UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 29, 1997
---------------------------
BELL SPORTS CORP.
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(Exact name of registrant as specified in its charter)
Delaware 0-19873 36-3671789
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(State or other jurisdiction of (Commission (I.R.S. employer
incorporation or organization) file number) identification no.)
15170 N. Hayden Rd. Suite 1, Scottsdale, Arizona 85260
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(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.
<PAGE>
Item 2. Acquisition or Disposition of Assets.
- ---------------------------------------------
On April 29, 1997, Bell Sports Corp., a Delaware corporation
("Bell") announced that it completed the sale (the "Sale") of its Service/Cycle
Mongoose inventory, trademarks and certain other related assets (collectively,
the "Purchased Assets") to Brunswick Corporation, a Delaware corporation
("Brunswick"), pursuant to the Asset Purchase Agreement (the "Asset Purchase
Agreement") dated as of April 1, 1997 among Brunswick, American Recreation
Company, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of
Bell ("American Recreation"), and Bell. Brunswick also assumed certain
liabilities relating to the Purchased Assets pursuant to the terms of the Asset
Purchase Agreement. Bell will retain and collect the pre-Sale accounts
receivable for the Service/Cycle Mongoose business, which are estimated to be
approximately $19 million.
In connection with the completion of the Sale, Bell, American
Recreation and Brunswick entered into: (i) a one-year Supply Agreement (the
"Supply Agreement") pursuant to which American Recreation agreed to manufacture
and sell to Brunswick certain Advent brand bicycle helmets and racks and (ii) a
Warehouse Services Agreement (the Warehouse Services Agreement"), pursuant to
which American Recreation agreed to provide Brunswick until September 30, 1997,
subject to earlier termination in accordance with the terms of the Warehouse
Services Agreement, with the use of certain of its distribution facilities, and
the assistance of American Recreation personnel at such facilities in managing,
receiving, packing, and shipping, Brunswick's inventory of bicycles and bicycle
components, service parts and bicycle accessories. Bell and Brunswick also
entered into a Stock Option Agreement (the "Stock Option Agreement"), pursuant
to which Brunswick purchased from Bell a three-year option (the "Stock Option")
to purchase 600,000 shares of Bell Common Stock, $.01 par value, at a price of
$7.50 per share.
Brunswick paid $20.4 million to Bell upon consummation of the
Sale in consideration of the transfer to Brunswick of the Purchased Assets and
the issuance of the Stock Option and placed an additional $500,000 (the "Escrow
Fund") into an escrow account pursuant to the Escrow Agreement (the "Escrow
Agreement") contemplated by the Asset Purchase Agreement. The amount paid by
Brunswick upon consummation of the sale was based, in part, on American
Recreation's estimate of certain inventories as of the closing of the Sale. The
Asset Purchase Agreement provides for certain post-closing adjustments to the
purchase price for the Purchased Assets based on a final determination of the
actual amounts of such inventories. Bell applied the funds received from
Brunswick to reduce borrowings under its line of credit.
The foregoing description is qualified in its entirety by
reference to the provisions of the Asset Purchase Agreement, the Escrow
Agreement, the Supply Agreement, the Warehouse Services Agreement and the Stock
Option Agreement, which are filed as Exhibits 2, 10.1, 10.2, 10.3 and 10.4
hereto, respectively, and each of which is incorporated herein by reference.
Item 5. Other Events.
- ---------------------
Simultaneously with the closing of the transactions
contemplated by the Asset Purchase Agreement, Bell amended its bank line of
credit, inter alia, to reduce the maximum amount of the line of credit to
$60,000,000, and to modify certain covenants applicable to Bell. The amended
line of credit is evidenced by an Amended and Restated Multicurrency Credit
Agreement dated as of April 28, 1997 with Harris Bank & Trust Company and the
other lenders parties thereto (the "Amended Credit Agreement").
<PAGE>
The foregoing description is qualified in its entirety by
reference to the provisions of the Amended Credit Agreement, which is filed as
Exhibit 10.5 hereto and which is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
- ------------------------------------------
(a) Financial statements of businesses acquired.
--------------------------------------------
Not applicable.
<PAGE>
(b) Pro forma financial information.
--------------------------------
BELL SPORTS CORP. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 29, 1997
(unaudited; in thousands)
<TABLE>
<CAPTION>
BELL SPORTS SERVICE CYCLE PRO FORMA
MARCH 29, MARCH 29, MARCH 29,
1997 1997 1997
--------------------- --------------------- ---------------------
ASSETS
- ------
<S> <C> <C> <C>
Cash and cash equivalents $ 26,755 $ - $ 26,755
Accounts receivable 89,305 - 89,305
Inventories 72,390 (18,257) a 54,133
Other current assets 22,875 - 22,875
--------------------- --------------------- ---------------------
Total current assets 211,325 (18,257) 193,068
Property, plant and equipment 25,577 (387) b 25,190
Goodwill 56,962 (13,656) c 43,306
Intangibles and other assets 15,912 (2,650) d 13,262
--------------------- --------------------- ---------------------
Total assets $ 309,776 $ (34,950) $ 274,826
===================== ===================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable $ 12,282 $ - $ 12,282
Accrued expenses 22,707 (9,054) e 13,653
Accrued compensation and employee benefits 3,182 - 3,182
Notes payable and current maturities of long-term
debt and capital lease obligations 2,843 - 2,843
--------------------- --------------------- ---------------------
Total current liabilities 41,014 (9,054) 31,960
Long-term debt and capital lease obligations 150,346 (20,883) f 129,463
Other liabilities 4,152 - 4,152
--------------------- --------------------- ---------------------
Total liabilities 195,512 (29,937) 165,575
Total stockholders' equity 114,264 (5,013) 109,251
--------------------- --------------------- ---------------------
Total liabilities and stockholders' equity $ 309,776 $ (34,950) $ 274,826
===================== ===================== =====================
a. Represents the disposal of the Service Cycle/Mongoose inventory at net book value.
b. Represents the disposal of the Service Cycle/Mongoose property, plant and equipment at net book value.
c. Represents the disposal of the Service Cycle/Mongoose goodwill of $14.3 million less accumulated amortization.
d. Represents the disposal of the Service Cycle/Mongoose trademark of $3 million less accumulated amortization.
e. Represents costs associated with exiting the Service Cycle/Mongoose product line and related
reorganization of distribution network.
f. Represent the reduction of the Company's outstanding line of credit with
the proceeds from the disposal of Service Cycle/Mongoose product line.
</TABLE>
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 29, 1997
(unaudited; in thousands, except per share data)
<TABLE>
<CAPTION>
BELL SPORTS SERVICE CYCLE PRO FORMA
MARCH 29, MARCH 29, MARCH 29,
1997 1997 1997
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Net sales $ 189,267 $ 44,263 a $ 145,004
Cost of sales 135,037 35,314 b 99,723
--------------------- --------------------- ---------------------
Gross Profit 54,230 8,949 45,281
Selling, general and administrative expenses 45,342 8,645 c 36,697
Loss on disposal of product line 25,360 25,360 d -
Amortization of goodwill and intangible assets 2,592 418 e 2,174
Restructuring charges 4,142 - 4,142
Net investment income (2,610) - (2,610)
Interest expense 5,467 1,203 f 4,264
--------------------- --------------------- ---------------------
(Loss) income before income taxes (26,063) (26,677) 614
(Benefit) provision for income taxes (3,649) (3,735) 86
--------------------- --------------------- ---------------------
Net (loss) income $ (22,414) $ (22,942) $ 528
===================== ===================== =====================
Net (loss) income per common
and common equivalent share $ (1.63) $ (1.67) $ 0.04
===================== ===================== =====================
Weighted average number of
common and common
equivalent shares outstanding 13,764 13,764 13,764
===================== ===================== =====================
a. Represents the world wide net sales for the Service Cycle/Mongoose product line.
b. Represents the world wide cost of sales for the Service Cycle/Mongoose product line.
c. Represents the world wide selling, general and administrative expenses for the Sevice Cycle/Mongoose product line.
d. Represents the costs associated with the disposition of the Service Cycle/Mongoose product line and resulting distribution
changes. The write-off of goodwill and intangibles were $14.8 million, disposal and exit costs were $5.4 million and costs
to reorganize the distribution network as a result of the sale of Service Cycle/Mongoose product line were $5.2 million.
e. Represents the amortization expense associated with the Service Cycle/Mongoose related goodwill and intangibles.
f. Represents the interest expense allocated to the Service Cycle/Mongoose product line.
</TABLE>
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 29, 1996
(unaudited; in thousands, except per share data)
<TABLE>
<CAPTION>
BELL SPORTS SERVICE CYCLE PRO FORMA
JUNE 29, JUNE 29, JUNE 29,
1996 1996 1996
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Net sales $ 262,340 $ 63,385 a $ 198,955
Cost of sales 201,621 53,171 b 148,450
--------------------- --------------------- ---------------------
Gross Profit 60,719 10,214 50,505
Selling, general and administrative expenses 66,826 10,831 c 55,995
Amortization of goodwill and intangible assets 2,854 557 d 2,297
Restructuring charges 5,850 - 5,850
Net investment income (2,877) - (2,877)
Interest expense 8,691 1,999 e 6,692
--------------------- --------------------- ---------------------
Loss before income taxes (20,625) (3,173) (17,452)
Benefit from income taxes (8,250) (1,269) (6,981)
--------------------- --------------------- ---------------------
Net loss $ (12,375) $ (1,904) $ (10,471)
===================== ===================== =====================
Net loss per common
and common equivalent share $ (0.90) $ (0.14) $ (0.76)
===================== ===================== =====================
Weighted average number of
common and common
equivalent shares outstanding 13,740 13,740 13,740
===================== ===================== =====================
a. Represents the world wide net sales for the Service Cycle/Mongoose product line.
b. Represents the world wide cost of sales for the Service Cycle/Mongoose
product line, including inventory step-up from the AMRE merger.
c. Represents the world wide selling, general and administrative expenses for the Sevice Cycle/Mongoose product line.
d. Represents the amortization expense associated with the Service Cycle/Mongoose related goodwill and intangibles.
e. Represents the interest expense allocated to the Service Cycle/Mongoose product line.
</TABLE>
(c) Exhibits:
---------
The following is a list of the Exhibits filed herewith.
2 Asset Purchase Agreement dated as of April 1, 1997 among
Brunswick, American Recreation and Bell. Certain schedules and
similar attachments to this Exhibit have been omitted. Bell
agrees to furnish supplementally a copy any such omitted
schedule or similar attachment to the Securities and Exchange
Commission upon request.
10.1 Escrow Agreement and Instructions dated as of April 28, 1997
among Brunswick, American Recreation, Bell and The First
National Bank of Chicago, as Escrow Agent.
10.2 Supply Agreement dated April 28, 1997 among Brunswick,
American Recreation and Bell.
10.3 Warehouse Services Agreement dated April 28, 1997 among
Brunswick, American Recreation and Bell.
10.4 Stock Option Agreement dated as of April 28, 1997 among
Brunswick and Bell.
10.5 Amended and Restated Multicurrency Credit Agreement dated as
of April 28, 1997 among Bell, Harris Bank & Trust Company and
the other lenders parties thereto.
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BELL SPORTS CORP.
Date: May 13, 1997 By: Terry G. Lee
------------
Terry G. Lee
Chairman and Chief
Executive Officer
<PAGE>
EXHIBIT INDEX
-------------
The following is a list of the Exhibits filed herewith.
Exhibit
- -------
2 Asset Purchase Agreement dated as of April 1, 1997 among
Brunswick, American Recreation and Bell. Certain schedules and
similar attachments to this Exhibit have been omitted. Bell
agrees to furnish supplementally a copy any such omitted
schedule or similar attachment to the Securities and Exchange
Commission upon request.
10.1 Escrow Agreement and Instructions dated as of April 28, 1997
among Brunswick, American Recreation, Bell and The First
National Bank of Chicago, as Escrow Agent.
10.2 Supply Agreement dated April 28, 1997 among Brunswick,
American Recreation and Bell.
10.3 Warehouse Services Agreement dated April 28, 1997 among
Brunswick, American Recreation and Bell.
10.4 Stock Option Agreement dated as of April 28, 1997 among
Brunswick and Bell.
10.5 Amended and Restated Multicurrency Credit Agreement dated as
of April 28, 1997 among Bell, Harris Bank & Trust Company and
the other lenders parties thereto.
================================================================================
ASSET PURCHASE AGREEMENT
among
BRUNSWICK CORPORATION,
a Delaware corporation
("Purchaser"),
AMERICAN RECREATION COMPANY, INC.,
a Delaware corporation
("Seller"),
and
BELL SPORTS CORP.,
a Delaware corporation
("Parent")
Date: April 1, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
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<S> <C> <C> <C>
ARTICLE I DEFINITIONS............................................................................... 1
1.1 Definitions............................................................................... 1
ARTICLE II SALE AND PURCHASE OF ASSETS............................................................... 8
2.1 Purchase of Assets........................................................................ 8
2.2 Assignment of Certain Contracts........................................................... 10
2.3 Excluded Assets........................................................................... 11
2.4 Assumed Liabilities....................................................................... 12
2.5 Closing................................................................................... 12
2.6 Payment of Purchase Price................................................................. 13
2.7 Consistent Treatment...................................................................... 16
2.8 Procedures for Purchased Assets not
Transferable.............................................................................. 16
2.9 Prorations................................................................................ 17
2.10 Risk of Loss.............................................................................. 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND
PARENT.................................................................................. 18
3.1 Due Incorporation......................................................................... 18
3.2 Due Authorization......................................................................... 18
3.3 Consents and Approvals.................................................................... 19
3.4 Financial Statements...................................................................... 19
3.5 No Adverse Effects or Changes............................................................. 20
3.6 Title to Properties....................................................................... 20
3.7 Computer System........................................................................... 21
3.8 Facilities................................................................................ 21
3.9 Personal Property......................................................................... 22
3.10 Inventories............................................................................... 22
3.11 No Third Party Options.................................................................... 23
3.12 Intellectual Property..................................................................... 23
3.13 Contracts................................................................................. 24
3.14 Permits................................................................................... 25
3.15 Insurance................................................................................. 26
3.16 Employee Benefit Plans and Employment
Agreements................................................................................ 26
3.17 Employees................................................................................. 28
3.18 Taxes..................................................................................... 28
3.19 No Defaults or Violations................................................................. 29
3.20 Environmental Matters..................................................................... 29
3.21 Litigation................................................................................ 30
3.22 Related Parties........................................................................... 30
3.23 Intercompany Services and Transactions.................................................... 31
3.24 Customers and Suppliers................................................................... 31
3.25 Product Warranties........................................................................ 31
3.26 Brokers................................................................................... 32
3.27 Accuracy of Statements.................................................................... 32
</TABLE>
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<PAGE>
<TABLE>
Page
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<S> <C> <C> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER............................................... 32
4.1 Due Incorporation......................................................................... 32
4.2 Due Authorization......................................................................... 32
4.3 Consents and Approvals.................................................................... 33
4.4 Brokers................................................................................... 33
ARTICLE V COVENANTS................................................................................. 33
5.1 Preservation of Business.................................................................. 33
5.2 Efforts................................................................................... 34
5.3 Maintenance of Insurance.................................................................. 34
5.4 Supplemental Information.................................................................. 34
5.5 Noncompetition; Confidentiality........................................................... 35
5.6 Exclusivity............................................................................... 37
5.7 Use of Name............................................................................... 37
5.8 Product Liability and Warranty Claims..................................................... 38
5.9 Employees and Employee Benefits........................................................... 39
5.10 Access.................................................................................... 41
5.11 Use of Facilities......................................................................... 42
5.12 Collection Support........................................................................ 43
5.13 Right of First Refusal.................................................................... 43
5.14 Disposition of Excluded Inventories....................................................... 44
5.15 Ally-Cat.................................................................................. 45
5.16 Credit Agreement.......................................................................... 45
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER............................................................................ 46
6.1 Warranties True........................................................................... 46
6.2 Compliance with Covenants................................................................. 46
6.3 Consents, Approvals ...................................................................... 46
6.4 No Action................................................................................. 46
6.5 No Material Adverse Change................................................................ 46
6.6 Closing Deliveries........................................................................ 47
ARTICLE VII CONDITIONS PRECEDENT TO
OBLIGATIONS OF SELLER................................................................... 48
7.1 Warranties True........................................................................... 48
7.2 Compliance with Agreements and Covenants.................................................. 48
7.3 Consents and Approvals.................................................................... 48
7.4 No Action................................................................................. 49
7.5 Closing Deliveries........................................................................ 49
ARTICLE VIII TERMINATION.......................................................................... 49
8.1 Termination............................................................................... 49
8.2 Effect of Termination..................................................................... 50
ARTICLE IX INDEMNIFICATION........................................................................... 50
9.1 Survival.................................................................................. 50
9.2 Indemnification by Seller and Parent...................................................... 50
9.3 Indemnification by Purchaser.............................................................. 51
</TABLE>
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<PAGE>
<TABLE>
Page
----
<S> <C> <C> <C>
9.4 Claims.................................................................................... 51
9.5 Third Party Claims; Assumption of Defense................................................. 52
9.6 Additional Limitations and Other Agreements............................................... 53
ARTICLE X MISCELLANEOUS............................................................................. 54
10.1 Expenses.................................................................................. 54
10.2 Amendment................................................................................. 54
10.3 Notices................................................................................... 54
10.4 Effect of Investigation................................................................... 55
10.5 Waivers................................................................................... 55
10.6 Counterparts.............................................................................. 55
10.7 Interpretation............................................................................ 55
10.8 Applicable Law............................................................................ 56
10.9 Binding Agreement......................................................................... 56
10.10 No Third Party Beneficiaries.............................................................. 56
10.11 Publicity................................................................................. 56
10.12 Further Assurances........................................................................ 56
10.13 Severability.............................................................................. 56
10.14 Remedies.................................................................................. 57
10.15 Forum..................................................................................... 57
10.16 Disclaimer of Warranties.................................................................. 57
10.17 Assignment................................................................................ 58
10.18 Preparation of W-2 Forms.................................................................. 58
10.19 Entire Understanding...................................................................... 58
10.20 Liability of Parent and Seller............................................................ 58
</TABLE>
-iii-
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS AGREEMENT is made as of the 1st day of April, 1997, by and between
Brunswick Corporation, a Delaware corporation ("Purchaser"), and American
Recreation Company, Inc. a Delaware corporation ("Seller"), and Bell Sports
Corp., a Delaware corporation ("Parent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Purchaser wishes to purchase from Seller, and Seller desires
to sell to Purchaser, all of the Purchased Assets (as defined below) and to
assume certain specified liabilities defined below as the Assumed Liabilities.
Certain capitalized terms used herein are defined in Article I.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the following meanings
for the purposes of this Agreement:
"Administration Facility" shall mean the sales, marketing, research and
development facility of Bell Sports, Inc. at 6350 San Ignacio, San Jose,
California.
"Affiliate" shall mean, with respect to any specified Person, any other
Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person.
"Agreement" shall mean this Asset Purchase Agreement, including all
exhibits and schedules hereto, as it may be amended from time to time.
"Assignment" means the assignment and bill of sale to be dated the
Closing Date, substantially in the form of Exhibit A.
"Assumed Liabilities" shall have the meaning set forth at Section 2.4.
"Balance Sheet" shall mean the statement of the inventories, fixed
assets (other than the Distribution Facilities) and intangibles of the U.S.
Business at February 22, 1997, a copy of which is set forth on Schedule 3.4.
<PAGE>
"Business" shall mean, collectively, the U.S. Business and the
International Business.
"Closing" shall mean the consummation of the transactions contemplated
herein.
"Closing Date" shall have the meaning set forth at Section 2.5.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Computer System" shall have the meaning set forth in Section 3.7.
"Contract" shall mean any contract, lease, commitment, understanding,
sales order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral, which is
intended or purports to be binding and enforceable.
"Continuing Employees" shall have the meaning set forth in Section 5.9.
"Distribution Facilities" shall mean Seller's distribution centers
located at 2300 Cordelia Road, Fairfield, California 94533; 2900 Lakeview,
Memphis, Tennessee 38116; and 57 Grumbacher
Road, York, Pennsylvania 17402.
"Environmental Law" shall mean any applicable domestic or foreign Laws
pertaining to the protection of the indoor or outdoor environment (including
ambient air, surface water, ground water, land surface or subsurface strata), or
pertaining to the protection of natural resources, the environment and public or
employee health and safety and including the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. ss. 9601 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.),
the Resource Conservation and Recovery Act ("RCRA") (42 U.S.C. ss. 6901 et
seq.), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (33
U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 7401
et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss.
136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et
seq.) ("OSHA"), and the regulations promulgated pursuant to any of the
foregoing, and any such applicable state or local statutes, and the regulations
promulgated pursuant thereto, as such laws have been and may be amended or
supplemented at the Closing Date.
2
<PAGE>
"Environmental Permit" shall mean any permit, license, approval,
consent or other authorization required by or pursuant to any applicable
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Escrow Agent" shall mean any of the Northern Trust Bank, the First
National Bank of Chicago or such other financial institution mutually acceptable
to Purchaser and Seller.
"Escrow Agreement" shall mean the Escrow Agreement in the form of
Exhibit B hereto, as may be subsequently modified to reflect changes required by
the Escrow Agent.
"Escrow Amount" means that portion of the Purchase Price equal to
$500,000, placed in escrow with the Escrow Agent pursuant to the Escrow
Agreement to satisfy claims pursuant to Sections 2.6 and 9.2.
"Excluded Assets" shall have the meaning set forth in Section 2.3.
"Excluded Inventories" shall have the meaning set forth in Section 2.3.
"Facilities" shall mean the Administration Facility and the
Distribution Facilities.
"Financial Statements" shall mean, collectively, (a) the Balance Sheet,
(b) the unaudited statements of operating income of the Business for the 12
month period ended June 29, 1996 (U.S., Canada and Europe individually), (c) the
unaudited statement of operating income of the U.S. Business for the seven month
period ended February 22, 1997 and (d) the March Balance Sheet (it being
understood that the March Balance Sheet will not be delivered until at least
five days prior to the Closing Date).
"GAAP" shall mean U.S. generally accepted accounting principles,
consistently applied.
"Governmental Authority" shall mean the government of the United States
or any state or political subdivision thereof or any foreign government, or any
entity, body or authority exercising executive, legislative, judicial,
regulatory, administrative or other governmental functions or any court,
department, commission, board, agency, instrumentality or administrative body of
any of the foregoing.
"Hazardous Substance" means any substance, material or waste which is
regulated under Environmental Laws, including, without
3
<PAGE>
limitation, petroleum products, asbestos, lead paint, and any material or
substance which is defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste," "restricted hazardous
waste," "contaminant," "toxic waste" or "toxic substance" under any provision of
any Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Initial Net Inventory Value" shall have the meaning set forth in
Section 2.6(b).
"Initial Purchase Price" shall mean the sum of (a) the Initial Net
Inventory Value plus (b) $236,731.
"Intellectual Property" shall have the meaning set forth at Section
2.1.
"Intellectual Property Assignment" shall mean the assignment of the
Intellectual Property, to be dated the Closing Date, substantially in the form
of Exhibit C.
"International Business" shall mean the business of Seller and its
Affiliates, conducted outside the United States involving the design,
development, distribution, marketing, sourcing and selling to customers outside
of the United States of the "Mongoose" brand of bicycles and "Advent" brand of
bicycle helmets, racks and accessories. The "International Business"
specifically excludes, and Purchaser is not acquiring (except to the extent
constituting part of the Mongoose bicycle business or Advent accessory
business), (i) any business of Bell Sports, Inc., Euro Bell S.A., Giro Sport
Design International, Inc., Giro Ireland Limited, Bell Sports Canada, Inc. or
Bell Sports Australia Pty. Limited, including, without limitation, the business
of designing, developing, manufacturing, distributing, marketing, sourcing and
selling bicycle accessories and helmets, in each case, under the Bell, Giro,
Rhode Gear, VistaLite, Blackburn, BSI, Bike Star, SportRack, Copper Canyon,
Cycle Products, BikeXtras, Cycletech or Spoke Hedz brand names or names licensed
from third parties and (ii) any business conducted through the Mass
Merchant/Sporting Goods division of Seller or the In-store Service division of
Seller. The International Business specifically includes all ownership of and
sole right to use the "Mongoose", "Advent", "Service Cycle" and "Maurice" names,
tradenames, logos, trademarks, trade dress, marks and all names or images
associated with the foregoing.
"Inventories" shall have the meaning set forth in Section 2.1.
4
<PAGE>
"Law" shall mean any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, or entered into, agreed or imposed by any
Governmental Authority.
"Lien" shall mean any mortgage, lien, charge, restriction, pledge,
security interest, option, lease or sublease, claim, right of any third party,
easement, encroachment or encumbrance.
"Loss" or "Losses" shall mean all liabilities, losses, costs, claims,
damages, penalties and expenses including reasonable attorneys' fees and
expenses and reasonable investigation and litigation costs incurred in relation
to the indemnified matter or in enforcing such indemnity.
"March Balance Sheet" shall mean the statement of the inventories,
fixed assets (other than the Distribution Facilities) and intangibles of the
U.S. Business at March 29, 1997, a copy of which will be delivered pursuant to
Section 2.6(b).
"Material Adverse Change" shall mean a change (or circumstance which
could reasonably be expected to result in a prospective change) in the
operations, assets, liabilities, results of operations, cash flows or condition
(financial or otherwise) of the Business or the Purchased Assets, in each case
which is or could reasonably be expected to be materially adverse to (a) the
Business taken as a whole or (b) the Purchased Assets taken as a whole.
"Material Contracts" shall mean all of the Contracts to which Seller is
a party or its assets are subject which are material to the Business or the
value of the Purchased Assets, including any Contract listed on Schedule 3.13.
"Parent Financial Statements" shall mean, collectively, (a) Parent's
audited consolidated balance sheets, statements of operations, statements of
stockholder's equity and statements of cash flow, each dated June 29, 1996 and
for the year then ending, and (b) all financial statements filed by Parent with
the Securities and Exchange Commission since June 29, 1996.
"Permits" shall have the meaning set forth in Section 2.1.
"Person" shall mean any individual, corporation, proprietorship, firm,
partnership, limited partnership, limited liability company, trust, association,
Governmental Authority or other entity.
"Purchase Price" shall mean the Initial Purchase Price, as adjusted
pursuant to Section 2.6.
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"Purchased Assets" shall have the meaning set forth in Section 2.1.
"Release" shall mean any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment or movement through or in the
air, soil, surface water or ground water or other property.
"Seller Assigned Contracts" shall have the meaning set forth at Section
2.2 below.
"Seller's Liabilities" mean all debts, claims, obligations or other
liabilities of Seller or any of its Affiliates, absolute or contingent, known or
unknown, including, without limitation:
(a) all liabilities with respect to any Taxes applicable to
the Purchased Assets or Business and in each case attributable to
taxable years or periods (including partial periods) ending at the time
of or prior to the Closing;
(b) all liabilities arising under any Environmental Laws;
(c) all accounts payable not constituting Assumed Liabilities
and all liabilities for borrowed funds;
(d) all liabilities under any Contracts not being assigned to
Purchaser pursuant to this Agreement;
(e) all liabilities under any Seller Assigned Contracts, to
the extent that by virtue of the limitation contained in the first
sentence of Section 2.4 such liabilities do not constitute Assumed
Liabilities;
(f) all warranty, or product replacement claims to the extent
Seller is responsible for such claims pursuant to Section 5.8;
(g) all product liability claims for products of the Mongoose
brand of bicycles and bicycle parts and Advent brand of bicycle
helmets, racks and accessories sold by Seller prior to the Closing Date
in accordance with Section 5.8);
(h) all liabilities to or with respect to the employees of
Seller (including Continuing Employees with respect to periods on or
prior to the Closing Date), including all employee compensation and
benefit obligations and any claims with respect to severance or
termination of
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employment of such employees (except for any such obligations or claims
arising after the Closing Date with respect to Continuing Employees and
arising out of or relating solely to Purchaser's employment of such
Continuing Employees).
"Seller's Plans" shall have the meaning set forth in Section 3.16.
"Stock Option Agreement" shall have the meaning set forth in Section
6.6(j).
"Supply Agreement" shall mean the Supply Agreement in the form of
Exhibit D pursuant to which Seller will supply certain products to Purchaser.
"Tax Return" shall mean any report, return or other information
required to be supplied to any Governmental Authority in connection with any
Taxes.
"Taxes" shall mean all taxes, charges, fees, duties (including customs
duties), levies or other assessments, including without limitation, income,
gross receipts, net proceeds, ad valorem, turnover, real and personal property
(tangible and intangible), sales, use, franchise, excise, value added, stamp,
leasing, lease, user, transfer, fuel, excess profits, occupational, interest
equalization, windfall profits, severance, license, payroll, environmental,
capital stock, disability, employee's income withholding, other withholding,
unemployment and Social Security taxes, which are imposed by any Governmental
Authority, and such term shall include any interest, penalties or additions to
tax attributable thereto.
"Transaction Agreements" shall mean the Escrow Agreement, Supply
Agreement, Warehouse Services Agreement and Stock Option Agreement.
"U.S. Business" shall mean Seller's business, conducted in the United
States through Seller's Service Cycle/Mongoose division, involving the design,
development, distribution, marketing, sourcing and selling in the United States
of (a) bicycles and bicycle parts (such as, by way of example and not
limitation, bicycle wheels, spokes, tires, handle bars, seats, connecting stems,
wheel gears and gear mechanisms) and (b) the "Advent" brand of bicycle helmets,
racks and accessories. The "U.S. Business" specifically excludes, and Purchaser
is not acquiring (except to the extent constituting part of the Mongoose bicycle
business or Advent accessory business): (i) any business of Bell Sports, Inc.,
Euro Bell S.A., Giro Sport Design International, Inc., Giro Ireland Limited,
Bell Sports Canada, Inc., Bell Sports Australia Pty. Limited, including, without
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limitation, the business of designing, developing, manufacturing, distributing,
marketing, sourcing and selling bicycle, in-line skate, auto racing or other
helmets, bicycle parts and bicycle accessories, in each case, under the Bell,
Giro, Rhode Gear, VistaLite, Blackburn, BSI, Bike Star, SportRack, Copper
Canyon, Cycle Products, BikeXtras, Cycletech or Spoke Hedz brand names or names
licensed from third parties and (ii) any business conducted through the Mass
Merchant/Sporting Goods division of Seller or the In-store Service division of
Seller. The U.S. Business specifically includes all ownership of and sole right
to use the "Mongoose", "Advent", "Service Cycle" and "Maurice" names,
tradenames, logos, trademarks, trade dress and all names and images associated
with the foregoing.
"Warehouse Services Agreement" shall mean the Warehouse Services
Agreement in the form of Exhibit E hereto.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Purchase of Assets. Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall sell, assign, convey, transfer and
deliver to Purchaser, and Parent shall cause its subsidiaries to sell, assign,
convey, transfer and deliver to Purchaser and Purchaser shall purchase, acquire
and take assignment and delivery of, the Purchased Assets. The "Purchased
Assets" shall mean all assets of Seller or its Affiliates necessary to the
operation of or primarily related to or used in, the Business, other than the
Excluded Assets, wherever located and in whatever form, real, personal, tangible
or intangible, including, without limitation, all right, title and interest in
and to the following:
(a) U.S. Equipment. All machinery, equipment, tools, dies,
molds, plugs, castings, spare and replacement parts, tooling, supplies,
maintenance equipment, materials and other personal property primarily
used in connection with or necessary to the U.S. Business, including
those items listed on Schedule 2.1(a).
(b) U.S. Vehicles. All trucks, trailers, automobiles and other
vehicles primarily used in connection with the U.S. Business, including
those vehicles listed on Schedule 2.1(b).
(c) Inventories. All inventories of the Business, wherever
located (other than Excluded Inventories) including, without
limitation, all raw materials, work in process, finished goods and
supplies inventories and inventories of any nature in transit, on
consignment or in possession of any vendor (the "Inventories"), and all
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documentation necessary to show ownership in the Inventories.
(d) Information and Records. All records, files, notebooks,
confidential and nonconfidential information (including electronic
information), price lists, marketing information, sales records,
customer lists, dealer lists, supplier lists, and files (including
credit and collection information), legal and accounting records,
personnel and labor relations records (to the extent applicable to the
Continuing Employees), employee benefits and compensation plans and
records (to the extent applicable to the Continuing Employees),
historical and financial records and files, and all other proprietary
information related primarily to, or used primarily in connection with,
the Business, in each case, only to the extent that they relate to the
Business or the Continuing Employees, it being understood that Seller
will be entitled to retain all credit and collection information until
such time as the related account receivables have been collected (after
which point such information shall be promptly delivered to Purchaser).
(e) Intellectual Property. All (i) names or designations used
in the Business, including, without limitation, "Mongoose", "Maurice"
(including the image and character so named), "Service Cycle", "Advent"
"Presto", "Racer X", "Gelsoft", "cycle transfer" (and related graphic
logo), "On-The-Go" (and related graphic logo) "Mongoose Ultra Storm",
"Mongoose Gale Storm", "Motivator", "Redondo", "Del Mar", "Supergoose",
"Cyclotech", "Alta", "Dynametric", "Expert", "LilQT", "Little Foot",
"Miniscoot", "Mightygoose", "Motomag" and any derivation thereof, and
all tradenames, trade dress, corporate names and logos, trademarks,
service marks, common law marks for any of the foregoing or otherwise
used in the Business or in connection with the Advent name or Mongoose
name, (ii) patents and copyrights used in the Business (and any
registrations with any Governmental Authority of, and applications for
registration pending with respect to, any of the foregoing), (iii)
trade secrets, mask works, technology, inventions, processes, designs,
know-how, computer software and data, formulas, goodwill, any licenses
related to any of the foregoing, each to the extent related primarily
to the Business, and all other intangible assets related primarily to
the Business, and (iv) including, in each case, those items described
on Schedule 2.1(e), including such rights to receive all income,
royalties, damages and payments for infringements thereof occurring
after the Closing ((i), (ii), (iii) and (iv) above being, collectively,
the "Intellectual Property").
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(f) Permits. To the extent transferable, all licenses,
permits, variances, interim permits, permit applications, approvals or
other authorizations under any Law applicable to the Business or
otherwise required in connection with the Business or the ownership or
operation of the Purchased Assets, including those listed on Schedule
2.1(f) (the "Permits").
(g) Phone Numbers. The phone numbers (408) 224-8868, (408)
224-8969, (310) 539-8860, (800) 645-5806 and (800) 858-2800 and the
facsimile numbers (408) 224-3987 and (310) 539-8046.
(h) Other Assets. To the extent not included in the foregoing,
any assets related primarily to the Business which were or should have
been included in the Balance Sheet (except for Excluded Assets),
including the Seller Assigned Contracts, all customer deposits and
prepayments and any warranties or other rights, claims, demands or
causes of action to the extent relating primarily to the Purchased
Assets, including the right to receive delivery of any Inventories
purchased or ordered on or prior to the Closing Date.
2.2 Assignment of Certain Contracts.
Subject to the terms and conditions of this Agreement, Seller
shall assign and transfer to (and Parent shall cause its subsidiaries to assign
and transfer to) Purchaser, effective as of the Closing Date, all right, title
and interest in, and Purchaser will take assignment of, the following (the
"Seller Assigned Contracts"), free and clear of any Lien (other than Liens
arising under equipment lease agreements), each to the extent pertaining to the
Business:
(a) Personal Property Leases. The leases of equipment,
machinery, vehicles, computer software and hardware, and other personal
property set forth on Schedule 2.2(a).
(b) Purchase Orders and Contracts. All Contracts for the
purchase of goods, materials or services set forth on Schedule 2.2(b).
(c) Customer Contracts. All contracts for the sale of goods or
services relating to the Business (including dealer contracts) which
are listed on Schedule 2.2(c), and all customer deposits made under
such Contracts.
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(d) Marketing Contracts. All marketing, endorsement,
advertising or promotion contracts that are listed on Schedule 2.2(d).
(e) Other Contracts. The Contracts with suppliers and other
Contracts listed on Schedule 2.2(e) and all such other Contracts as
shall be entered into between the date hereof and the Closing Date
which fall into the categories set forth above and are entered into in
the ordinary course of business or such other Contracts which shall be
expressly designated in writing by Purchaser prior to the Closing.
2.3 Excluded Assets. Notwithstanding the foregoing, Seller shall not
assign and transfer, and Purchaser shall not take assignment of, and Seller
shall retain, the following (collectively, the "Excluded Assets"):
(a) any Contract listed on Schedule 2.3;
(b) all cash on hand or in banks on the Closing Date owned by
Seller and relating to the Business (other than prepayments for goods
to be delivered after the Closing Date);
(c) all tax records relating to the Business;
(d) all inventories located in and held for final delivery to,
or in transit for final delivery to, Rantoul, Illinois, Canada or
Europe, including, without limitation, all raw materials, work in
process, finished goods and supplies inventories (collectively, the
"Excluded Inventories");
(e) all accounts receivable, notes receivables and other
receivables arising from the operation of the Business by Seller;
(f) the leases listed on Schedule 2.3.
(g) Seller's rights, claims or causes of action relating
hereto or any agreement entered into in connection herewith or the
transactions contemplated hereby or thereby;
(h) Seller's rights, claims or causes of action against third
parties relating to the assets, properties, business or operations of
Seller which may arise in connection with the discharge by Seller of
its liabilities which are not Assumed Liabilities;
(i) all refunds of any Tax for which Seller is eligible
pursuant to this Agreement;
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(j) any corporate minute books and stock transfer books or the
corporate seal of Seller;
(k) any information or records of Seller, including, without
limitation, financial records, used by Seller or its Affiliates in
connection with the conduct of its, or their, respective business
generally (other than such items set forth at Section 2.1(d) above);
and
(l) the inventory of Univega bicycles owned by Bell Sports
Canada, Inc.; and
(m) notwithstanding anything herein to the contrary, any item
listed on Schedule 2.3.
2.4 Assumed Liabilities. At the Closing, Purchaser shall assume, and
agree to pay, perform, fulfill and discharge, the obligations of Seller: (a)
that are required to be performed and that accrue after the Closing Date under
the Seller Assigned Contracts but only to the extent that and except as set
forth in Section 5.8, (i) all rights of Seller under the Contract to which the
obligation relates are effectively assigned to Purchaser on the Closing Date,
and (ii) such obligations do not constitute (A) indemnities, warranties, service
or other obligations relating to matters occurring on or before the Closing
Date, (B) obligations for any tort, violation of Law or breach of or default by
Seller under any Seller Assigned Contract arising on or prior to the Closing
Date or (C) performance of any obligation that Seller failed to perform on or
before the Closing Date, (b) that relates to Taxes applicable to the Purchased
Assets, in each case attributable to taxable years or periods (including partial
periods) beginning after the Closing, and (c) claims for which Purchaser is
responsible pursuant to Section 5.8. The obligations of Purchaser under this
Section 2.4 shall be referred to collectively as the "Assumed Liabilities."
Except as specifically set forth above, neither Purchaser nor any of its
Affiliates shall assume or otherwise be liable in respect of any of Seller's
Liabilities and any other debt, claim, obligation or other liability of Seller
or any of its Affiliates whatsoever, including any payable, debt, tort,
violation of Law or breach of any Contract.
2.5 Closing. The Closing shall take place at the offices of Mayer,
Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603 at 8:00 A.M. on
the Closing Date. The "Closing Date" shall mean April 28, 1997 or, if the
conditions set forth in Section 7.3 and clause (c) of Section 6.3 are not
satisfied before April 28, 1997, the first business day thereafter which is a
Monday and at least five Business Days after satisfaction of the conditions in
Sections 7.3 and clause (c) of Section 6.3.
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2.6 Payment of Purchase Price.
(a) In consideration for the transfer of the Purchased Assets
to Purchaser, Purchaser shall (i) pay Seller the Initial Purchase
Price, less the Escrow Amount, by electronic bank transfer directly to
Seller's Account No. 1870419 at Harris Bank and Trust, Chicago,
Illinois, and assume the Assumed Liabilities and (ii) pay the Escrow
Amount to the Escrow Agent, by electronic bank transfer, to be held
thereby as required by the Escrow Agreement. The Escrow Amount shall be
disbursed in accordance with the terms of the Escrow Agreement. The
Escrow Agreement shall provide, among other things, that the amount
held thereunder shall be disbursed to Purchaser in respect of amounts
due to Purchaser under Sections 2.6 and 9.2. The Escrow Amount shall
not limit Purchaser's right of recovery under this Agreement, at law or
in equity, including any right of recovery under Sections 9.2 and 2.6.
The Escrow Agreement shall terminate, and all amounts held thereby
(other than amounts subject to claim) disbursed in accordance
therewith, on the fifteenth day after the date of the final
determination of the Final Net Inventory Amount. The parties will share
the costs of the escrow arrangement.
(b) Inventory. (i) At least 5 days prior to the Closing Date,
Seller shall deliver its good faith estimate of the net book value of
the Inventories as of the Closing Date to Purchaser (the "Initial Net
Inventory Value") and a copy of the March Balance Sheet. The Initial
Net Inventory Value shall (A) be based on the net book value of the
Inventories as of March 29, 1997, (B) be determined in accordance with
GAAP and in a manner consistent with Seller's past practice described
on Schedule 2.6(b) and (C) include fully paid in-transit Inventories.
At Closing, Seller shall certify in writing to Purchaser that the
Initial Net Inventory Value was determined in accordance with the
foregoing.
(ii) On the Closing Date, Purchaser shall, at its expense,
perform a physical inventory of the Inventories at each Distribution
Facility. Seller shall provide access to the Inventories and all
necessary employees and resources at the Distribution Facilities for
this purpose. Seller and Price Waterhouse shall have the right to
observe this physical inventory. Each inventory unit included in the
physical count shall be valued at the weighted average perpetual
inventory cost on the Closing Date applicable to that unit. Such
weighted average perpetual inventory cost shall be determined in
accordance with Seller's past practices, as described on Schedule 2.6.
Such valuation, plus paid in-transit Inventories, in each case net of
all
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applicable excess and obsolescence reserves, shall constitute the
"Interim Net Inventory Value". The amount of the Purchase Price shall
be (A) decreased by the amount by which the Interim Net Inventory Value
is less than the Initial Net Inventory Value, and (B) increased by the
amount that the Interim Net Inventory Value exceeds the Initial Net
Inventory Value. No later than ten (10) days after the date of the
determination of the Interim Net Inventory Value, (1) Seller shall pay
Purchaser the amount by which the Interim Net Inventory is less than
the Initial Net Inventory Value, and (2) Purchaser shall pay Seller the
amount by which the Interim Net Inventory Value exceeds the Initial Net
Inventory Value. Such payment shall be made by wire transfer of
immediately available funds to an account designated by the party to
receive payment, in either case together with interest thereon at the
Prime Rate, accrued on a per annum basis from the Closing Date to the
date of payment. The "Prime Rate" shall mean the prime interest rate on
a per annum basis as quoted by the First National Bank of Chicago from
time to time during the period in question for its most credit worthy
borrowers.
(iii) In determining the Initial Net Inventory Value and the
Interim Net Inventory Value, there shall be included all applicable
excess and obsolecences reserves, such reserves to be determined in a
manner consistent with the determination of the reserves as of February
25, 1997 (a copy of such determination being set forth on Schedule
2.6). Seller and its representatives shall be given advance notice of
and the opportunity to observe all physical inventories.
(iv) Seller shall adjust its perpetual inventory records to
reflect the results of and conform with the Interim Net Inventory
Value. Such adjustment shall be made immediately after the physical
inventory. Seller shall maintain a perpetual record of the book value
of inventory in each of the Distribution Facilities for the period
beginning on the Closing Date. During the period that any Inventory of
Purchaser is stored at a Distribution Facility, Purchaser shall perform
a monthly reconciliation and recommend appropriate adjustments of the
perpetual inventory records to conform to the book value of the
Inventories as shown on Purchaser's records. All such adjustments shall
be reasonably agreed to by the parties. Seller shall provide Purchaser
with all necessary employees and resources at the Distribution
Facilities for such purpose.
(v) On the date that Purchaser removes all of its inventory
from a Distribution Facility, it shall conduct a physical count of the
Inventories located at such facility. Seller shall provide access to
the Inventories and all
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necessary employees and resources at the Distribution Facilities for
this purpose. The costs of such physical inventory shall be shared
equally by the parties. Each inventory unit included in the physical
inventory shall be valued at the weighted average perpetual inventory
cost applicable to that unit for the date of such physical inventory.
Such weighted average perpetual inventory cost shall be determined
consistent with Seller's past practice described on Schedule 2.6. The
total book value of the inventory, as determined by all such physical
inventories at all of the Distribution Facilities, shall be known as
the "Final Inventory Value". The Purchase Price (as previously adjusted
pursuant to Section 2.6(b)(ii) above), shall be decreased to the extent
that the Final Inventory Value is less than the perpetual book value of
the inventories.
(vi) At Purchaser's expense, the physical inventory count for
purposes of determining the Final Inventory Value or the Interim Net
Inventory Value may be audited and accompanied by a report of Arthur
Andersen L.L.P., Purchaser's independent accountants ("Purchaser's
Auditors"). In rendering the foregoing audit and report, Purchaser's
Auditors shall permit Price Waterhouse, Seller's independent
accountants ("Seller's Auditors") to observe and test the physical
inventory and to review, at their request, the report of Purchaser's
Auditors, including all work papers, schedules and calculations related
thereto prior to the issuance thereof.
(vii) If Seller disputes the Interim Net Inventory Value or
the final count used in determining the Final Inventory Value, such
dispute shall be resolved in the following manner:
(A) Seller shall notify Purchaser in writing within
thirty (30) days after Seller's receipt of the report which
notice shall specify in reasonable detail the nature of the
dispute;
(B) during the thirty (30) day period following
Purchaser's receipt of such notice, Purchaser and Seller shall
attempt to resolve such dispute; and
(C) if at the end of such 30 day period Seller and
Purchaser shall have failed to resolve such dispute in
writing, the matter shall be referred to the offices of Ernst
& Young L.L.P. (the "Referee"). The Referee shall act as an
arbitrator and shall issue its report resolving all disputes
within sixty (60) days after such dispute is referred to it.
The Final Inventory Value as modified by any count adjustments
determined
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to be appropriate by the Referee, shall then be the Final
Inventory Value for all purposes of this Agreement. Each of
the parties hereto shall bear all costs and expenses incurred
by it in connection with such arbitration, except that the
fees and expenses of the Referee hereunder shall be borne
equally by Seller and Purchaser. This provision for
arbitration shall be specifically enforceable by the parties.
The decision of the Referee in accordance with the provisions
hereof shall be final and binding (absent manifest error) and
there shall be no right of appeal therefrom.
(c) From the Closing Date until the final determination of the
Final Inventory Value, each party will grant to the other and its
respective representatives reasonable access during usual business
hours to the agents and employees of such party and to the books,
records and files of the business in its possession to enable such
party to review and otherwise satisfy itself as to the accuracy of the
books, records and determinations contemplated by this Section 2.6(b)
and the preparation thereof.
(d) No later than ten (10) days after the date of the final
determination of the Final Inventory Value, Seller shall pay Purchaser
the amount by which the perpetual book value of the inventories exceeds
the Final Inventory Value by wire transfer of immediately available
funds to an account designated by the party to receive payment.
2.7 Consistent Treatment. The parties shall allocate the purchase price
among the Purchased Assets and the covenant not to compete set forth in Section
5.5 in accordance with Exhibit 2.7 (which shall be agreed to by Purchaser and
Seller prior to the Closing Date and be binding on the parties) and Section 1060
of the Code, treat and report the transactions contemplated by this Agreement in
all respects consistently with such allocation upon all Tax Returns and for
purposes of any Taxes, and not take any action inconsistent with such
obligation.
2.8 Procedures for Purchased Assets not Transferable. If, either by
virtue of the provisions thereof or under applicable Law, any of the Contracts
or any other property or rights included in the Purchased Assets are not
assignable or transferable without the consent of some other Person, Seller
shall diligently use all commercially reasonable efforts to obtain such consent
prior to the Closing Date and Purchaser shall use all commercially reasonable
efforts to assist in that endeavor. If any such consent cannot be obtained prior
to the Closing Date and the Closing occurs, this Agreement and the related
instruments of transfer shall not constitute an assignment or transfer thereof,
but Seller shall diligently use
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all commercially reasonable efforts to obtain such consent as soon as possible
after the Closing Date or otherwise obtain for Purchaser the practical benefit
of such property or rights and Purchaser shall use all commercially reasonable
efforts to assist in that endeavor.
2.9 Prorations. As soon as practicable, but no later than ninety (90)
days after the Closing Date, Seller shall prepare and deliver a statement (a
"Post-Closing Accrual Statement") prorating all of the items listed below with
respect to the Purchased Assets ("Prorated Items") through the time of the
Closing, subject, however, to Section 2.4. Seller shall be liable to the extent
the Prorated Items relate to any time period up to the time of the Closing
("Seller Prorations") and Purchaser shall be liable to the extent Prorated Items
relate to periods including and subsequent to the time of the Closing
("Purchaser Prorations").
(a) All personal property and ad valorem taxes relating to the
Purchased Assets which shall have accrued and become payable prior to
or on the Closing Date shall be paid by Seller. All such taxes which
shall be (or should be) accrued but unpaid or which have been paid in
advance shall be properly prorated as of the Closing Date between
Purchaser and Seller. In connection with such proration of taxes, if
the actual tax figures are not available at the time of delivery of the
Post-Closing Accrual Statement, the taxes to be prorated shall be based
upon the actual taxes for the preceding year for which actual tax
amounts are available and such taxes shall be reprorated upon request
of either party made within sixty (60) days after the date that the
actual amounts become available, provided that the actual amount is at
least 5% more or 5% less than the amount on which the original
proration was based, and appropriate payment shall be made within
thirty (30) days after such reproration. Notwithstanding the foregoing,
if the transactions contemplated by this Agreement result in the
reassessment of the value of any of the Purchased Assets for property
tax purposes, or the imposition of any property taxes on such Purchased
Assets at a rate which is different than the rate that would have been
imposed if such transactions had not occurred, then (y) the Seller
Proration with respect to such property taxes shall be determined on a
daily basis, using the assessed value and tax rate that would have
applied had such transactions not occurred, and (z) the Purchaser
Proration with respect to such property taxes shall be the total amount
of such taxes minus the amount described in clause (y) of this
sentence.
(b) Notwithstanding anything to the contrary in Section 2.4 or
this Section 2.9, any sales tax, use tax,
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real property transfer or gains tax, documentary stamp tax or similar
tax attributable to the sale or transfer of the Purchased Assets shall
be paid by the Purchaser.
(c) Any other Taxes not described in Section 2.9(a) or 2.9(b)
that are required to be prorated under Section 2.4 shall be prorated on
a "closing of the books" basis as of the time of the Closing.
(d) The amount of any fees with respect to any Permits.
Seller agrees to furnish Purchaser with such documents and other records as
Purchaser reasonably requests in order to confirm all adjustment and proration
calculations reflected on the Post- Closing Accrual Statement. Within ten (10)
days after the delivery to Purchaser of the Post Closing Accrual Statement and
agreement by Purchaser as to the calculations and amounts set forth thereon,
each party shall pay the other any amount shown as owed thereon.
2.10 Risk of Loss. Any loss or damage to the Purchased Assets prior to
the Closing Date shall be the sole responsibility of Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
Seller and Parent, jointly and severally, represent and warrant to
Purchaser, as of the date of this Agreement and as of the Closing Date (such
representations and warranties being deemed remade on the Closing Date), as
follows:
3.1 Due Incorporation. Seller is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation with all requisite power and authority to own, lease and operate
its properties relating to the Business and to carry on the Business as they are
now being owned, leased, operated and conducted. Seller is duly licensed or
qualified to do business and in good standing as a foreign corporation in each
jurisdiction where the nature of the Business requires such licensing or
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Purchased Assets or the Business.
3.2 Due Authorization. Seller and Parent have full power and authority
to enter into this Agreement and the Transaction Agreements and to consummate
the transactions contemplated hereby. The execution, delivery and performance by
Seller of this Agreement have been duly and validly approved by all necessary
corporate action and do not require the approval of the
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stockholders of Seller or Parent. Seller has duly and validly executed and
delivered this Agreement. This Agreement constitutes, and on the Closing Date
each of the Transaction Agreements will constitute, the legal, valid and binding
obligation of Seller and Parent, enforceable against each of them in accordance
with its terms.
3.3 Consents and Approvals. No consent, authorization or approval of,
or filing or registration with, any Governmental Authority or any other Person
not a party to this Agreement is necessary in connection with the execution,
delivery and performance by Seller and Parent (and, as necessary, their
respective Affiliates) of this Agreement and each of the Transaction Agreements
and the consummation by Seller and Parent of the transactions contemplated
hereby, other than (a) the consents set forth on Schedule 3.3, (b) as required
by applicable requirements of the HSR Act, and (c) informational filings with
the Securities and Exchange Commission or Nasdaq. Except for matters set forth
in Schedule 3.3, the execution, delivery and performance by Seller and Parent of
this Agreement and the Transaction Agreements does not and will not (i) violate
or conflict with, result in a breach or termination of, constitute a default
under, or permit cancellation of any Seller Assigned Contract, (ii) result in
the creation of any Lien upon any of the Purchased Assets or (iii) violate or
conflict with any provision of the Certificate of Incorporation, By-laws or any
loan indenture of Seller or binding on the Purchased Assets or Parent or any Law
to which Seller or the Business is subject.
3.4 Financial Statements.
(a) The Financial Statements have been prepared in accordance with GAAP
consistently applied (except such Financial Statements do not include footnotes,
statements of cash-flow, liabilities or income below operating income) and
present fairly the assets (including inventories) of the Business as of the
dates thereof and the revenues, expenses and results of operations of the
Business, for the periods covered thereby. The Financial Statements (i) do not
contain any material item of special or non-recurring income or any other income
not earned in the ordinary course of business, and (ii) expressly state any
material assumptions upon which the Financial Statements are based. Schedule 3.4
sets forth a true and correct copy of the Financial Statements.
(b) The Parent Financial Statements have been prepared in accordance
with GAAP consistently applied and present fairly the financial position, assets
and liabilities of Parent as of the dates thereof and the revenues, expenses,
results of operations and cash flows of Parent, for the periods covered thereby.
The Financial Statements are in accordance with the books and records
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of Parent, and do not reflect any transactions which are not bona fide
transactions. Except as set forth in Schedule 3.4 or in the respective Parent
Financial Statements, Parent has no material liabilities, debts, claims or
obligations, whether accrued, absolute, contingent or otherwise, whether due or
to become due, other than trade payables to third parties and accrued expenses
incurred in the ordinary course of business since December 31, 1996.
3.5 No Adverse Effects or Changes. Except as listed on Schedule 3.5,
since December 31, 1996 through the date hereof Seller has not (a) suffered any
damage or destruction to, or loss of, any of its assets or properties used in or
related to the Business (whether or not covered by insurance) other than such
loss, damage and destruction which, in the aggregate, does not exceed $50,000;
(b) permitted the imposition of a Lien on, or disposed of, any of its assets
(other than Excluded Assets or sales of Inventories in the ordinary course of
business, consistent with past practice); (c) terminated, modified or entered
into any Material Contract or group of Contracts that, considered together, are
material to the Business; (d) cancelled, waived, released or otherwise
compromised any trade debt, receivable or claim exceeding $25,000 individually
or $50,000 in the aggregate; (e) entered into, adopted, amended or terminated
any bonus, profit sharing, compensation, termination, stock option, stock
appreciation right, restricted stock, performance unit, pension, retirement,
deferred compensation, employment, severance or other employee benefit
agreements, trusts, plans, funds or other arrangements for the benefit or
welfare of any key employee of the Business, or increased in any manner the
compensation or fringe benefits of any key employee of the Business, or paid any
benefit not required by any existing plan and arrangement or entered into any
contract, agreement, commitment or arrangement to do any of the foregoing except
for annual increases in compensation made in the ordinary course of Seller's
business, consistent with past practice and not in excess of 10% of the
employee's overall compensation; (f) disposed of or permitted the lapse in
registration of any Intellectual Property; (g) experienced any Material Adverse
Change in the accounts receivable or accounts payable or sources of supply; (h)
changed its accounting methods, systems, policies, principles or practices; or
(i) otherwise experienced a Material Adverse Change.
3.6 Title to Properties. Except as disclosed on Schedule 3.6, Seller
has good and marketable title to, and is the lawful owner of, the Purchased
Assets, free and clear of all Liens. The Purchased Assets include (a) all of the
tangible and intangible assets, properties and rights material to or used
primarily in connection with or material to the Business (other than Excluded
Assets or assets leased under the leases set forth
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on Schedule 2.2(a) and Inventories disposed of in the ordinary course of
business since the date of the Balance Sheet) and (b) all of the tangible and
intangible assets, properties and rights reflected in the Balance Sheet. Except
as set forth in Schedule 3.6, no other person (including any Affiliate of Seller
or Parent), owns any assets, properties or rights (other than Excluded Assets)
relating to or used in the Business, performs or furnishes services for the
benefit of the Business, or is a party to or otherwise enjoys rights under any
Contracts or arrangements pertaining to the operation of the Business. The
Assignment, deeds, endorsements and other instruments of transfer delivered at
the Closing by Seller (and, as appropriate, its Affiliates) to Purchaser will be
sufficient to transfer to Purchaser the entire right, title and interest, legal
and beneficial, in the Purchased Assets free and clear of any Lien. All tangible
property (including all tooling, molds and dies) included in the Purchased
Assets is located at the locations set forth on Schedule 3.6. Schedule 3.6
identifies all tooling included in the Purchased Assets and located at third
party vendors, and the names and addresses of, and contract personnel at, such
vendors.
3.7 Computer System. Except as disclosed in Schedule 3.7 (and except
for the Excluded Assets), all computer hardware and software and related
materials used by Seller and necessary to or relating primarily to the U.S.
Business (collectively, "Computer System") are in good working order and
condition, and Seller has not experienced any significant defects in design,
workmanship or material. Except as disclosed in Schedule 3.7, the Computer
System has the performance capabilities, characteristics and functions necessary
to the conduct of the U.S. Business as conducted by Seller. To the knowledge of
Seller and Parent, the use of the Computer System by the U.S. Business
(including any software modifications) (a) has not violated or infringed upon
and will not violate or infringe upon the rights of any third parties and (b)
has not resulted and will not result in the termination of any maintenance,
service or support agreement relating to any part of the Computer System or any
reduction in the services provided to the U.S. Business, warranties available to
the Business or rights of the Business thereunder. Seller has, and at the
Closing will transfer to Purchaser, good and marketable title to (free of any
Lien), user and service documentation it possesses for, the Computer System.
3.8 Facilities.
(a) Seller operates the U.S. Business at the Facilities and at
its facility in Torrance, CA, and at no other locations. Seller either
has full ownership of the Facilities or is the lessee of the
Facilities. No facilities of Seller or its Affiliates located outside
the United States are dedicated to the Business. Any lease by
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Seller of any of the Facilities is pursuant to a lease in effect and to
continue in effect until December 31, 1997. Each such lease is valid
and in full force and effect without default thereunder by Seller, or
to the knowledge of Seller and Parent, the lessor. Seller shall use all
commercially reasonable efforts to assure that Purchaser shall receive
the benefits of Section 5.11(a) below and under the Warehouse Services
Agreement without interference from or risk of interference by, any
other Person claiming through Seller, including any lessor of any of
the Facilities or any mortgagee of any lessor of the Facilities.
(b) To the knowledge of Seller and Parent, the buildings,
plants and structures, constituting the Facilities and at Torrance
(including fixtures and improvements) are structurally sound, have no
material defects and are in good operating condition and repair (normal
wear and tear excepted). No condemnation, zoning, eminent domain or
other proceeding is pending or, to the knowledge of Seller and Parent,
threatened which would preclude or impair the use of any of the
Facilities or Torrance or any portion thereof by Purchaser for the
purposes for which it is currently used.
3.9 Personal Property. Except as disclosed on Schedule 3.9, all of the
tangible assets (whether owned or leased) included in the Purchased Assets are
suitable for the purposes for which such assets are used in the Business, and
free from defects other than such minor defects as do not interfere with the
intended use thereof in the conduct of normal operations and are in good
operating order (ordinary wear and tear excepted) and have been well maintained.
3.10 Inventories. Schedule 3.10 contains a true and accurate schedule
of all Inventories of the U.S. Business. Except as described on Schedule 3.10,
each item of the Inventories of the U.S. Business is of merchantable quality,
usable and saleable in the ordinary course of business, and not obsolete in
excess of Seller's recorded reserves for obsolescence. None of the Inventories
of the U.S. Business are held on assignment or consignment. All such Inventories
are fairly reflected in the inventory accounts included in the Financial
Statements, including all appropriate obsolescence and other reserves, and are
valued at the lower of cost or market. Other than as set forth in Schedule 3.10,
Seller is not under any obligation with respect to the return of any
Inventories. All of the Inventories are, and will be, located at the
Distribution Facilities or in transit to the Distribution Facilities and none of
the Inventories have been subject to any theft or other unlawful diversion.
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3.11 No Third Party Options. There are no agreements, options,
commitments or rights with, of or to any Person (other than Purchaser) to
acquire any of the Purchased Assets except for those Contracts entered into for
the sale of Inventories in the ordinary course of business, consistent with past
practice.
3.12 Intellectual Property. Schedule 2.1(e) includes a true and
complete list of all of the Intellectual Property used in the conduct of or
related to the Business. Except as disclosed on Schedule 3.12:
(a) All of the Intellectual Property is owned by Seller or an
Affiliate of Seller (as shown on Schedule 2.1(e)), free and clear of
all Liens, are valid and enforceable, and are not subject to any
license, royalty or other agreement, and neither Seller nor any of its
Affiliates has granted any license or agreed to pay or receive any
royalty in respect of any of the Intellectual Property. All
registration and maintenance fees that have become due and payable to
any Governmental Authority with respect to any Intellectual Property
for which a registration has been issued have been paid and no act or
omission has occurred to cancel, impair, dedicate to the public or
entitle any Governmental Authority to cancel, modify, forfeit or hold
abandoned any such Intellectual Property. Seller and its Affiliates
will transfer to the Purchaser at the Closing all rights in and to the
Intellectual Property. Schedule 3.12 lists all invention assignment
documentation executed by employees or independent contractors of the
Business. Representations and warranties made herein with respect to
any Intellectual Property registered outside of the United States shall
be deemed made only as of the Closing Date.
(b) The products manufactured or sold by Seller and its
Affiliates in the Business and any process, method, part, design,
material, logo, trademark, other distinguishing mark or other
intellectual property it employs, and the marketing and use by Seller
and its Affiliates of any such product, service or other intellectual
property, do not infringe any intellectual property or confidential or
proprietary rights of another. Seller and its Affiliates have not
received any notice contesting the right to use the Intellectual
Property. To the knowledge of Seller and Parent, no products
manufactured or activities conducted by any other Person infringe on
the Intellectual Property. There is not now, nor has there been in the
last two years, any pending or, to the knowledge of Seller and Parent,
threatened litigation regarding any Intellectual Property.
Representations and warranties made herein with respect to any
Intellectual Property registered
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outside of the United States shall be deemed made only as of the
Closing Date.
(c) No product has been sold by Seller or its Affiliates with
respect to the infringement matter asserted by Softride, Inc. (as
disclosed on Schedule 3.12), and no bicycles that would relate to the
Softride, Inc. infringement claim are included in the Inventories.
3.13 Contracts.
(a) All of the Material Contracts are in full force and effect
and constitute the legal, valid and binding obligations of Seller and,
to the knowledge of Seller and Parent, the other parties thereto. All
of the Material Contracts are enforceable in accordance with their
respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and by
equitable limitations on the availability of specific remedies. No
termination notice (or other indication of an intent to terminate) has
been delivered by any party to any other party with respect to any
Material Contract. Seller has delivered or made available to Purchaser
true and complete copies of each Material Contract and a complete and
accurate written description of any Material Contract not reduced to
writing.
(b) Schedule 3.13 lists all the Contracts and arrangements of
the following types to which Seller or one of its Affiliates is a
party, by which it is bound, or to which any of its assets or
properties is subject, and which pertains primarily to the Business
(each of which shall be included within the definition of "Material
Contracts"):
(i) any Contract or arrangement with a sales
representative, manufacturer's representative, distributor,
dealer, broker, sales agency, advertising agency, product
promoter, endorser, or other Person engaged in sales,
distribution or promotional activities;
(ii) any Contract or arrangement of any nature having
an aggregate value in excess of $10,000 or not terminable on
notice of thirty (30) days or less;
(iii) any indenture, credit agreement, loan
agreement, note, mortgage, security agreement, letter of
credit, loan commitment, guaranty, repurchase agreement or
other Contract or arrangement relating to the borrowing of
funds, an extension of credit or
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financing, pledging of assets or guarantying the obligations
of any Person;
(iv) any Contract or arrangement involving Seller as
a participant in a partnership, joint venture or other
cooperative undertaking;
(v) any Contract or arrangement involving any
restrictions with respect to the geographical area of
operations or scope of the Business as operated by Seller;
(vi) any power of attorney or agency agreement or
arrangement pursuant to which a Person is granted the
authority to act for or on behalf of Seller with respect to
the Purchased Assets or the operation of the Business, or
Seller is granted the authority to act for or on behalf of any
Person in connection with the Purchased Assets or the
operation of the Business;
(vii) any Contract relating to the Computer System;
(viii) any Contract not made in the ordinary course
of business which is to be performed in whole or in part at or
after the date of this Agreement;
(ix) any Contract or arrangement pertaining to
management support, facilities support or similar arrangement;
(x) any Contract whereby any Person agrees (A) not to
compete with the Business as operated by Seller or (B) to
maintain the confidentiality of any information of Seller;
(xi) any Contract with any employee of, or consultant
to, the Business, other than those set forth on Schedule 3.16;
(xii) any Contract relating to any Intellectual
Property; and
(xiii) any Contract or arrangement not specified
above that is material to the Business.
3.14 Permits. Schedule 2.1(f) is a true and accurate list of all
Permits held primarily by Seller with respect to the Business. Except for such
Permits, there are no permits, licenses, consents or authorizations, whether
federal, state, local or foreign, which are necessary for the lawful operation
of
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the Business or ownership of the Purchased Assets. Seller is in compliance with
all requirements and limitations under such Permits in all material respects. No
employee, officer, director or Affiliate of Seller owns or has any interest in
any such Permit.
3.15 Insurance. During the past two (2) years, Seller, with respect to
the Business, has (a) not been refused any insurance nor has its coverage been
limited and (b) has not experienced a substantial increase in its rates.
Schedule 3.15 contains a brief description of all insurance currently maintained
with respect to the U.S. Business and the International Business as conducted in
North America or the Purchased Assets.
3.16 Employee Benefit Plans and Employment Agreements.
(a) Schedule 3.16 is a list of all employee contracts, and
employee benefit plans, programs, policies and arrangements (including
all collective bargaining, stock purchase, stock option, employment,
compensation, deferred compensation, pension, retirement, severance,
termination, separation, vacation, sickness, health, welfare and bonus
plans, arrangements, and agreements) which are "employee benefit plans"
within the meaning of Section 3(3) of ERISA under or with respect to
which Seller has any obligation or liability that relates to the U.S.
Business (collectively, the "Seller's Plans").
(b) Seller has provided access to Purchaser of true and
correct copies of each of Seller's Plans and all contracts relating
thereto, or to the funding thereof, including, without limitation, all
trust agreements, insurance contracts, administration contracts,
investment management agreements, subscription and participation
agreements, and recordkeeping agreements, each as in effect on the date
hereof, and an accurate description of any Seller's Plans that are not
in written form. To the extent applicable, a true and correct copy of
the most recent annual report, actuarial report, summary plan
description, and Internal Revenue Service determination letter with
respect to each of Seller's Plans has been supplied to Purchaser by
Seller and there have been no material changes in the financial
condition of any Seller's Plan from that stated in the applicable
annual reports and actuarial reports supplied.
(c) With respect to each of Seller's Plans and except as set
forth on Schedule 3.16:
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(i) no such Seller's Plan is a multiemployer plan (as
defined in Section 3(37) of ERISA) or is subject
to title IV of ERISA;
(ii) to Seller's knowledge, each such Seller's Plan
complies and has been administered in form and in
operation in all material respects with all
applicable requirements of law, including, to the
extent applicable, sections 401(a) and 501(a) of
the Code; to Seller's knowledge, no event has
occurred which will or could cause any such
Seller's Plan to fail to comply with such
requirements and there have been no amendments to
such plans which are employee benefit pension
plans (as defined in Section 3(2) of ERISA) which
are not the subject of a favorable determination
letter issued with respect thereto by the Internal
Revenue Service;
(iii) to Seller's knowledge, there are no actions, suits
or claims (other than routine claims for benefits)
pending or threatened involving any such Seller's
Plan or the assets thereof and no facts exist
which could give rise to any such actions, suits
or claims (other than routine claims for
benefits);
(iv) to Seller's knowledge, there have been no
"prohibited transactions" (as described in section
406 of ERISA or section 4975 of the Code) with
respect to any of Seller's Plans and Seller has
not engaged in any prohibited transaction, which
could reasonably be expected to have a material
adverse effect on Seller;
(v) Seller does not have any liability or contingent
liability for providing, under any of Seller's
Plans or otherwise, any post-retirement medical or
life insurance benefits, other than statutory
liability for providing group health plan
continuation coverage under Part 6 of Title I of
ERISA and Section 4980B of the Code, which could
reasonably be expected to have a material adverse
effect on Seller; and
(vi) there have been no acts or omissions by Seller
which have given rise to or may give rise to
fines, penalties, taxes or related charges under
section 502 of ERISA or Chapters 43, 47 or 68 of
the Code for which Purchaser may be liable on
account of the execution of this Agreement or
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the consummation of the transaction contemplated
hereby, which could reasonably be expected to have
a material adverse effect on Seller.
3.17 Employees. Schedule 3.17 contains a true, complete and accurate
list of the names, titles, annual compensation and all current bonuses for each
employee of the U.S. Business and employees that are employed exclusively by the
International Business who has an annual base salary of $25,000 or more. Except
as disclosed on Schedule 3.17, there is no, and during the past two years there
has been no, labor strike, picketing, dispute, slow-down, work stoppage, union
organization effort, grievance filing or proceeding, or other labor difficulty
actually pending or threatened against or involving the conduct of the Business
by Seller. Except as set forth in Schedule 3.17 Seller is not a party to any
collective bargaining agreement pertaining to the conduct of the Business and no
such agreement determines the terms and conditions of the employment of
employees of the Business. Except as set forth in Schedule 3.17 no collective
bargaining agent has been certified as a representative of any of employees of
the Business and no representation campaign or election is now in progress with
respect to any employees of the Business. As of March 27, 1997, the Business has
73 full-time employees and 1 part-time employee. Seller is in compliance with
its obligations, if any, pursuant to the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN Act") and all other obligations, if any, arising
under any other applicable Law relating to the termination of employees of the
Business. Except as set forth on Schedule 3.17, Seller has not received notice
that any key employee of the Business intends to terminate his employment with
Seller or would not be willing to work for Purchaser.
3.18 Taxes. Except for current Taxes not due and payable prior to or on
the Closing Date (such Taxes to be paid when due by Seller), Seller and its
Affiliates have timely filed all tax returns and has paid, and where necessary
collected or withheld and remitted to, the proper Governmental Authority all
Taxes related to taxable periods or portions thereof ending prior to or on the
Closing Date (including governmental charges, assessments and required
contributions of Seller with respect to the Business) that may result in the
filing of a Lien on the Purchased Assets or that may result in the imposition of
transferee or other liability on Purchaser for the payment of such Taxes. After
the Closing Date, Seller and its Affiliates shall (a) pay all Taxes due from
them with respect to the period prior to the Closing Date, including all such
Taxes on their property, income and operations, and (b) timely file all Tax
returns for the period prior to the Closing Date.
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3.19 No Defaults or Violations. Except as disclosed on Schedule 3.19 or
except as would not result in claims, liabilities or fines in excess of $50,000
in the aggregate:
(a) Seller is not in breach or default under the terms of any
material Contract pertaining to the Business, no event has occurred or
circumstance exists which, with notice or lapse of time or both, would
constitute a breach or default under any such Contract, and, to the
knowledge of Seller and Parent, no other party to any such Contract is
in breach or default under any such Contract.
(b) Seller is in compliance with, and no violation exists
under, any Laws applicable to the Business, and no event has occurred
or circumstance exists which, with or without notice or lapse of time
or both, would constitute a violation under any such Law.
(c) Neither Parent nor Seller has received any notice from any
Governmental Authority claiming any violation of any Law with respect
to the Business or the Purchased Assets, and has no knowledge of any
investigation or inquiry involving the same.
3.20 Environmental Matters. Except as disclosed in Schedule 3.20:
(a) Seller has not used or stored any, and there are no,
Hazardous Substances in, on, or at any of the Facilities or the
Torrance facility subject of the lease to be assigned to Purchaser
("Torrance"). There is not now at any of the Facilities or Torrance any
(i) underground storage tank or surface impoundments, (ii)
asbestos-containing materials or (iii) polychlorinated biphenyls,
except in compliance with applicable Environmental Laws.
(b) No notice has been received from any Governmental
Authority or any other Person that Seller or any of the Facilities or
Torrance is or may be required to be subject to Remedial Action. There
is no (i) civil, criminal or administrative claim, suit, proceeding or
investigation (including a request for information) pending or, to the
knowledge of Seller and Parent, threatened with respect to the
Business, the Purchased Assets or any of the Facilities or Torrance
relating in any way to any Environmental Laws, Environmental Permits or
Remedial Action and Seller does not know of any fact or circumstance
which would give rise to any such claim, suit, proceeding or
investigation, or (ii) outstanding written orders or Contracts with any
Governmental Authority or other Person relating in any way to
Environmental Laws, Environmental Permits or Remedial
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Action. Seller has timely filed all reports and notifications required
to be filed with respect to, and obtained and maintained all
Environmental Permits required for, the Facilities and Torrance, all
improvements on the foregoing and all operations conducted therein, and
has generated and maintained all required records and data under all
applicable Environmental Laws.
(c) To the knowledge of Seller and Parent, no condition has
existed or event has occurred that could, with or without notice,
passage of time or both, give rise to any present or future liability,
pursuant to any Environmental Law, with respect to any of the
Facilities or Torrance.
3.21 Litigation. Except as disclosed in Schedule 3.21, as of the date
hereof there are no actions, suits, arbitrations, regulatory proceedings or
other litigation, proceedings or governmental investigations pending or, to the
knowledge of Seller and Parent, threatened against or affecting the Business or
the Purchased Assets. Neither Seller nor Parent is aware of any facts or
circumstances which may give rise to any of the foregoing. Except as disclosed
in Schedule 3.21, neither the Business nor the Purchased Assets are subject to
(a) any order, judgment, decree, injunction, stipulation or consent order of or
with any court or other Governmental Authority or (b) any settlement agreement
with any Governmental Authority or other Person. There are no claims, actions,
suits, proceedings or investigations pending or, to the knowledge of Seller and
Parent, threatened by or against Seller relating to this Agreement or the
transactions contemplated hereby.
3.22 Related Parties. Except as disclosed on Schedule 3.22, neither
Seller, Parent, any subsidiary of Parent nor any of their respective Affiliates
nor, to the knowledge of Seller and Parent, any of their respective officers or
directors engage in, or have or claim to have any direct or indirect interest in
any other Person which is engaged in the business of designing, distributing,
marketing, sourcing or selling bicycles. Schedule 3.22 contains a complete and
accurate description of all such Persons, interests, arrangements and other
matters. None of Seller's subsidiaries or Affiliates engage, or have since July
1995 have engaged in, the business of designing, manufacturing, distributing,
marketing or selling bicycles or designing, developing, manufacturing,
distributing, marketing, sourcing or selling bicycle accessories (including
helmets and racks) under the "Advent" name. Except as included in the Excluded
Assets or as set forth on Schedule 3.22, none of the Seller's subsidiaries or
Affiliates own any asset or right used in the conduct of the Business.
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3.23 Intercompany Services and Transactions. Schedule 3.23 contains a
complete and accurate list of all agreements or arrangements (whether written or
unwritten) relating to all intercompany services and transactions currently
existing between Seller and any of its Affiliates and existing during the past
two (2) years, in each case with respect to the Business.
3.24 Customers and Suppliers. Schedule 3.24 sets forth (a) a list of
the largest customers of the Business, each in terms of over $200,000 in revenue
during each of the 1996 calendar year and the portion of 1997 prior to the date
hereof (such $200,000 figure to be appropriately prorated for the portion of
1997 prior to the date hereof) (collectively, the "Major Customers"), showing
the total revenue received in each such period from each such customer; and (b)
a list of the 25 largest suppliers of the Business, in terms of purchases during
the 1996 calendar year and the portion of 1997 prior to the date hereof
(collectively, the "Major Suppliers"), and showing the approximate total
purchases in each such period from each such supplier. Except to the extent set
forth in Schedule 3.24, since January 1, 1996, through the date hereof, there
has not been any adverse change in the business relationship with, and there has
been no material dispute of Seller with, any Major Customer or Major Supplier.
As of the date hereof, there are no indications of which Seller is aware that
any Major Customer or Major Supplier intends to reduce in any material respect
(solely by reference to such Major Customer or Major Supplier) its purchases
from or sales to (as the case may be) the Business.
3.25 Product Warranties. Except as set forth on Schedule 3.25 or for
claims or liabilities that do not exceed $25,000 in the aggregate, there is no
claim against or liability of Seller (or any predecessor, subsidiary or
Affiliate of Seller) on account of product warranties or with respect to the
design, manufacture, sale or distribution of allegedly defective products and to
the knowledge of Seller and Parent there is no basis for any such claim on
account of defective products heretofore manufactured, sold, distributed or
rented. Schedule 3.25 sets forth a summary of all product liability claims filed
against Seller (or any predecessor or Affiliate of Seller) relating to the
Business within the past two (2) years. Schedule 3.25 sets forth copies of all
product warranties issued for Seller's products which constitute part of the
Business during the past two (2) years. In each of the past two years, warranty
claims relating to the Business have not exceeded 2% of Seller's sales relating
to the Business for that year. To Seller's knowledge, there have been no
material delinquencies in payment or failures to make payment, in each case by
any product vendor of the Business on any product warranty. There are no
actions, suits, inquiries, proceedings or investigations by or before any
Governmental Authority or, to the knowledge of Seller and Parent,
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threatened involving any product of the Business. Except as disclosed on
Schedule 3.25, to the knowledge of Seller and Parent, there exists no production
problems or other matters with respect to the products of the Business (whether
previously sold or to be sold) that could reasonably be expected to lead to a
recall (whether voluntarily or involuntarily), recurring material claims
relating to a particular defect or other claims (either in quantity or type of
claim) that would be outside the normal experience of parties engaged generally
in the sale of bicycles, bicycle parts or bicycle helmets, racks or accessories.
In Seller's historical experience in the last 5 years, there have not been more
than 50 warranty claims for chromoly and aluminum bike frames and forks per year
pertaining to frames and forks 5 years or older. Seller does not, and has not
engaged in, the manufacture of any products other than Advent bicycle helmets
and racks with respect to the Business.
3.26 Brokers. Neither Purchaser nor any Affiliate of Purchaser has or
shall have any liability or otherwise suffer or incur any Loss as a result of or
in connection with any brokerage or finder's fee or other commission of any
Person retained by Seller or any of its Affiliates in connection with any of the
transactions contemplated by this Agreement.
3.27 Accuracy of Statements. Neither this Agreement nor any schedule
furnished with this Agreement or any of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Parent and Seller, as of the date
of this Agreement and as of the Closing Date (such representations and
warranties being remade on the Closing Date), as follows:
4.1 Due Incorporation. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization with all requisite power and authority to own, lease and operate
its properties and to carry on its business as they are now being owned, leased,
operated and conducted.
4.2 Due Authorization. Purchaser has full power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Purchaser of this Agreement have been
duly and
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validly approved by all necessary corporate action. Purchaser has duly and
validly executed and delivered this Agreement. This Agreement constitutes the
legal, valid and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms.
4.3 Consents and Approvals. No consent, authorization or approval of,
or filing or registration with, any Governmental Authority or any other Person
not a party to this Agreement is necessary in connection with the execution,
delivery and performance by Purchaser of this Agreement and the consummation by
Purchaser of the transactions contemplated hereby, other than (a) the consents
set forth on Schedule 4.3, (b) as required by applicable requirements of the HSR
Act, and (c) informational filings with the Securities and Exchange Commission
or any securities exchange. The execution, delivery and performance by Purchaser
of this Agreement does not and will not violate or conflict with any provision
of Purchaser's Certificate of Incorporation or by-laws or any Law to which
Purchaser is subject.
4.4 Brokers. Neither Seller nor any Affiliate of Seller has or shall
have any liability or otherwise suffer or incur any Loss as a result of or in
connection with any brokerage or finder's fee or other commission of any Person
retained by Purchaser or any of its Affiliates in connection with any of the
transactions contemplated by this Agreement.
ARTICLE V
COVENANTS
5.1 Preservation of Business. Prior to the Closing, Seller shall
operate the Business only in the ordinary and usual course of business
consistent with past practice and shall use all commercially reasonable efforts
to (a) preserve intact its respective present business organization and
personnel with respect to the Business, (b) preserve the goodwill and
advantageous relationships with customers, suppliers, independent contractors,
employees and other Persons material to the operation of the Business, (c) not
permit any action or omission which would cause (or if existing, occurring or
known on the date of this Agreement, would cause) any of the representations or
warranties of Seller or Parent contained herein to become inaccurate, including
the representations and warranties contained in Section 3.5, or any of the
covenants of Seller or Parent to be breached, and (d) not terminate, modify or
amend any Material Contract or any Seller Assigned Contract, (e) not sell,
assign, lease, encumber or otherwise dispose of assets that constitute Purchased
Assets (except for inventories disposed of in the ordinary course of business),
(f) except as required by law, not enter into, adopt or amend in any material
respect any
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Benefit Plan or other agreement, arrangement, plan or policy affecting
Continuing Employees or increase the compensation of any Continuing Employee
other than annual raises granted on anniversary dates in the ordinary course of
business consistent with Seller's past practice), and (g) maintain the
Intellectual Property in effect in accordance with its terms.
5.2 Efforts. Subject to the terms and conditions hereof, each party
hereto shall use all commercially reasonable efforts to obtain any required
consent or approval to the transactions contemplated hereby. Each party shall
make all filings, applications, statements and reports to all Governmental
Authorities which are required to be made prior to the Closing Date by such
party pursuant to applicable Law in connection with this Agreement and the
transactions contemplated hereby. Seller and Parent shall cause all parties
shown as owners of the Intellectual Property on Schedule 2.1(e) to convey all
right, title and interest to such property to Purchaser at Closing. Seller shall
execute such standard financing statement forms (UCC-1) as Purchaser may
reasonably request to be filed with the appropriate state and county officials
evidencing Seller's ownership of the Inventories located at the Distribution
Facilities. Purchaser shall pay all filing fees for the foregoing UCC-1 filings.
5.3 Maintenance of Insurance. Seller shall continue to maintain and
carry its existing insurance (or comparable insurance) with respect to the
Business or the Purchased Assets through the Closing Date, and shall not allow
any breach, default, termination or cancellation of such insurance policies or
agreements to occur or exist that could adversely affect the Business or the
Purchased Assets. Seller shall continue to maintain and carry, at Seller's cost,
its premises, casualty and other insurance currently maintained (or comparable
coverage) with respect to the Facilities, through the end of the sixth calendar
month after the Closing Date. Seller shall not allow any breach, default,
termination or cancellation of any such insurance to occur or exist that could
adversely affect the Business or the Purchased Assets. Upon the request of
Purchaser from time to time following the Closing, Seller shall provide
Purchaser with insurance certificates showing that the coverage required by this
Section 5.3 is in effect and that such coverage will not be cancelled or limited
without 30 days prior written notice to Purchaser.
5.4 Supplemental Information. Promptly prior to the Closing, Seller and
Parent will disclose in writing to Purchaser any matter hereafter occurring
which, if existing, occurring or known at the date of this Agreement would have
been required to be disclosed to Purchaser in accordance with Article III or
which would render inaccurate any of the representations, warranties or
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statements set forth in Article III hereof. No information provided pursuant to
this Section, however, shall be deemed to cure any breach of any representation,
warranty or covenant in this Agreement.
5.5 Noncompetition; Confidentiality.
(a) In order to induce Purchaser to enter into this Agreement,
Seller and Parent expressly covenant and agree that, without the prior
express written consent of Purchaser, neither Parent nor any subsidiary
of Parent will (i) for a period of five 5 years commencing on the
Closing Date, own, manage, operate, knowingly assist, form a joint
venture or partnership with, consult with, participate in or control
any business, individual, partnership, firm, corporation or other
entity which is engaged in the business of manufacturing, distributing,
developing, selling, sourcing or marketing bicycles (the foregoing
shall not restrict the formation of a joint venture or partnership with
an entity that is engaged in manufacturing, distributing, developing,
selling, sourcing or marketing bicycles, provided that such joint
venture or partnership shall not engage in the business of
manufacturing, distributing, developing, selling, sourcing or marketing
bicycles), (ii) for a period of five (5) years commencing on the
Closing Date, induce or attempt to induce any customer of the Business
to terminate its business relationship with Purchaser with respect to
the bicycle portion of the Business and (iii) for a period of one (1)
year commencing on the Closing Date, knowingly solicit or encourage any
former employee of the Business who shall become a Continuing Employee
to terminate such employee's employment with Purchaser. Nothing in this
Section 5.5(a) shall be construed to limit, prohibit or restrict (A)
the ownership, management, operation or control of the respective
remaining businesses and product lines of Parent or any of its
subsidiaries provided, however, that neither Parent nor any of its
subsidiaries will engage in the manufacture, distribution, development,
sale, sourcing or marketing of bicycles except as, and only to the
extent, permitted by, clauses (D) and (E) below, (B) the sale of
products other than bicycles or provision of services other than
bicycle services, each in the ordinary course of business, to any
Person engaged in the Business, (C) the licensing by Seller of the use
of a tradename to any manufacturer of bicycles, provided, that, such
license is not in violation of Purchaser's right of first refusal under
Section 5.15 or the other covenants of Parent and Seller hereunder; and
(D) the sale of the Excluded Inventories, and the inventory of Univega
bicycles of Bell Sports Canada, Inc. located in Canada, after the
Closing Date, provided, that, such sales
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shall (1) be conducted in a manner so as not to impair the goodwill of
the Business or value of any Intellectual Property, (2) prohibit and
restrict the distribution, resale or shipment into, or to a Person whom
Seller has reason to believe will distribute or sell the Excluded
Inventory or any of the Univega bicycle inventory into, the United
States, and (3) otherwise conducted in accordance with Section 5.14
below; and (E) the continuing sale of infant tricycles and scooters
under the Fisher Price tradename. Notwithstanding anything in this
Section 5.5 to the contrary, Seller and its subsidiaries shall not be
precluded from (i) owning not more than 5% of the outstanding capital
stock or other equity interests of a Person, the equity securities of
which are listed on a national securities exchange or NASDAQ,
notwithstanding that such Person is engaged in a business competitive
with the Business, (ii) owning an interest acquired as a creditor in
bankruptcy or otherwise than by voluntary investment decision provided
that Seller or such subsidiary makes arrangement to dispose of such
interest as promptly as commercially practicable thereafter, or (iii)
acquiring the assets or more than 5% of the capital stock of any other
person that, among other things, operates a business that would
otherwise be prohibited by this Section 5.5, provided that the portion
of such acquired business which is competitive with the Business does
not represent more than 25% of the total revenues of the acquired
business, as measured by the most recent fiscal year of the acquired
business ending prior to such acquisition provided, however, that the
portion of the acquired business which is competitive is disposed of as
promptly as is commercially practicable, and in no event more than one
year thereafter. In addition, the restrictions of this Section 5.5
shall not be deemed to apply to any Person that acquires, whether by
purchase, merger or otherwise, all or any portion of the assets or
capital stock of Parent or any subsidiary thereof to the extent that
any actions that would otherwise be limited or prohibited by the
provisions of this Section 5.5 are conducted by or on behalf of such
Person through any entity other than Parent or any subsidiary thereof.
(b) Except to the extent expressly required by Law, Parent and
Seller shall, and shall cause their Affiliates to keep secret and
confidential indefinitely all non-public information concerning
Purchaser, the Purchased Assets and the Business (other than to the
extent necessary to collect Accounts Receivable) and not disclose the
same, either directly or indirectly, to any other Person, or use the
same in any way.
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(c) Seller and Parent expressly agree that the remedies at law
for any breach of the provisions of this Section 5.5 (or Section 5.13
below) would be inadequate and that, in addition to any other remedies
that Purchaser may have, Purchaser shall be entitled to temporary and
permanent injunctive relief or specific performance (as appropriate)
without the necessity of proving actual damages or posting bond. To the
extent that any part of this Section 5.5 (or Section 5.13 below) may be
invalid, illegal or unenforceable for any reason, it is intended that
such part shall be enforceable to the extent that a court of competent
jurisdiction shall determine that such part, if more limited in scope,
would have been enforceable. Parent and Seller acknowledge that
Purchaser would not have entered into this Agreement or agreed to
acquire the Purchased Assets unless Seller agreed to the provisions of
this Section 5.5 (and Section 5.13 below).
(d) A portion of the Purchase Price, as set forth in Exhibit
2.7, shall be allocated to the non-competition covenant set forth in
this Section 5.5.
5.6 Exclusivity. Neither Parent, Seller nor any of their respective
directors, officers, employees, representatives, agents, subsidiaries or
Affiliates shall, directly or indirectly, (a) take any action which would have
the effect of preventing or impairing the performance by Seller and Parent of
their respective obligations under this Agreement or (b) prior to the Closing,
knowingly solicit, initiate, encourage, respond favorably to, inquiries or
proposals from, or provide any information to, or participate in any discussions
or negotiations with, any Person (other than Purchaser and its representatives)
concerning any merger, sale of assets (other than inventory in the ordinary
course of business consistent with past practice), acquisition, business
combination, or other similar transaction involving the Purchased Assets or the
Business; provided, however, that nothing contained herein shall prohibit Parent
or any director, officer, employee, representative, agent, subsidiary or
Affiliate of Parent from taking any action described above to the extent that
such action relates to the assets or capital stock of Parent and its
subsidiaries generally or to any business or property other than the Business or
the Purchased Assets.
5.7 Use of Name. From and after the Closing Date, Parent, Seller and
their respective subsidiaries and Affiliates and any provider of services to
Parent, Seller and their respective subsidiaries and Affiliates will not
directly or indirectly use in any manner any name, trade name, trademark,
service mark or logo used by the Business and listed on Schedule 5.7 or any word
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or logo that is similar in sound or appearance, except as permitted by Section
5.14 below.
5.8 Product Liability and Warranty Claims.
(a) Subject to Section 5.8(c), Seller shall be responsible for
any product returns (not arising from warranty claims) related to
products of the Mongoose brand of bicycles or bicycle parts or the
Advent brand of bicycle helmets, racks and accessories sold by Seller
prior to the Closing Date to the extent such returns are presented by
third parties to Seller or the Purchaser within 90 days after the
Closing Date and provided that such returns are approved by Seller. In
determining whether to grant such approval, Seller shall act reasonably
and consistent with a vendor having an on-going relationship with the
party making the product return. Any such product return presented more
than 90 days after the Closing Date, or that are presented within 90
days but not approved by Seller (which approval shall not be
unreasonably withheld), in each case that relate to products of the
Mongoose brand of bicycles or bicycle parts or the Advent brand of
bicycle helmets, racks and accessories sold by Seller on or prior to
the Closing Date, shall be the sole responsibility of Purchaser.
(b) Seller shall be responsible for any product liability or
injury claims for products of the Mongoose brand of bicycles or bicycle
parts and the Advent brand of bicycle helmets, racks and accessories
sold by Seller prior to the Closing Date to the extent that the
incident, accident or injury affecting a third party and giving rise to
such claim occurred prior to the Closing Date. Any product liability or
injury claims for products of the Mongoose brand of bicycles or bicycle
parts and the Advent brand of bicycle helmets, racks and accessories
sold by Seller on or prior to the Closing Date that involve an
incident, accident or injury affecting a third party and giving rise to
such claim that occurs after the Closing Date shall be the sole
responsibility of Purchaser, provided, that Seller shall remain solely
responsible for Advent bicycle helmets or racks supplied by Seller or
its Affiliates prior to Closing, regardless of when the incident,
accident or injury occurs.
(c) Purchaser shall have sole responsibility with respect to,
and sole authority to administer, returns of products of the Mongoose
brand of bicycles or bicycle parts or the Advent brand of bicycle
helmets, racks or accessories sold by Seller prior to the Closing Date
and arising from warranty claims, provided, that, Seller shall be
responsible for all warranty claims for Advent bicycle helmets or racks
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supplied by Seller or its Affiliates prior to Closing (with Purchaser
having authority to administer such warranty claims), whether asserted
prior to or after the Closing. Seller shall remain responsible for all
warranty claims for products of the Mongoose brand of bicycles or
bicycle parts and Advent brand of bicycle helmets, racks or accessories
asserted prior to the Closing.
(d) With respect to all such returns or replacements of
products of the Business referenced at Section 5.8(a) that would
otherwise be administered at Seller's expense, Purchaser shall purchase
from Seller at Seller's cost, any Current Product refunded or replaced
by it, up to an aggregate amount not exceeding $1,000,000. "Current
Product" means bicycles, bicycle components or "Advent" bicycle helmets
and accessories for the 1997 or 1998 model year that are in a condition
permitting resale by Purchaser without undue rework, repair or expense.
As used herein, "Seller's original cost" shall mean the original
purchase price paid by Seller for the Current Product at issue.
"Seller's original cost" shall not include freight costs or handling
expenses, sales commissions or other costs incidental to the
acquisition or disposition of the Current Product. Any returns or
replacements of products of the Mongoose brand of bicycles and the
Advent brand of bicycle helmets, racks and accessories sold by Seller
on or prior to the Closing Date and arising more than 90 days after the
Closing Date shall be administered by Purchaser, at Purchaser's
expense.
(e) After the Closing, neither Seller nor any of its
Affiliates shall sell any product that would cause a royalty to be paid
under the royalty agreement with Edward Levine.
5.9 Employees and Employee Benefits.
(a) Purchaser will offer employment as of the Closing Date to
all those employees of Seller who are actively employed in the Business
on the Closing Date and who are listed on Schedule 5.9, on terms and
conditions that Purchaser deems to be appropriate. Each such employee
who accepts the offer of employment and becomes an employee of
Purchaser as of the Closing Date (collectively, the "Continuing
Employees") shall cease to be an employee of Seller or entitled to
participate in any employee benefit plans, programs, policies and
arrangements (including all collective bargaining, stock purchase,
stock option, employment, compensation, deferred compensation, pension,
retirement, severance, termination, separation, vacation, sickness,
health, welfare and bonus plans, arrangements and agreements) under
which Seller has any obligation or
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liability for periods after the Closing Date (unless otherwise set
forth on Schedule 5.9).
(b) Subject to the following provisions of this Section 5.9,
for periods on and after the Closing Date, each Continuing Employee
shall be eligible to participate in employee benefit plans,
arrangements, programs and policies, if any, maintained from time to
time by Purchaser for the benefit of Continuing Employees, as
determined in the sole discretion of Purchaser.
(c) To the extent applicable, Continuing Employees (and their
eligible dependents) shall be given credit under employee benefit
plans, programs, policies and arrangements that are established or
maintained by Purchaser for the benefit of Continuing Employees for
their service with Seller (i) for purposes of eligibility to
participate and vesting (but not benefit accrual) to the extent such
service was taken into account under a corresponding Seller's Plan, and
(ii) for purposes of satisfying any waiting periods, evidence of
insurability requirements, or the application of any pre-existing
condition limitations and shall be given credit for amounts paid under
a corresponding Seller's Plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though
such amounts had been paid in accordance with the terms and conditions
of the plans, programs, policies and arrangements maintained by
Purchaser. Notwithstanding the foregoing provisions of this paragraph
(c), service and other amounts shall not be credited to Continuing
Employees (or their eligible dependents) to the extent the crediting of
such service or other amounts would produce benefits which are
substantially more favorable to Continuing Employees than are provided
to current similarly situated employees of Purchaser who are covered by
similar plans, determined in the sole discretion of Purchaser.
(d) Seller shall take all actions as it deems necessary or
appropriate to cause each Continuing Employee to be fully vested in his
account balance under the Bell Sports Corp. Employees' Retirement and
401(k) Plan, effective as of the Closing Date.
(e) Seller and Purchaser agree to take all actions reasonably
necessary to accomplish the transactions contemplated by this Section
5.9.
(f) Notwithstanding any other provision of this Agreement,
Purchaser shall not assume or otherwise have any liability under or
with respect to any Seller's Plan, including liability for life,
health, disability,
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retirement, severance or other benefits whether incurred before, on or
after the Closing Date.
(g) Nothing in this Agreement shall limit or restrict in any
way the rights of Purchaser or Seller to modify, amend, terminate or
establish employee benefit plans, programs, policies, or arrangements
in whole or in part at any time after the Closing Date, nor shall it
require Purchaser or Seller to provide any form or level of benefit to
any employee after the Closing Date.
(h) All provisions contained in this Agreement with respect to
employee benefit plans or employee compensation are included for the
sole benefit of the respective parties hereto and do not and shall not
create any right in any other person, including, but not limited to,
any Continuing Employee, any participant in any benefit or compensation
plan or any beneficiary thereof.
(i) Seller shall not discourage any employee from accepting
employment with Purchaser.
5.10 Access. Seller will permit representatives of Purchaser from and
after the date hereof up to the Closing Date to have full access at all
reasonable times to the books, accounts, records, properties, operations,
facilities and personnel to the extent pertaining to the Business, and will
furnish Purchaser with such financial and operating data concerning the Business
as Purchaser shall from time to time reasonably request. Seller shall maintain
all records remaining in its possession relating to the Business or the Acquired
Assets for a period of five years after the Closing Date and shall permit
Purchaser and its agents full access thereto at all reasonable times. Seller
shall not destroy any such records without giving Purchaser 30 days advance
written notice and an opportunity to review and take possession of such records.
If requested, Seller shall ship such records to Purchaser and Purchaser shall
reimburse Seller for its third party costs incurred in connection therewith.
Subject to applicable confidentiality restrictions, Purchaser will permit
representatives of Seller from and after the Closing Date to have full access at
all reasonable times to the books, accounts, and records of the Business and
will furnish Seller with such financial and operating data concerning the
Business as Seller may from time to time reasonably request solely in connection
with (i) any litigation with third parties, (ii) proceedings before or filings
with any Governmental Authority (including, without limitation, tax filings), or
(iii) as may be necessary for Seller or its Affiliates to comply with applicable
Law.
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5.11 Use of Facilities.
(a) Seller shall cause the Continuing Employees currently
located at the Administration Facility to be permitted to continue to
use such facility in the performance of their duties for Purchaser
after the Closing Date until September 30, 1997. The parties agree that
these Continuing Employees will engage in credit, billing, design,
customer service, sales, and marketing duties for Purchaser. All direct
costs exclusively associated with the Business (after the Closing) will
be forwarded directly to Purchaser for payment including, but not
limited to, products purchased for inventory; billings for contracts,
leases and maintenance services related to the Business and disclosed
in Schedules 2.1(a and b) and 2.2(b-e) (except as agreed to below),
computer maintenance; sponsorship and BMX team expense; office expenses
for the Torrance office; and employee related expenses such as payroll,
sales commissions and travel and expense reports; direct design,
marketing, and selling costs of the Business.
Purchaser acknowledges that Seller has the right to continue
usage of the AS400 computer system acquired by Purchaser included on
Schedule 2.2(a) for a period through September 30, 1997 for the
following applications: (1) electronic data interchange (EDI) for the
Mass/Sporting Goods Division and Bell Sports Canada, Inc., (2) accounts
receivable collections for the Mass/Sporting Goods Division of Bell
Sports, Inc., (3) In-Store Service Division of Bell Sports, Inc. and
(4) importation activities. Seller agrees to pay to Purchaser a monthly
fee of $2,500 for said use of the computer system.
Purchaser shall pay Seller, on a monthly basis, a use fee
equal to Seller's cost in permitting such use of the Administrative
Facilities. "Sellers Cost" under this Section 5.11(a) shall mean the
amount of monthly expenses as
follows:
Rents, utilities, insurance, property taxes, and maintenance
shall be allocated to Purchaser based on the square footage occupied by
the Business at Seller's Administrative Facility of 13,000 square feet
at a cost of $1.10 per square foot per month or $14,300 per month.
Allocable share of common expenses of the Administrative
Facility for telephone, postage, federal express, general supplies,
depreciation, office equipment rental and maintenance, PC, network and
computer maintenance, common MIS support personnel and services (all
such personnel to devote at least 25% of their time to work for
Purchaser) related to PCs and networks and common import, purchasing
and financial personnel support services
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(all such personnel to devote at least 25% of their time to work for
Purchaser). Purchaser's "allocable share" shall be 25% of the total
common expenses incurred monthly by Seller as reported on Seller's
internal departmental financial reports.
(b) Purchaser's use of the Distribution Facilities shall be
governed by the Warehouse Services Agreement.
(c) Seller acknowledges that while Continuing Employees are at
the Administration Facility, they shall have access to and use of the
computer equipment at the Administration Facility at no additional
charge to Purchaser.
(d) Seller shall not be required to provide an alternative
work space or replacement equipment if the Administration Facility is
damaged or destroyed beyond use.
5.12 Collection Support. Any collection effort conducted by Seller with
respect to its accounts receivable shall be commercially reasonable and
consistent with Seller's past business practices. The parties shall act
reasonably and endeavor in good faith to work together to resolve any collection
issues with the goal of helping Seller's collection efforts, to the extent
reasonably possible, while avoiding impairing Purchaser's relationship with
customers of the Business. Upon the reasonable request of Seller, Purchaser
shall refuse to continue to extend credit to any customer that fails to pay any
account receivable of Seller existing on the Closing Date for the Business after
a period of 60 days from the due date if (a) such refusal to extend credit is
commercially reasonable under the circumstances (such determination to be made
by deeming the outstanding receivable to be a receivable of Purchaser), and (b)
consistent with the normal credit practices of the Business, under the
circumstances.
5.13 Right of First Refusal. Each of Parent and Seller, on its own
behalf and on behalf of their respective Subsidiaries, hereby grant Purchaser
the right of first refusal to obtain, subject to the provisions of this Section
5.13, from Seller a license, solely in connection with the manufacture, sale,
servicing, design, distribution or marketing of bicycles of any name, trademark,
logo or common law mark held by Parent, Seller or any of their respective
subsidiaries. Seller, Parent and their respective subsidiaries shall promptly
inform Purchaser in writing of each and any proposed license agreement whereby
any party (the "Prospective Licensee") is to license (whether on an exclusive or
a non-exclusive basis) any such name, trademark, logo or common law mark in
connection with the manufacture, sourcing, sale, distribution, design or
marketing of bicycles.
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Such notice shall inform Purchaser of the identity of the Prospective Licensee,
the royalty rate, the matter to be licensed, the geographic area to be covered
by the license and the term of the license. Purchaser shall have the right to
exercise its right of first refusal, by written notice to Parent, within 30 days
after receipt of written notice of the Prospective Licensee. If Purchaser
exercises its right of first refusal, the royalty rate to be paid for the
license shall equal the royalty rate to be paid by the Prospective Licensee. The
term of the license, scope of the license and geographic area shall be the same
as to be granted to the Prospective Licensee. Upon exercise of Purchaser's right
of first refusal, the parties shall cooperate, in good faith, in preparing a
license agreement consistent with this Section 5.13. If Purchaser fails to
exercise its right of first refusal, Seller, Parent or its subsidiary (as the
case may be) shall be free to enter into the license with the Prospective
Licensee, on the terms consistent with those set forth in the notice to
Purchaser. This right of first refusal is granted to Purchaser in consideration
of this Agreement and no further payment shall be due from Purchaser for the
grant of the right or in connection with the exercise of the right. Purchaser's
right of first refusal under this Section 5.13 shall expire on the fifth
anniversary of the Closing Date. Purchaser and Parent, Seller and their
respective subsidiaries shall cooperate, in good faith, in filing notices with
the U.S. Patent and Trademark Office requested to evidence Purchaser's right of
first refusal under this Section 5.13. Purchaser shall pay all filing fees for
such filings.
5.14 Disposition of Excluded Inventories. Before June 30, 1998 Seller
shall take all steps necessary to sell the Excluded Inventories and the
inventory of Univega bicycles owned by Bell Sports Canada, Inc. Seller shall
sell the Excluded Inventories in a commercially reasonable manner to maximize
the proceeds of each such sale (which may include one or more sales to a third
party in liquidation after December 31, 1997). Seller shall not take any action
to impair the goodwill of the Business, the value of the Intellectual Property
or Purchaser's relationships with customers of the Business (it being understood
that Seller may sell to a third party in liquidation after December 31, 1997).
Seller shall not permit any of the Excluded Inventory or Univega bicycle
inventory to be sold or distributed into the United States. Until June 30, 1998
Seller shall have a non-exclusive, non-transferrable (and not subject to
sublicense), royalty free right to use the Intellectual Property set forth on
Schedule 5.14 in connection with the sale of the Excluded Inventory, provided
such sale is in accordance with this Section 5.14 and provided, further, that
such use of the Intellectual Property is limited only to selling or distributing
Excluded Inventory containing any Intellectual Property set forth on Schedule
5.14. Seller shall afford Purchaser reasonable opportunities during the term
hereof
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to inspect and monitor the activities of Seller in order to ensure Seller's use
of the Intellectual Property in accordance with the foregoing. Seller acquires
no right, title or interest in the Intellectual Property other than the limited
right to use set forth herein. After June 30, 1998 (or such earlier date as all
of the Excluded Inventories have been sold), Purchaser shall reimburse Seller
for up to $500,000 in sales losses incurred by Seller in the sale of the
Excluded Inventories. "Sales losses" shall equal the amount by which (a)
Seller's landed costs as of the Closing Date for the Excluded Inventories exceed
(b) the aggregate proceeds and other economic benefit to Seller received on the
sale of the Excluded Inventories, less sales commissions incurred in such sale.
Purchaser shall use all commercially reasonable efforts to obtain for Seller the
benefits under any Seller Assigned Contract of the International Business to the
extent reasonably requested by Seller to assist in the disposition of the
Excluded Inventory in accordance with this Section 5.14. Seller shall use all
commercially reasonable efforts to assist in such matter. Seller shall notify
Purchaser in writing of any intended sale of Excluded Inventories in an amount
over $100,000 in a single transaction for a price less than the applicable
landed cost, such notice to set forth the proposed sale price. Purchaser shall
have 10 business days from the receipt of such notice to purchase the Excluded
Inventory at the price set forth in Seller's notice to Purchaser.
5.15 Ally-Cat. The parties shall work, in good faith, to prepare a
sublicense agreement for the exclusive license by Seller from Purchaser after
closing, for the sale, manufacture and distribution of the products covered by
the Ally-Cat Agreement into the mass merchant market. Purchaser shall retain the
sole right to sell, manufacture and distribute the products covered by the
Ally-Cat Agreement into the independent bicycle dealer market and sporting goods
market. The royalty rate to be paid by Seller shall be as set forth in the
Ally-Cat Agreement, provided, that, if Purchaser exercises the right to purchase
the assets of Ally-Cat, such license shall be perpetual at the royalty rate as
set forth in the Ally-Cat Agreement. In no event may Seller transfer its license
rights (except in connection with the sale of its business, provided that it
obtains the prior written consent of Purchaser, which shall not be unreasonably
withheld) or grant sublicenses. "Ally-Cat Agreement" shall mean that certain
License Agreement dated August 9, 1995 between Seller and Ally-Cat Bicycles,
Inc.
5.16 Credit Agreement. Seller shall comply with the requirements of the
letter from its lenders, as set forth on Schedule 5.16, and shall not take any
action to cause the consent in such letter to be withdrawn.
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
The obligations of Purchaser under Article II and stock option of this
Agreement are subject to the satisfaction of the following conditions precedent
on or before the Closing Date:
6.1 Warranties True. The representations and warranties of Seller and
Parent contained herein shall have been (a) accurate, true and correct on and as
of the date of this Agreement (except to the extent that they specifically
relate to another date, in which case they need only be accurate, true and
correct as of such other date), and (b) shall also be accurate, true and correct
on and as of the Closing Date (except to the extent that they specifically
relate to another date, in which case they need only be accurate, true and
correct as of such other date) and provided, that, where a representation and
warranty is not qualified as to materiality, it shall be accurate, true and
correct in all material respects as of the Closing Date.
6.2 Compliance with Covenants. Seller and Parent shall have performed
and complied with all of their respective covenants, obligations and agreements
contained in this Agreement to be performed and complied with by it on or prior
to the Closing Date.
6.3 Consents, Approvals. Purchaser shall have received written evidence
reasonably satisfactory to Purchaser that (a) all consents and approvals
specified in Schedule 6.3 have been obtained by Seller (b) all required filings
have been made by Seller, including those set forth on Schedule 3.3, and (c) all
waiting and review periods under the HSR Act shall have expired, without adverse
action being taken by any Governmental Authority to prevent consummation of this
Agreement.
6.4 No Action. No order of any court or Governmental Authority shall
have been entered that enjoins, restrains or prohibits this Agreement or the
complete consummation of the transactions contemplated by this Agreement. No
action shall be pending or threatened that seeks to enjoin, restrain, prohibit
or obtain damages with respect to this Agreement or the complete consummation of
the transactions contemplated by this Agreement. No investigation shall be
pending or threatened that might result in any such order, suit, action or
proceeding.
6.5 No Material Adverse Change. Since the date hereof, none of the
Purchased Assets or the Business shall have experienced, and no action or event
shall have occurred that could reasonably be expected to cause the Purchased
Assets or the Business to experience, a Material Adverse Change other than
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changes in general economic conditions or the bicycle industry generally or
changes caused by Purchaser's proposed ownership and operation of the Business.
6.6 Closing Deliveries. Purchaser shall have received, in form and
substance satisfactory to Purchaser, such agreements, documents, instruments and
certificates as shall be reasonably requested by Purchaser to consummate the
transactions contemplated hereby to and convey the Purchased Assets to Purchaser
free and clear of any Lien, including the following duly executed agreements,
releases, instruments and opinions:
(a) the Assignment;
(b) the Intellectual Property Assignment and documentation
reasonably acceptable to Purchaser by which the parties shown as owners
of the Intellectual Property on Schedule 2.1(e) convey all right, title
and interest to such property to Purchaser;
(c) UCC-3 release statements for all Lien filings against, and
all other Lien releases deemed appropriate by Purchaser with respect
to, the Purchased Assets (including, without limitation, any Liens
against the Intellectual Property);
(d) the original title certificates for the owned Vehicles,
executed by Seller, as necessary, together with all necessary Lien
releases, and all certificates of registration, renewal statements and
certificates of use for the Intellectual Property;
(e) the opinion of Sidley & Austin, counsel to Seller, as to
due authorization, validity and enforceability of this Agreement and
the Transaction Agreements;
(f) all required consents to the transfer of the Seller
Assigned Contracts listed on Schedule 6.3 and any others received prior
to Closing (including the consent of Ally-Cat Bicycles Inc. to the
transfer of the Ally-Cat Agreement to Purchaser and the Sublicense by
Purchaser to Seller as contemplated by Section 5.15);
(g) a duly executed copy of the Warehouse Services Agreement;
(h) duly executed copies of the Escrow Agreement and the
Supply Agreement; and
(i) releases of all Liens against Intellectual Property;
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(j) a duly executed copy of the Stock Option Agreement in the
form of Exhibit G hereto (the "Stock Option Agreement");
(k) disclosures, reports and filings required by all
applicable Law; and
(l) substantiation of the trade show costs to be reimbursed by
Purchaser pursuant to Section 7.5 below (and that such trade shows have
not already occurred) and assignment of Seller's privileges with
respect to such trade shows; and
(m) the Sublicense Agreement contemplated by Section 5.15; and
(n) conveyance documents reasonably acceptable to Purchaser,
transferring all right, title and interest, if any, of Seller and its
Affiliates to the patents listed on Schedule 6.6.
ARTICLE VII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF SELLER
The obligations of Seller under Article II of this Agreement are
subject to the satisfaction of the following conditions precedent on or before
the Closing Date:
7.1 Warranties True. The representations and warranties of Purchaser
contained herein shall have been (a) accurate, true and correct on and as of the
date of this Agreement (except to the extent that they specifically relate to
another date, in which case they need only be accurate, true and correct as of
such other date), and (b) shall also be accurate, true and correct on and as of
the Closing Date (except to the extent that they specifically relate to another
date, in which case they need only be accurate, true and correct as of such
other date) and provided, that, where a representation and warranty is not
qualified as to materiality, it shall be accurate, true and correct in all
material respects as of the Closing Date.
7.2 Compliance with Agreements and Covenants. Purchaser shall have
performed and complied with all of its covenants, obligations and agreements
contained in this Agreement to be performed and complied with by it on or prior
to the Closing Date.
7.3 Consents and Approvals. All waiting and review periods under the
HSR Act shall have expired without adverse action being
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taken by any Governmental Authority to prevent consummation of this Agreement.
7.4 No Action. No order of any court or Governmental Authority shall
have been entered in that enjoins, restrains or prohibits this Agreement or the
complete consummation of the transactions as contemplated by this Agreement. No
action shall be pending or threatened that seeks to enjoin, restrain, prohibit
or obtain damages with respect to this Agreement or the complete consummation of
the transactions contemplated by this Agreement. No investigation shall be
pending or threatened that might result in any such order, suit, action or
proceeding.
7.5 Closing Deliveries. Purchaser shall (a) make the payments required
by Section 2.6(a), (b) deliver to Seller the assignment and assumption agreement
evidencing Purchaser's assumption of the Assumed Liabilities, duly executed by
Purchaser; (c) deliver to Seller the opinion of Mayer, Brown & Platt, as to the
due authorization, validity and enforceability of this Agreement and the
Transaction Agreements; (d) deliver to Seller duly executed copies of the
Warehouse Services Agreement, the Stock Option Agreement, the Escrow Agreement
and the Supply Agreement; (e) deliver to Seller, by wire transfer to an account
designated by Seller, payment of (i) the $2,500,000 consideration recited in the
Stock Option Agreement and (ii) $39,401 for reimbursement of prepayment of 1997
trade show space; and (f) the Sublicense Agreement contemplated by Section 5.15.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time on or
prior to the Closing Date:
(a) By the written consent of Seller and Purchaser;
(b) By written notice of Seller or Purchaser to the other, if
any court of competent jurisdiction or other governmental body shall
have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
transactions as contemplated hereby and such order, decree, ruling or
other action shall have become final and nonappealable; and
(c) By written notice of either Purchaser or Seller, if there
shall have been a material breach of any covenant, representation or
warranty hereunder, and such breach shall not have been remedied within
ten (10) Business Days after receipt of a notice in writing from the
non-breaching party specifying the breach and requesting such be
remedied.
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This Agreement shall terminate automatically, without further action of the
parties, if the Closing does not occur on or before June 30, 1997.
8.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all obligations of the parties hereunder shall terminate, except
for the obligations of Seller and Parent set forth in Section 5.5(b) to the
extent that such obligations relate to non-public information concerning
Purchaser and provided, however, that no such termination shall affect
Purchaser's obligations under its existing Confidentiality Agreement with
Parent.
ARTICLE IX
INDEMNIFICATION
9.1 Survival. The representations and warranties of the parties in this
Agreement or in any document delivered pursuant hereto shall survive the Closing
until the second anniversary of the Closing Date, provided, however, that such
time limitation shall not apply to the representations and warranties set forth
at Sections 3.2, 3.6, 3.18, 3.20 and 3.26 and such representations and
warranties shall survive forever or until the earlier expiration of any
applicable statute of limitations. The covenants and agreements of the parties
set forth herein shall survive the Closing and not expire other than in
accordance with their terms.
9.2 Indemnification by Seller and Parent. Parent and Seller, jointly
and severally, agree to indemnify, defend and hold harmless each of Purchaser
and its Affiliates against any Losses relating to or arising out of:
(a) any breach of any representation or warranty made by
Seller or Parent in this Agreement or any document delivered to
Purchaser at the Closing or pursuant to this Agreement, provided,
however that Seller and Parent shall not have any liability under this
Section 9.2(a) with respect to breaches of such representations and
warranties until, and then only to the extent that, the aggregate
Losses arising out of such breaches equal or exceed $150,000, and
provided, further that in no event shall the obligation or liability of
Parent and Seller under this Section 9.2(a) exceed 25% of the Purchase
Price (as finally adjusted pursuant to Section 2.6); provided, further,
that the foregoing basket and cap limitations shall not apply to any
breaches of the representations and warranties set forth at Sections
3.2, 3.6, 3.18, 3.20 and 3.26;
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(b) any breach of any covenant made by Seller or Parent in
this Agreement or any document delivered to Purchaser at the Closing or
pursuant to this Agreement;
(c) the bulk sales Laws of any jurisdiction applicable to the
transactions contemplated herein, and any Laws of any jurisdiction
imposing liability on Purchaser for Seller's Taxes, including the
failure to comply with any such Laws;
(d) Seller's Liabilities (other than Assumed Liabilities);
(e) product liability claims and warranty claims for which
Seller is responsible pursuant to Section 5.8;
(f) any damage to any Purchased Assets while such assets are
located at any of the Facilities; and
(g) any liability under the WARN Act or any applicable
employee notification, retraining or protection law arising from the
actions or inactions of Seller prior to the Closing.
9.3 Indemnification by Purchaser. Purchaser agrees to indemnify, defend
and hold harmless Seller, Parent and their respective Affiliates against any
Losses relating to or arising out of (a) any breach of any representation or
warranty or covenant made by Purchaser in this Agreement or any document
delivered to Seller at the Closing or pursuant to this Agreement, or (b) subject
to Section 2.4, any Assumed Liability, (c) any wrongful action or negligent
conduct of any employee of Purchaser, including, without limitation, any
Continuing Employee, in connection with such employee's use of the
Administrative Facility or (d) any product liability claims or product warranty
or replacement claims for which Purchaser is responsible pursuant to Section
5.8.
9.4 Claims. The provisions of this Section shall be subject to Section
9.5. As soon as is reasonably practicable after becoming aware of a claim for
indemnification under this Agreement (including a claim or suit by a third
party) the indemnified Person shall promptly give notice to the indemnifying
Person of such claim. Such written notice shall describe the Loss, the amount
thereof, if known, and the method of computation of such Loss (to the extent
known), all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such Loss shall have occurred.
The failure of the indemnified Person to give notice shall not relieve the
indemnifying Person of its obligations under this Article IX except to the
extent that the indemnifying Person shall have been prejudiced thereby. If the
indemnifying Person
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does not object in writing to such indemnification claim within 60 calendar days
of receiving notice thereof, the indemnified Person shall be entitled to
promptly recover from the indemnifying Person the amount of such claim, and no
later objection by the indemnifying Person shall be permitted. If the
indemnifying Person agrees that it has an indemnification obligation but objects
that it is obligated to pay only a lesser amount, the indemnifying Person shall
promptly pay to the indemnified Person the lesser amount, without prejudice to
the indemnified Person's claim for the difference.
9.5 Third Party Claims; Assumption of Defense. The indemnifying Person
may, at its own expense, (a) participate in the defense of any claim, suit,
action or proceeding and (b) upon notice to the indemnified Person, and the
indemnifying Person's delivering to the indemnified Person a written agreement
that the indemnified Person is entitled to indemnification pursuant to Section
9.2 or 9.3 for all Losses arising out of such claim, suit, action or proceeding
and that the indemnifying Person shall be liable for the entire amount of any
Loss, may at any time during the course of any such claim, suit, action or
proceeding, assume the defense thereof; provided, however, that (i) the
indemnifying Person's counsel is reasonably satisfactory to the indemnified
Person, and (ii) the indemnifying Person shall thereafter consult with the
indemnified Person upon the indemnified Person's reasonable request for such
consultation from time to time with respect to such claim, suit, action or
proceeding. If the indemnifying Person assumes such defense, the indemnified
Person shall have the right (but not the duty) to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the indemnifying Person. Whether or not the indemnifying Person
chooses to assume the defense of any such claim, suit, action or proceeding, all
of the parties hereto shall cooperate in the defense or prosecution thereof, and
keep each other informed of the status thereof. If the indemnifying Person
assumes such defense, the indemnified Person shall not be entitled to enter into
any settlement or compromise of the related claim, suit, action or proceeding.
If the indemnifying Person does not assume such defense the indemnified Person
shall not be permitted to enter into any settlement or compromise of the related
claim, suit, action or proceeding unless: (i) the indemnified Person has
provided 30 days prior written notice to the indemnifying Person of the terms of
the proposed settlement or compromise, (ii) the indemnified Person has provided
to the indemnifying Person such information with respect to the related claim,
suit, action or proceeding as the indemnifying Person shall reasonably request
and (iii) the indemnifying Person shall not have disapproved of such proposed
settlement or compromise within the 30 day period following receipt of the
written notice referenced in (i). If the indemnifying Person shall disapprove of
a
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settlement or compromise proposed by the indemnified Person the indemnifying
Person may assume defense of the related claim, suit, action or proceeding, it
being understood that if the indemnifying Person does not assume such defense,
the indemnified person shall be entitled to enter into such proposed settlement
or compromise. If the indemnified Person shall enter into such settlement or
compromise (i) without complying with the procedures set forth above or (ii)
after the indemnifying Person shall have disapproved of the same and offered to
assume the defense of the related claim, suit, action or proceeding, such
compromise or settlement shall discharge the indemnifying Person from liability
arising from such settlement or compromise with respect to the subject matter
thereof, and no amount in respect thereof shall be claimed as a loss after this
Article IX; provided that the indemnifying Person shall be responsible for all
Losses arising prior to the date of such settlement or compromise. Except in
cases where the indemnifying person has assumed the defense in accordance
herewith and the claim, suit, action or proceeding is solely for money damages
and will have no continuing effect on the business, reputation or future
business prospects of the indemnified person, the indemnifying Person shall not
be permitted to settle or compromise any claim, suit, action or proceeding
without obtaining the prior written consent of the indemnified Person. In no
case shall the consent of the indemnified Person be unreasonably withheld or
delayed. In the event that the indemnifying Person does not elect to assume the
defense of any claim, suit, action or proceeding, then any failure of the
indemnified Person to defend or to participate in the defense of any such claim,
suit, action or proceeding or to cause the same to be done, shall not relieve
the indemnifying Person of its obligations hereunder.
9.6 Additional Limitations and Other Agreements.
(a) In calculating any Loss under this Article IX there shall
be deducted the amount of any income tax benefit available to the
indemnified Person (or any of its Affiliates) with respect to such Loss
(after giving effect to the tax effect of receipt of the
indemnification payment).
(b) An indemnifying Person shall have no obligation to pay
indemnification for any Loss to the extent that recovery for such Loss
is actually paid to the indemnified Person under any policy of
insurance. To the extent that an indemnified Person is subsequently
paid by an insurance company for any Loss with respect to which payment
was previously received by the indemnified Person hereunder, the
indemnified Person shall promptly, upon receipt of the insurance
proceeds, reimburse the indemnifying Person from the insurance proceeds
in an amount up to the indemnifying
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Person's prior payment to the indemnified Person with respect to such
Loss.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party hereto shall bear its own expenses with respect to the
transactions contemplated hereby.
10.2 Amendment. This Agreement may be amended, modified or supplemented
only by written agreement of the parties.
10.3 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (a) when received if given in person or by courier or a courier
service, (b) on the date of transmission if sent by telex, facsimile or other
wire transmission or (c) three (3) business days after being deposited in the
U.S. mail, certified or registered mail, postage prepaid:
(a) If to Seller or Parent, addressed as follows:
Bell Sports Corp.
15170 N. Hayden Road, Suite 1
Scottsdale, AZ 85260
Attention: Chief Financial Officer
Facsimile No.: (602) 951-0511
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Larry A. Barden
Facsimile No.: (312) 853-7036
(b) If to Purchaser, addressed as follows:
Brunswick Corporation
One North Field Court
Lake Forest, Illinois 60045-4811
Attention: General Counsel
Facsimile No.: (847) 735-4050
with a copy to:
Brunswick Outdoor Recreation Group
6101 E. Apache
Tulsa, Oklahoma 74115
Attention: President
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Facsimile No.: (918) 834-8575
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
10.4 Effect of Investigation. Any due diligence review, audit or other
investigation or inquiry undertaken or performed by or on behalf of Purchaser
shall not limit, qualify, modify or amend the representations, warranties or
covenants of, or indemnities by, Seller or Parent made pursuant to this
Agreement, irrespective of the knowledge and information received (or which
should have been received) therefrom by Purchaser.
10.5 Waivers. The failure of a party to require performance of any
provision shall not affect its right at a later time to enforce the same. No
waiver by a party of any condition or of any breach of any term, covenant,
representation or warranty contained in this Agreement shall be effective unless
in writing. No waiver in any one or more instances shall be deemed to be a
further or continuing waiver of any such condition or breach in other instances
or a waiver of any other condition or breach of any other term, covenant,
representation or warranty. Consummation of the transactions contemplated herein
shall not be deemed a waiver of a breach of or inaccuracy in any representation,
warranty or covenant or of any party's rights and remedies with regard thereto.
10.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
10.7 Interpretation. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender shall not limit any provision of this
Agreement. The use of the terms "including" or "include" shall in all cases
herein mean "including, without limitation" or "include, without limitation,"
respectively. If any representation or warranty is qualified by knowledge, the
party making such representation or warranty hereby confirms that it has made a
diligent inquiry into the matter addressed by the representation or warranty. No
specific representation, warranty or covenant contained herein shall limit the
generality or applicability of a more general representation, warranty or
covenant contained herein. A breach of or inaccuracy in any representation,
warranty or covenant shall not be affected by the fact that any more general or
less general representation, warranty or covenant was not also breached or
inaccurate. The language in all parts of this Agreement shall be construed, in
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all cases, according to its fair meaning. The parties acknowledge that each
party and its counsel have reviewed and revised this Agreement and that any rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this
Agreement.
10.8 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Illinois
without giving effect to the principles of conflicts of law thereof.
10.9 Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
10.10 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and no provision of this Agreement shall be deemed
to confer rights upon any other Person.
10.11 Publicity. The parties shall cooperate and agree (provided that
neither party may withhold consent to any disclosure required by law) to the
form, content, timing and manner of distribution or publication of any public
announcement relating to this Agreement.
10.12 Further Assurances. Upon the request of Purchaser, Seller and
Parent will, and will cause their respective Affiliates to, on and after the
Closing Date, execute and deliver to Purchaser such other documents, further
releases, assignments and other instruments as may be required or reasonably
deemed appropriate by Purchaser to effect or evidence transfer and assignment to
Purchaser of all or any of the Purchased Assets, and to otherwise carry out the
purposes of this Agreement. Seller will execute and deliver to third party
vendors in possession of tooling included in the Purchased Assets, as reasonably
requested by Purchaser to notify such vendors of Purchaser's ownership of the
tooling. Seller shall make any payments for amounts due for work performed or
goods supplied prior to the Closing by third party vendors in possession of any
tooling included in the Purchased Assets, to the extent that such payments are
required for Purchaser to obtain the possession, use or economic or practical
benefit of such tooling.
10.13 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
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10.14 Remedies. The parties hereto acknowledge and agree that, from and
after the Closing, their sole and exclusive remedy with respect to any and all
claims for breach of any representation or warranty in Article III shall be
pursuant to the indemnification provisions set forth in Article IX. Except as so
stated, the remedies under this Agreement shall be cumulative, and shall not
preclude the assertion or exercise of any other rights or remedies available by
law, in equity or otherwise.
10.15 Forum. Purchaser, Parent and Seller agree that any suit, action
or proceeding brought by any party in connection with or arising out of this
Agreement or the Escrow Agreement shall be brought solely in the Federal Courts
of the Northern District of Illinois (or in the State Courts of Lake County,
Illinois solely in the event that the Federal Courts lack subject matter
jurisdiction over such action, suit or proceeding) and each of Purchaser, Parent
and Seller consent to the jurisdiction of such Courts for any such suit, action
or proceeding. Each of Purchaser, Parent and Seller irrevocably waives any
defenses of lack of personal jurisdiction, improper venue or forum non
conveniens as to any such action, suit or proceeding brought in the Courts
specified in the preceding sentence. Each of Purchaser, Parent and Seller also
irrevocably agree that service of process in any such action, suit or proceeding
shall be deemed good and effective if made in any manner (other than by mail)
specified for delivery of written notice pursuant to Section 10.3 hereof.
10.16 Disclaimer of Warranties. Seller makes no representations or
warranties with respect to any projections, forecasts or forward-looking
information provided to Purchaser. There is no assurance that any projected or
forecasted results will be achieved. EXCEPT AS TO THOSE MATTERS EXPRESSLY
COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT, SELLER IS
SELLING THE TANGIBLE ASSETS INCLUDED IN THE PURCHASED ASSETS ON AND "AS IS,
WHERE IS" BASIS AND DISCLAIMS ALL OTHER WARRANTIES, REPRESENTATIONS AND
GUARANTEES WHETHER EXPRESS OR IMPLIED WITH RESPECT TO SUCH ASSETS. SELLER MAKES
NO REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE AND NO IMPLIED WARRANTIES WHATSOEVER WITH RESPECT TO SUCH
ASSETS. Purchaser acknowledges that neither Seller nor any of its
representatives nor any other Person has made any representation or warranty,
express or implied, as to the accuracy or completeness of any memoranda, charts,
summaries or schedules heretofore made available by Seller or its
representatives to Purchaser or any other information which is not included in
this Agreement or the Schedules hereto, and neither Seller nor any of its
representatives nor any other Person will have or be subject to any liability to
Purchaser, any Affiliate of Purchaser or any other Person resulting from the
57
<PAGE>
distribution of any such information to, or use of any such information by,
Purchaser, any Affiliate of Purchaser, or any of their agents, consultants,
accountants, counsel or other representatives. Nothing in this Section 10.16
limits the representations and warranties of Seller and Parent hereunder.
10.17 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Purchaser may assign this Agreement or any of its rights hereunder to any of its
wholly owned subsidiaries. In the event of such assignment, Purchaser shall be
responsible for all obligations of such subsidiary and shall continue to be
bound in all respects by the provisions hereof. Neither Seller nor Parent may
assign this Agreement without the prior written consent of Purchaser.
10.18 Preparation of W-2 Forms. Seller and Purchaser agree that they
will not apply the alternative procedure contained in Section 5 of Revenue
Procedure 96-60. Accordingly, Seller acknowledges that it will be responsible
for the furnishing of a Form W-2 to each employee who has been employed by it,
such Form W-2 to disclose all wages and other compensation paid for the period
ending on the Closing Date, and taxes withheld thereon. Purchaser acknowledges
that it will be responsible for the furnishing of a Form W-2 to each Continuing
Employee, such Form W-2 to disclose all wages and other compensation paid for
the period beginning on the day following the Closing Date and ending on
December 31, 1997, and taxes withheld thereon.
10.19 Entire Understanding. This Agreement sets forth the entire
agreement and understanding of the parties hereto and supersedes any and all
prior agreements, arrangements and understandings among the parties.
10.20 Liability of Parent and Seller. Whenever this Agreement requires
Seller or Parent to take any action, such requirement will be deemed to include
an undertaking on the part of each of Parent and Seller. Parent and Seller shall
be jointly and severally liable for all of the obligations to be performed by
any of them under this Agreement and any representation or warranty made by any
of them.
* * *
58
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
BRUNSWICK CORPORATION
By: Robert T. McNaney
-------------------------------------
Name: Robert T. McNaney
----------------------------
Title: Vice President of General
Counsel
---------------------------
BELL SPORTS CORP.
By: Howard Kosick
-------------------------------------
Name: Howard Kosick
----------------------------
Title: CFO
---------------------------
AMERICAN RECREATION COMPANY, INC.
By: Howard Kosick
-------------------------------------
Name: Howard Kosick
----------------------------
Title: CFO
---------------------------
59
ESCROW AGREEMENT AND INSTRUCTIONS
---------------------------------
This Escrow Agreement and Instructions dated as of April 28, 1997 (this
"Agreement") is made by and among Brunswick Corporation, a Delaware corporation
("Brunswick"), American Recreation Company, Inc., a Delaware corporation
("Seller"), Bell Sports Corp., a Delaware corporation ("Parent"), and The First
National Bank of Chicago ("Bank").
RECITALS
--------
A. Brunswick, Parent and Seller have entered into an Asset Purchase
Agreement dated April 1, 1997 (the "Purchase Agreement") pursuant to which,
among other things, Brunswick has agreed to pay into the escrow created hereby
the sum of $500,000 to be disbursed as provided in this Agreement. Bank is not a
party to the Purchase Agreement.
B. Brunswick, Parent and Seller desire Bank to act as escrowee of the
total amount paid into escrow and income earned thereon as provided herein, and
Bank is willing to so act. Bank has agreed to act in accordance with the terms
of this Agreement.
AGREEMENT
---------
It is agreed as follows:
1. Creation of Escrow Fund. Brunswick has paid, or will pay to the
Bank, to be held in escrow pursuant hereto, the sum of $500,000 (the "Escrow
Fund").
2. Income. The Escrow Fund shall be invested pursuant to Section 6
hereof until it is released and paid as provided herein. Income earned by the
Escrow Fund shall accrue and become part of the Escrow Fund to be used as
provided herefor. Parent and Seller shall be responsible for, and report, all
taxes on income earned by the Escrow Fund.
3. Disbursements from Escrow Fund.
<PAGE>
3.1 Disbursement from Escrow Fund for Breach of
Representations and Warranties, Covenants and Agreements. Whenever Brunswick
demands payment from the Escrow Fund for breach of any representation or
warranty, covenant or agreement of Parent and Seller pursuant to Section 2.6 or
Section 9.2 of the Purchase Agreement, Brunswick shall give notice thereof to
Bank and to Parent (acting on behalf of Parent and Seller), which notice ("Claim
Notice") shall specify the amount claimed and the basis for the claim. If after
fifteen (15) business days after such Claim Notice is so received, Parent has
not given notice to Bank of Parent's objection to the disbursement of such funds
in the amount claimed by Brunswick in such Claim Notice, Bank shall disburse to
Brunswick from the Escrow Fund the full amount so claimed. If, on the other
hand, Parent gives written notice to Bank objecting to the distribution of the
claimed amount or any portion thereof within fifteen (15) business days of the
giving of a Claim Notice, Bank shall not disburse any funds to Brunswick with
respect to the amount disputed under such Claim Notice, unless and until Bank
has either received the written notice of Parent evidencing Parent's acceptance
of such disbursement or a non-appealable court order has been issued, in a court
of competent jurisdiction, providing that such funds be disbursed.
3.2 Final Disbursement. Unless this Agreement is terminated
earlier in accordance with Section 4 hereof, the full amount of the Escrow Fund,
less any amounts previously disbursed to Brunswick pursuant hereto, shall be
disbursed to Seller on the date written direction to disburse is delivered to
the Escrow Agent by Brunswick and Parent (acting on behalf of Parent and
Seller). Brunswick and Parent covenant to each other that such written notice
shall be delivered on the fifteenth day after the final determination of the
Final Inventory Value (as defined in the Purchase Agreement), such fifteenth day
being the "Disbursement Date". Notwithstanding anything to the contrary herein,
if on the Disbursement Date there is pending one or more Claim Notices which
have not been the subject of a disbursement or other final resolution, Bank
shall not disburse from the Escrow Fund amounts which would deplete the Escrow
Fund below the amount so claimed by Brunswick unless and until final resolution
of such matters is made.
4. Termination. This Escrow Agreement shall terminate and be of no
further force and effect upon the earlier of (a) the date that no funds remain
in the Escrow Fund to be disbursed hereunder,
2
<PAGE>
and (b) the Disbursement Date, unless one or more pending Claim Notices exist on
such date, in which case this Escrow Agreement will terminate upon final
resolution of such pending Claim Notices.
5. Investments. Bank shall invest and reinvest any cash in the Escrow
Fund in any one of the following investments: (i) direct obligations of or
obligations guaranteed by the United States of America; (ii) in repurchase
agreements collateralized by investments in (i) above, (iii) commercial paper
rated A-1 by Standard & Poor's Corporation or Prime-1 by Moody's Investors
Services, Inc., or better; (iv) certificates of deposit issued by United States
commercial banks having capital and surplus of at least $500,000,000; (v)
investments in institutional money market funds of Bank investing principally in
obligations permitted by clauses (i) through (iv) above; (vi) such other
investments as may be mutually agreed upon by Brunswick and Parent ("Permitted
Investments"), provided, that, in any case any investments shall be with such
maturities as Parent and Brunswick may determine are compatible with the
payments which may be required hereunder. The parties agree that the Escrow Fund
shall initially be invested in the Bank's Pegasus U.S. Government Securities
Cash Management Fund. Bank acknowledges that it has no interest in any cash or
investments held in the Escrow Fund from time to time, and further acknowledges
that the Escrow Fund is to be held for the benefit of Brunswick, Parent and
Seller in the manner contemplated in the Purchase Agreement. Bank covenants and
agrees that (i) it will keep all cash and Permitted Investments in the Escrow
Fund in an account conspicuously marked on the records of Bank as "Escrow
Account for the benefit of Brunswick, Parent and Seller", together with the
account number thereof, (ii) it will issue Form 1099 to Parent and Seller with
respect to income earned by them, to the extent required by the Internal Revenue
Code of 1986, as amended, (iii) it will report all income earned by the Escrow
Fund to Parent and Seller and (iv) it will give such further assurances as
Brunswick and Parent may reasonably request from time to time in order to ensure
that Bank is in compliance with the provisions of this Agreement.
6. General Terms.
6.1 Duties. The duties and responsibilities of Bank shall be
limited to those expressly set forth herein.
3
<PAGE>
6.2 No Additional Liability. Bank shall not be personally
liable for any act taken or omitted hereunder if taken or omitted by it in good
faith and in the exercise of its own best judgment and Bank shall also be fully
protected in relying upon any written notice, demand, certificate, or document
which it in good faith believes to be genuine.
6.3 Assumed Validity of Documents. Bank shall not be
responsible for the sufficiency or accuracy of the form, execution, validity or
genuineness of documents deposited hereunder, or of any endorsement thereon or
for lack of endorsement thereon, or for any description therein, nor shall Bank
be responsible or liable in any respect on the account of the identity,
authority or right of the persons executing or delivering or purporting to
execute or deliver any such document or endorsement.
6.4 Fees. Bank shall be paid a reasonable fee for its services
and shall be reimbursed for its reasonable expenses incurred in connection with
the ordinary administration of the Escrow Fund, including charges for the
acceptance, disbursement and investment of the Escrow Fund. Brunswick and Parent
shall each pay one-half of Bank's reasonable fees and expenses.
6.5 Indemnification. Brunswick, Parent and Seller each agree
to hold Bank harmless and to indemnify Bank against any loss, liability or
expenses (including reasonable attorneys' fees and expenses) incurred by Bank
and arising out of or in connection with the performance of its obligations in
accordance with the provisions of this Agreement, except for any loss, liability
or expense incurred as a result of the negligence or willful misconduct of Bank.
The foregoing indemnity in this paragraph shall survive the resignation of Bank
or the termination of this Agreement.
6.6 Notices. All claims, notices, requests, demands, or other
communications hereunder shall be in writing and be given in person, by express
mail service or by mail, and shall become effective (a) on delivery if given in
person, (b) on the date of delivery if sent by facsimile or by express mail
service, return receipt requested, or (c) four business days after being
deposited in the mails, with proper postage for first-class registered or
certified mail, prepaid.
4
<PAGE>
Notices shall be addressed as follows:
(a) If to Brunswick:
Brunswick Corporation
One North Field Court
Lake Forest, IL 60045-4811
Attention: General Counsel
Facsimile: (847) 735-4050
With a copy to:
Brunswick Outdoor Recreation Group
6101 East Apache
Tulsa, Oklahoma 74115
Attention: President
Facsimile: (918) 834-8575
(b) If to Parent or Seller:
Bell Sports Corp.
15170 N. Hayden Road, Suite 1
Scottsdale, Arizona 85260
Attention: Chief Financial Officer
Facsimile: (602) 951-0511
With a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden
Facsimile: (312) 853-7036
(c) If to Bank:
The First National Bank of Chicago
One First National Plaza
Suite 0673
Chicago, Illinois 60670-0673
Attention: Corporate Trust Administration
Facsimile: (312) 407-1708
5
<PAGE>
or such other address as any party may from time to time specify by notice to
the other parties.
6.7 Responsibilities and Rights of Bank.
(a) Bank undertakes to perform only such duties as are
expressly set forth herein. Without limiting the generality of the
foregoing, Bank shall have no duty or responsibility with regard to
any: (i) security as to which a default in the payment of principal or
interest has occurred, to give notice of default, make demand for
payment or take any other action with respect to such default; and (ii)
loss occasioned by delay in the actual receipt of notice of any
payment, redemption or other transaction regarding any item in the
Escrow Fund as to which it is authorized to take action hereunder. Bank
may consult with counsel and shall be fully protected with respect to
any action taken in good faith in accordance with such advice.
(b) Bank does not make any representation or warranty with
regard to the creation or perfection, hereunder or otherwise, of a
security interest in the Escrow Fund or regarding the negotiability or
transferability of, or existence of other interest in the Escrow Fund.
Bank shall have no responsibility at any time to ascertain whether or
not any security interest exists in the Escrow Fund or any part thereof
or to file any financing statement under the Uniform Commercial Code of
any state with respect to the Escrow Fund or any part thereof.
(c) Bank is hereby authorized to comply with any judicial
order or legal process which stays, enjoins, directs or otherwise
affects the transfer or delivery of the Escrow Fund or any party hereto
and shall incur no liability for any delay or loss which may occur as a
result of such compliance.
(d) Bank shall have no duty or responsibility with regard to
any loss resulting from the investment, reinvestment, sale or
liquidation of the Escrow Fund in accordance with the terms of this
Agreement. Bank need not maintain any insurance with respect to the
Escrow Fund.
(e) Except as otherwise expressly provided herein, Bank is
authorized to execute instructions and take other actions
6
<PAGE>
pursuant to this Agreement in accordance with its customary processing
practices for similar customers and, in accordance with such practices
Bank may retain agents, including its own subsidiaries or affiliates,
to perform certain of such functions. All collection and receipt of
funds or securities and all payment and delivery of funds or securities
under this Agreement shall be made by Bank as agent, at the risk of the
other parties hereto with respect to their actions or omissions and
those of any person other than Bank. In no event shall Bank be
responsible or liable for any loss due to forces beyond its control,
including, but not limited to, acts of God, flood, fire, nuclear
fusion, fission or radiation, war (declared or undeclared), terrorism,
insurrection, revolution, riot, strikes or work stoppages for any
reason, embargo, movement action, including any laws, ordinances,
regulations or the like which restrict or prohibit the providing of the
services contemplated by this Agreement, inability to obtain equipment
or communications facilities, or the failure of equipment or
interruption of communications facilities, and other causes whether or
not of the same class or kind as specifically named above. In the event
that Bank is unable substantially to perform for any of the reasons
described in the immediately preceding sentence, it shall so notify the
other parties hereto as soon as reasonably practicable.
(f) Notwithstanding any provision of this Agreement to the
contrary, Bank shall not be bound by, or have any responsibility with
respect to, any other agreement or contract between Brunswick, Parent
and Seller (whether or not Bank has knowledge thereof). In no event
shall Bank be liable to Brunswick, Parent and Seller, or any other
person whatsoever for special, indirect or consequential loss or damage
of any kind whatsoever (including but not limited to lost profits),
even if Bank has been advised of the likelihood of such loss or damage
and regardless of the form of action.
(g) It is understood and agreed that should any dispute arise
with respect to the payment and/or ownership or right of possession of
the Escrow Fund, Bank is authorized and directed to retain in its
possession, without liability to anyone, all or any part of the Escrow
Fund until such dispute shall have been settled either by mutual
agreement by the parties concerned or by the final order, decree or
judgment of any court or other tribunal of competent jurisdiction in
the
7
<PAGE>
United States of America and time for appeal has expired and no appeal
has been perfected, but Bank shall be under no duty whatsoever to
institute or defend any such proceedings.
(h) Brunswick, Parent and Seller acknowledge and agree that
Bank shall not be responsible for taking any steps, including without
limitation, the filing of forms or reports, or withholding of any
amounts in connection with any tax obligations of Brunswick, Parent and
Seller or any other party in connection with the Escrow Fund. Bank
shall be entitled to take any action such as withholding, that it deems
appropriate to ensure compliance with its obligations under any
applicable tax laws.
7. Instructions; Escrow Fund Transfers.
(a) Bank is authorized to rely and act upon all instructions
given or purported to be given by one or more officers, employees or
agents of Brunswick, Parent or Seller (i) authorized by or in
accordance with a corporate resolution delivered to Bank or (ii)
described as authorized in a certificate delivered to Bank by the
appropriate Secretary or an Assistant Secretary or similar officer
(each such officer, employee or agent or combination of officers,
employees and agents authorized pursuant to clause (ii) or described
pursuant to clause (ii) of this Subsection 7(a) is hereinafter referred
to as an "Authorized Officer"). (The term "instructions" includes,
without limitation, instructions to sell, assign, transfer, deliver,
purchase or receive for the Escrow Fund any and all stocks, bonds and
other securities or to transfer all or any portion of the Escrow Fund.)
Bank may also rely and act upon instructions when bearing or purporting
to bear the signature or facsimile signature of any of the individuals
designated by an Authorized Officer regardless of by whom or by what
means the actual or purported facsimile signature or signatures thereon
may have been affixed thereto if such facsimile signature or signatures
resemble the facsimile specimen or specimens from time to time
furnished to Bank by any of such Officers, Secretary or an Assistant
Secretary or similar officer.) In addition, and subject to subsection
7(b) hereof, Bank may rely and act upon instructions received by
telephone, telex, TWX, facsimile transmission, bank wire or other
teleprocess acceptable to it which Bank believes in good faith to have
been given by an
8
<PAGE>
Authorized Officer or which are transmitted with proper testing or
authentication pursuant to terms and conditions which Bank may specify.
Bank shall incur no liability to Brunswick or Seller or otherwise for
having acted in accordance with instructions on which it is authorized
to rely pursuant to the provisions hereof. Any instructions delivered
to Bank by telephone shall promptly thereafter be confirmed in writing
by an Authorized Officer but Bank shall incur no liability for a
failure to send such confirmation in writing, the failure of any such
written confirmation to conform to the telephone instruction which it
received, the failure of any such written confirmation to be signed or
properly signed, or its failure to produce such confirmation at any
subsequent time. Bank shall incur no liability for refraining from
acting upon any instructions which for any reason it, in good faith, is
unable to verify to its own satisfaction. Unless otherwise expressly
provided, all authorizations and instructions shall continue in full
force and effect until canceled or superseded by subsequent
authorizations or instructions received by Bank's safekeeping account
administrator. Bank's authorization to rely and act upon instructions
pursuant to this paragraph shall be in addition to, and shall not
limit, any other authorization which either Brunswick or Seller may
give to it hereunder.
(b) With respect to written or telephonic instructions or
instructions sent by facsimile transmission to transfer funds from the
Escrow Fund in accordance herewith (such instructions hereinafter
referred to as "Transfer Instructions"), the security procedure agreed
upon for verifying the authenticity of Transfer Instructions is a
callback by Bank to any of the persons designated below, whether or not
any such person has issued such Transfer Instructions. (It is
recommended that the persons designated below not be persons who
generally issue Transfer Instructions; whenever possible, Bank will
endeavor to call someone other than the issuer of the Transfer
Instructions).
(i) With respect to Transfer Instructions given by Brunswick
pursuant to its authority under this Agreement:
Name/Title Telephone No.
---------- -------------
9
<PAGE>
Richard S. O'Brien, (847) 735-4351
Vice President & Treasurer
Peter B. Hamilton, (847) 735-4605
Senior Vice President and
Chief Financial Officer
(ii) With respect to Transfer Instructions given by the
Parent or Seller pursuant to its authority under this
Agreement:
Name/Title Telephone No.
---------- -------------
Howard A. Kosick, (602) 951-0033
Chief Financial Officer
Linda K. Bounds, Vice President
and Corporate Controller (602) 951-0033
Alternatively, at Bank's option, the callback may be made to any person
designated in the certified resolutions or other certificates or documentation
furnished to it by a party in connection with the Escrow Fund as authorized to
issue Transfer Instructions or otherwise transact business with respect to the
Escrow Fund for that party. Brunswick and Seller shall implement any other
authentication method or procedure or security device required by Bank at any
time or from time to time.
8. Resignation or Removal of Bank.
(a) Bank may resign at any time by giving written notice to
Brunswick and Seller. Brunswick and Seller may remove Bank upon joint
written notice to Bank. Such resignation or removal shall take effect
upon delivery of the Escrow Fund to a successor Bank designated in
writing by Brunswick and Seller, and Bank shall thereupon be discharged
from all obligations under this Agreement, and shall have no further
duties or responsibilities in connection herewith. The obligations of
Brunswick and Seller to Bank and the rights of Bank hereunder shall
survive termination of this Agreement or the resignation or removal of
Bank.
(b) In the event that Bank submits a notice of resignation,
its only duty, until a successor Bank shall have been appointed and
shall have accepted such appointment, shall
10
<PAGE>
be to hold, invest and dispose of the Escrow Fund in accordance with
this Agreement, but without regard to any notices, requests,
instructions, demands or the like received by it from the other parties
hereto after such notice shall have been given, unless the same is a
direction that the Escrow Fund be paid or delivered in its entirety.
11
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have caused this Escrow
Agreement to be executed by its duly authorized officer effective as of the day
and year first above written.
BRUNSWICK CORPORATION
By: Michael D. Schmitz
--------------------------------
Name: Michael D. Schmitz
Title: Assistant Secretary
AMERICAN RECREATION COMPANY, INC.
By: Howard Kosick
--------------------------------
Name: Howard Kosick
Title: Chief Financial Officer
BELL SPORTS CORP.
By: Howard Kosick
--------------------------------
Name: Howard Kosick
Title: Chief Financial Officer
The undersigned hereby accepts the terms and provisions of the foregoing
Escrow Agreement and agrees to accept, hold, deal with and dispose of any
property comprising the Escrow Fund in accordance with the foregoing Escrow
Agreement.
THE FIRST NATIONAL BANK OF CHICAGO
By: Richard Manella
--------------------------------
Title: Vice President
12
April 28, 1997
Brunswick Corporation
1 North Field Court
Lake Forest, Illinois 60045-4811
Ladies and Gentlemen:
Reference is made to the Asset Purchase Agreement dated April 1, 1997
(the "Asset Purchase Agreement"), among Brunswick Corporation ("Purchaser"),
American Recreation Company, Inc. ("Seller") and Bell Sports Corp. ("Parent")
pursuant to which Purchaser is acquiring from Seller, among other things, the
Advent brand of bicycle helmets and racks (the "Advent Products") described in
the Asset Purchase Agreement. As an inducement to Purchaser to consummate the
transactions contemplated by the Asset Purchase Agreement, Seller and Parent
hereby agree as follows:
1. For a period commencing on the Closing Date (as defined in
the Asset Purchase Agreement) and ending on the first anniversary of
the Closing Date, Seller shall manufacture and sell to Purchaser Advent
Products in such quantities as Purchaser shall reasonably request from
time to time pursuant to customary purchase orders.
2. Any Advent Products sold by Seller to Purchaser pursuant to
this letter agreement shall be at Seller's standard cost of manufacture
of such Advent Products plus 10%. All Advent Products so sold to
Purchaser shall be shipped F.O.B. Seller's Rantoul, Illinois facility,
at Purchaser's expense. Seller shall provide Purchaser, upon reasonable
request, with substantiation of Seller's standard cost of manufacture.
Seller's standard cost can be adjusted once during the term of this
letter agreement on or after July 1, 1997, subject to 90 days' prior
notice to Purchaser. No price adjustment shall apply to any purchase
order submitted to Seller prior to the date of adjustment. Credit terms
shall be 1%, 10, net 30.
<PAGE>
3. Any Advent Products sold by Seller to Purchaser in
accordance with this letter agreement shall be on such other terms and
conditions, and shall be subject to Seller's warranty that all Advent
Products are free of defects in design and manufacture and such other
warranties, as Seller shall provide its customers generally with
respect to comparable products manufactured and sold by Seller. Seller
shall be responsible for all product liability claims for Advent
Products sold to Purchaser hereunder; provided, however, that Seller
shall not be responsible for any product liability claim arising out of
modifications made by Purchaser to finished Advent Products or arising
out of any failure to warn by Purchaser or advertising by Purchaser.
4. Purchaser may terminate this letter agreement at any time
upon not less than 90 days' prior written notice; provided, however,
that no such termination shall affect Purchaser's obligation to pay for
any Advent Products ordered prior to such termination.
-2-
<PAGE>
If the foregoing accurately sets forth our mutual understanding with
respect to the matters described herein, please execute a copy of this letter
agreement in the space provided below and return a copy to the undersigned.
Very truly yours,
AMERICAN RECREATION COMPANY, INC.
By: Howard Kosick
----------------------------
BELL SPORTS CORP.
By: Howard Kosick
----------------------------
ACKNOWLEDGED AND AGREED:
this 28th day of April, 1997
BRUNSWICK CORPORATION
By: Robert T. McNaney
-------------------------
-3-
WAREHOUSE SERVICES AGREEMENT
----------------------------
This Warehouse Services Agreement (this "Agreement") is made and
entered into on April 28, 1997 by and between American Recreation Company, Inc.,
a Delaware corporation ("Provider"), and Brunswick Corporation, a Delaware
corporation ("Brunswick").
RECITALS
--------
A. Pursuant to that certain Asset Purchase Agreement dated April 1,
1997 (the "Purchase Agreement"), Brunswick is purchasing Provider's business of
designing, developing, distributing, marketing, sourcing and selling bicycles
and bicycle components and bicycle accessories.
B. Brunswick has requested that Provider enter into this Agreement to
provide Brunswick with the (1) use of certain of Provider's Distribution
Facilities (as defined below) and (2) assistance of Provider personnel at such
facilities in managing, documenting, shipping, receiving, packing, repacking,
repairing and safeguarding Brunswick's inventory of bicycles and bicycle
components, service parts and bicycle accessories.
C. This Agreement is a material inducement to Brunswick entering into
the Purchase Agreement and consummating the transactions contemplated therein.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth below, the parties agree as follows:
1. Preamble; Recitals. The preamble and recitals set forth above are
incorporated into and form a part of this Agreement.
2. Definitions. The following terms have the meanings set forth:
<PAGE>
(a) "Distribution Facilities" shall mean Provider's
distribution centers located at 2300 Cordelia Road, Fairfield,
California 94533 ("Fairfield"); 2900 Lakeview, Memphis, Tennessee 38116
("Memphis"); and 57 Grumbacher Road, York, Pennsylvania 17402 ("York").
(b) "Inventory" shall mean Brunswick's inventory of bicycles,
bicycle components, service parts and bicycle accessories (including,
without limitation, raw materials, work in process, supplies and
finished goods inventory). Inventory shall include the inventory of
bicycles, bicycle components, service parts and bicycle accessories
acquired on the date hereof pursuant to the Purchase Agreement and all
additional inventory of bicycles, bicycle components, service parts and
bicycle accessories whenever and however acquired by Brunswick.
(c) "Storage Term" shall mean, with respect to each
Distribution Facility, the period beginning on the date of this
Agreement and ending on (a) September 30, 1997, or (b) such earlier
date as stated upon at least 30 days' prior written notice from
Brunswick to Provider (which date may vary by Distribution Facility).
Any other capitalized term not otherwise defined herein shall have the same
meaning as in the Purchase Agreement.
3. Warehouse Space. During the Storage Term, Provider shall permit
Brunswick to store the Inventory at one or more of the Distribution Facilities,
as designated by Brunswick. Provider shall designate part of each of the
Distribution Facilities as a storage area for the Inventory. Such designated
storage areas shall be sufficient to satisfy Brunswick's storage requirements
for the Inventory; however, not to exceed approximately (a) 125,000 square feet
of storage space at York, (b) 70,000 square feet of storage space at Memphis,
and (c) 80,000 square feet of storage space at Fairfield.
Provider acknowledges possession, on behalf of and as agent of
Brunswick, of the Inventory listed on Schedule 3.10 of the Purchase Agreement,
adjusted as of the date hereof in accordance with Purchaser's physical
inventory. Brunswick shall have the right to cause to be deposited with Provider
additional Inventory to be
-2-
<PAGE>
stored and serviced in accordance with this Agreement during the Storage Term.
Provider shall keep all Inventory in a neat and orderly condition, dry,
protected from the elements and at a temperature set to maintain the Inventory
in good condition.
Brunswick shall cause the Inventory to be removed from the Distribution
Facilities no later than the last day of the Storage Term.
4. Reports. During the Storage Term, Provider shall keep accurate and
complete perpetual records of the Inventory. Such records shall indicate (i) the
quantity of the Inventory (by sku), (ii) the date of delivery of the Inventory,
(iii) the date of shipment of the Inventory from the applicable Distribution
Facility, (iv) all damaged goods, (v) all inventory balances and any inventory
shortages, and (vi) such other matters as are reasonably requested by Brunswick
to verify Inventory, quantity, quality or disposition. Provider shall promptly
report to Brunswick any Inventory delivered to Provider that is of a defective
or deficient quality or quantity.
5. No Lien. Provider shall execute such standard financing statement
forms (UCC-1) as Brunswick may reasonably request to be filed with the
appropriate state and county officials evidencing Brunswick's ownership of the
Inventories stored at the Distribution Facilities. Provider waives any lien that
it may now or subsequently have against the Inventory (whether now existing or
subsequently acquired by Brunswick), whether arising by custom or common or
statutory law or otherwise, including any lien arising by reason of Provider's
performance of this Agreement. Provider shall execute, deliver and file all
public notices reasonably required by Brunswick to evidence Brunswick's
ownership of the Inventory. Provider shall use commercially reasonable best
efforts to cause each of its secured creditors and its lessors' mortgagees to
deliver acknowledgements and waivers in form satisfactory to Brunswick
acknowledging Brunswick's ownership of the Inventory, free of any lien. Provider
shall take all other actions reasonably requested by Brunswick to ensure that no
lien attaches to the Inventory at the Distribution Facilities. Brunswick shall
pay all filing fees and any document processing fees relating to any filing to
be made, or waiver to be obtained, hereunder.
6. Stocking Inventories. Provider shall stock all Inventory received
for storage consistent with sound commercial practice.
-3-
<PAGE>
7. Shipment of Inventories. Provider shall not permit shipment of any
Inventory except in strict compliance with the terms of this Agreement. Upon
Brunswick's written instructions (and only upon such instructions), Provider
shall pick Inventory from storage and pack and ship such Inventory in accordance
with such instructions and sound commercial practices. Time is of the essence in
these shipments and Provider shall make all reasonable efforts to meet shipment
schedules. Provider shall distribute the inventory consistent with its past
practices. Provider shall perform these services consistent with the performance
expected by customers of the Business prior to the date of this Agreement.
Provider shall be solely responsible for any mistakes made in shipping any
Inventory except to the extent that mistakes result from following the specific
instructions of Brunswick regarding the manner of shipment of Inventory.
Provider shall promptly remit to Brunswick any payment received for any
Inventory, and such payments shall not be subject to any off-set by Provider
(other than offsets for amounts that are due from Brunswick under this Agreement
and not in dispute).
8. Reimbursement for Materials. Brunswick shall promptly reimburse
Provider for the cost of all packaging materials, forms and supplies necessary
for Provider to carry out its obligations hereunder upon receipt of appropriate
documentation therefor.
9. Fees. Brunswick shall pay Provider an amount equal to Brunswick's
allocable share of Provider's monthly costs in providing storage and services at
each Distribution Facility. Provider's "monthly cost" shall mean salaries,
labor, fringes, rent, depreciation, utilities, insurance and related overhead
costs (but excluding, in any case, pre-pricing costs, child seat assembly costs
and costs of supplies) recorded monthly as a part of the Provider's monthly
internal warehouse department financial report, an example of which is attached
as Schedule 1. "Brunswick's allocable share" shall be calculated by comparing
the sales value of Brunswick Inventory shipped from the Distribution Facility in
question to the total sales value shipped from such facility. In no event shall
Brunswick's allocable share (a) with respect to the Distribution Facility at
York, be less than 30% or exceed 40%; (b) with respect to the Distribution
Facility at Fairfield, be less than 30% or exceed 40%; and (c) with respect to
the Distribution Facility at Memphis, be less than 20% and shall not exceed 40%.
If Brunswick's use of a Distribution Facility ends before calendar
-4-
<PAGE>
month end, Brunswick's allocable share shall be appropriately prorated.
10. Agreements and Warranties.
10.1 Customs. Provider shall make all necessary filings and
payments in connection with the export of any Inventories. Brunswick
shall promptly reimburse Provider for these payments.
10.2 Warranties.
(a) Provider shall comply with all Laws in connection
with the receiving, safeguarding, storing, handling and
shipping of Inventory and otherwise carrying out its
obligations under this Agreement.
(b) Provider shall not move the Inventory to another
location without prior written instructions from Brunswick.
(c) Provider shall hire, employ and supervise a
sufficient number of employees to accurately and efficiently
carry out its obligations in accordance with the terms of this
Agreement. Except as otherwise expressly contemplated herein,
Provider shall pay and be solely responsible for the payment
of all costs and expenses related to the operation of the
Distribution Facilities and storage of the Inventory,
including, without limitation, all salary, benefits, workers
compensation insurance and other expenses of its employees.
Provider shall maintain insurance covering the full
replacement value of the Inventory (subject to a $25,000
deductible), the Distribution Facilities and Provider's
employees, including, without limitation, general liability
and workers compensation insurance, in such minimum amounts as
are reasonable under the circumstances or as required by law.
Provider shall deliver certificates of insurance evidencing
such coverage and, with respect to coverage for casualty or
damage to or loss or theft of the Inventory, showing Brunswick
as an additional named insured thereon.
-5-
<PAGE>
11. Access. During the term of this Agreement, Provider shall permit
such employees and agents of Brunswick as Brunswick desires to have access at
reasonable times to (a) the Distribution Facilities for the purpose of
inspecting the Inventory, and (b) Provider's records and files (wherever
located) for purposes of verifying receipt, disposition and condition of the
Inventory and compliance with this Agreement. Until the end of the Storage Term,
Provider shall permit Brunswick and its agents access at reasonable times to the
Premises for purposes of enabling Brunswick to take possession of and remove the
inventory from the Distribution Facilities, at no additional charge to
Brunswick. Provider shall take all actions reasonably requested by Brunswick to
assist Brunswick, at the expense of Brunswick, in any physical count required by
Brunswick for the Inventory.
12. No Termination. Provider's storage and service obligations
hereunder are unconditional and shall not be affected by Brunswick's failure to
perform any obligation owed to Provider (whether hereunder or otherwise) or any
claim or action Provider may have against Brunswick, other than a failure by
Brunswick to pay any amount due under this Agreement and not in dispute. The
Storage Term shall not be shortened or terminated before the date contemplated
by Section 2(a) above without Brunswick's written consent, notwithstanding any
provision of law to the contrary, except that Storage Term with respect to any
particular Distribution Facility may be shortened, on written notice to
Brunswick from Provider, due to Brunswick's failure to pay any amount due under
this Agreement that is not in dispute with respect to such Distribution
Facility.
13. Indemnification by Provider. Provider agrees to indemnify, defend
and hold harmless Brunswick, its affiliates and successors and assigns against
any loss, liability, damage (including any damage incurred by Brunswick),
expense, cost, fee, loss in value or other matter (whether or not covered by
insurance) arising from or related to (a) any failure by Provider or its
personnel to comply with the terms of this Agreement; (b) any damage to, or loss
or theft of, the Inventory while located at any of the Distribution Facilities,
whatever the cause, including causes beyond the control of Provider (Provider
acknowledges that liability may be imposed under this Section 13 without any
fault on the part of Provider or its personnel); (c) any personal injury,
including, without limitation, death to any of Provider's personnel; or (d) the
physical condition of or operations at the Distribution Facilities.
Notwithstanding
-6-
<PAGE>
anything to the contrary contained herein or in the Purchase Agreement, Provider
shall not be responsible for, and shall not be required to indemnify, defend or
hold harmless Brunswick, its affiliates or successors and assigns against any
loss, liability, damage (including any damage incurred by Brunswick), expense,
cost, fee, loss in value or other matter (whether or not covered by insurance)
to the extent that any of the foregoing results from (i) any actions taken or
not taken on the specific instructions of Brunswick regarding the manner of
shipping, receiving, packing or storing the Inventory, or (ii) any acts of
Brunswick's employees taken at any Distribution Facility.
14. Miscellaneous.
14.1 Independent Contractor. The relationship that Provider
holds as to Brunswick is that of an independent contractor. This
Agreement is not intended to create and does not create between
Brunswick and Provider the relationship of principal and agent, joint
venturers, partners or any other similar relationship, the existence of
which is hereby expressly denied. Neither party shall be liable to any
third party in any way for any engagement, obligation, commitment,
contract or representation of the other party.
14.2 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns; provided, that no assignment of any rights or
obligations by law or otherwise shall be made without the consent of
the other party hereto except that Brunswick may assign its rights
hereunder to a subsidiary or an affiliate, but no such assignment by
Brunswick shall relieve Brunswick of its obligations hereunder.
14.3 Severability. Each of the provisions contained in this
Agreement shall be severable, and the unenforceability of one shall not
affect the enforceability of any others or of the remainder of this
Agreement.
14.4 Waiver. The failure of any party to enforce any condition
or part of this Agreement at any time shall not be construed as a
waiver of that condition or part, nor shall it forfeit any rights to
future enforcement thereof.
-7-
<PAGE>
14.5 Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the laws of Illinois
without regard to the conflicts of laws provisions thereof.
14.6 Headings. The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not be
deemed to constitute a part hereof.
14.7 Counterparts. More than one counterpart of this Agreement
may be executed by the parties hereto, and each fully executed
counterpart shall be deemed an original.
14.8 Further Assurances. Brunswick and Provider shall, at the
request of another party, execute and deliver to such other party all
such further instruments, assignments, assurances and other documents
as such other party may reasonably request in connection with the
carrying out of this Agreement and the transactions contemplated
hereby.
14.9 Notices. All communications, notices and consents
provided for herein shall be in writing and be deemed given (a) on
delivery if given in person, (b) on the date of transmission if sent by
telex, facsimile or other means of wire transmission (receipt
confirmed), (c) one (1) day after being delivered to a nationally
recognized overnight courier or (d) three (3) business days after being
deposited in the United States mails, with proper postage and
documentation, for first-class registered or certified mail, prepaid.
-8-
<PAGE>
Notices shall be addressed as follows:
If to Brunswick, to:
Brunswick Corporation
One North Field Court
Lake Forest, Illinois 60045-4811
Attention: General Counsel
Facsimile No.: (708) 735-4050
with a copy to:
Brunswick Outdoor Recreation Group
6101 E. Apache
Tulsa, Oklahoma 74115
Attention: President
Facsimile No.: 918-834-8575
If to Provider, to:
American Recreation Company, Inc.
c/o Bell Sports Corp.
15170 N. Hayden Road
Suite 1
Scottsdale, Arizona 85260
Attn: Chief Financial Officer
Facsimile Number: (602) 951-0511
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attn: Larry E. Barden
Facsimile: (312) 853-7036
provided, that if any party shall have designated a different address by notice
to the others, then to the last address so designated.
14.10 Construction. The language in all parts of this Agreement shall
be construed, in all cases, according to its fair meaning. The parties
acknowledge that each party and its counsel have reviewed and revised this
Agreement and that any rule of
-9-
<PAGE>
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement.
14.11 Amendments. This Agreement may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by all of the
parties hereto.
14.12 Obligations. Bell Sports Corp. shall be jointly and severally
obligated with respect to the representations, warranties, covenants and
indemnities of Provider hereunder.
* * * * * * *
-10-
<PAGE>
IN WITNESS WHEREOF, Provider and Brunswick have each caused this
Agreement to be entered into and signed, effective and delivered as of the date
and year first above written.
BELL SPORTS CORP.
By: Howard Kosick
------------------------------
Name: Howard Kosick
-------------------------
Title: Chief Financial Officer
------------------------
BRUNSWICK CORPORATION
By: Michael D. Schmitz
------------------------------
Name: Michael D. Schmitz
-------------------------
Title: Assistant Secretary
------------------------
AMERICAN RECREATION COMPANY, INC.
By: Howard Kosick
------------------------------
Name: Howard Kosick
-------------------------
Title: Chief Financial Officer
------------------------
-11-
STOCK OPTION AGREEMENT
----------------------
This Stock Option Agreement (this "Option Agreement"), dated as of
April 28, 1997, is made by and between Brunswick Corporation, a Delaware
corporation ("Brunswick"), and Bell Sports Corp., a Delaware corporation (the
"Company").
R E C I T A L S
---------------
A. Brunswick and the Company are parties to that certain Asset Purchase
Agreement dated April 1, 1997 (the "Purchase Agreement") pursuant to which
Brunswick is purchasing certain assets of the Company on the date hereof.
B. In consideration of Brunswick entering into the Purchase Agreement,
the Company wishes to grant Brunswick the option to purchase certain of the
Company's capital stock, as set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and the mutual
covenants set forth herein, the parties agree as follows:
A G R E E M E N T
-----------------
1. Preamble; Recitals. The preamble and recitals set forth above are
incorporated into and form a part of this Agreement.
2. Option to Purchase Shares. The Company hereby irrevocably grants to
Brunswick the option, exercisable in accordance with the terms hereof, to
purchase from the Company 600,000 shares of the Company's common stock, $.01 par
value ("Common Stock"), at a price per share equal to $7.50 (the "Option"). The
number of shares subject to this Option, and the per share purchase price, are
subject to adjustment pursuant to Section 5 below. Such Option may be exercised
in whole or in part by Brunswick by written notice to the Company on or prior to
April 28, 2000 (the "Expiration Date"). The purchase and sale of shares pursuant
hereto shall be consummated on the third business day following the date of
Brunswick's delivery of its exercise notice to the Company. The shares subject
to purchase by Brunswick hereunder shall be referred to as the "Option Shares".
<PAGE>
The Option Shares shall bear a restrictive legend reflecting the fact that such
shares have not been registered under the Securities Act of 1933 (the "Act").
Payment for the Option Shares shall be made by Brunswick to the Company by wire
transfer of next-day funds. One or more stock certificates (as directed by
Brunswick) evidencing the Option Shares shall be delivered to Brunswick within
three business days after payment by Brunswick. The Option Shares, however,
shall be deemed issued to Brunswick on the date Brunswick makes payment
therefor.
3. Election by the Company.
(a) At the Company's option after receipt of Brunswick's
written notice pursuant to Section 2 above, in lieu of issuing the
Option Shares pursuant to Section 2 above, it may pay Brunswick, in
cash, the Market Spread Amount. The "Market Spread Amount" shall be the
amount by which the average of the high and low sales prices of the
shares of Common Stock, determined by reference to the price listed on
NASDAQ (or such other listing organization upon which the common stock
is traded) on the most recent trading day prior to the date Brunswick
exercises its option, exceeds the per share purchase price then in
effect. If the Company elects to pay the Market Spread Amount, it shall
make such payment by wire transfer of immediately available funds to an
account designated by Brunswick, such payment to be made no later than
three days after Brunswick's delivery of its exercise notice.
(b) At any time that, and provided that, the current per share
market price of the Company's common stock equals or exceeds $14.50
(subject to adjustment pursuant to Section 5 below), the Company may,
at its election and without Brunswick electing to exercise its Option
pursuant to Section 2 above, upon written notice to Brunswick, either
(i) issue to Brunswick the Option Shares in accordance with this
Agreement and require payment therefor from Brunswick in accordance
with this Agreement, or (ii) pay to Brunswick the applicable Market
Spread Amount without any further obligation to issue the Option
Shares.
4. Option Price. The Company acknowledges receipt from Brunswick of
$2,500,000 as full payment for the Option and other rights granted hereunder,
such amount to be allocated between the Option and goodwill and other
intangibles, as set forth on Schedule 4.
-2-
<PAGE>
5. Adjustments.
(a) If the Company shall, at any time, subdivide the
outstanding shares of common stock into a greater number of shares, the
per share purchase price shall be proportionally reduced and the number
of shares covered by the Option shall be proportionally increased.
Conversely, if the outstanding shares of common stock shall be combined
into a smaller number of shares, the per share purchase price shall be
proportionally increased and the number of shares covered by this
Option shall be proportionally reduced.
(b) In the event of any reorganization, reclassification,
consolidation, merger, or sale of all or substantially all of the
assets of the Company (a "Sale Event"), Brunswick shall subsequently
have the right to exercise the Option prior to the occurrence of any
Sale Event or to purchase and receive the securities or assets that
Brunswick would have received or been entitled to receive had Brunswick
been a holder of an aggregate number of outstanding shares subject to
this Option at the effective time of the reorganization,
reclassification, consolidation, merger, or sale. This right shall be
on the basis and on the terms and conditions specified in this Option.
(c) If the Company shall declare or effect a stock dividend or
distribution on its common stock, or make a distribution to holders of
its common stock of any security convertible into its common stock or
any other asset, or take any other action that affects its capital
structure as it relates to its common stock, an appropriate and
equitable adjustment shall be made to the per share purchase price and
number of shares subject to this Option to account for, and give
Brunswick the benefit of, such dividend, distribution or other action.
Notwithstanding the foregoing, exercise of conversion privileges
existing as of the date hereof under the Company's 4 1/4% Convertible
Subordinated Debentures due 2000 shall not require adjustment to the
per share purchase price or number of shares.
6. Ability to Effect Issuance. The Company covenants and agrees that
all shares that may be issued on the exercise of the
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<PAGE>
rights represented by this option shall, on issuance, be fully paid and
nonassessable and free from all (other than any income tax liability of
Brunswick) liens, and charges related to such issuance. The Company further
covenants and agrees that during the period within which the rights represented
by this option may be exercised, the Company shall, at all times, have
authorized and reserved for issuance on the exercise of this option a sufficient
number of the shares subject to this Option to provide for its exercise. All
corporate action on the part of the Company necessary for the authorization,
execution, delivery and performance by the Company of its obligations under this
Agreement and for the authorization and issuance of the Option and the Option
Shares has been taken, and this Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against it in accordance with its
terms.
7. Securities Matters.
(a) The Company represents and warrants to Brunswick that the
Common Stock (including, without limitation, the Option Shares)
conforms to all statements relating thereto (including, without
limitation, statements relating to dividend, voting, conversion and
exchange features) contained in the Commission Documents (as defined
below). Except as set forth in the Commission Documents, there are no
outstanding (i) securities or obligations of the Company convertible
into or exchangeable for any shares of capital stock of the Company or
(ii) warrants, rights or options to subscribe for or purchase from the
Company any such capital stock or any such convertible or exchangeable
securities or obligations.
(b) Since December 31, 1996, except as otherwise disclosed in
filings with the Commission, (i) there has been no material adverse
change in the condition, financial or otherwise, or the earnings or
business affairs of the Company, (ii) there have been no filings by the
Company of a current report on Form 8-K or transactions entered into by
the Company which required the filing of a current report on Form 8-K,
(iii) there has been no dividend or distribution of any kind declared,
paid or made by the Company on its capital stock, and (iv) there has
not been any change in the capital stock of the Company, or any
material change in the long-term debt of the Company. There are no
contracts or
-4-
<PAGE>
documents of the Company which are required to be described in the
Commission Documents or filed as exhibits thereto which have not been
so described or so filed or incorporated by reference.
(c) Each report, schedule, registration statement, prospectus,
and proxy statement and other reports filed by the Company with the
Commission since April 1, 1992 (the "Commission Documents") are all the
documents (other than preliminary material) that the Company was
required to file with the Commission since such date. As of their
respective dates, each of the Commission Documents complied in all
material respects with the requirements of the Act and the Securities
Exchange Act of 1934, as the case may be, and the rules and regulations
of the Securities and Exchange Commission (the "Commission").
8. Resale of Option Shares. Within 20 business days after the date
Brunswick delivers its notice of the exercise of its Option or the Company
delivers to Brunswick the notice contemplated by Section 3(b) above, the
Company, (at a cost shared equally between the Company and Brunswick), shall
prepare and file with the Commission, on not more than one occasion, a
registration statement on Form S-3, or such other form as is required or
appropriate under the circumstances, covering the resale on a continuous or
delayed basis of the Option Shares (the "Registration Statement").
Notwithstanding the preceding sentence, the Company shall be entitled to
postpone for up to 120 days the filing of the Registration Statement if the
Board of Directors of the Company determines, in its good faith reasonable
judgment, that the filing of the Registration Statement and the sale of the
Option Shares contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition, disposition or
reorganization involving the Company or any of its subsidiaries and the Company
promptly gives Brunswick notice of such determination. The Company shall use its
best efforts, at the joint expense of the Company and Brunswick, to have the
Registration Statement declared effective by the Commission. The Company shall
take such steps as may be required to cause the Registration Statement to become
effective at the earliest practicable time. Additionally, the Company shall, at
the joint expense of the Company and Brunswick, from time to time after the
Registration Statement is declared
-5-
<PAGE>
effective until the Expiration Date (as defined below), (a) prepare and file
with the Commission such other amendments and supplements to the Registration
Statement and Prospectus, and take such other actions, as may be necessary to
keep the Registration Statement effective and to comply with the Act with
respect to the sale or other disposition by Brunswick of all or any of the
Option Shares whenever Brunswick shall desire to sell or dispose of the same;
(b) furnish to Brunswick such number of copies of the Prospectus and such other
documents as Brunswick may reasonably request to facilitate the sale or other
disposition by Brunswick of all or any of the Option Shares; (c) use every
reasonable effort to qualify the Option Shares under the blue sky laws and other
laws, if any, as Brunswick may request to enable Brunswick to consummate the
sale or other disposition of such shares in such jurisdictions; and (d)
immediately inform Brunswick in writing of the happening of any event as a
result of which the Prospectus includes an untrue statement of material fact or
omits to state a material fact required to be stated therein to make the
statements in the Prospectus not misleading. The "Expiration Date" shall mean
the first to occur of (i) the first anniversary of the date the Registration
Statement is declared effective by the Commission or (ii) the date when all the
Option Shares have been resold. The prospectus to be set forth in the
Registration Statement and relating to the Option Shares is referred to herein
as the "Prospectus". Nothing in this Section 8 shall require the Company to
qualify to do business in any jurisdiction where it is not currently qualified.
9. Transferability. This Option and the other rights granted hereunder
are fully transferable by Brunswick. The Company agrees that it will register in
its transfer books any transfer of this Option by Brunswick and that such
transferee shall have all the rights granted to Brunswick hereunder.
10. General.
(a) Amendment. This Option Agreement may be amended, modified
or supplemented only by written agreement of the parties.
(b) Notices. Any notice, request, instruction or other
document to be given hereunder by a party hereto shall be in writing
and shall be deemed to have been given, (a)
-6-
<PAGE>
when received if given in person or by courier or a courier service,
(b) on the date of transmission if sent by telex, facsimile or other
wire transmission or (c) three (3) Business Days after being deposited
in the U.S. mail, certified or registered mail, postage prepaid:
(a) If to the Company, addressed as follows:
Bell Sports Corp.
15170 N. Hayden Road, Suite 1
Scottsdale, Arizona 85260
Attention: Chief Financial Officer
Facsimile No.: (602) 951-0511
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden, Esq.
Facsimile No.: (312) 853-7036
(b) If to Brunswick, addressed as follows:
Brunswick Corporation
One North Field Court
Lake Forest, Illinois 60045-4811
Attention: General Counsel
Facsimile No.: (847) 735-4050
(c) Counterparts. This Option Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(d) Applicable Law. This Option Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the
State of Delaware without giving effect to the principles of conflicts
of laws thereof.
(e) Construction. Each party and its counsel have reviewed
this Agreement and this Agreement shall be construed fairly. No rule of
construction shall apply construing this Agreement against the drafting
party.
-7-
<PAGE>
(f) Severability. If any provision of this Option Agreement
shall be held invalid, illegal or unenforceable, the validity, legality
and enforceability of the other provisions hereof shall not be affected
thereby, and there shall be deemed substituted for the provision at
issue a valid, legal and enforceable provision as similar as possible
to the provision at issue.
(g) Entire Understanding. This Option Agreement sets forth the
entire agreement and understanding of the parties hereto and supersedes
any and all prior agreements, arrangements and understandings among the
parties.
(h) Investment. Brunswick represents that (i) Brunswick is
acquiring the Option, and upon exercise thereof will acquire the shares
of Common Stock subject thereto, for investment for its own account and
not with a view to participating directly or indirectly in any resale,
distribution or underwriting thereof in violation of the Act or
applicable state securities laws, (ii) Brunswick will not offer or sell
the Option or the shares of Common Stock subject thereto in violation
of the Securities Act or applicable state securities laws, and (iii)
Brunswick acknowledges that its acquisition of the Option has not been,
and upon exercise thereof its acquisition of the shares of Common Stock
subject thereto initially will not be, registered under the Securities
Act by reason of an exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide
nature of the investment intent expressed herein.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Option Agreement on the date first set forth above.
BRUNSWICK CORPORATION BELL SPORTS CORP.
By: Michael D. Schmitz By: Howard Kosick
------------------------- ---------------------------
Name: Michael D. Schmitz Name: Howard Kosick
-------------------- ----------------------
Title: Assistant Secretary Title: Chief Financial Officer
-------------------- ------------------------
================================================================================
U.S. $60,000,000
AMENDED AND RESTATED MULTICURRENCY CREDIT AGREEMENT
DATED AS OF
APRIL 28, 1997
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>
PAGE
<S> <C> <C>
SECTION 1. THE REVOLVING CREDIT..................................................................................1
Section 1.1. The Loan Commitment...............................................................................1
Section 1.2. Letters of Credit.................................................................................2
Section 1.3. Applicable Interest Rates.........................................................................4
Section 1.4. Minimum Borrowing Amount for Committed Loans......................................................7
Section 1.5. Manner of Borrowing Committed Loans and Designating Interest Rates Applicable to Committed
Loans.............................................................................................8
Section 1.6. Default Rate on Committed Loans..................................................................10
Section 1.7. Notes for Committed Loans........................................................................11
Section 1.8. Domestic Current Asset Collateral................................................................11
SECTION 2. THE SWING LINE.......................................................................................12
Section 2.1. Swing Loans......................................................................................12
Section 2.2. Interest on Swing Loans..........................................................................13
Section 2.3. Requests for Swing Loans.........................................................................13
Section 2.4. Refunding Loans..................................................................................13
Section 2.5. Participations...................................................................................14
SECTION 3. GENERAL PROVISIONS APPLICABLE TO LOANS; REDUCTION OF COMMITMENTS.....................................14
Section 3.1. Interest Periods.................................................................................14
Section 3.2. Maturity of Loans................................................................................15
Section 3.3. Prepayments......................................................................................15
Section 3.4. Funding Indemnity for Fixed Rate Loans...........................................................17
Section 3.5. Commitment Terminations..........................................................................18
Section 3.6. Canadian Loan Participations.....................................................................19
SECTION 4. FEES AND EXTENSIONS..................................................................................19
Section 4.1. Fees.............................................................................................19
SECTION 5. PLACE AND APPLICATION OF PAYMENTS....................................................................21
Section 5.1. Place and Application of Payments................................................................21
SECTION 6. DEFINITIONS; INTERPRETATION..........................................................................22
Section 6.1. Definitions......................................................................................22
Section 6.2. Interpretation...................................................................................34
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 7. REPRESENTATIONS AND WARRANTIES.......................................................................35
Section 7.1. Corporate Organization and Authority.............................................................35
Section 7.2. Subsidiaries.....................................................................................35
Section 7.3. Corporate Authority and Validity of Obligations..................................................36
Section 7.4. Financial Statements.............................................................................36
Section 7.5. No Litigation; No Labor Controversies............................................................36
Section 7.6. Taxes............................................................................................37
Section 7.7. Approvals........................................................................................37
Section 7.8. ERISA............................................................................................37
Section 7.9. Government Regulation............................................................................37
Section 7.10. Margin Stock.....................................................................................37
Section 7.11. Licenses and Authorizations; Compliance with Environmental and Health Laws.......................38
Section 7.12. Ownership of Property; Liens.....................................................................38
Section 7.13. No Burdensome Restrictions; Compliance with Agreements...........................................38
Section 7.14. Full Disclosure..................................................................................39
Section 7.15. No Other Domestic Bank Debt At Closing...........................................................39
SECTION 8. CONDITIONS PRECEDENT.................................................................................39
Section 8.1. Initial Credit Event.............................................................................39
Section 8.2. All Credit Events................................................................................41
SECTION 9. COVENANTS............................................................................................42
Section 9.1. Corporate Existence; Subsidiaries................................................................42
Section 9.2. Maintenance......................................................................................42
Section 9.3. Taxes............................................................................................43
Section 9.4. ERISA............................................................................................43
Section 9.5. Insurance........................................................................................43
Section 9.6. Financial Reports and Other Information..........................................................43
Section 9.7. Bank Inspection Rights...........................................................................46
Section 9.8. Conduct of Business..............................................................................46
Section 9.9. Liens............................................................................................46
Section 9.10. Use of Proceeds; Regulation U....................................................................48
Section 9.11. Sales and Leasebacks.............................................................................48
Section 9.12. Mergers, Consolidations and Sales of Assets......................................................48
Section 9.13. Use of Property and Facilities; Environmental and Health and Safety Laws.........................50
Section 9.14. Investments, Acquisitions, Loans, Advances and Guaranties........................................50
Section 9.15. Consolidated Stockholders Equity.................................................................53
Section 9.16. Funded Debt Ratio................................................................................53
Section 9.17. Interest Coverage Ratio..........................................................................53
Section 9.18. Capital Expenditures.............................................................................54
Section 9.19. Dividends and Certain Other Restricted Payments..................................................54
</TABLE>
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<S> <C> <C>
Section 9.20. North American Company...........................................................................55
Section 9.21. Transactions with Affiliates.....................................................................55
Section 9.22. Compliance with Laws.............................................................................55
Section 9.23. No Changes in Fiscal Year........................................................................56
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.......................................................................56
Section 10.1. Events of Default................................................................................56
Section 10.2. Non-Bankruptcy Defaults..........................................................................58
Section 10.3. Bankruptcy Defaults..............................................................................58
Section 10.4. Collateral for Undrawn Letters of Credit.........................................................58
Section 10.5. Notice of Default................................................................................59
Section 10.6. Expenses.........................................................................................59
Section 10.7. Alternative Currency Loan........................................................................59
SECTION 11. CHANGE IN CIRCUMSTANCES..............................................................................60
Section 11.1. Change of Law....................................................................................60
Section 11.2. Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR....................60
Section 11.3. Increased Cost and Reduced Return................................................................60
Section 11.4. Lending Offices..................................................................................62
Section 11.5. Discretion of Bank as to Manner of Funding.......................................................62
SECTION 12. THE AGENT............................................................................................63
Section 12.1. Appointment and Authorization of Agent...........................................................63
Section 12.2. Agent and its Affiliates.........................................................................63
Section 12.3. Action by Agent..................................................................................63
Section 12.4. Consultation with Experts........................................................................64
Section 12.5. Liability of Agent; Credit Decision..............................................................64
Section 12.6. Indemnity........................................................................................64
Section 12.7. Resignation of Agent and Successor Agent.........................................................65
SECTION 13. THE GUARANTEES.......................................................................................65
Section 13.1. The Guarantees...................................................................................65
Section 13.2. Guarantee Unconditional..........................................................................65
Section 13.3. Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances......................66
Section 13.4. Waivers..........................................................................................66
Section 13.5. Limit on Recovery................................................................................67
Section 13.6. Stay of Acceleration.............................................................................67
Section 13.7. Benefit to Guarantors............................................................................67
</TABLE>
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<S> <C> <C>
SECTION 14. MISCELLANEOUS........................................................................................67
Section 14.1. Withholding Taxes................................................................................67
Section 14.2. No Waiver of Rights..............................................................................69
Section 14.3. Non-Business Day.................................................................................70
Section 14.4. Documentary Taxes................................................................................70
Section 14.5. Survival of Representations......................................................................70
Section 14.6. Survival of Indemnities..........................................................................70
Section 14.7. Sharing of Set-Off...............................................................................70
Section 14.8. Notices..........................................................................................71
Section 14.9. Counterparts.....................................................................................71
Section 14.10. Successors and Assigns...........................................................................71
Section 14.11. Participants and Note Assignees..................................................................71
Section 14.12. Assignment Agreements............................................................................72
Section 14.13. Amendments.......................................................................................74
Section 14.14. Headings.........................................................................................74
Section 14.15. Legal Fees, Other Costs and Indemnification......................................................74
Section 14.16. Set Off..........................................................................................75
Section 14.17. Currency.........................................................................................75
Section 14.18. Entire Agreement.................................................................................77
Section 14.19. Governing Law....................................................................................77
Section 14.20. Submission to Jurisdiction; Waiver of Jury Trial.................................................77
Section 14.21. Confidentiality..................................................................................77
Signature.......................................................................................................................78
EXHIBITS
A - Form of Notice of Payment Request
B-1 - Form of Revolving Credit Note
B-2 - Revolving Credit Note to Harris Trust and Savings Bank
B-3 - Revolving Credit Note to LaSalle National Bank
C-1 - Form of Swingline Note
C-2 - Swingline Note to Harris Trust and Savings Bank
D - Form of Compliance Certificate
E - Subsidiary Guarantee Agreement
F-1 - Opinion of Counsel
F-2 - Opinion of Counsel
G - Assignment Agreement
</TABLE>
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
SCHEDULE 7.11 Environmental Matters
SCHEDULE 7.12 Real Property
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SCHEDULE 9.9 Existing Liens
SCHEDULE 9.21 Contracts with Affiliates
<PAGE>
AMENDED AND RESTATED MULTICURRENCY CREDIT AGREEMENT
To each of the Banks signatory hereto
Ladies and Gentlemen:
The undersigned, Bell Sports Corp., a Delaware corporation (the
"Borrower") and each Guarantor party to the Original Credit Agreement (as herein
defined), each refers to the Multicurrency Credit Agreement dated as of February
15, 1996, as amended, currently in effect among the Borrower, the Guarantors
party thereto, the Banks party thereto and Harris Trust and Savings Bank, as
Agent and a Bank (the "Original Credit Agreement"). The Borrower and each
Guarantor each hereby requests that certain amendments be made to the Original
Credit Agreement and for the sake of clarity and convenience that the Original
Credit Agreement be restated in its entirety as so amended. Each of you is
hereinafter referred to 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 and any successor pursuant to Section 12.7, is
hereinafter referred to as the "Agent". This Amended and Restated Multicurrency
Credit Agreement (the "Agreement") amends and replaces in its entirety the
Original Credit Agreement, and from the date hereof all references made to the
Original Credit Agreement in any Credit Document or in any other document shall,
without more, be deemed to refer to this Agreement. This Agreement supersedes
all provisions of the Original Credit Agreement as of such date, upon the
execution of this Agreement by each of the parties hereto and the fulfillment of
the conditions precedent contained in Section 8.1 hereof. All "Obligations"
outstanding under the Original Credit Agreement on the date hereof shall not be
extinguished, but shall be payable in accordance with, and otherwise be governed
by, the terms of this Amended and Restated Multicurrency Credit Agreement
applicable to Obligations of such type.
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
lesser of (x) the Revolving Credit Commitments in effect at such time or (y) the
Borrowing Base as then determined and computed; and the sum of the aggregate
Original Dollar Amount of
<PAGE>
Committed Loans denominated in the Alternative Currency shall not exceed
$30,000,000. 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.
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 (x) the lesser of (i)
the Revolving Credit Commitments in effect at such time or (ii) the Borrowing
Base as then determined and computed and (y) the 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 and
except as provided in Section 1.8 hereof, 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
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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 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 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
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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.
(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
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<PAGE>
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 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
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<PAGE>
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
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 1.50% per annum until August 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 4.00 to 1.0 1.00%
2. Greater than 3.00 to 1.0,
but less than or equal to 4.00 to 1.0 1.25%
3. Less than or equal to 3.00 to 1.0 1.50%
(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
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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 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
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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 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 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
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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. (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
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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 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
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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-1 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." The Borrower acknowledges and agrees that the Revolving Credit Notes
dated February 15, 1996 issued to each of Harris Trust and Savings Bank and
LaSalle National Bank, copies of which are attached hereto as Exhibits B-2 and
B-3 respectively, under the Original Credit Agreement shall constitute the
Revolving Credit Notes for purposes of this Agreement.
(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 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 1.8. Domestic Current Asset Collateral. (a) The Loans and other
Obligations shall be secured by valid and perfected first Liens on all inventory
of the Borrower and each Subsidiary incorporated in the United States which is a
Material Subsidiary (a "Material U.S. Subsidiary") and all accounts receivable
of the Borrower and its Material U.S. Subsidiaries and all proceeds of the
foregoing, pursuant to (i) in the case of the Borrower, the Security Agreement
from the Borrower to the Agent dated as of August 9, 1996 (the "Borrower
Security Agreement"), (ii) in the case of Bell Sports, Inc. and American
Recreation Company, Inc., the Security Agreements, one from each such Material
U.S. Subsidiary to the Agent dated as of August 9, 1996 (each an "Existing
Subsidiary Security Agreement") and (iii) in the case of a Material U.S.
Subsidiary which has not executed an Existing Subsidiary Security Agreement, a
security agreement in the form of the Existing Subsidiary Security Agreement
(with appropriate insertions and
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conforming changes) (each an "Additional Subsidiary Security Agreement" and
together with the Borrower Security Agreement and the Existing Subsidiary
Security Agreements, the "Security Agreements"), as the Security Agreements may
from time to time be modified or amended; provided, however, that such Liens
need not be perfected on any inventory located outside the United States in
accordance with the Security Agreements. The Borrower agrees that it will, and
will cause the Material U.S. Subsidiaries to, from time to time at the request
of the Agent or the Required Banks, execute and deliver such documents and do
such acts and things, as the Agent or the Required Banks may reasonably request
in order to provide for or perfect such Liens on the Collateral, except to the
extent any of the foregoing represents action to perfect Liens on Collateral
located outside the United States in accordance with the Security Agreements.
(b) The Borrower and each Material U. S. Subsidiary acknowledges and
agrees that the Security Agreements remain in full force and effect, and that
the Collateral is and shall remain subject to the Liens granted and provided for
by the Security Agreements as supplemented hereby, for the benefit and security
of all the Obligations, including without limitation all credit from time to
time extended by the Banks to the Company under this Agreement.
(c) All references in the Collateral Documents to (i) the Multicurrency
Credit Agreement shall be deemed references to this Amended and Restated
Multicurrency Credit Agreement and (ii) the Lenders or Banks shall be deemed
references to the Banks party hereto.
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 (a) the lesser of (1) the Revolving
Credit Commitments in effect at such time or (2) the Borrowing Base as then
determined and computed and (b) 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-1 hereto (the "Swing Line Note"). The
Borrower acknowledges and agrees that the Swing Line Note dated February 15,
1996 issued to Harris Trust and Savings Bank under the Original Credit
Agreement, a copy of which is attached hereto as Exhibit C-2, shall constitute
the Swing Line Note for purposes of this Agreement. 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.
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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.
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
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available funds, at Harris' principal office in Chicago, Illinois, before 12:00
Noon (Chicago time) on the Business Day following the day 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:
(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;
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(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 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. (i) Change of Control Event. 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
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(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.
(ii) Clean Up. If at any time during a period (each, a "Clean Up
Period") of at least 30 consecutive days in each fiscal year, commencing no
earlier than July 1 to and ending no later than September 30, 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 during such Clean Up
Period, when taken together with the U.S. Dollar Equivalent of the Canadian Loan
Participations then outstanding during such Clean Up Period, shall exceed the
lesser of (1) $15,000,000 or (2) the portion of the Borrowing Base then
attributable to Eligible Receivables, the Borrower shall within three (3)
Business Days after written demand from the Agent, pay over (or cause to be paid
over) the amount of such excess (to the extent such excess remains outstanding
three Business Days after such demand) (x) to the Agent for the account of the
Lenders as and for a mandatory prepayment on the Swing Loans or, if the Swing
Loans have been prepaid in full but Committed Loans are outstanding, then and in
any such event, such excess to be paid over to the Agent as and for mandatory
prepayment on the Committed Loans or, if the Committed Loans have been prepaid
in full but L/C Obligations are outstanding, then and in any such event, such
excess to be paid over to the Agent to be applied against the Reimbursement
Obligations then outstanding with any balance held as collateral security for
any remaining L/C Obligations, or (y) to Bank of Montreal as and for a mandatory
prepayment on the loans made to Bell Canada under the Canadian Credit Agreement.
Notwithstanding the foregoing, unless any Event of Default occurs and is
continuing, the Borrower shall not be required to make any prepayment of any
Eurocurrency Loan pursuant to this subsection (b)(ii) until the last day of the
Interest Period with respect thereto so long as an amount equal to such
prepayment is deposited by the Borrower in a cash collateral account maintained
with the Agent to be held in such account on terms satisfactory to the Agent and
the Required Lenders.
(iii) Excess Credit and Canadian Loan Participations. The Borrower
covenants and agrees that if at any time 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, when taken together with the U.S. Dollar
Equivalent of the Canadian Loan Participations then outstanding, shall exceed
the Revolving Credit Commitments in effect at such time, the Borrower shall
within three (3) Business Days after written demand from the Agent, pay over the
amount of such excess (to the extent such excess remains outstanding three
Business Days after such demand) to the Agent for the account of the Lenders as
and for a mandatory prepayment on the Swing Loans or, if the Swing Loans have
been prepaid in full but Committed Loans are outstanding, then and in any such
event, such excess shall be paid over to the Agent as and for mandatory
prepayment on the Committed Loans or, if the Committed Loans have been prepaid
in full but L/C Obligations are outstanding, then and in any such event, such
excess shall be paid over to the Agent to be applied against the
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Reimbursement Obligations then outstanding with any balance held as collateral
security for any remaining L/C Obligations. Notwithstanding the foregoing,
unless any Event of Default occurs and is continuing, the Borrower shall not be
required to make any prepayment of any Eurocurrency Loan pursuant to this
subsection (b)(iii) until the last day of the Interest Period with respect
thereto so long as an amount equal to such prepayment is deposited by the
Borrower in a cash collateral account maintained with the Agent to be held in
such account on terms satisfactory to the Agent and the Required Lenders.
(iv) Excess Canadian Credit. The Borrower covenants and agrees that if
at any time the sum of the aggregate Original Dollar Amount of Committed Loans
denominated in the Alternative Currency, when taken together with the U.S.
Dollar Equivalent of the Canadian Loan Participations then outstanding, shall be
in excess of $30,000,000, the Borrower shall within three (3) Business Days
after written demand from the Agent, pay over the amount of such excess (to the
extent such excess remains outstanding three Business Days after such demand) to
the Agent for the account of the Lenders as and for a mandatory prepayment on
such Committed Loans. Notwithstanding the foregoing, unless any Event of Default
occurs and is continuing, the Borrower shall not be required to make any
prepayment of any Eurocurrency Loan pursuant to this subsection (b)(iv) until
the last day of the Interest Period with respect thereto so long as an amount
equal to such prepayment is deposited by the Borrower in a cash collateral
account maintained with the Agent to be held in such account on terms
satisfactory to the Agent and the Required Lenders.
(v) Credit in Excess of Borrowing Base. The Borrower covenants and
agrees that if 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,
when taken together with the U.S. Dollar Equivalent of the Canadian Loan
Participations then outstanding, shall for any reason exceed the Borrowing Base
as then determined and computed, the Borrower shall within three (3) Business
Days after written demand from the Agent, pay over the amount of such excess to
the Agent for the account of the Lenders as and for a mandatory prepayment on
the Swing Loans or, if the Swing Loans have been prepaid in full but Committed
Loans are outstanding, then and in any such event, such excess shall be paid
over to the Agent as and for mandatory prepayment on the Committed Loans or, if
the Committed Loans have been prepaid in full but L/C Obligations are
outstanding, then and in any such event, such excess shall be paid over to the
Agent to be applied against the Reimbursement Obligations then outstanding with
any balance held as collateral security for any remaining L/C Obligations.
Notwithstanding the foregoing, unless any Event of Default occurs and is
continuing, the Borrower shall not be required to make any prepayment of any
Eurocurrency Loan pursuant to this subsection (b)(v) until the last day of the
Interest Period with respect thereto so long as an amount equal to such
prepayment is deposited by the Borrower in a cash collateral account maintained
with the Agent to be held in such account on terms satisfactory to the Agent and
the Required Lenders.
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
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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,
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 plus the U.S. Dollar Equivalent of the Canadian Loan
Participations 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.
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Section 3.6. Canadian Loan Participations. The Borrower desires that
loans denominated in Canadian Dollars be made in Canada on a revolving basis to
Bell Canada in an aggregate U.S. Dollar Equivalent, when taken together with the
Original Dollar Amount of Committed Loans denominated in the Alternative
Currency, not to exceed the Canadian Loan Limit at any one time outstanding and
on substantially the same terms and conditions as Loans are available to the
Borrower under this Credit Agreement. Bank of Montreal, a chartered bank of
Canada, is willing to make such Canadian Dollar loans on the condition, among
others, that the Banks acquire risk participations in the full amount of the
Canadian Dollar loans. Each Bank agrees, severally but not jointly, to acquire
and hold a Canadian Loan Participation equal at all times to its Percentage in
each such Canadian Dollar loan and for that purpose to enter into the Canadian
Participation Agreement. The Canadian Participation Agreement may from time to
time be modified or amended and its provisions may be waived at any time, in
each case without notice to or consent of anyone (including the Borrower) upon
the written consent of the requisite parties thereto; provided, however, that
(i) the Banks shall not, without the prior consent of the Borrower, agree to any
modification or amendment of the Canadian Participation Agreement which would
(x) obligate or permit the Banks to fund their participations thereunder except
upon the occurrence and during the continuance of any event or condition which
is specified in this Agreement as a Default or Event of Default hereunder or
which is specified in the Canadian Credit Agreement as an Event of Default or
which is an event which with the passage of time, giving of notice, or both,
would constitute such an Event of Default under the Canadian Credit Agreement or
(y) impair the rights of the Banks under Paragraphs 8 and 9 of the Canadian
Participation Agreement to control Bank of Montreal's administration and
enforcement of the loans made under the Canadian Credit Agreement and (ii) the
Agent and Banks will not consent to the grant by Bank of Montreal of any
participation (other than the Canadian Loan Participations) in, or any other
assignment by Bank of Montreal of, its rights and obligations under the Canadian
Credit Agreement without the Borrower's prior written consent (which consent
shall not be unreasonably withheld). The Agent will provide the Borrower a fully
executed counterpart of the Canadian Participation Agreement and will use
reasonable efforts to provide the Borrower on a prompt basis with a copy of each
formal written amendment or similar modification to the Canadian Participation
Agreement. The Agent will also promptly notify the Borrower in the event the
Banks fund the purchase of their Canadian Loan Participations.
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 June 30,
1997, 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 0.30% per annum through August 15, 1997 and from and
after such date, from such
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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: COMMITMENT FEE RATE:
1. Greater than 4.00 to 1.0 0.20%
2. Greater than 3.00 to 1.0,
but less than or equal to 4.00 to 1.0 0.25%
3. Less than or equal to 3.00 to 1.0 0.30%
The Original Dollar Amount of the Canadian Loan Participations from time to time
outstanding shall be deemed usage of the Revolving Credit Commitments for
purposes of determining such commitment fee.
(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 June 30, 1997, 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 cancelable 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) Agent Fees. The Borrower shall pay to the Agent the fees agreed to
between the Agent and the Borrower.
(d) 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.
(e) Participation Fee. In consideration of their taking the Canadian
Loan Participations, for such period during which any Canadian Loan
Participations are outstanding to the Banks, the Borrower shall pay to the Agent
for the ratable account of the Banks in accordance with their Percentages a fee
accruing at the rate per annum equal to the Eurocurrency Margin as in effect
from time to time on the average daily Original Dollar Amount of the unpaid
principal balance of the loans which are the subject of the Canadian Loan
Participations. Such fee is payable in arrears on the last day of each calendar
quarter (commencing on the first of such dates after any Canadian Loan
Participations are outstanding) and on the Termination Date and thereafter such
fee shall be payable on demand."
(f) Audit Fees. The Borrower shall pay to the Agent reasonable charges
for audits of the Collateral performed by the Agent or its agents or
representatives in such amounts as the Agent may from time to time request (the
Agent acknowledging and agreeing that such charges shall be computed in the same
manner as it at the time customarily uses for the assessment of charges for
similar collateral audits); provided, however, that in the absence of any
Default or Event of Default, the Borrower shall not be required to pay the Agent
for more than two (2) such audits per fiscal year of the Borrower.
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 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.
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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.
"Bell Canada" means Bell Sports Canada Inc., a Canadian federally
chartered corporation.
"Borrower" means Bell Sports Corp., a Delaware corporation.
"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
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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).
"Borrowing Base" means, as of any time it is to be determined, the sum
of:
(a) 80% of the then net book value of Eligible Accounts
(computed using the method of receivables valuation applied by the
Borrower in accordance with GAAP which reflects such value as the net
book value of its receivables, except that net book value for such
purposes shall not reflect any reserve for accounts more than ninety
days past due that have already been excluded from gross accounts in
computing such Eligible Accounts) less such other reserves for
uncollectibility, location of account debtor, contras and other matters
as the Agent or Required Lenders in good faith shall from time to time
reasonably deem appropriate to adjust such net book value; plus
(b) the lesser of (i) $20,000,000 and (ii) 50% of the value
(computed at its cost using the method of inventory valuation applied
by the Borrower in accordance with GAAP which reflects such cost on the
Borrower's books as its net book value, but in any event after reducing
such value as so computed by the aggregate amount of all reserves for
obsolescence, slow-moving items, shrinkage and all such other matters
as the Agent or Required Lenders in good faith shall from time to time
reasonably deem appropriate to adjust such net book value) of Eligible
Inventory;
provided that (i) the Borrowing Base shall be computed only as against and on so
much of the Collateral as is included on the certificates to be furnished from
time to time by the Company pursuant to Section 9.6(d) hereof and, if required
by the Agent pursuant to any of the terms hereof or any Collateral Document, as
verified by such other evidence required to be furnished to the Agent pursuant
hereto or pursuant to any such Collateral Document and (ii) the Agent shall have
the right to reduce the advance rates against Eligible Accounts or Eligible
Inventory and the sublimit on Eligible Inventory in the reasonable exercise of
its discretion based on the results of any field audit of any Collateral (which
the Borrower acknowledges may be conducted by in-house audit personnel) which
reasonably supports any such reduction.
"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.
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"Canadian Credit Agreement" means that certain Amended and Restated
Credit Agreement dated as of September 5, 1996 by and between Bank of Montreal
and Bell Canada, as the same may from time to time be modified or amended.
"Canadian Dollar" means the lawful currency of Canada.
"Canadian Loan Limit" shall mean $30,000,000.
"Canadian Loan Participations" means the participations acquired by the
Banks pursuant to the Canadian Participation Agreement in loans extended from
time to time to Bell Canada under the Canadian Credit Agreement. The U.S. Dollar
Equivalent of the Canadian Loan Participations shall mean (x) prior to the
Banks' funding of their purchases thereof, the U.S. Dollar Equivalent of the
Canadian Loan Participations as of the close of the most recently completed
calendar month or as of such more current date as the Agent or any Bank shall
specify and (y) on and after the Banks' funding thereof, the U.S. Dollar
Equivalent of the Canadian Loan Participation so funded as of the date of such
funding.
"Canadian Participation Agreement" shall mean that certain
Participation Agreement Re: Bell Sports Canada Credit Agreement dated as of
April 22, 1996 by and among Bank of Montreal and the Banks, as the same may from
time to time be modified or amended.
"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)
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;
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(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.
"Collateral" means all properties, rights, interests and privileges
from time to time subject to the Liens granted to the Agent by the Collateral
Documents.
"Collateral Documents" means the Security Agreements and all other
security agreements, assignments, financing statements and other documents as
shall from time to time secure the Obligations.
"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 hereof.
"Companies" means the Borrower and the Material U.S. Subsidiaries, and
the term "Company" shall mean any of the foregoing unless the context in which
such term is used shall otherwise require.
"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 constitute patents, tradenames,
trademarks, copyrights, franchises, organization expense,
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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.
"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, each Subsidiary Guaranty Agreement delivered to the Agent
pursuant to Section 9.1 hereof and the Collateral Documents.
"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.
"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.
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"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, (a) Consolidated Net Income for such
period plus (b) 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 (including without
limitation any write-off of goodwill), (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 minus (c) all amounts included in arriving at such
Consolidated Net Income amount for such period for income from Investments
permitted by Section 9.14(a) through (e) and 9.14(n) 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.
"Eligible Account" means each account receivable of each Company that:
(a) arises out of the sale by such Company of inventory
delivered to and accepted by, or out of the rendition of services fully
performed by such Company and accepted by, the account debtor on such
account receivable, and in each case such account receivable otherwise
represents a final sale;
(b) is an asset of such Company to which it has good and
marketable title, is freely assignable, is subject to a perfected,
first priority Lien in favor of the Agent, and is free and clear of any
other Lien other than Liens permitted by Sections 9.9(a), (b), (c), (d)
and (h) hereof
(c) the account debtor thereon is not a Subsidiary or an
Affiliate of any Company; and
(d) is not unpaid more that ninety (90) days after the
original due date of the applicable invoice.
"Eligible Inventory" means all finished goods inventory of each Company
(other than packaging, crating and supplies inventory), provided that such
inventory:
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(a) is an asset of such Company to which it has good and
marketable title, is freely assignable, is subject to a perfected,
first priority Lien in favor of the Agent, and is free and clear of any
other Lien other than Liens permitted by Sections 9.9(a), (b), (c), (d)
and (h) hereof; and
(b) is located in the United States.
"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
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
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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 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.
"Harris' Quoted Rate" is defined in Section 2.3 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,
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(vi) Capitalized Lease Obligations of such Person and (vii) obligations for
which such Person is obligated pursuant to a Guaranty.
"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 Net Interest Expense for such period.
"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 $15,000,000, 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.
"LIBOR Index Rate" 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."
"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.
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"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.
"Material U.S. Subsidiary" is defined in Section 1.8(a) hereof.
"Net Interest Expense" means, for any period, Interest Expense for such
period minus income for such period from Investments permitted by Sections
9.14(a) through (e) and 9.14(n) hereof.
"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 Credit Agreement" is defined in the first paragraph hereof.
"Original Dollar Amount" means (x) the amount of any Obligation
denominated in U.S. Dollars and (y) 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 and (z) in relation to any Bank's
Canadian Loan Participation, such Bank's Percentage of the sum of the U.S.
Dollar Equivalents of each loan outstanding under the Canadian Credit Agreement
on the day such loan was advanced by Bank of Montreal or continued by Bell
Canada for a new "Fixed Period" identified and defined in the Canadian Credit
Agreement.
"Overseas Subsidiary" means each Subsidiary that is not a North
American Subsidiary.
"Participating Bank" is defined in Section 1.2(d) hereof.
"Participating Interest" 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
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(including through participation interests in L/C Obligations) of the aggregate
principal amount of all outstanding Obligations.
"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). 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 1.50% per annum and the Commitment Fee Rate shall be
0.30% 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.
"Required Banks" means, as of the date of determination thereof, Banks
holding at least 66-2/3% of the Percentages.
"Revolving Credit" is defined in the first paragraph of this Agreement.
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"Revolving Credit Commitment" is defined in Section 1.1 hereof.
"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" is defined in the first paragraph of this Agreement.
"Swing Line Commitment" means $5,000,000, as reduced pursuant to the
terms hereof.
"Swing Line Note" is defined in Section 2.1 hereof.
"Swing Loans" is defined in Section 2.1 hereof.
"Telerate Page 3740" or "3750" is defined in Section 1.3(b) hereof.
"Termination Date" means December 31, 1999, subject to any extension of
such date pursuant to Section 4.2 hereof.
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"Total Funded Debt" means all Debt of the Borrower and its Subsidiaries
determined without duplication on a consolidated basis.
"Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable accrued benefits under such Plan exceeds (ii) the fair market
value of all Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the Controlled Group to
the PBGC or the Plan under Title IV of ERISA.
"U.S. Dollars" and "$" 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 Commitment" means at any time the difference between the (x)
the Revolving Credit Commitments then in effect and (y) the aggregate
outstanding Original Dollar Amount of Loans (whether Committed Loans or Swing
Loans), L/C Obligations and Canadian Loan Participations then outstanding.
"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 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)
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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 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.
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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 June 29, 1996, and the
interim financial statements heretofore delivered to the Banks showing
historical performance of the Borrower for the six months ending on December 28,
1996, 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 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 28, 1996, 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
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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 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).
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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 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
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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 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.
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 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;
(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
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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;
(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 Event no Default or Event of Default
has occurred and is continuing;
(i) (x) The sale of the Service Cycle/Mongoose business
contemplated by the April 1, 1997 Asset Purchase Agreement among the
Borrower, American Recreation Company, Inc. (the "Seller") and
Brunswick Corporation shall have closed resulting in gross proceeds to
the Seller of not less than $18,000,000, (y) the Borrower shall have
prepaid the Obligations by at least $18,000,000 concurrently with and
out of the proceeds of such sale (such prepayment to be accompanied by
any funding indemnity payments required under the Original Credit
Agreement) and (z) the Agent shall have received (1) evidence
reasonably satisfactory to it of such closing, (2) a pro forma
Compliance Certificate giving effect to such sale and (3) a written
certificate signed by the Borrower's chief financial officer or
corporate controller showing in reasonable detail a pro forma
computation of the Borrowing Base as of the date of but immediately
after giving effect to such sale (absent material inaccuracy, the
Borrower
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being entitled to make such computation using the Borrowing Base as
determined and computed as of March 29, 1997 and subtracting therefrom
the portion of the Borrowing Base attributable to the assets being sold
in such sale.)
(j) Concurrently with or promptly after the prepayment of
loans contemplated by Section 8.1(i) hereof, the Agent shall have
received (1) notice from the Borrower in accordance with Section 3.5 of
the Original Credit Agreement to partially terminate the Revolving
Credit Commitments, ratably among the Banks in proportion to their
respective percentages, to $60,000,000 and (2) an amendment to the
Canadian Credit Agreement executed by each of Bell Sports Canada, Inc.
and Bank of Montreal reducing the Authorized Limit (as defined therein)
to U.S. $30,000,000; and
(k) Concurrently with or promptly after the giving of notice
and delivery of the amendment contemplated by Section 8.1(j) hereof,
the Agent shall have received assignment agreements for each of (1) the
Original Credit Agreement and (2) the Canadian Participation Agreement,
in form and substance satisfactory to it, from each of The Boatmen's
National Bank of St. Louis, Bank of America - Arizona, Norwest Bank
Arizona, N.A., The Northern Trust Company and LaSalle National Bank
(the "Assigning Banks"), assigning 100% of each Assigning Banks'
interest in and to all of the Assigning Banks' rights and obligations
under such Agreements to Harris Trust and Savings Bank.
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;
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(d) After giving effect to such Borrowing, (i) neither the
Original Dollar Amount nor the U.S. Dollar Equivalent of the aggregate
principal amount of all Loans (whether Committed Loans or Swing Loans)
and L/C Obligations outstanding hereunder, when taken together with the
U.S. Dollar Equivalent of the Canadian Loan Participations then
outstanding, shall exceed the lesser of (x) the Revolving Credit
Commitments then in effect or (y) the Borrowing Base as then determined
and computed, (ii) the aggregate L/C Obligations shall not exceed the
L/C Commitment then in effect and (iii) the aggregate principal amount
of Swing Loans outstanding hereunder shall not exceed the Swing Line
Commitment; and
(e) 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 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
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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 (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. The Borrower shall in any
event maintain insurance on the Collateral to the extent required by the
Collateral Documents.
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
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(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 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
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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.
(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.
(d) Without any request from the Agent or any Bank, the Borrower will
furnish to the Agent, with sufficient copies for each Bank (which the Agent
shall promptly distribute to each Bank), as soon as available, but in any event
within 25 days following the close of each monthly accounting period of the
Borrower (commencing with the monthly accounting period ending on or about April
30, 1997), a written certificate signed by the Borrower's chief financial
officer or corporate controller showing in reasonable detail the computation of
the Borrowing Base as of the close of such monthly accounting period, such
certificate to be in form and substance reasonably acceptable to the Agent and
the Required Banks.
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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 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 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
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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 $5,000,000; 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 of 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;
(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
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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.
Notwithstanding anything herein to the contrary, this Section shall not apply to
nor operate to prevent the Liens granted in favor in the Agent and the Lenders
pursuant to the Collateral Documents.
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 $5,000,000 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
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a "substantial part" of the assets of the Borrower and its North American
Subsidiaries; provided, however, that:
(1) any Subsidiary of the Borrower may 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 (i) in the case of any
such sale, lease or other conveyance of any Collateral to a Subsidiary
which is not then providing Collateral under a Security Agreement
executed by it, the transferee or lessee (as the case may be) shall
execute and deliver to the Agent such instruments and documents
(including, if a requested, a security agreement and financing
statements) as the Agent may reasonably request to confirm and assure
the continued validity, perfection and priority of the Agent's liens
under the Collateral Documents of the Collateral so sold, leased or
otherwise conveyed and (ii) at the time of such sale, lease or
conveyance, and after giving effect thereto, no Default or Event of
Default shall have occurred or be continuing;
(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, (y) in any
merger or consolidation not involving the Borrower but involving a
Subsidiary then providing Collateral under a Security Agreement in
which the surviving or continuing Subsidiary is not a Subsidiary then
providing Collateral under a Security Agreement executed by it, such
surviving or continuing Subsidiary shall execute and deliver to the
Agent an Additional Subsidiary Security Agreement and such other
instruments and documents as the Agent may reasonably request to grant
and perfect a lien on the accounts and inventory of such surviving or
continuing Subsidiary and (z) 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;
(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 Default or Event of Default shall have occurred and
be continuing; and
(4) subject to the provisions of this Section 9.12, Bell
Sports, Inc. and American Recreation Company, Inc. may merge into the
Borrower if the Borrower is the corporation surviving such merger and
the Borrower confirms, in form and substance reasonably satisfactory to
the Agent and the Required Banks, its liability 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
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(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.
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;
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(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 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 sum of: (1) the aggregate amount
expended by the Borrower and its Subsidiaries as consideration for such
acquisition (and in any event (x) including as such consideration, any
Debt assumed or incurred as a result of such acquisition, and (y)
excluding as such consideration, any equity
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securities issued by the Borrower as consideration for such
acquisition), (2) 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")
and (3) all Restricted Payments made after the date hereof (on a
cumulative basis), does not exceed $40,000,000 further 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 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
$40,000,000, 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;
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(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, 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 Stockholders Equity. The Borrower will at
all times maintain Consolidated Stockholders Equity of not less than the Minimum
Required Amount. For purposes of this section, the "Minimum Required Amount"
shall mean $110,000,000 and shall increase as of June 28, 1997 and as of the
last day of each fiscal quarter thereafter, by an amount equal to (i) 50% of the
cumulative positive Consolidated Net Income earned each fiscal quarter
commencing and completed after March 28, 1997 (but without subtraction for any
negative Consolidated Net Income for any such fiscal quarter) minus (ii) the
cumulative amount expended by the Borrower for any redemptions of its capital
stock during each fiscal quarter commencing and completed after March 28, 1997
plus (iii) the cumulative amount of proceeds received by the Borrower from its
sale of its capital stock during each fiscal quarter commencing and completed
after March 28, 1997.
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 .65 to 1
June 28, 1997 July 2, 1999 .60 to 1
July 3, 1999 As of the last day of each .55 to 1
fiscal quarter thereafter
Section 9.17. Interest Coverage Ratio. The Borrower will, as of the
last day of each fiscal quarter of the Borrower occurring on or about the date
specified below (commencing with the fiscal quarter of the Borrower ending on
June 28, 1997), maintain an Interest Coverage Ratio of not less than:
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INTEREST COVERAGE RATIO
FOR FISCAL QUARTER ENDING: SHALL NOT BE LESS THAN:
June 28, 1997 .40 to 1
September 27, 1997 .50 to 1
December 27, 1997 .55 to 1
March 28, 1998 2.00 to 1
June 27, 1998 2.50 to 1
September 26, 1998 2.50 to 1
December 26, 1998 2.50 to 1
March 27, 1999 2.50 to 1
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 $9,000,000 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 make Restricted Redemptions 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
Restricted Redemptions made after the date hereof to and including the
date the Borrower delivers a Compliance Certificate pursuant to Section
9.6(b) for the period ending December 31, 1997 does not exceed
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$20,000,000 and (z) the aggregate amount of all Restricted Payments
made or expended, as the case may be, and the Aggregate Acquisition
Consideration after the date hereof (on a cumulative basis) does not
exceed $40,000,000;
(b) 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 and (x) the aggregate amount of
all Restricted Payments made after the date hereof (on a cumulative
basis) does not exceed $40,000,000; it being understood that the
Borrower may request that the Banks permit such purchases in excess of
$40,000,000 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 $110,000,000.
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.
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.
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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 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 or (iii) any event occurs or condition exist in each case which
is specified as an Event of Default under the Canadian Credit
Agreement;
(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
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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 $2,500,000, which is not
stayed on appeal or otherwise being 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;
(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); or
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(k) Default for five (5) Business Days after written notice to
the Borrower in the observance or performance of any provision of any
Collateral Document requiring the maintenance of insurance on the
inventory subject thereto, or default in the observance or performance
of any provision of any Collateral Document dealing with the use or
remittance of proceeds of the accounts subject thereto, or any Company
shall purport to disavow, repudiate, revoke or terminate any Collateral
Document or otherwise assert that any of the Collateral Documents is
null and void.
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 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
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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 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 10.7. Alternative Currency Loan. If any Event of Default has
occurred and is continuing, if the Banks so determine in their sole discretion,
the Borrower shall be deemed to have requested a Borrowing of Eurocurrency Loans
denominated in the Alternative Currency with an Interest Period of one month in
an amount sufficient to repay in full all the loans and other obligations owing
under the Canadian Credit Agreement (whether or not then due and payable). Such
Borrowing shall be disbursed to Bank of Montreal in repayment of such loans and
obligations without regard to the conditions precedent hereunder to making any
such Borrowing and any requirement of this Agreement that each Borrowing of
Eurocurrency Loans denominated in the Alternative Currency be in a minimum
amount. Nothing herein contained shall in any way impair or otherwise affect the
obligations of Bell Canada or any guarantor on such loans and obligations to the
extent the
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same are not so repaid. The Banks shall be under no obligation whatsoever to
make such Borrowing, the decision to do so being wholly within their discretion.
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.
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
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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 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.
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(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,
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.
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,
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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 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.
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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 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
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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.
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;
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(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;
(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
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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 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 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
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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 (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
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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.
(e) In order to induce the Banks to enter into the Canadian Loan
Participations, the Borrower hereby agrees that each payment to a Bank on its
Canadian Loan Participation shall be made without withholding for or on account
of any present or future taxes (other than overall net income taxes on the Bank
receiving the payment) imposed by or within the jurisdiction in which Bell
Canada, Bank of Montreal or the Borrower is domiciled, any jurisdiction from
which Bell Canada or the Borrower makes any payment on the loans made under the
Canadian Credit Agreement, or any jurisdiction from which Bank of Montreal makes
any payment to the Banks on the Canadian Loan Participations, or (in each case)
any political subdivision or taxing authority thereof or therein. If any such
withholding is so required, the Borrower 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 insure that the net amount actually received by
each Bank on its Canadian Loan Participation free and clear of such taxes
(including such taxes on such additional amount) is equal to the amount which
that Bank would have received had such withholding not been made, all to the
greatest extent possible as if such payment on its Canadian Loan Participation
were a payment to that Bank by the Borrower under the Credit Documents. The
Borrower's obligations under this paragraph are separate from its obligations to
Bank of Montreal in respect of the loans made under the Canadian Credit
Agreement.
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
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right under 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 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.
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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.
15170 North Hayden Road, Suite 1
Scottsdale, Arizona 85260
Attn: Chief Financial Officer or
Vice President and Corporate Controller
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.
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
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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.
(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
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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 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.
Notwithstanding anything in the foregoing to the contrary, no such assignment to
an assignee Bank shall be permitted unless such assignee Bank becomes a party,
with Bank of Montreal's consent, to the Canadian Participation Agreement,
holding an undivided fractional interest in the relevant assigning Bank's
Canadian Loan Participations equal to the Percentage of such assignee Bank after
giving effect to such assignment.
(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)
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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 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 $16,000 (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
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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
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. Notwithstanding anything
in the foregoing to the contrary, no Bank and none of its directors, officers
and employees shall be entitled to indemnification under this Section for an
Indemnified Claim arising out of such Bank's failure to fund its Canadian Loan
Participation as and when required by the terms of the Canadian Participation
Agreement. The Borrower acknowledges and agrees that the costs and expenses for
which the Borrower is liable under this Section shall include the cost of
recording, filing and releasing the Collateral Documents.
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
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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
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.
The Borrower acknowledges that the loans in which the Banks participate
under the Canadian Loan Participations are denominated in the Alternative
Currency. In order to induce the Banks to enter into the Canadian Loan
Participations, the Borrower agrees that in the event the amount of U.S. Dollars
which any Bank may purchase, with a sum paid to it on its Canadian Loan
Participation in another currency (after any premium and costs of exchange), on
the Business Day immediately following the day on which such Bank receives such
payment is for any reason less (any such deficiency being hereinafter referred
to as a "loss") than the U.S. Dollar Equivalent of any corresponding payment
made by such Bank to acquire a participation under its Canadian Loan
Participation in the amount so paid to it in such other currency, the Borrower
agrees, as an obligation separate from those arising under the Canadian Credit
Agreement, to indemnify such Bank against such loss. Notwithstanding the
foregoing, the indemnification provided by this paragraph (i) shall not cover
any loss due to taxes covered by Section 14.1 hereof and (ii) shall not apply to
payments to a Bank on its Canadian Loan Participation representing interest
which accrued after such Bank funded its purchase of a participation in the
principal on which such interest accrued. If the Banks have funded the purchase
of their Canadian Loan Participations and the Borrower notifies the Agent (which
shall promptly notify each Bank) of the Business Day on which the Borrower
expects the loans outstanding under the Canadian Credit Agreement will be paid
and demonstrates (to the reasonable satisfaction of the Required Banks)
reasonable prospects for making such repayment, the amount for which the
Borrower is liable to each Bank under this Section shall be determined as if
such Bank had entered into hedging arrangements (whether or not such Bank
actually enters into such hedging arrangements, there being no obligation on any
Bank to do so) to protect such Bank against exchange rate risk on the amount
expended by that Bank to fund its Canadian Loan Participation, such hedging
arrangements to be effective for the period commencing on the Business Day
following such notice from the Agent to that Bank and ending on the date of
repayment so specified by the Company. The Company agrees to pay each Bank its
reasonable costs and expenses of actually entering into such hedging
arrangements and to indemnify each Bank against any liabilities or damages
incurred by such Bank as a result of entering into such arrangements. Each Bank
will provide the Borrower upon its reasonable request a certificate setting
forth in reasonable detail a calculation to the amount due such Bank under this
Section and, if applicable, such information establishing such Bank's actual
participation in such hedging arrangements to the extent that its claim is made
on account of same.
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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 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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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 April 28, 1997.
BELL SPORTS CORP.
By Linda K. Bounds
--------------------------------------
Name: Linda K. Bounds
-----------------------------------
Title: Assistant Secretary
----------------------------------
BELL SPORTS, INC.
By Linda K. Bounds
--------------------------------------
Name: Linda K. Bounds
-----------------------------------
Title: Assistant Secretary
----------------------------------
AMERICAN RECREATION COMPANY
HOLDINGS, INC.
By Linda K. Bounds
--------------------------------------
Name: Linda K. Bounds
-----------------------------------
Title: Assistant Secretary
----------------------------------
AMERICAN RECREATION COMPANY, INC.
By Linda K. Bounds
--------------------------------------
Name: Linda K. Bounds
-----------------------------------
Title: Assistant Secretary
----------------------------------
GIRO SPORT DESIGN INTERNATIONAL, INC.
By Linda K. Bounds
--------------------------------------
Name: Linda K. Bounds
-----------------------------------
Title: Assistant Secretary
----------------------------------
BELL SPORTS CANADA INC.
By Linda K. Bounds
--------------------------------------
Name: Linda K. Bounds
-----------------------------------
Title: Assistant Secretary
----------------------------------
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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 Lee A. Vandermyde
--------------------------------------
Telecopy: (312) 461-2591 Name: Lee A. Vandermyde
-----------------------------------
Telephone: (312) 461-3474 Title: Vice President
----------------------------------
Commitment: $45,000,000
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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Address and Amount of Commitments:
Address: LASALLE NATIONAL BANK
135 South LaSalle Street
Chicago, Illinois
Attn.: Mr. Rob Winkelmann
By Robert Winkelman
Telecopy: (312) 904-6457 --------------------------------------
Telephone: (312) 904-2634 Name: Robert Winkelman
-----------------------------------
Commitment: $15,000,000 Title: AVP
----------------------------------
Lending Offices:
Domestic Rate Loans:
135 South LaSalle Street
Chicago, Illinois
Attn.: Mr. Rob Winkelmann
Eurocurrency Loans:
135 South LaSalle Street
Chicago, Illinois
Attn.: Mr. Rob Winkelmann
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