Property theretofore owned by it and which
has been or is to be sold or transferred by such owner to such lender or
investor, except to the extent the aggregate principal amount of Capitalized
Lease Obligations under such leases does not exceed $10,000,000 at any time
outstanding;
Section 9.12. Mergers, Consolidations and Sales of Assets. (a) The
Borrower will not, and will not permit any of its North American Subsidiaries
to, (i) consolidate with or be a party to a merger with any other Person or (ii)
sell, lease or otherwise dispose of all or a "substantial part" of the assets of
the Borrower and its North American Subsidiaries; provided, however, that:
(1) any Subsidiary of the Borrower may merge or consolidate
with or into or sell, lease or otherwise convey all or a substantial
part of its assets to the Borrower or any Subsidiary of which the
Borrower holds at least the same percentage equity ownership; provided
that in any such merger or consolidation involving the Borrower, the
Borrower shall be the surviving or continuing corporation;
(2) any Subsidiary of the Borrower may consolidate or merge
with any other Person (including the Borrower) if (x) in the case of
such a transaction involving the Borrower, the Borrower is the
surviving or continuing corporation or in any other case, if the
surviving corporation is a subsidiary of the Borrower and (y) at the
time of such consolidation or merger, and after giving effect thereto,
no Default or Event of Default shall have occurred and be continuing;
and
(3) the Borrower may consolidate or merge with any other
Person if (x) the Borrower is the surviving or continuing corporation
and (y) at the time of such consolidation or merger, and after giving
effect thereto, no
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Default or Event of Default shall have occurred and be continuing; and
(4) Bell Sports Canada Inc., Denrich Sporting Goods Canada
Ltd., Cycle Products Company Canada Inc. and Mongoose Bicycle Canada
Inc. may amalgamate into a single corporation if such surviving
corporation will be a Subsidiary of the Borrower and such corporation
confirms, in form and substance reasonably satisfactory to the Agent
and Required Banks, its liability in a Subsidiary Guarantee Agreement
for the Obligations.
As used in this Section 9.12(a), a sale, lease, transfer or disposition of
assets during any fiscal year shall be deemed to be of a "substantial part" of
the consolidated assets of the Borrower and its Subsidiaries if the net book
value of such assets, when added to the net book value of all other assets
(including without limitation stock in Subsidiaries) sold, leased, transferred
or disposed of by the Borrower and its Subsidiaries during such fiscal year
(other than inventory in the ordinary course of business) and the aggregate
consideration received by Subsidiaries from their issuance or sale of their
stock during such fiscal year exceeds 10% of the Consolidated Tangible Assets of
the Borrower and its Subsidiaries as of the last day of the immediately
preceding fiscal year.
(b) The Borrower will not sell, transfer or otherwise dispose of any
shares of capital stock in any Guarantor, or any Indebtedness of any Guarantor,
in each case except to a Wholly-Owned Subsidiary.
Section 9.13. Use of Property and Facilities; Environmental and
Health and Safety Laws. (a) The Borrower will, and will cause each of its North
American Subsidiaries to, comply in all material respects with the requirements
of all Environmental and Health Laws applicable to or pertaining to the
Properties or business operations of the Borrower or any Subsidiary of the
Borrower. Without limiting the foregoing, the Borrower will not, and will not
permit any Person to, except in accordance with applicable law, dispose of any
Hazardous Material into, onto or upon any real property owned or operated by the
Borrower or any of its Subsidiaries except to the extent such disposal would not
(individually or in the aggregate) have a material adverse effect on the
Property, business or operations of the Borrower and its Subsidiaries taken as a
whole.
(b) The Borrower will promptly provide the Agent (which shall
promptly furnish each Bank) with copies of any notice or other instrument of the
type described in Section 7.11(c) hereof, and in no event later than ten (10)
Business Days after an executive officer of the Borrower receives such notice or
instrument.
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Section 9.14. Investments, Acquisitions, Loans, Advances and
Guaranties. The Borrower will not, nor will it permit any North American
Subsidiary to, directly or indirectly, make, retain or have outstanding any
investments (whether through purchase of stock or obligations or otherwise) in,
or loans or advances to, any other Person, or acquire all or any substantial
part of the assets or business of any other Person or division thereof, or be or
become liable as endorser, guarantor, surety or otherwise (such as liability as
a general partner) for any debt, obligation or undertaking of any other Person,
or otherwise agree to provide funds for payment of the obligations of another,
or supply funds thereto or invest therein or otherwise assure a creditor of
another against loss, or apply for or become liable to the issuer of a letter of
credit which supports an obligation of another, or subordinate any claim or
demand it may have to the claim or demand of any other Person (cumulatively, all
of the foregoing, being "Investments"); provided, however, that the foregoing
provisions shall not apply to nor operate to prevent:
(a) investments in direct obligations of the United States of
America or of any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America provided that any such obligation matures within one year from
the date it is acquired by the Borrower or Subsidiary;
(b) investments in commercial paper rated P-1 by Moody's
Investors Services, Inc. or A-1 by Standard & Poor's Corporation
maturing within one year of its date of issuance;
(c) investments in certificates of deposit issued by any Bank
or any United States commercial bank having capital and surplus of not
less than $200,000,000 maturing within one year from the date of
issuance thereof or in banker's acceptances endorsed by any Bank or
other such commercial bank and maturing within six months of the date
of acceptance or in Eurodollar time deposits placed with any Bank or
other such commercial bank;
(d) investments in repurchase obligations with a term of not
more than seven (7) days for underlying securities of the types
described in subsection (a) above entered into with any bank meeting
the qualifications specified in subsection (c) above, provided all such
agreements require physical delivery of the securities securing such
repurchase agreement, except those delivered through the Federal
Reserve Book Entry System;
(e) investments in money market funds that invest solely, and
which are restricted by their respective charters to invest solely, in
investments of the type
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described in the immediately preceding subsections (a), (b), (c)
and (d) above;
(f) ownership of stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing
to the Borrower or any Subsidiary;
(g) endorsements of negotiable instruments for collection in
the ordinary course of business;
(h) loans and advances to employees in the ordinary course of
business for travel, relocation, and similar purposes;
(i) acquisitions of all or any substantial part of the assets
or business of any other Person or division thereof engaged in the
sporting goods business, or of a majority of the Voting Stock of such a
Person, or of equity interests in any Person which does not become a
Subsidiary as a result of such acquisition but is engaged (or promptly
after such acquisition will be engaged) in the sporting goods business,
provided that (i) no Default or Event of Default exists or would exist
after giving effect to such acquisition, (ii) the Board of Directors or
other governing body of such Person whose Property, or Voting Stock or
other interests in which, are being so acquired has approved the terms
of such acquisition, (iii) the Borrower shall have delivered to the
Banks an updated Schedule 7.2 to reflect any new Subsidiary resulting
from such acquisition and (iv) the aggregate amount expended by the
Borrower and its Subsidiaries as consideration for such acquisition
(and in any event (1) including as such consideration, any Debt assumed
or incurred as a result of such acquisition, and (2) excluding as such
consideration, any equity securities issued by the Borrower as
consideration for such acquisition), when taken together with the
aggregate amount expended as consideration (including Debt and
excluding equity securities as aforesaid) for all other acquisitions
permitted under this Section 9.14(i) after the date hereof on a
cumulative basis (the aggregate of the consideration for the
acquisition in question and all such other acquisitions being
hereinafter referred to as the "Aggregate Acquisition Consideration"),
does not exceed $50,000,000 provided (x) if the Aggregate Acquisition
Consideration is $10,000,000 or greater but not over $25,000,000, the
Borrower can demonstrate that on a pro forma basis (including financial
projections for the twelve months following the subject acquisition)
after giving effect to the subject acquisition it will continue to
comply with all the terms and conditions of the Credit Documents and
that the ratio of the Borrower's Total Funded Debt as of (and after
giving effect to) the acquisition in question to the Borrower's EBITDA
for its then four most recently
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completed fiscal quarters (EBITDA for such purposes to be determined on
a pro forma basis as if the acquisition in questions took place on the
first day of such four quarter period) would be less than 4.0 to 1 and
(y) if the Aggregate Acquisition Consideration is over $25,000,000 but
not over $50,000,000, all of the conditions of the immediately
preceding clause (x) have been satisfied and the Borrower's actual
EBITDA (not on a pro forma basis) for its then four most recently
completed fiscal quarters exceeds $25,000,000;
(j) Guaranties in existence as of the date hereof of
Indebtedness of Overseas Subsidiaries (the "Originally Guarantied
Overseas Debt") and other Guaranties of Indebtedness to the extent such
Indebtedness repays or otherwise refinances the Originally Guaranteed
Overseas Debt or repays or otherwise refinances any further
refinancings thereof to the extent such refinancing does not exceed the
relevant Originally Guarantied Overseas Debt;
(k) Investments (as defined above in this Section) in
Overseas Subsidiaries provided that (i) such Investments as are made
after the date hereof aggregate not more than $10,000,000 on a
cumulative basis after the date hereof (excluding for such purposes
Investments in the form of Guaranties to the extent the same are
replaced or terminate undrawn (without any payment having been made
thereon by the relevant guarantor)) and (ii) Investments in Overseas
Subsidiaries that only become Subsidiaries through such Investment must
comply with the provisions of subsection (i) above;
(l) Investments (as defined above in this Section) existing
on the date hereof to the extent heretofore disclosed in writing to the
Banks in a writing expressly designated for such purpose;
(m) Investments (as defined above in this Section) in the
Borrower and North American Subsidiaries;
(n) other Investments (as defined above in this Section) of
the types permitted by the Borrower's written June 1994 Cash Investment
Policy, as furnished to the Agent prior to the Closing Date, provided
such investments are not made for trading purposes as set forth in such
Policy; and
(o) Investments not otherwise permitted by this Section 9.14
aggregating not more than $2,000,000 at any one time outstanding.
In determining the amount of investments, acquisitions, loans, advances
and guarantees permitted under this Section 9.14,
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investments and acquisitions shall always be taken at the original cost thereof
(regardless of any subsequent appreciation or depreciation therein), loans and
advances shall be taken at the principal amount thereof then remaining unpaid,
and guarantees shall be taken at the amount of obligations guaranteed thereby.
Section 9.15. Consolidated Tangible Net Worth. The Borrower will at
all times maintain a Consolidated Tangible Net Worth of not less than the
Minimum Required Amount. For purposes of this section, the "Minimum Required
Amount" shall mean $55,000,000 and shall increase as of September 28, 1996 and
as of the last day of each fiscal quarter thereafter, by an amount equal to 50%
of the cumulative positive Consolidated Net Income earned each fiscal quarter
commencing and completed after June 30, 1996 (but without subtraction for any
negative Consolidated Net Income for any such fiscal quarter).
Section 9.16. Funded Debt Ratio. The Borrower will, as of the last
day of each fiscal quarter of the Borrower occurring during the periods
specified below, maintain the ratio of (x) Total Funded Debt to (y) the sum of
(i) Total Funded Debt and (ii) Consolidated Stockholders' Equity (the "Funded
Debt Ratio") at not more than:
FROM AND TO AND FUNDED DEBT RATIO
INCLUDING INCLUDING SHALL NOT EXCEED:
The date hereof June 27, 1997 .60 to 1
June 28, 1997 June 26, 1998 .55 to 1
June 27, 1998 As of the last day of
each fiscal quarter
thereafter .50 to 1
Section 9.17. Interest Coverage Ratio. The Borrower will, as of the
last day of each fiscal quarter of the Borrower occurring during the periods
specified below, maintain an Interest Coverage Ratio of not less than:
FROM AND TO AND INTEREST COVERAGERATIO
INCLUDING INCLUDING SHALL NOT BE LESS THAN:
The date hereof March 30, 1996 1.5 to 1
March 31, 1996 March 29, 1997 2.25 to 1
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March 30, 1997 September 25, 1998 2.50 to 1
September 26, 1998 As of the last day of each
fiscal quarter thereafter 2.75 to 1
Section 9.18. Capital Expenditures. The Borrower will not, nor will
it permit any Subsidiary to, expend during any fiscal year, or (without
duplication) become obligated to expend during such fiscal year, in each case
for capital expenditures (as determined and classified in accordance with GAAP,
but in any event excluding amounts expended in Acquisitions permitted by Section
9.14(i) hereof) an aggregate amount in excess of $12,000,000 for the Parent and
its Subsidiaries.
Section 9.19. Dividends and Certain Other Restricted Payments. The
Borrower will not during any fiscal year (a) declare or pay any dividends on or
make any other distributions in respect of any class or series of its capital
stock (other than dividends payable solely in its capital stock) (such
non-excepted declarations and payments being hereinafter collectively called
"Restricted Dividends") or (b) directly or indirectly purchase, redeem or
otherwise acquire or retire any of its capital stock (such purchases,
redemptions, acquisitions or retirements being hereinafter collectively called
"Restricted Redemptions") or (c) directly or indirectly make any payment or
other distribution of principal, or interest or premium on or in respect of, or
acquire, prepay or retire, any Sub Debt, in each case prior to the stated
maturity thereof or prior to any other times required for payment thereof as are
in force and effect as of the date hereof (such payments, distributions,
acquisitions, prepayments and retirements being hereinafter collectively called
"Restricted Sub Debt Payments") (Restricted Redemptions and Restricted Sub Debt
Payments being hereinafter collectively called "Restricted Payments"); provided,
however, that:
(a) The Borrower may declare and pay Restricted Dividends if
and to the extent that at the time each such Restricted Dividend is
made and immediately after giving effect thereto, (x) no Default or
Event of Default shall occur or be continuing, and (y) the aggregate
amount of all Restricted Dividends made during each fiscal year (on a
cumulative basis) does not exceed 25% of the sum of Net Income for each
fiscal quarter of such year in which Net Income is positive;
(b) The Borrower may make Restricted Redemptions of up to 15%
of its common capital stock outstanding as of the date hereof if and to
the extent that at the time each such Restricted Redemption is made and
immediately after giving effect thereto, (x) no Default or Event of
Default shall occur or be continuing, (y) the aggregate amount of all
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Restricted Redemptions made after the date hereof (on a cumulative
basis) does not exceed $10,000,000 and (z) the aggregate amount of all
Restricted Payments made after the date hereof (on a cumulative basis)
does not exceed $20,000,000;
(c) The Borrower may make Restricted Sub Debt Payments
retiring Sub Debt at an aggregate purchase price not in excess of 90%
of the face value of the Sub Debt so retired if and to the extent that
at the time of each such Restricted Sub Debt Payment is made and
immediately after giving effect thereto, (w) no Default or Event of
Default shall occur or be continuing, (x) the Interest Coverage Ratio
for the most recently completed four (4) fiscal quarters of the
Borrower is greater than 2.25 to 1.0, (y) the aggregate amount of all
Restricted Sub Debt Payments made after the date hereof (on a
cumulative basis) does not exceed $13,500,000 and (z) the aggregate
amount of all Restricted Payments made after the date hereof (on a
cumulative basis) does not exceed $20,000,000; it being understood that
the Borrower may request that the Banks permit such purchases in excess
of $13,500,000 and that each Bank will consider such request, provided
that nothing herein shall constitute a commitment by any Bank to agree
to any such additional purchase (it being understood that each Bank has
complete discretion to withhold its consent for any reason whatsoever).
Section 9.20. North American Company. Notwithstanding Sections 9.12
and 9.14 or any other provision of this Agreement, the Consolidated Tangible
Assets owned directly by the Borrower and its Wholly-Owned Subsidiaries which
are North American Subsidiaries (without regard to their ownership of equity
interests in Subsidiaries) shall at all times equal or exceed $150,000,000.
Section 9.21. Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into or be a party to any
material transaction or arrangement (where "material" means material for the
Borrower and its Subsidiaries taken as a whole) with any Affiliate of such
Person (other than the Borrower or any of its Subsidiaries), including without
limitation, the purchase from, sale to or exchange of Property with, any merger
or consolidation with or into, or the rendering of any service by or for, any
Affiliate, except as set forth on Schedule 9.21 (as amended from time to time in
accordance with the provisions hereof) and except in the ordinary course of and
pursuant to the reasonable requirements of the Borrower's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the Borrower or
such Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arm's-length transaction with a Person other than an Affiliate.
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Section 9.22. Compliance with Laws. Without limiting any of the
other covenants of the Borrower in this Section 9, the Borrower will, and will
cause each of its Subsidiaries to, conduct its business, and otherwise be, in
compliance with all applicable laws, regulations, ordinances and orders of any
governmental or judicial authorities; provided, however, that neither the
Borrower nor any Subsidiary of the Borrower shall be required to comply with any
such law, regulation, ordinance or order if (x) it shall be contesting such law,
regulation, ordinance or order in good faith by appropriate proceedings and
reserves in conformity with GAAP have been provided therefor on the books of the
Borrower or such Subsidiary, as the case may be, or (y) the failure to comply
therewith is not reasonably expected to have, in the aggregate, a material
adverse effect on the business, operations, property or financial condition of
the Borrower and its Subsidiaries, taken as a whole.
Section 9.23. No Changes in Fiscal Year. Neither the Borrower nor
any Subsidiary shall change its fiscal year from its present basis without the
prior written consent of the Required Banks (which shall not be unreasonably
withheld).
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
Section 10.1. Events of Default. Any one or more of the following
shall constitute an Event of Default:
(a) default (x) in the payment when due of the principal
amount of any Loan or of any Reimbursement Obligation or (y) for a
period of three (3) Business Days in the payment when due of interest
or of any other Obligation;
(b) default by the Borrower or any Subsidiary in the
observance or performance of any covenant set forth in Section 9.1,
9.6(c), 9.9 through 9.12, or 9.14 through 9.19 hereof;
(c) default by the Borrower or any Subsidiary in the
observance or performance of any provision hereof or of any other
Credit Document not mentioned in (a) or (b) above, which is not
remedied within thirty (30) days after notice thereof to the Borrower
by the Agent;
(d) (i) failure to pay when due Debt in an aggregate
principal amount of $5,000,000 or more of the Borrower or any Material
Subsidiary or (ii) default shall occur under one or more indentures,
agreements or other instruments under which any Debt of the Borrower or
any Material Subsidiary in an aggregate principal amount of $10,000,000
or more may be issued or created and such default shall continue for a
period of time sufficient to permit the
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holder or beneficiary of such Debt or a trustee therefor to cause the
acceleration of the maturity of any such Debt or any mandatory
unscheduled prepayment, purchase or funding thereof;
(e) any representation or warranty made herein or in any
other Credit Document by the Borrower or any Subsidiary, or in any
statement or certificate furnished pursuant hereto or pursuant to any
other Credit Document by the Borrower or any Subsidiary, or in
connection with any Credit Document, proves untrue in any material
respect as of the date of the issuance or making, or deemed making or
issuance, thereof;
(f) the Borrower or any Material Subsidiary shall (i) have
entered involuntarily against it an order for relief under the United
States Bankruptcy Code, as amended, or any analogous action is taken
under any other applicable law relating to bankruptcy or insolvency,
(ii) fail to pay, or admit in writing its inability to pay, its debts
generally as they become due, (iii) make an assignment for the benefit
of creditors, (iv) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any substantial part of its Property, (v)
institute any proceeding seeking to have entered against it an order
for relief under the United States Bankruptcy Code, as amended, to
adjudicate it insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, (vi) take any corporate action (such as the passage by the
Borrower's board of directors of a resolution) in furtherance of any
matter described in parts (i)-(v) above, or (vii) fail to contest in
good faith any appointment or proceeding described in Section 10.1(g)
hereof;
(g) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Borrower or any Material
Subsidiary or any substantial part of any of their Property, or a
proceeding described in Section 10.1(f)(v) shall be instituted against
the Borrower or any Material Subsidiary, and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a
period of sixty (60) days;
(h) the Borrower or any Material Subsidiary shall fail within
thirty (30) days to pay, bond or otherwise discharge any judgment or
order for the payment of money in excess of $7,500,000, which is not
stayed on appeal or otherwise being
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appropriately contested in good faith in a manner that stays execution
thereon;
(i) the Borrower or any other member of the Controlled Group
shall fail to pay when due an amount or amounts aggregating in excess
of $1,000,000 which it shall have become liable to pay to the PBGC or
to a Plan under Title IV of ERISA; or notice of intent to terminate
under a distress termination under Section 4041 of ERISA, a Plan or
Plans having aggregate Unfunded Vested Liabilities in excess of
$1,000,000 (collectively, a "Material Plan") shall be filed under Title
IV of ERISA by the Borrower or any Subsidiary or any other member of
the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of
ERISA to terminate or to cause a trustee to be appointed to administer
any Material Plan; or a proceeding shall be instituted by a fiduciary
of any Material Plan against the Borrower or any other member of the
Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within thirty (30) days
thereafter and the Borrower or any member of the Controlled Group is
reasonably likely to incur a liability in excess of $1,000,000 from
such proceeding; or
(j) the Borrower or any Subsidiary, or any Person acting on
behalf of the Borrower or a Subsidiary, or any governmental authority
challenges the validity of any Credit Document or the Borrower's or a
Subsidiary's obligations thereunder or any Credit Document ceases to be
in full force and effect (other than as the direct result of the
amalgamation permitted by Section 9.12(a)(4) hereof).
Section 10.2. Non-Bankruptcy Defaults. When any Event of Default
other than those described in subsections (f) or (g) of Section 10.1 hereof has
occurred and is continuing, the Agent shall, by written notice to the Borrower:
(a) if so directed by the Required Banks, terminate the remaining Commitments
and all other obligations of the Banks hereunder on the date stated in such
notice (which may be the date thereof); (b) if so directed by the Required
Banks, declare the principal of and the accrued interest on all outstanding
Notes to be forthwith due and payable and thereupon all outstanding Notes,
including both principal and interest thereon, shall be and become immediately
due and payable together with all other amounts payable under the Credit
Documents without further demand, presentment, protest or notice of any kind;
and (c) if so directed by the Required Banks, demand that the Borrower
immediately pay to the Agent, subject to Section 10.4, the full amount then
available for drawing under each or any Letter of Credit, and the Borrower
agrees to immediately make such payment and acknowledges and agrees that the
Banks would not have an adequate remedy at law for failure by
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the Borrower to honor any such demand and that the Agent, for the benefit of the
Banks, shall have the right to require the Borrower to specifically perform such
undertaking whether or not any drawings or other demands for payment have been
made under any Letter of Credit. The Agent, after giving notice to the Borrower
pursuant to Section 10.1(c) or this Section 10.2, shall also promptly send a
copy of such notice to the other Banks, but the failure to do so shall not
impair or annul the effect of such notice.
Section 10.3. Bankruptcy Defaults. When any Event of Default
described in subsections (f) or (g) of Section 10.1 hereof has occurred and is
continuing, then all outstanding Notes shall immediately become due and payable
together with all other amounts payable under the Credit Documents without
presentment, demand, protest or notice of any kind, the obligation of the Banks
to extend further credit pursuant to any of the terms hereof shall immediately
terminate and the Borrower shall immediately pay to the Agent, subject to
Section 10.4, the full amount then available for drawing under all outstanding
Letters of Credit, the Borrower acknowledging that the Banks would not have an
adequate remedy at law for failure by the Borrower to honor any such demand and
that the Banks, and the Agent on their behalf, shall have the right to require
the Borrower to specifically perform such undertaking whether or not any draws
or other demands for payment have been made under any of the Letters of Credit.
Section 10.4. Collateral for Undrawn Letters of Credit. (a) If the
payment or prepayment of the amount available for drawing under any or all
outstanding Letters of Credit is required under Section 1.2(b) or Section 3.3(b)
or under Section 10.2 or 10.3 above, the Borrower shall forthwith pay the amount
required to be so prepaid, to be held by the Agent as provided in subsection (b)
below.
(b) All amounts prepaid pursuant to subsection (a) above shall be
held by the Agent in a separate collateral account (such account, and the credit
balances, properties and any investments from time to time held therein, and any
substitutions for such account, any certificate of deposit or other instrument
evidencing any of the foregoing and all proceeds of and earnings on any of the
foregoing being collectively called the "Account") as security for, and for
application by the Agent (to the extent available) to, the reimbursement of any
payment under any Letter of Credit then or thereafter made by the Agent, and to
the payment of the unpaid balance of any Loans and all other Obligations. The
Account shall be held in the name of and subject to the exclusive dominion and
control of the Agent for the benefit of the Agent and the Banks. If and when
requested by the Borrower, the Agent shall invest funds held in the Account from
time to time in direct obligations of, or obligations the
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principal of and interest on which are unconditionally guaranteed by, the United
States of America with a remaining maturity of one year or less, provided that
the Agent is irrevocably authorized to sell investments held in the Account when
and as required to make payments out of the Account for application to amounts
due and owing from the Borrower to the Agent or Banks; provided, however, that
if (i) the Borrower shall have made payment of all such obligations referred to
in subsection (a) above and (ii) no Letters of Credit, Commitments, Loans or
other Obligations remain outstanding hereunder, then the Agent shall repay to
the Borrower any remaining amounts held in the Account.
Section 10.5. Notice of Default. The Agent shall give notice to the
Borrower under Section 10.1(c) hereof promptly upon being requested to do so by
any Bank and shall thereupon notify all the Banks thereof.
Section 10.6. Expenses. The Borrower agrees to pay to the Agent, for
the account of the Agent and each Bank, and any other holder of any Note
outstanding hereunder, all out-of-pocket expenses reasonably incurred or paid by
the Agent and such Bank or any such holder, including reasonable attorneys' fees
and court costs, in connection with any Default or Event of Default by the
Borrower hereunder or in connection with the enforcement of any of the Credit
Documents.
SECTION 11. CHANGE IN CIRCUMSTANCES.
Section 11.1. Change of Law. Notwithstanding any other provisions of
this Agreement or any Note, if at any time after the date hereof any change in
applicable law or regulation or in the interpretation thereof makes it unlawful
for any Bank to make or continue to maintain Eurocurrency Loans or to perform
its obligations as contemplated hereby, such Bank shall promptly give notice
thereof to the Borrower and such Bank's obligations to make or maintain
Eurocurrency Loans under this Agreement shall terminate until it is no longer
unlawful for such Bank to make or maintain Eurocurrency Loans. To the extent
required by such change, the Borrower shall prepay on demand the outstanding
principal amount of any such affected Eurocurrency Loans, together with all
interest accrued thereon at a rate per annum equal to the interest rate
applicable to such Loan; provided, however, subject to all of the terms and
conditions of this Agreement, the Borrower may then elect to borrow the
principal amount of the affected Eurocurrency Loans from such Bank by means of
Domestic Rate Loans from such Bank, which Domestic Rate Loans shall not be made
ratably by the Banks but only from such affected Bank and provided, further that
the Borrower shall have no obligation under Section 3.4 with respect to any such
prepayment.
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Section 11.2. Unavailability of Deposits or Inability to Ascertain,
or Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period
for any Borrowing of Eurocurrency Loans:
(a) the Agent determines that deposits in U.S. Dollars or the
Alternative Currency (in the applicable amounts) are not being offered
to it in the eurocurrency interbank market for such Interest Period, or
that by reason of circumstances affecting the interbank eurocurrency
market adequate and reasonable means do not exist for ascertaining the
applicable LIBOR, or
(b) Banks having 25% or more of the aggregate amount of the
Revolving Credit Commitment reasonably determine and so advise the
Agent that LIBOR as reasonably determined by the Agent will not
adequately and fairly reflect the cost to such Banks or Bank of funding
their or its Eurocurrency Loans or Loan for such Interest Period, then
the Agent shall forthwith give notice thereof to the Borrower and the
Banks, whereupon until the Agent notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, the
obligations of the Banks or of the relevant Bank to make Eurocurrency
Loans in the currency so affected shall be suspended.
Section 11.3. Increased Cost and Reduced Return. (a) If, on or after
the date hereof, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Lending Office) with any request or directive (whether or not having the force
of law but, if not having the force of law, compliance with which is customary
in the relevant jurisdiction) of any such authority, central bank or comparable
agency:
(i) shall subject any Bank (or its Lending Office) to any
tax, duty or other charge with respect to its Eurocurrency Loans, its
Notes, its Letter(s) of Credit, or its participation in any thereof,
any Reimbursement Obligations owed to it or its obligation to make
Eurocurrency Loans, issue a Letter of Credit, or to participate
therein, or shall change the basis of taxation of payments to any Bank
(or its Lending Office) of the principal of or interest on its
Eurocurrency Loans, Letter(s) of Credit, or participations therein or
any other amounts due under this Agreement in respect of its
Eurocurrency Loans, Letter(s) of Credit, or participations therein, any
Reimbursement Obligations owed to it, or its obligation to make
Eurocurrency Loans, issue a Letter of
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Credit, or acquire participations therein (except for changes in the
rate of tax on the overall net income or profits of such Bank or its
Lending Office imposed by the jurisdiction in which such Bank or its
lending office is incorporated, or in which such Bank's principal
executive office or Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding with respect to any Eurocurrency Loans
any such requirement included in an applicable Eurocurrency Reserve
Percentage) against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Lending Office) or shall impose on
any Bank (or its Lending Office) or on the interbank market any other
condition affecting its Eurocurrency Loans, its Notes, its Letter(s) of
Credit, or its participation in any thereof, any Reimbursement
Obligation owed to it, or its obligation to make Eurocurrency Loans, to
issue a Letter of Credit, or to participate therein;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Eurocurrency Loan, issuing or
maintaining a Letter of Credit, or participating therein, or to reduce the
amount of any sum received or receivable by such Bank (or its Lending Office)
under this Agreement or under its Notes with respect thereto, by an amount
deemed by such Bank to be material, then, within fifteen (15) days after demand
by such Bank (with a copy to the Agent), the Borrower shall be obligated to pay
to such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction; provided, however, that such Bank shall
promptly notify the Borrower of an event which might cause it to seek
compensation, and the Borrower shall be obligated to pay only such compensation
which is incurred or which arises after the date ninety (90) days prior to the
date such notice is given. In the event any law, rule, regulation or
interpretation described above is revoked, declared invalid or inapplicable or
is otherwise rescinded, and as a result thereof a Bank is determined to be
entitled to a refund from the applicable authority for any amount or amounts
which were paid or reimbursed by Borrower to such Bank hereunder, such Bank
shall refund such amount or amounts to Borrower without interest.
(b) If any Bank or the Agent shall have determined that the adoption,
after the date hereof, of any applicable law, rule or regulation regarding
capital adequacy, or any change therein (including, without limitation, any
revision in the Final Risk-Based Capital Guidelines of the Board of Governors of
the Federal Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225,
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Appendix A) or of the Office of the Comptroller of the Currency (12 CFR Part 3,
Appendix A), or in any other applicable capital rules heretofore adopted and
issued by any governmental authority), or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Lending Office) with any request or directive regarding
capital adequacy (whether or not having the force of law but, if not having the
force of law, compliance with which is customary in the applicable jurisdiction)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Bank's capital, or on the capital
of any corporation controlling such Bank, as a consequence of its obligations
hereunder to a level below that which such Bank could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's policies
with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time, within fifteen (15) days after demand by such
Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such reduction;
provided, however, that such Bank shall promptly notify the Borrower of an event
which might cause it to seek compensation, and the Borrower shall be obligated
to pay only such compensation which is incurred or which arises after the date
ninety (90) days prior to the date such notice is given.
(c) Each Bank that determines to seek compensation under this Section
11.3 shall notify the Borrower and the Agent of the circumstances that entitle
the Bank to such compensation pursuant to this Section 11.3 and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section 11.3 and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
demonstrable error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
(d) No Bank shall request any additional compensation under this
Section 11.3 unless it is generally making similar requests of other borrowers
similarly situated.
Section 11.4. Lending Offices. Each Bank may, at its option, elect
to make its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof (each a "Lending Office") for each type of
Loan available hereunder or at such other of its branches, offices or affiliates
as it may from time to time elect and designate in a written notice to the
Borrower and the Agent.
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Section 11.5. Discretion of Bank as to Manner of Funding.
Notwithstanding any other provision of this Agreement, each Bank shall be
entitled to fund and maintain its funding of all or any part of its Loans in any
manner it sees fit, it being understood, however, that for the purposes of this
Agreement all determinations hereunder shall be made as if each Bank had
actually funded and maintained each Eurocurrency Loan through the purchase of
deposits of U.S. Dollars or the Alternative Currency in the eurocurrency
interbank market having a maturity corresponding to such Loan's Interest Period
and bearing an interest rate equal to LIBOR for such Interest Period.
SECTION 12. THE AGENT.
Section 12.1. Appointment and Authorization of Agent. Each Bank
hereby appoints Harris Trust and Savings Bank as the Agent under the Credit
Documents and hereby authorizes the Agent to take such action as Agent on its
behalf and to exercise such powers under the Credit Documents as are delegated
to the Agent by the terms thereof, together with such powers as are reasonably
incidental thereto.
Section 12.2. Agent and its Affiliates. The Agent shall have the
same rights and powers under this Agreement and the other Credit Documents as
any other Bank and may exercise or refrain from exercising the same as though it
were not the Agent, and the Agent and its affiliates may accept deposits from,
lend money to, and generally engage in any kind of business with the Borrower or
any Affiliate of the Borrower as if it were not the Agent under the Credit
Documents. The term "Bank" as used herein and in all other Credit Documents,
unless the context otherwise clearly requires, includes the Agent in its
individual capacity as a Bank. References in Section 1 hereof to the Agent's
Loans, or to the amount owing to the Agent for which an interest rate is being
determined, refer to the Agent in its individual capacity as a Bank.
Section 12.3. Action by Agent. If the Agent receives from the
Borrower a written notice of an Event of Default pursuant to Section 9.6(c)(i)
hereof, the Agent shall promptly give each of the Banks written notice thereof.
The Banks expressly agree that the Agent is not acting as a fiduciary of the
Banks in respect of the Credit Documents, the Company or otherwise, and nothing
herein or in any of the other Credit Documents shall result in any duties or
obligations on the Agent or any of the Banks except as expressly set forth
herein. The obligations of the Agent under the Credit Documents are only those
expressly set forth therein. Without limiting the generality of the foregoing,
the Agent shall not be required to take any action hereunder with respect to any
Default or Event of Default, except as expressly provided in Sections 10.2 and
10.5. In no event, however, shall the Agent be required to take any action in
violation of
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applicable law or of any provision of any Credit Document, and the Agent shall
in all cases be fully justified in failing or refusing to act hereunder or under
any other Credit Document unless it shall be first indemnified to its reasonable
satisfaction by the Banks against any and all costs, expense, and liability
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall be entitled to assume that no Default or Event of
Default exists unless notified to the contrary by a Bank or the Borrower. In all
cases in which this Agreement and the other Credit Documents do not require the
Agent to take certain actions, the Agent shall be fully justified in using its
discretion in failing to take or in taking any action hereunder and thereunder.
Section 12.4. Consultation with Experts. The Agent may consult with
legal counsel, independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel, accountants or
experts.
Section 12.5. Liability of Agent; Credit Decision. Neither the Agent
nor any of its directors, officers, agents, or employees shall be liable for any
action taken or not taken by it in connection with the Credit Documents (i) with
the consent or at the request of the Required Banks or (ii) in the absence of
its own gross negligence or willful misconduct. Neither the Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement, any other Credit Document
or any Credit Event; (ii) the performance or observance of any of the covenants
or agreements of the Borrower or any Guarantor contained herein or in any other
Credit Document; (iii) the satisfaction of any condition specified in Section 6
hereof, except receipt of items required to be delivered to the Agent; or (iv)
the validity, effectiveness, genuineness, enforceability, perfection, value,
worth or collectibility hereof or of any other Credit Document or of any other
documents or writing furnished in connection with any Credit Document; and the
Agent makes no representation of any kind or character with respect to any such
matter mentioned in this sentence. The Agent may execute any of its duties under
any of the Credit Documents by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Banks, the Borrower, or any
Guarantor or any other Person for the default or misconduct of any such agents
or attorneys-in-fact selected with reasonable care. The Agent shall not incur
any liability by acting in reliance upon any notice, consent, certificate, other
document or statement (whether written or oral) believed by it to be genuine or
to be sent by the proper party or parties. In particular and without limiting
any of the foregoing, the Agent shall have no responsibility for confirming the
accuracy of any Compliance Certificate or other
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document or instrument received by it under the Credit Documents. The Agent may
treat the payee of any Note as the holder thereof until written notice of
transfer shall have been filed with the Agent signed by such payee in form
satisfactory to the Agent. Each Bank acknowledges that it has independently and
without reliance on the Agent or any other Bank, and based upon such
information, investigations and inquiries as it deems appropriate, made its own
credit analysis and decision to extend credit to the Borrower in the manner set
forth in the Credit Documents. It shall be the responsibility of each Bank to
keep itself informed as to the creditworthiness of the Borrower and the
Guarantors, and the Agent shall have no liability to any Bank with respect
thereto.
Section 12.6. Indemnity. The Banks shall ratably, in accordance with
their respective Percentages, indemnify and hold the Agent, and its directors,
officers, employees, agents and representatives harmless from and against any
liabilities, losses, costs or expenses suffered or incurred by it under any
Credit Document or in connection with the transactions contemplated thereby,
regardless of when asserted or arising, except to the extent they are promptly
reimbursed for the same by the Borrower and except to the extent that any event
giving rise to a claim was caused by the gross negligence or willful misconduct
of the party seeking to be indemnified. The obligations of the Banks under this
Section 12.6 shall survive termination of this Agreement.
Section 12.7. Resignation of Agent and Successor Agent. The Agent
may resign at any time by giving written notice thereof to the Banks and the
Borrower. Upon any such resignation of the Agent, the Required Banks shall have
the right to appoint a successor Agent with the consent of the Borrower. If no
successor Agent shall have been so appointed by the Required Banks, and shall
have accepted such appointment, within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be any Bank hereunder or
any commercial bank organized under the laws of the United States of America or
of any State thereof and having a combined capital and surplus of at least
$200,000,000. Upon the acceptance of its appointment as the Agent hereunder,
such successor Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring or removed Agent under the Credit Documents,
and the retiring Agent shall be discharged from its duties and obligations
thereunder. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Section 12 and all protective provisions of the other Credit
Documents shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent.
SECTION 13. THE GUARANTEES.
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Section 13.1. The Guarantees. To induce the Banks to provide the
credits described herein and in consideration of benefits expected to accrue to
each Guarantor by reason of the Commitments and for other good and valuable
consideration, receipt of which is hereby acknowledged, each Guarantor hereby
unconditionally and irrevocably guarantees jointly and severally to the Agent,
the Banks, and each other holder of an Obligation, the due and punctual payment
of all present and future indebtedness of the Borrower evidenced by or arising
out of the Credit Documents, including, but not limited to, the due and punctual
payment of principal of and interest on the Notes and the due and punctual
payment of all other Obligations now or hereafter owed by the Borrower under the
Credit Documents as and when the same shall become due and payable, whether at
stated maturity, by acceleration or otherwise, according to the terms hereof and
thereof. In case of failure by the Borrower punctually to pay any indebtedness
or other Obligations guaranteed hereby, each Guarantor hereby unconditionally
agrees jointly and severally to make such payment or to cause such payment to be
made punctually as and when the same shall become due and payable, whether at
stated maturity, by acceleration or otherwise, and as if such payment were made
by the Borrower.
Section 13.2. Guarantee Unconditional. The obligations of each
Guarantor as a guarantor under this Section 13 shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower or of any other
Guarantor under this Agreement or any other Credit Document or by
operation of law or otherwise;
(b) any modification or amendment of or supplement to this
Agreement or any other Credit Document;
(c) any change in the corporate existence, structure or
ownership of, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting, the Borrower, any other Guarantor, or any
of their respective assets, or any resulting release or discharge of
any obligation of the Borrower or of any other Guarantor contained in
any Credit Document;
(d) the existence of any claim, set-off or other rights which
the Guarantor may have at any time against the Agent, any Bank or any
other Person, whether or not arising in connection herewith;
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(e) any failure to assert, or any assertion of, any claim or
demand or any exercise of, or failure to exercise, any rights or
remedies against the Borrower, any other Guarantor or any other Person
or Property;
(f) any application of any sums by whomsoever paid or
howsoever realized to any obligation of the Borrower, regardless of
what obligations of the Borrower remain unpaid;
(g) any invalidity or unenforceability relating to or against
the Borrower or any other Guarantor for any reason of this Agreement or
of any other Credit Document or any provision of applicable law or
regulation purporting to prohibit the payment by the Borrower or any
other Guarantor of the principal of or interest on any Note or any
other amount payable by it under the Credit Documents; or
(h) any other act or omission to act or delay of any kind by
the Agent, any Bank or any other Person or any other circumstance
whatsoever that might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the obligations of the
Guarantor under this Section 13.
Section 13.3. Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances. Each Guarantor's obligations under this Section 13 shall
remain in full force and effect until the Commitments are terminated and the
principal of and interest on the Notes and all other amounts payable by the
Borrower under this Agreement and all other Credit Documents shall have been
paid in full. If at any time any payment of the principal of or interest on any
Note or any other amount payable by the Borrower under the Credit Documents is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Borrower or of a Guarantor, or otherwise,
each Guarantor's obligations under this Section 13 with respect to such payment
shall be reinstated at such time as though such payment had become due but had
not been made at such time.
Section 13.4. Waivers. (a) General. Each Guarantor irrevocably
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by the Agent, any Bank or any other Person against the Borrower, another
Guarantor or any other Person.
(b) Subrogation and Contribution. Unless and until the Obligations
have been fully paid and satisfied and the Commitments have terminated, each
Guarantor hereby irrevocably waives any claim or other right it may now or
hereafter acquire
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against the Borrower or any other Guarantor that arises from the existence,
payment, performance or enforcement of such Guarantor's obligations under this
Section 13 or any other Credit Document, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution, indemnification,
or any right to participate in any claim or remedy of the Agent, any Bank or any
other holder of an Obligation against the Borrower or any other Guarantor
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, including, without limitation, the right to take or
receive from the Borrower or any other Guarantor directly or indirectly, in cash
or other property or by set-off or in any other manner, payment or security on
account of such claim or other right.
Section 13.5. Limit on Recovery. Notwithstanding any other provision
hereof, the right to recovery of the holders of the Obligations against each
Guarantor under this Section 13 shall not exceed $1.00 less than the amount
which would render such Guarantor's obligations under this Section 13 void or
voidable under applicable law, including without limitation fraudulent
conveyance law.
Section 13.6. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Borrower under this Agreement or any other
Credit Document is stayed upon the insolvency, bankruptcy or reorganization of
the Borrower, all such amounts otherwise subject to acceleration under the terms
of this Agreement or the other Credit Documents shall nonetheless be payable
jointly and severally by the Guarantors hereunder forthwith on demand by the
Agent made at the request of the Required Banks.
Section 13.7. Benefit to Guarantors. The Borrower and all of the
Guarantors are engaged in related businesses and integrated to such an extent
that the financial strength and flexibility of the Borrower and each Guarantor
has a direct impact on the success of each other Guarantor. Each Guarantor will
derive substantial direct and indirect benefit from the extension of credit
hereunder.
SECTION 14. MISCELLANEOUS.
Section 14.1. Withholding Taxes. (a) Payments Free of Withholding.
Except as otherwise required by law and subject to Section 14.1(b) hereof, each
payment by the Borrower and each Guarantor under this Agreement or the other
Credit Documents shall be made without withholding for or on account of any
present or future taxes (other than overall net income taxes on the recipient)
imposed by or within the jurisdiction in which the Borrower or such Guarantor is
domiciled, any jurisdiction from
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which the Borrower or such Guarantor makes any payment, or (in each case) any
political subdivision or taxing authority thereof or therein. If any such
withholding is so required, the Borrower or relevant Guarantor shall make the
withholding, pay the amount withheld to the appropriate governmental authority
before penalties attach thereto or interest accrues thereon and forthwith pay
such additional amount as may be necessary to ensure that the net amount
actually received by each Bank and the Agent free and clear of such taxes
(including such taxes on such additional amount) is equal to the amount which
that Bank or the Agent (as the case may be) would have received had such
withholding not been made. If the Agent or any Bank pays any amount in respect
of any such taxes, penalties or interest the Borrower shall reimburse the Agent
or that Bank for that payment on demand in the currency in which such payment
was made. If the Borrower or any Guarantor pays any such taxes, penalties or
interest, it shall deliver official tax receipts evidencing that payment or
certified copies thereof to the Bank or Agent on whose account such withholding
was made (with a copy to the Agent if not the recipient of the original) on or
before the thirtieth day after payment. If any Bank or the Agent determines it
has received or been granted a credit against or relief or remission for, or
repayment of, any taxes paid or payable by it because of any taxes, penalties or
interest paid by the Borrower or any Guarantor and evidenced by such a tax
receipt, such Bank or Agent shall, to the extent it can do so without prejudice
to the retention of the amount of such credit, relief, remission or repayment,
pay to the Borrower or such Guarantor as applicable, such amount as such Bank or
Agent determines is attributable to such deduction or withholding and which will
leave such Bank or Agent (after such payment) in no better or worse position
than it would have been in if the Borrower had not been required to make such
deduction or withholding. Nothing in this Agreement shall interfere with the
right of each Bank and the Agent to arrange its tax affairs in whatever manner
it thinks fit nor oblige any Bank or the Agent to disclose any information
relating to its tax affairs or any computations in connection with such taxes.
(b) U.S. Withholding Tax Exemptions. Each Bank that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) (a
"Non-U.S. Person") shall submit to the Borrower and the Agent on or before the
earlier of the date the initial Borrowing is made hereunder and thirty (30) days
after the date hereof, two duly completed and signed copies of either Form 1001
(relating to such Bank and entitling it to a complete exemption from withholding
under the Code on all amounts to be received by such Bank, including fees,
pursuant to the Credit Documents and the Loans) or Form 4224 (relating to all
amounts to be received by such Bank, including fees, pursuant to the Credit
Documents and the Loans) of the United States Internal Revenue Service or, in
the case of any Bank exempt from United States Federal withholding tax pursuant
to Sections 871(h) or 881(c) of the Code, a Form W-8 or any successor applicable
form
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(a "Form W-8") together with a statement under penalty of perjury that such Bank
is not a "bank" under Section 881(c)(3) of the Code. Thereafter and from time to
time, each Bank shall submit to the Borrower and the Agent such additional duly
completed and signed copies of one or the other of such Forms (or such successor
forms as shall be adopted from time to time by the relevant United States taxing
authorities) as may be (i) requested by the Borrower in a written notice,
directly or through the Agent, to such Bank and (ii) required under then-current
United States law or regulations to avoid or reduce United States withholding
taxes on payments in respect of all amounts to be received by such Bank,
including fees, pursuant to the Credit Documents or the Loans. Each Bank that is
a Non-U.S. Person and that is a party hereto as of the Closing Date hereby
represents and warrants that, as of the Closing Date, payments made to it
hereunder are exempt from the withholding of United States Federal income taxes
(i) because such payments are effectively connected with a United States trade
or business conducted by such Non-U.S. Person; (ii) pursuant to the terms of an
income tax treaty between the United States and such Non-U.S. Person's country
of residence; or (iii) because such payments are portfolio interest exempt
pursuant to Sections 871(h) or 881(c) of the Code.
(c) Inability of Bank to Submit Forms. If any Bank determines, as a
result of any change in applicable law, regulation or treaty, or in any official
application or interpretation thereof, that it is unable to submit to the
Borrower or Agent any form or certificate that such Bank is obligated to submit
pursuant to subsection (b) of this Section 14.1. or that such Bank is required
to withdraw or cancel any such form or certificate previously submitted or any
such form or certificate otherwise becomes ineffective or inaccurate, such Bank
shall promptly notify the Borrower and Agent of such fact and the Bank shall to
that extent not be obligated to provide any such form or certificate and will be
entitled to withdraw or cancel any affected form or certificate, as applicable.
(d) Notwithstanding any provision of Section 14.1(a) above to the
contrary, the Borrower shall not have any obligation to pay any taxes or to
indemnify any Bank for such taxes pursuant to this Section 14.1 to the extent
that such taxes result from (i) the failure of any Bank to comply with its
obligations pursuant to Section 14.1(b) or (ii) any representation made on Form
1001, 4224 or W-8 or successor applicable form or certification by any Bank
incurring such taxes proving to have been incorrect, false or misleading in any
material respect when so made or deemed to be made.
Section 14.2. No Waiver of Rights. No delay or failure on the part
of the Agent or any Bank or on the part of the holder or holders of any Note in
the exercise of any power or right under
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any Credit Document shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise thereof preclude any other
or further exercise of any other power or right, and the rights and remedies
hereunder of the Agent, the Banks and the holder or holders of any Notes are
cumulative to, and not exclusive of, any rights or remedies which any of them
would otherwise have.
Section 14.3. Non-Business Day. If any payment of principal or
interest on any Loan or of any other Obligation shall fall due on a day which is
not a Business Day, interest or fees (as applicable) at the rate, if any, such
Loan or other Obligation bears for the period prior to maturity shall continue
to accrue on such Obligation from the stated due date thereof to and including
the next succeeding Business Day, on which the same shall be payable.
Section 14.4. Documentary Taxes. The Borrower agrees that it will
pay any documentary, stamp or similar taxes payable in respect to any Credit
Document, including interest and penalties, in the event any such taxes are
assessed, irrespective of when such assessment is made and whether or not any
credit is then in use or available hereunder.
Section 14.5. Survival of Representations. All representations and
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall continue in full force and effect with respect to the date as of which
they were made as long as any credit is in use or available hereunder.
Section 14.6. Survival of Indemnities. All indemnities and all other
provisions relative to reimbursement to the Banks of amounts sufficient to
protect the yield of the Banks with respect to the Loans, including, but not
limited to, Section 3.4, Section 11.3 and Section 14.15 hereof, shall survive
the termination of this Agreement and the other Credit Documents and the payment
of the Loans and all other Obligations.
Section 14.7. Sharing of Set-Off. Each Bank agrees with each other
Bank a party hereto that if such Bank shall receive and retain any payment,
whether by set-off or application of deposit balances or otherwise ("Set-off"),
on any of the Loans or Reimbursement Obligations in excess of its ratable share
of payments on all such obligations then outstanding to the Banks, then such
Bank shall purchase for cash at face value, but without recourse, ratably from
each of the other Banks such amount of the Loans or Reimbursement Obligations,
or participations therein, held by each such other Banks (or interest therein)
as shall be necessary to cause such Bank to share such excess payment ratably
with all the other Banks; provided, however, that if any such
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purchase is made by any Bank, and if such excess payment or part thereof is
thereafter recovered from such purchasing Bank, the related purchases from the
other Banks shall be rescinded ratably and the purchase price restored as to the
portion of such excess payment so recovered, but without interest. For purposes
of this Section 14.7, amounts owed to or recovered by, the Agent in connection
with Reimbursement Obligations in which Banks have been required to fund their
participation shall be treated as amounts owed to or recovered by the Agent as a
Bank hereunder.
Section 14.8. Notices. Except as otherwise specified herein, all
notices under the Credit Documents shall be in writing (including telecopy or
other electronic communication) and shall be given to a party hereunder at its
address or telecopier number set forth below or such other address or telecopier
number as such party may hereafter specify by notice to the Agent and the
Borrower, given by courier, by United States certified or registered mail, or by
other telecommunication device capable of creating a written record of such
notice and its receipt. Notices under the Credit Documents to the Banks and the
Agent shall be addressed to their respective addresses, telecopier or telephone
numbers set forth on the signature pages hereof, and to the Borrower and the
Guarantors to:
Bell Sports Corp.
10601 North Hayden Road
Suite I-100
Attn: Chief Financial Officer or
Director of Corporate Finance
Scottsdale, Arizona 85260
Telecopy: 602-951-0511
Telephone: 602-951-0033 x231 or x232
Each such notice, request or other communication shall be effective (i)
if given by telecopier, when such telecopy is transmitted to the telecopier
number specified in this Section 14.8 or on the signature pages hereof and a
confirmation of receipt of such telecopy has been received by the sender, (ii)
if given by courier, when delivered, (iii) if given by mail, three business days
after such communication is deposited in the mail, registered with return
receipt requested, addressed as aforesaid or (iv) if given by any other means,
when delivered at the addresses specified in this Section 14.8 or on the
signature pages hereof; provided that any notice given pursuant to Section 1
hereof shall be effective only upon receipt.
Section 14.9. Counterparts. This Agreement may be executed in any
number of counterpart signature pages, and by the different parties on different
counterparts, each of which when executed shall be deemed an original but all
such counterparts taken together shall constitute one and the same instrument.
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Section 14.10. Successors and Assigns. This Agreement shall be
binding upon the Borrower and its successors and assigns, and shall inure to the
benefit of each of the Banks and the benefit of their respective successors and
assigns, including any subsequent holder of any Note. The Borrower may not
assign any of its rights or obligations under any Credit Document without the
written consent of all of the Banks.
Section 14.11. Participants and Note Assignees. Each Bank shall have
the right at its own cost to grant participations (to be evidenced by one or
more agreements or certificates of participation) in the Loans made and
Reimbursement Obligations and/or Commitments and/or participations in Swing
Loans held by such Bank at any time and from time to time, and to assign its
rights under such Loans or the Notes evidencing such Loans or Reimbursement
Obligations, to one or more other banks, insurance companies, commercial lenders
and other financial institutions; provided that no such participation or
assignment shall relieve any Bank of any of its obligations under this
Agreement, and provided further that no such assignee or participant shall have
any rights under this Agreement except as provided in this Section 14.11, and
the Agent shall have no obligation or responsibility to such participant or
assignee, except that nothing herein provided is intended to affect the rights
of an assignee of a Note to enforce the Note assigned. Any party to which such a
participation or assignment has been granted shall have the benefits of Section
3.4 and Section 11.3 hereof but shall not be entitled to receive any greater
payment under either such Section than the Bank granting such participation or
assignment would have been entitled to receive with respect to the rights
transferred. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment or
modification or waiver of any provision of this Agreement; provided that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement that would (A) increase any
Commitment of such Bank if such increase would also increase the participant's
obligations, (B) forgive any amount of or postpone the date for payment of any
principal of or interest on any Loan or Reimbursement Obligation or of any fee
payable hereunder in which such participant has an interest or (C) reduce the
stated rate at which interest or fees accrue or other amounts payable hereunder
in which such participant has an interest. The Borrower and each Guarantor
authorizes each Bank to disclose to any participant or prospective participant
under this Section 14.11 any financial or other information pertaining to the
Borrower or any Guarantor, subject to Section 14.21 hereof.
Section 14.12. Assignment Agreements.
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(a) Generally. Each Bank may, from time to time upon at least five
(5) Business Days' notice to the Agent and the Borrower, assign to other Persons
all or any part of its rights and obligations under this Agreement (including
without limitation the indebtedness evidenced by each Note then owned by such
assigning Bank, together with an equivalent proportion of its obligation to make
Loans and advances and participate in Letters of Credit and Swing Loans
hereunder) pursuant to written agreements in the form attached hereto as Exhibit
G executed by such assigning Bank, such assignee Bank or Banks, the Borrower and
the Agent, which agreements shall specify in each instance the portion of the
indebtedness evidenced by each Note which is to be assigned to each such
assignee lender and the portion of the Commitments, and obligations to
participate in Letters of Credit and Swing Loans, in each case of the assigning
Bank to be assumed by such assignee lender (the "Assignment Agreements");
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of the assigning Bank's rights and obligations under this
Agreement and the assignment shall cover the same percentage of such Bank's
Commitments, Loans, Notes and interests in Letters of Credit and Swing Loans;
(ii) the aggregate amount of the Revolving Credit Commitment of the assigning
Bank being assigned pursuant to each such assignment (determined as of the
effective date of the relevant Assignment Agreement) shall in no event be less
than $10,000,000; (iii) each Bank shall maintain for its own account at least
$10,000,000 of its Revolving Credit Commitment and the Agent must retain all of
the Swing Line Commitment; (iv) the Agent and the Borrower must each consent
(which consent shall not be unreasonably withheld) to each such assignment
(except that the Borrower's consent is not required if such assignment is made
after an Event of Default under Sections 10.1(f) or 10.1(g) has occurred) to a
party which is not a Bank at such time; and (v) the assigning Bank must pay to
the Agent a processing and recordation fee of $2,500 and any out-of-pocket
attorney's fees incurred by the Agent in connection with such Assignment
Agreement. Upon the execution of each Assignment Agreement by the assigning Bank
thereunder, the assignee lender thereunder, the Borrower and the Agent and
payment to such assigning Bank by such assignee lender of the purchase price for
the portion of the indebtedness of the Borrower being acquired by it, (i) such
assignee lender shall thereupon become a "Bank" for all purposes of this
Agreement with Commitments (including the related obligations to participate in
Letters of Credit and Swing Loans) in the amounts set forth in such Assignment
Agreement and with all the rights, powers and obligations afforded a Bank
hereunder, (ii) such assigning Bank shall have no further liability for funding
the portion of its Commitments (including the related obligations to participate
in Letters of Credit and Swing Loans) assumed by such new assignee Bank and
(iii) the address for notices to such assignee Bank shall be as specified in the
Assignment Agreement executed by it. Concurrently with the execution and
delivery of such Assignment Agreement, the Borrower shall execute and deliver a
Revolving Credit Note to the assignee Bank in the amount of its Revolving Credit
Commitment (and a Swing Line Note if such assignee Bank is concurrently with
such assignment becoming a new Agent) and a new Revolving Credit Note to the
assigning
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Bank in the amount of its Revolving Credit Commitment after giving effect to the
reduction occasioned by such assignment, all such Notes to constitute "Notes"
for all purposes of this Agreement.
(b) Assignment of Commitments under Certain Circumstances. If (a) any
Bank (i) shall have delivered a notice or certificate pursuant to Section 11.3,
(ii) shall become subject to the provisions of Section 11.1 or (iii) shall fail
or refuse to fund its portion of any Loan for any reason other than the failure
of the Borrower to satisfy the conditions precedent to the making of such Loan
hereunder, (b) the Borrower shall be required to make additional payments to any
Lender under Section 14.1 (or would be required to make such additional payments
with respect to any future interest payment), the Borrower shall have the right,
but not the obligation, at its own expense, upon notice to such Bank and the
Agent, to replace such Bank with an assignee (in accordance with and subject to
the restrictions contained in Section 14.12(a) hereof), and such Bank hereby
agrees to transfer and assign without recourse (in accordance with and subject
to the restrictions contained in Section 14.12(a) hereof) all of such assigning
Bank's interests, rights and obligations under this Agreement to such assignee;
provided, however, that (A) no such assignment shall conflict with any law or
any rule, regulation or order of any governmental authority, (B) such assignee
Bank shall pay to the affected Bank in immediately available funds on the date
of such assignment the principal of the Loans made and Reimbursement Obligations
funded by such Bank hereunder, (C) the Borrower must exercise its right to
replace such Bank within forty-five (45) days of the event giving rise to the
Borrower's right to so replace such Bank, and (D) the Borrower shall pay to the
affected Bank in immediately available funds on the date of such assignment the
interest accrued to the date of payment on the Loans made by such Bank hereunder
and all other amounts accrued for such Bank's account or owed to it hereunder.
Section 14.13. Amendments. Any provision of the Credit Documents may
be amended or waived if, but only if, such amendment or waiver is in writing and
is signed by (a) the Borrower, (b) the Required Banks, and (c) if the rights or
duties of the Agent are affected thereby, the Agent; provided that:
(i) no amendment or waiver pursuant to this Section 14.13
shall (A) increase any Commitment of any Bank without the consent of
such Bank or (B) forgive, or reduce the amount of, or postpone any
fixed date for payment of, any principal of or interest on any Loan or
Reimbursement Obligation or any fee payable hereunder without the
consent
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of each Bank or (C) reduce the stated rate at which interest or any fee
hereunder is calculated; and
(ii) no amendment or waiver pursuant to this Section 14.13
shall, unless signed by each Bank, change any provision of Section 8,
Section 11, this Section 14.13, or the definition of Required Banks, or
affect the number of Banks required to take any action under the Credit
Documents, or release any Guarantor from its guaranty of any
Obligations.
Section 14.14. Headings. Section headings used in this Agreement
are for reference only and shall not affect the construction of this Agreement.
Section 14.15. Legal Fees, Other Costs and Indemnification. The
Borrower agrees to pay all reasonable out-of-pocket costs and expenses of the
Agent in connection with the preparation and negotiation of the Credit
Documents, including without limitation, the reasonable fees and disbursements
of Chapman and Cutler, counsel to the Agent, in connection with the preparation
and execution of the Credit Documents, and any amendment, waiver or consent
related hereto, whether or not the transactions contemplated herein are
consummated; provided, however that the Borrower's obligation to reimburse the
Agent for such fees of Messrs. Chapman and Cutler in connection with the
preparation and negotiation of the Credit Documents delivered on or before the
Closing Date shall not exceed $40,000 (exclusive of out-of-pocket disbursements
and separately charged items). The Borrower further agrees to indemnify each
Bank, the Agent, and their respective directors, officers and employees
(collectively, "Indemnified Parties"), against all losses, claims, damages,
penalties, judgments, liabilities and related expenses (including, without
limitation, all expenses of litigation or preparation therefor, whether or not
the indemnified Person is a party thereto) which any of them may incur or
reasonably pay arising out of or relating to any Credit Document or any of the
transactions contemplated thereby or the direct or indirect application or
proposed application of the proceeds of any Loan or Letter of Credit
(collectively, "Indemnified Claims"), other than (i) those which arise from the
gross negligence or willful misconduct of the party claiming indemnification;
(ii) Indemnified Claims which arise out of a dispute to which the Borrower is
not a party, between two or more Banks or between the Agent and one or more
Banks; (iii) Indemnified Claims for reimbursement of amounts paid by an
Indemnified Party on any final, non-appealable judgment in the Borrower's favor
against an Indemnified Party by a court of competent jurisdiction (it being
understood and agreed that this clause (iii) shall not affect or limit any
amount the Borrower may owe to any Bank as a result of any such claim pursuant
to Section 10.6) and (iv) an Indemnified Claim for reimbursement of amounts paid
by the party seeking
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indemnification in any settlement with a party other than the Borrower or any
Affiliate thereof which has been properly effected by an Indemnified Party
without the prior consent of the Borrower, unless the Borrower has had a
reasonable opportunity to assume responsibility and not diligently prosecuted a
defense of such Indemnified Claim. The Borrower, upon demand by the Agent or a
Bank at any time, shall reimburse the Agent or Bank for any reasonable legal or
other expenses incurred in connection with investigating or defending against
any of the foregoing except if the same is directly due to the gross negligence
or willful misconduct of the party to be indemnified.
Section 14.16. Set Off. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence of any Event of Default and upon the acceleration of all
amounts owing hereunder, each Bank and each subsequent holder of any Note is
hereby authorized by the Borrower and each Guarantor at any time or from time to
time, with notice to the Borrower simultaneously therewith or promptly
thereafter, but without notice, to the Guarantors or to any other Person, any
such additional notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts, and in whatever currency
denominated) and any other Indebtedness at any time held or owing by that Bank
or that subsequent holder to or for the credit or the account of the Borrower or
any Guarantor, whether or not matured, against and on account of the obligations
and liabilities of the Borrower or any Guarantor to that Bank or that subsequent
holder under the Credit Documents, including, but not limited to, all claims of
any nature or description arising out of or connected with the Credit Documents,
irrespective of whether or not (a) that Bank or that subsequent holder shall
have made any demand hereunder or (b) the principal of or the interest on the
Loans or Notes and other amounts due hereunder shall have become due and payable
pursuant to Section 8 and although said obligations and liabilities, or any of
them, may be contingent or unmatured.
Section 14.17. Currency. Each reference in this Agreement to U.S.
Dollars or to an Alternative Currency (the "relevant currency") is of the
essence. To the fullest extent permitted by law, the obligation of the Borrower
and each Guarantor in respect of any amount due in the relevant currency under
this Agreement shall, notwithstanding any payment in any other currency (whether
pursuant to a judgment or otherwise), be discharged only to the extent of the
amount in the relevant currency that the Person entitled to receive such payment
may, in accordance with normal banking procedures, purchase with the sum paid in
such other currency (after any premium and costs of exchange) on the Business
Day immediately following the day on which such Person receives such payment. If
the amount of the relevant currency so
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<PAGE>
purchased is less than the sum originally due to such Person in the relevant
currency, the Borrower or relevant Guarantor agrees, as a separate obligation
and notwithstanding any such judgment, to indemnify such Person against such
loss, and if the amount of the specified currency so purchased exceeds the sum
of (a) the amount originally due to the relevant Person in the specified
currency plus (b) any amounts shared with other Banks as a result of allocations
of such excess as a disproportionate payment to such Person under Section 14.7
hereof, such Person agrees to remit such excess to the Borrower.
Section 14.18. Entire Agreement. The Credit Documents constitute the
entire understanding of the parties thereto with respect to the subject matter
thereof and any prior or contemporaneous agreements, whether written or oral,
with respect thereto are superseded thereby.
Section 14.19. Governing Law. This Agreement and the other Credit
Documents, and the rights and duties of the parties hereto, shall be construed
and determined in accordance with the internal laws of the State of Illinois.
Section 14.20. Submission to Jurisdiction; Waiver of Jury Trial. The
Borrower and each Guarantor hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Northern District of Illinois and of
any Illinois State court sitting in the City of Chicago for purposes of all
legal proceedings arising out of or relating to this Agreement, the other Credit
Documents or the transactions contemplated hereby or thereby. The Borrower and
each Guarantor irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. The Borrower,
each Guarantor, the Agent, and each Bank hereby irrevocably waives any and all
right to trial by jury in any legal proceeding arising out of or relating to any
Credit Document or the transactions contemplated thereby.
Section 14.21. Confidentiality. Each Bank agrees to maintain in
confidence and not to disclose without the Borrower's consent (other than to its
employees, affiliates, auditors, counsel or other professional advisors, or to
another Bank, each of which shall have a bona-fide need to know and shall also
be bound by this Section 14.21) any information concerning the Borrower or any
of its Subsidiaries furnished pursuant to this Agreement and not previously
disclosed in any filing made by the Borrower with the SEC; provided that any
Bank may disclose any such information (a) that has become generally available
to the public, (b) if required or appropriate in any report, statement or
testimony submitted to any regulatory body having or claiming to have
jurisdiction over such Bank, (c) if required or appropriate in
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<PAGE>
response to any summons or subpoena or in connection with any litigation, (d) in
order to comply with any law, order, regulation or ruling applicable to such
Bank, or (e) to any prospective or actual participant under Section 14.11 or
14.12 hereof in connection with any contemplated or actual transfer of a
participating or other interest in such Bank's rights or obligations hereunder;
provided, that (i) such actual or prospective transferee executes an agreement
with such Bank containing provisions substantially identical to those contained
in this Section 14.21 and (ii) in the case of any disclosure under subsection
(c) above, such Bank shall (to the extent permitted by applicable law) notify
the Borrower of such disclosure so that the Borrower may seek an appropriate
protective order or waive such Bank's compliance with the provisions of this
Section, it being understood that if the Borrower has no right to obtain such a
protective order or if the Borrower does not commence procedures to obtain such
a protective order within ten business days of the receipt of such notice, such
Bank's compliance with this Section shall be deemed to have been waived with
respect to such disclosure.
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<PAGE>
Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall be a contract between us for the purposes hereinabove set forth.
Dated as of February 15, 1996.
BELL SPORTS CORP.
By Howard A. Kosick
------------------
Name: Howard A. Kosick
Title: Secretary, Executive
Vice President & CFO
BELL SPORTS, INC.
By Howard A. Kosick
----------------
Name: Howard A. Kosick
Title: Secretary
AMERICAN RECREATION COMPANY
HOLDINGS, INC.
By Howard A. Kosick
----------------
Name: Howard A. Kosick
Title: Secretary
AMERICAN RECREATION COMPANY, INC.
By Howard A. Kosick
----------------
Name: Howard A. Kosick
Title: Secretary
GIRO SPORT DESIGN INTERNATIONAL, INC.
By Howard A. Kosick
----------------
Name: Howard A. Kosick
Title: Secretary
MONGOOSE BICYCLE CANADA INC.
By Stephen A. Silverstein
----------------------
Name: Stephen A. Silverstein
Title: President
DENRICH SPORTING GOODS CANADA LTD.
By Stephen A. Silverstein
-----------------------
Name: Stephen A. Silverstein
Title: President
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<PAGE>
CYCLE PRODUCTS COMPANY CANADA LTD.
By Stephen A. Silverstein
-----------------------
Name: Stephen A. Silverstein
Title: President
BELL SPORTS CANADA INC.
By Stephen A. Silverstein
-----------------------
Name: Stephen A. Silverstein
Title: President
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<PAGE>
Accepted and Agreed to as of the day and year last above written.
Address and Amount of Commitments:
Address: HARRIS TRUST AND SAVINGS BANK, IN ITS
INDIVIDUAL CAPACITY AS a Bank and as Agent
111 West Monroe Street
Chicago, Illinois 60690
Attn.: Emerging Majors
By M. Elizabeth Gilliam
-------------------------
Telecopy: (312) 461-2591 Name: M. Elizabeth Gilliam
Telephone: (312) 461-3474 Title: Vice President
Commitment: $30,000,000
Lending Offices:
Domestic Rate Loans:
111 West Monroe Street
Chicago, Illinois 60690
Attn.: Emerging Majors
Eurocurrency Loans:
111 West Monroe Street
Chicago, Illinois 60690
Attn.: Emerging Majors
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<PAGE>
Address and Amount of Commitments:
Address: THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
One Boatmen's Plaza
800 Market Street
Post Office Box 236
St. Louis, Missouri 63166-0236
Attn.: ______________
By Eric A. Gudmentad
--------------------
Telecopy: (___) ___-_____ Name: Eric A. Gudmentad
Telephone: (___) ___-_____ Title:Assistant Vice President
Commitment: $15,000,000
Lending Offices:
Domestic Rate Loans:
______________________
______________________
Attn.: ______________
Eurocurrency Loans:
______________________
______________________
Attn.: ______________
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<PAGE>
Address and Amount of Commitments:
Address: BANK OF AMERICA - ARIZONA
101 North First Avenue
Phoenix, Arizona 85003
Attn.: Debi D. Jefferson
By Jonathon N. Kenney
------------------
Telecopy: (602) 594-2967 Name: Jonathon N. Kenney
Telephone: (602) 594-4336 Title: Vice President
Commitment: $15,000,000
Lending Offices:
Domestic Rate Loans:
As Above _____________
______________________
Attn.: ______________
Eurocurrency Loans:
As Above _____________
______________________
Attn.: ______________
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<PAGE>
Address and Amount of Commitments:
Address: THE NORTHERN TRUST COMPANY
50 South LaSalle Street
Chicago, Illinois 60675
Attn.: Edie Reed
By__________________________
Telecopy: (312) 630-1566 Name:_______________________
Telephone: (312) 630-3352 Title:______________________
Commitment: $10,000,000
Lending Offices:
Domestic Rate Loans:
50 South LaSalle Street
Chicago, Illinois 60675
Attn.: Edie Reed
Eurocurrency Loans:
50 South LaSalle Street
Chicago, Illinois 60675
Attn.: Edie Reed
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<PAGE>
Address and Amount of Commitments:
Address: NORWEST BANK ARIZONA, N.A.
3300 North Central Avenue
Phoenix, Arizona 85012
Attn.: J. Daniel McKirgan
By J. Daniel McKirgan
------------------
Telecopy: (602) 263-5855 Name: J. Daniel McKirgan
Telephone: (602) 263-1265 Title: Vice President
Commitment: $10,000,000
Lending Offices:
Domestic Rate Loans:
______________________
______________________
Attn.: ______________
Eurocurrency Loans:
______________________
______________________
Attn.: ______________
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<PAGE>
Address and Amount of Commitments:
Address: LASALLE NATIONAL BANK
120 South LaSalle Street
Chicago, Illinois 60603
Attn.: Carol Morse
By Carol Morse
-----------
Telecopy: (312) 904-6457 Name: Carol Morse
Telephone: (312) 904-8128 Title: Vice President
Commitment: $20,000,000
Lending Offices:
Domestic Rate Loans:
______________________
______________________
Attn.: ______________
Eurocurrency Loans:
______________________
______________________
Attn.: ______________
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<PAGE>
EXHIBIT A
NOTICE OF PAYMENT REQUEST
[Name of Bank] [Date]
[Address]
Attention:
Reference is made to the Credit Agreement, dated as of February 15,
1996 among Bell Sports Corp., the Banks named therein, and Harris Trust and
Savings Bank, as Agent (the "Credit Agreement"). Capitalized terms used herein
and not defined herein have the meanings assigned to them in the Credit
Agreement. [The Borrower has failed to pay its Reimbursement Obligation in the
amount of $__________. Your Bank's Percentage of the unpaid Reimbursement
Obligation is $____________] or [Harris Trust and Savings Bank has been required
to return a payment by the Borrower of a Reimbursement Obligation in the amount
of $____________. Your Bank's Percentage of the returned Reimbursement
Obligations is $____________.]
Very truly yours,
HARRIS TRUST AND SAVINGS BANK
By________________________________
Its__________________________
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<PAGE>
EXHIBIT B
NOTE
________________, 19___
FOR VALUE RECEIVED, the undersigned, Bell Sports Corp., a Delaware
corporation (the "Borrower"), promises to pay to the order of
________________________________ (the "Bank") on the Termination Date of the
hereinafter defined Credit Agreement, at the principal office of Harris Trust
and Savings Bank, in Chicago, Illinois, (or in the case of Eurocurrency Loans
denominated in an Alternative Currency, at such office as the Agent has
previously notified the Borrower) in the currency of such Loan in accordance
with Section 5.1 of the Credit Agreement, the aggregate unpaid principal amount
of all Loans made by the Bank to the Borrower pursuant to the Credit Agreement,
together with interest on the principal amount of each Loan from time to time
outstanding hereunder at the rates, and payable in the manner and on the dates,
specified in the Credit Agreement.
The Bank shall record on its books or records or on a schedule attached
to this Note, which is a part hereof, each Loan made by it pursuant to the
Credit Agreement, together with all payments of principal and interest and the
principal balances from time to time outstanding hereon, whether the Loan is a
Domestic Rate Loan or a Eurocurrency Loan, the currency thereof and the interest
rate and Interest Period applicable thereto, provided that prior to the transfer
of this Note all such amounts shall be recorded on a schedule attached to this
Note. The record thereof, whether shown on such books or records or on a
schedule to this Note, shall be prima facie evidence of the same, provided,
however, that the failure of the Bank to record any of the foregoing or any
error in any such record shall not limit or otherwise affect the obligation of
the Borrower to repay all Loans made to it pursuant to the Credit Agreement
together with accrued interest thereon.
This Note is one of the Notes referred to in the Credit Agreement dated
as of February 15, 1996, among the Borrower, Harris Trust and Savings Bank, as
Agent, and the Banks party thereto (the "Credit Agreement"), and this Note and
the holder hereof are entitled to all the benefits provided for thereby or
referred to therein, to which Credit Agreement reference is hereby made for a
statement thereof. All defined terms used in this Note, except terms otherwise
defined herein, shall have the same meaning as in the Credit Agreement. This
Note shall be governed by and construed in accordance with the internal laws of
the State of Illinois.
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<PAGE>
Prepayments may be made hereon and this Note may be declared due prior
to the expressed maturity hereof, all in the events, on the terms and in the
manner as provided for in the Credit Agreement.
The Borrower hereby promises to pay certain out-of-pocket costs and
expenses (including certain attorneys' fees) suffered or incurred by the holder
hereof in collecting this Note or enforcing any rights in any collateral
therefor, all as more particularly provided in the Credit Agreement. The
Borrower hereby waives demand, presentment, protest or notice of any kind
hereunder except as expressly provided in the Credit Agreement.
BELL SPORTS CORP.
By___________________________________
Its_____________________________
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<PAGE>
EXHIBIT C
SWING LINE NOTE
$5,000,000.00 __________, 1996
On the Termination Date, for value received, the undersigned, BELL
SPORTS CORP., a Delaware corporation (the "Borrower"), promises to pay to the
order of Harris Trust and Savings Bank (the "Bank"), at the principal office of
Harris Trust and Savings Bank in Chicago, Illinois, the principal sum of (i)
Five Million and 00/100 Dollars ($5,000,000.00), or (ii) such lesser amount as
may at the time of the maturity hereof, whether by acceleration or otherwise, be
the aggregate unpaid principal amount of all Swing Loans owing from the Borrower
to the Bank under the Swing Line Commitment provided for in the Credit Agreement
hereinafter mentioned.
This Note evidences Swing Loans made and to be made to the Borrower by
the Bank under the Swing Line Commitment provided for under that certain Credit
Agreement dated as of February 15, 1996 by and between the Borrower, Harris
Trust and Savings Bank individually and as Agent and certain lenders which are
or may from time to time become parties thereto (the "Credit Agreement"), and
the Borrower hereby promises to pay interest at the office specified above on
each Swing Loan evidenced hereby at the rates and times specified therefor in
the Credit Agreement.
Each Swing Loan made under the Swing Line Commitment provided for in
the Credit Agreement by the Bank to the Borrower against this Note, any
repayment of principal hereon and the interest rates applicable thereto shall be
endorsed by the holder hereof on the reverse side of this Note or recorded on
the books and records of the holder hereof (provided that such entries shall be
endorsed on the reverse side hereof prior to any negotiation hereof) and the
Borrower agrees that in any action or proceeding instituted to collect or
enforce collection of this Note, the entries so endorsed on the reverse side
hereof or recorded on the books and records of the Bank shall be prima facie
evidence of the unpaid balance of this Note and the interest rates applicable
thereto.
This Note is issued by the Borrower under the terms and provisions of
the Credit Agreement, and this Note and the holder hereof are entitled to all of
the benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity as specified in the
Credit Agreement, and certain prepayments are
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<PAGE>
required to be made hereon, all in the events, on the terms and with the effects
provided in the Credit Agreement. All capitalized terms used herein without
definition shall have the same meaning herein as such terms have in the Credit
Agreement.
This Note shall be construed in accordance with, and governed by, the
internal laws of the State of Illinois without regard to principles of conflict
of law.
The Borrower hereby promises to pay certain out-of-pocket costs and
expenses (including certain attorneys' fees) suffered or incurred by the holder
hereof in collecting this Note or enforcing any rights in any collateral
therefor, all as more particularly provided in the Credit Agreement. The
Borrower hereby waives demand, presentment, protest or notice of any kind
hereunder except as expressly provided in the Credit Agreement.
BELL SPORTS CORP.
By________________________________
Its__________________________
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<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished to Harris Trust and Savings
Bank as Agent pursuant to the Credit Agreement (the "Credit Agreement") dated as
of February 15, 1996, by and among Bell Sports Corp., the Banks signatory
thereto and Harris Trust and Savings Bank as Agent. Unless otherwise defined
herein, the terms used in this Compliance Certificate have the meanings ascribed
thereto in the Credit Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected or appointed ________________ of
Bell Sports Corp.;
2. I have reviewed the terms of the Credit Agreement and in
my capacity as such officer, am generally familiar with the financial
condition of Bell Sports Corp. and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. I have no knowledge of the existence of any condition or
event which constitutes a Default or an Event of Default during or at
the end of the accounting period covered by the attached financial
statements or as of the date of this Certificate, except as set forth
below; and
4. Schedule 1 attached hereto sets forth financial data and
computations evidencing compliance with certain covenants of the Credit
Agreement, all of which data and computations are true, complete and
correct. All computations are made in accordance with the terms of the
Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
-101-
<PAGE>
The foregoing certifications, together with the computations set forth
in Schedule 1 hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this __________ day of
_____________, 19___.
__________________________________
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<PAGE>
SCHEDULE 1 TO COMPLIANCE CERTIFICATE
BELL SPORTS CORP.
Compliance Calculations for Multicurrency Credit Agreement
Dated as of February 15, 1996
Calculations as of _____________, 19___
- - -------------------------------------------------------------------------------
A. CONSOLIDATED TANGIBLE NET WORTH (SECTION 9.15)
1. Consolidated Stockholder's Equity as defined _________
2. Consolidated Intangible Assets as defined _________
3. Line 1 less line 2 ("Consolidated Tangible Net Worth")
__________________
4. Cumulative Consolidated Net Income
for each fiscal quarter commencing after
June 30, 1996 _________
5. 50% of Line 4 amount _________
6. Sum of Line 5 plus _________
55,000,000 ("Minimum Required Amount")
Line 3 must not be less than Line 6
7. Company is in compliance?
(Circle yes or no)
Yes/No
B. INVESTMENTS IN OVERSEAS SUBSIDIARIES (9.14(J))
1. Investments in Overseas Subsidiaries _________
2. Line 1 minus Investments in Overseas Subsidiaries
existing as of 2/15/96 __________
(Line 2 must not exceed $10,000,000)
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3. Company is in compliance?
(Circle yes or no)
Yes/No
C. FUNDED DEBT RATIO (SECTION 9.16 )
1. Total Funded Debt as defined _________
2. Consolidated Stockholders' Equity as defined _________
3. Ratio of Total Funded Debt (Line 1)
to Total Funded Debt plus Consolidated
Stockholder's Equity (Line 1 plus Line 2)
("Funded Debt Ratio") :1
4. As listed in Section 9.16, for the date
of this Certificate, Funded Debt Ratio
must not be greater than :1
5. Company is in compliance?
(Circle yes or no)
Yes/No
D. INTEREST COVERAGE RATIO (SECTION 9.17)
1. Consolidated Net Income as defined
for past four quarters (except as set forth
otherwise in definition) _________________
2. Amounts deducted in arriving
at Consolidated Net Income:
(a) Interest Expense _________________
(b) Federal, state and local
income taxes _________________
(c) Increase in cost of goods sold due to
write-ups of inventory acquired in a
business combination accounted for as a
purchase sold due to write-ups ___________
(d) Amortization _________________
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(e) Earnings charges representing
accruals for Canadian products
liability __________
3. Sum of Lines 1, 2(a), 2(b), 2(c),
2(d) and 2(e) ("EBITA")
4. Interest Expense ___________
5. Ratio of EBITA (Line 3)
to Interest Expense (Line 4) ("Interest
Coverage Ratio") :1
6. As listed in Section 9.17, for
the date of this Certificate,
the Interest Coverage
Ratio shall not be less than :1
7. Company is in compliance?
(Circle yes or no)
Yes/No
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<PAGE>
EXHIBIT E
SUBSIDIARY GUARANTEE AGREEMENT
_________________,19___
HARRIS TRUST AND SAVINGS BANK, as Agent for the Banks party to the Credit
Agreement dated as of February 15, 1996 among Bell Sports Corp., certain
Guarantors, such Banks and such Agent (the "Credit Agreement")
Dear Sirs:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Subsidiary Guarantor], a [jurisdiction of
incorporation] corporation, hereby elects to be a "Guarantor" for all purposes
of the Credit Agreement, effective from the date hereof. The undersigned
confirms that the representations and warranties set forth in Section 7 of the
Credit Agreement are true and correct as to the undersigned as of the date
hereof.
Without limiting the generality of the foregoing, the undersigned
hereby agrees to perform all the obligations of a Guarantor under, and to be
bound in all respects by the terms of, the Credit Agreement, including without
limitations Section 13 thereof, to the same extent and with the same force and
effect as if the undersigned were a direct signatory thereto.
This Agreement shall be construed in accordance with and governed by
the internal laws of the State of Illinois.
Very truly yours,
[NAME OF SUBSIDIARY GUARANTOR]
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By__________________________________
Name________________________________
Title_______________________________
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<PAGE>
EXHIBIT F-1
OPINION OF COUNSEL
-108-
<PAGE>
EXHIBIT F-2
OPINION OF COUNSEL
-109-
<PAGE>
EXHIBIT F-3
OPINION OF COUNSEL
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<PAGE>
EXHIBIT G
ASSIGNMENT AND ACCEPTANCE
Dated _____________, 19_____
Reference is made to the Multicurrency Credit Agreement dated as of
February ___, 1996 (the "Credit Agreement") among Bell Sports Corp., the
Guarantors (as defined in the Credit Agreement) party thereto, the Banks (as
defined in the Credit Agreement) and Harris Trust and Savings Bank, as Agent for
the Lenders (the "Agent").
Terms defined in the Credit Agreement are used herein with the same meaning.
_____________________________________________________ (the "Assignor")
and _________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a _______% interest in
and to all of the Assignor's rights and obligations under the Credit Agreement
as of the Effective Date (as defined below), including, without limitation, such
percentage interest in the Assignor's Revolving Credit Commitment as in effect
on the Effective Date and the Committed Loans, if any, owing to the Assignor on
the Effective Date and the Assignor's Percentage of any outstanding L/C
Obligations and Swing Loans, if any.
2. The Assignor (i) represents and warrants that as of the date
hereof (A) its Revolving Credit Commitment is $____________, (B) the aggregate
outstanding principal amount of Committed Loans made by it under the Credit
Agreement that have not been repaid is $____________ and a description of the
interest rates, currencies and interest periods for such Committed Loans is
attached as Schedule 1 hereto, (C) the aggregate principal amount of Assignor's
outstanding L/C Obligations is $___________ and (D) the aggregate amount of
Assignor's participations (whether or not funded) in outstanding Swing Loans is
$_____________; (ii) represents and warrants that it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim, lien, or encumbrance of any kind; (iii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iv) makes no
representation or warranty and assumes no responsibility with respect to the
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financial condition of the Borrower or any Guarantor or the performance or
observance by any Borrower or any Guarantor of any of their respective
obligations under the Credit Agreement or any other instrument or document
furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the most recent financial statements
delivered to the Banks pursuant to in Sections 9.6(a)(i), (ii) and (iii) thereof
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it will, independently and without reliance upon
the Agent, the Assignor or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement;
(iii) appoints and authorizes the Agent to take such action as Agent on its
behalf and to exercise such powers under the Credit Agreement as are delegated
to the Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (iv) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Bank; and (v) specifies as its lending
offices (and address for notices) the offices set forth beneath its name on the
signature pages hereof.
4. As consideration for the assignment and sale contemplated in
Section 1 hereof, the Assignee shall pay to the Assignor on the date hereof in
Federal funds an amount equal to $________________1. It is understood that
commitment and/or Letter of Credit fees accrued to the date hereof with respect
to the interest assigned hereby are for the account of the Assignor and such
fees accruing from and including the date hereof are for the account of the
Assignee. Each of the Assignor and the Assignee hereby agrees that if it
receives any amount under the Credit Agreement which is for the account of the
other party hereto, it shall receive the same for the account of such other
party to the extent of such other party's interest therein and shall promptly
pay the same to such other party.
5. The effective date for this Assignment and Acceptance shall be
_____________, 19___(the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Borrower for its
acceptance and to the Agent for acceptance and recording by the Agent.
- - --------
1 Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula
rather than as a fixed sum
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<PAGE>
6. Upon such acceptance and recording, as of the Effective Date, (i)
the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Bank thereunder and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.
7. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments under the Credit Agreement in respect of
the interest assigned hereby (including, without limitation, all payments of
principal, interest and commitment fees with respect thereto) to the Assignee.
The Assignor and Assignee shall make all appropriate adjustments in payments
under the Credit Agreement for periods prior to the Effective Date directly
between themselves.
8. In accordance with Section 14.12 of the Credit Agreement, the
Assignor and the Assignee request and direct that the Agent prepare and cause
the Borrower to execute and deliver to the Assignee a Revolving Credit Note
payable to the Assignee in the amount of its Revolving Credit Commitment and a
new Revolving Credit Note to the Assignor in the amount of its Revolving Credit
Commitment after giving effect to the assignment hereunder.
9. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Illinois.
[ASSIGNOR LENDER]
By:___________________________________
Title:
[ASSIGNEE LENDER]
By:___________________________________
Title:
Lending Office
(and
address
for
notices):
LIBOR Funding Office:
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<PAGE>
Accepted and consented this
____ day of ___________, 19__
BELL SPORTS CORP.
By:_________________________
Title:______________________
Accepted and consented to by the Agent this
_______ day of ___________, 19__
[AGENT]
By__________________________
Title:______________________
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<PAGE>
SCHEDULE I
Principal Type of Last day of
Amount Committed Loan Currency Interest Rate Interest Period
-115-
<PAGE>
SCHEDULE 7.2
SCHEDULE OF EXISTING SUBSIDIARIES
<TABLE>
<CAPTION>
Applicable
Definition of
Subsidiary
Borrower's Pursuant
Jurisdiction of Ultimate % to the Credit
Subsidiary Guarantor Incorporation Ownership Agreement
- - ---------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Bell Sports, Inc. Yes California 100% N, M
American Recreation
Company Holdings, Inc. Yes Delaware 100% N, M
American Recreation
Company, Inc. Yes Delaware 100% N, M
EuroBell, S.A. No France 100%* O
Bell Sports Canada
Inc. (1) Yes Quebec 100% N
Mongoose Bicycle
Canada Inc. (1) Yes Canada 100% N
Denrich Sporting Goods
Canada Ltd. (1) Yes Canada 100% N
Cycle Products Company
Canada, Ltd. (1) Yes Canada 100% N
Giro Sport Design
International, Inc. Yes California 100% N
Giro Ireland, Limited No Ireland 100%* O
</TABLE>
LEGEND --
* - Except for nominal statutory shares held by directors.
(1) - These subsidiaries are expected to be amalgamated by February 24, 1996
into a single federally chartered Canadian company to be known as Bell
Sports Canada, Inc. ("NEWCO"). NEWCO is expected to qualify as a Material
Subsidiary and will be a Guarantor as those terms are used in the Credit
Agreement.
N - North American Subsidiary as that term is used in the Credit Agreement.
M - Material Subsidiary as that term is used in the Credit Agreement.
O - Overseas Subsidiary as that terms is used in the Credit Agreement.
-116-
<PAGE>
SCHEDULE 7.5
LITIGATION AND LABOR CONTROVERSIES
Pursuant to Section 7.5 of the Credit Agreement, except as summarized below or
disclosed in the Borrower's Forms 10-Q and 10-K filed with the SEC or its other
filings with the SEC, there is no litigation or governmental proceeding or labor
controversies pending, or to the knowledge of the Borrower or any Guarantor,
threatened which could be reasonably be expected to be adversely determined and,
if adversely determined, would materially adversely affect the business,
operations, Property or financial condition of the Borrower and its Subsidiaries
taken as a whole:
Product Liability
o On February 2, 1996, a Toronto, Canada jury returned a verdict against
Bell based on injuries arising out of a 1986 motorcycle accident. The
jury found that Bell was 25% responsible for the injuries with the
remaining 75% of the fault assigned to the plaintiff and the other
defendant. If the judgment is upheld, the amount of the claim for which
Bell would be responsible and the fees and tax implication associated
therewith are estimated to be between $3.0 million and $4.0 million.
The Company sold its motorcycle helmet manufacturing business in June
1991 in a transaction in which the purchaser assumed all responsibility
for product liability claims arising out of helmets manufactured prior
to the date of disposition and the Company agreed to use its in-house
defense team defend these claims at the purchaser's expense. If the
purchaser is for any reason unable to pay the judgment, settlement
amount or defense costs arising out of this or any other claim, the
Company could be held responsible for the payment of such amounts or
costs. The Company believes that the purchaser does not have the
financial resources to pay any significant judgment, settlement amount
or defense costs arising out of this or any other claim.
The Company believes that there are significant grounds for appeal.
Although the Company cannot produce the outcome of an appeal, the
Company currently has adequate cash balance and sources of capital
available to satisfy the judgment of Bell was unsuccessful in an
appeal. Accordingly, the Company currently does not believe the claim
will have a material adverse effect n liquidity or the financial
condition of the Company. Although the Company maintains product
liability insurance, this claim arose during a
-117-
<PAGE>
period in which the Company was self-insured. The Company currently
does not have a reserve for this judgment.
o The Company is subject to various other product liability claims and/or
suits brought against it for claims involving damages for personal
injuries or deaths. Allegedly, these injuries or deaths relate to the
use by claimants of products manufactured by the Company and, in
certain cases, products manufactured by others. The ultimate outcome of
these existing claims and any potential future claims cannot presently
be determined. Management believes that other existing product
liability claims/suits are defensible and that, based on the Company's
past experience and assessment of current claims, the aggregate of
defense costs and any losses will not have a material adverse impact on
the Company's financial position or results of operations.
Shareholder Litigation
o On February 16, 1995, an AMRE shareholder filed a lawsuit, on his own
behalf, and a purported class action, against AMRE and its directors in
the Chancery Court of the State of Delaware, alleging various breaches
of fiduciary and common law duties and requesting both monetary and
injunctive relief. The alleged basis for the claims are the actin of
AMRE and its directors in connection with the authorization and
approval of the AMRE Merger with Bell Sports Corp. The AMRE Merger was
consummated on July 3, 1995 and the case has been inactive since that
date. On October 2, 1995, the Company filed a motion to dismiss the
case.
-118-
<PAGE>
SCHEDULE 7.11
ENVIRONMENTAL MATTERS
-119-
<PAGE>
SCHEDULE 7.12
REAL PROPERTY
LOCATION INTEREST LIENS
BELL SPORTS, INC.
1. Rt. 136 East
Rantoul, Illinois Operating Lease
No
2. 170 Knowles Ave
Los Gatos, California Operating Lease
No
BELL SPORTS CORP.
1. 10601 N. Hayden Rd.
Scottsdale, Arizona Operating Lease
No
AMERICAN RECREATION COMPANY HOLDINGS, INC.
1. 4B Mall Drive
Commack, New York Operating Lease
No
2. 55 and 57 Grumbacker Rd.
York, Pennsylvania Owned
No
AMERICAN RECREATION COMPANY, INC.
1. 4B Mall Drive
Commack, New York Operating Lease
No
2. 55 and 57 Grumbacker Rd.
York, Pennsylvania Operating Lease
No
-120-
<PAGE>
3. 2887 Lakeview Rd.
Memphis, Tennessee Operating Lease
No
4. 2900 Lakeview Rd.
Memphis, Tennessee Operating Lease
No
5. 3400 Kashwin Street
Torrence, California Operating Lease
No
6. 5045 Peabody Rd.
Fairfield, California Operating Lease
No
DENRICH SPORTING GOODS CANADA LTD.
1. 505 Leon Hammel
Granby, Quebec, Canada Operating Lease
No
2. 700 Charmin Bernard
Granby, Quebec, Canada Operating Lease
No
MONGOOSE BICYCLE CANADA, INC.
1. 123-9018 10th Av. NE
Calgary, Albeta, Canada Operating Lease
No
BELL SPORTS CANADA, INC.
1. 231 St. Charles South
Granby, Quebec, Canada Operating Lease
No
CYCLE PRODUCTS COMPANY CANADA, LTD.
1. 505 Leon Hammel
Granby, Quebec, Canada Operating Lease
No
2. 700 Charmin Bernard
Granby, Quebec, Canada Operating Lease
No
GIRO SPORT DESIGN INTERNATIONAL, INC.
-121-
<PAGE>
1. 380 and 337 Encinal
Santa Cruz, California Operating Lease
No
GIRO IRELAND, LIMITED
1. Bay Industrial Estate
Newcastle West
County Limerick, Ireland Operating Lease
No
EUROBELL, S.A.
1. 30 Cours Camille Pelletan
133000 Salon de Provence, France Operating Lease
No
2. Z1 du Buisson, Rue Mathieu Vallet
P.B.4,
Roche La Moliere, France Operating Lease
No
3. 5 Rue de'lAncienne Marle
Clinchy, France Capital Lease
No
CLOSED LOCATION
1. 13875 Cerritos Rd.
Cerritos, California Operating Lease
No
-122-
<PAGE>
SCHEDULE 9.9
EXISTING LIENS
-123-
<PAGE>
SCHEDULE 9.21
CONTRACTS WITH AFFILIATES
-124-
BELL SPORTS CORP.
EXHIBIT 11 - STATEMENT RE:
COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
Mar. 30, Apr. 1, Mar. 30, Apr. 1,
1996 (1) 1995 1996 (2) 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net (loss) income $(12,382) $ 759 $713 $22
Net effect on net (loss) income
from conversion of other potentially
dilutive securities 2,215 1,822 738 607
--------------------------------------------------------------------
Adjusted net (loss) income $(10,167) 2,581 $1,451 629
====================================================================
Weighted average number of common
and common equivalent shares
outstanding - primary 13,764 8,184 13,645 8,179
Net effect of common stock equivalents 112 -- 93 --
Net effect of convertible debentures 1,595 1,595 1,595 1,595
--------------------------------------------------------------------
Adjusted average shares outstanding for
fully diluted computation 15,471 9,779 15,333 9,774
====================================================================
Per share amount - fully diluted $(0.66) $0.26 $0.09 $0.06
====================================================================
</TABLE>
(1) Fully diluted net loss per common share for the nine months ended March 30,
1996 was determined based upon the assumption that the Company's 4 1/4%
convertible debentures were converted (using the if-converted method) as of
November 16, 1993, the date that such convertible debentures were issued. The
computation assumes that the weighted average number of common shares used in
the primary income per common share computation increases by 112,000 shares
assuming exercise of stock options and by 1,595,450 shares (assumes that
$86,250,000 of convertible debentures are converted at a price of $54.06 into
1,595,450 shares of common stock which were outstanding for the entire period);
and reported net loss decreases by $2,215,000 (representing the convertible
debentures' interest expense and offering cost amortization expense, net of tax
reported during fiscal 1996 assuming a 27% effective income tax rate for the
period.)
(2) Fully diluted net income per common share for the three months ended March
30, 1996 was determined based upon the assumption that the Company's 4 1/4%
convertible debentures were converted (using the if-converted method) as of
November 16, 1993, the date that such convertible debentures were issued. The
computation assumes that the weighted average number of common shares used in
the primary income per common share computation increases by 93,000 shares
assuming exercise of stock options and by 1,595,450 shares (assumes that
$86,250,000 of convertible debentures are converted at a price of $54.06 into
1,595,450 shares of common stock which were outstanding for the entire period);
and reported net income increases by $738,000 (representing the convertible
debentures' interest expense and offering cost amortization expense, net of tax
reported during fiscal 1995 assuming a 27% effective income tax rate for the
period.)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 19,668
<SECURITIES> 12,304
<RECEIVABLES> 91,315
<ALLOWANCES> (2,129)
<INVENTORY> 77,158
<CURRENT-ASSETS> 223,881
<PP&E> 43,418
<DEPRECIATION> (13,893)
<TOTAL-ASSETS> 325,985
<CURRENT-LIABILITIES> 34,376
<BONDS> 152,346
0
0
<COMMON> 142
<OTHER-SE> 134,512
<TOTAL-LIABILITY-AND-EQUITY> 325,985
<SALES> 181,331
<TOTAL-REVENUES> 181,331
<CGS> 142,838
<TOTAL-COSTS> 142,838
<OTHER-EXPENSES> 51,237
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 417
<INCOME-PRETAX> (16,961)
<INCOME-TAX> 4,579
<INCOME-CONTINUING> (12,382)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,382)
<EPS-PRIMARY> (.90)
<EPS-DILUTED> (.66)
</TABLE>
