UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended May 31, 1999
Commission file number 0-24450
RAWLINGS SPORTING GOODS COMPANY, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 43-1674348
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1859 Intertech Drive, Fenton, Missouri 63026
(Address of Principal Executive Offices) (Zip Code)
(636) 349-3500
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
Number of shares outstanding of the issuer's Common Stock, par
value $0.01 per share, as of June 30, 1999: 7,874,180 shares.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Rawlings Sporting Goods Company, Inc. and Subsidiaries
Consolidated Statements of Income
(Amounts in thousands, except per share data)
(Unaudited)
Quarter Ended Nine Months Ended
May 31, May 31,
1999 1998 1999 1998
Net revenues. .......... $46,614 $46,204 $138,145 $140,129
Cost of goods sold...... 32,179 31,285 93,968 96,428
Aluminum bat recall
(see Note 6) ......... 1,600 - 1,600 -
Gross profit ......... 12,835 14,919 42,577 43,701
Selling, general and
administrative
expenses ............. 12,514 10,497 35,480 30,091
Unusual charges......... - 975 - 1,475
Operating income ..... 321 3,447 7,097 12,135
Interest expense, net .. 1,344 1,164 3,577 3,259
Other expense, net...... 52 33 119 104
Income (loss) before
income taxes.......... (1,075) 2,250 3,401 8,772
Provision (benefit) for
income taxes.......... (398) 843 1,258 3,289
Net income (loss)..... $ (677) $ 1,407 $ 2,143 $ 5,483
Net income (loss)
per common share:
Basic................. ($0.09) $0.18 $0.27 $0.71
Diluted............... ($0.09) $0.18 $0.27 $0.70
Shares used in computing per
share amounts:
Basic................. 7,870 7,792 7,839 7,770
Assumed exercise of stock
options............... 16 66 28 36
Diluted............... 7,886 7,858 7,867 7,806
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
Rawlings Sporting Goods Company, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except share data)
(Unaudited)
May 31, August 31,
1999 1998
ASSETS
Current Assets:
Cash and cash equivalents...................... $ 1,815 $ 862
Accounts receivable, net of allowance of
$2,469 and $2,043 respectively............... 44,565 40,352
Inventories.................................... 46,685 43,573
Prepaid expenses............................... 764 673
Deferred income taxes.......................... 4,946 4,946
Total current assets......................... 98,775 90,406
Property, plant and equipment, net............... 13,009 12,911
Other assets..................................... 634 568
Deferred income taxes............................ 18,157 20,321
Goodwill, net.................................... 8,166 8,326
Total assets................................. $ 138,741 $ 132,532
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.............. $ 64 $ 61
Accounts payable............................... 11,376 9,047
Accrued liabilities............................ 13,735 12,547
Total current liabilities.................... 25,175 21,655
Long-term debt, less current maturities.......... 58,699 57,048
Other long-term liabilities...................... 7,366 9,577
Total liabilities............................ 91,240 88,280
Stockholders' equity:
Preferred stock, none issued................... - -
Common stock, 7,871,712 and 7,794,483
shares issued and outstanding,
respectively................................. 79 78
Additional paid-in capital..................... 30,236 29,479
Stock subscription receivable.................. (1,421) (1,421)
Cumulative translation adjustment.............. (1,233) (1,581)
Retained earnings.............................. 19,840 17,697
Stockholders' equity........................... 47,501 44,252
Total liabilities and stockholders'
equity....................................... $ 138,741 $ 132,532
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
Rawlings Sporting Goods Company, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
(Amounts in thousands)
(Unaudited)
Nine Months Ended
May 31,
1999 1998
Cash flows from operating activities:
Net income ........................................ $ 2,143 $ 5,483
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization.................... 1,895 1,216
Deferred income taxes............................ 2,164 2,811
Changes in operating assets and liabilities:
Accounts receivable, net......................... (4,213) (9,356)
Inventories...................................... (3,112) (10,870)
Prepaid expenses................................. (91) (8)
Other assets..................................... (151) (113)
Accounts payable................................. 2,329 1,104
Accrued liabilities and other ................... (694) (954)
Net cash provided by (used in) operating
activities ........................................ 270 (10,687)
Cash flows from investing activities:
Capital expenditures............................... (1,729) (2,523)
Acquisition of business............................ - (14,098)
Net cash used in investing activities................ (1,729) (16,621)
Cash flows from financing activities:
Borrowings of long-term debt....................... 41,750 99,950
Repayments of long-term debt....................... (40,096) (73,349)
Issuance of common stock........................... 758 614
Issuance of warrants............................... - 1,271
Net cash provided by financing activities............ 2,412 28,486
Net increase in cash and cash equivalents............ 953 1,178
Cash and cash equivalents, beginning of period....... 862 732
Cash and cash equivalents, end of period............. $ 1,815 $ 1,910
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
Rawlings Sporting Goods Company, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Summary of Significant Accounting Policies.
The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission pertaining to
interim financial information and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. These financial
statements should be read in conjunction with the consolidated
financial statements and accompanying notes included in the
Company's Annual Report for the year ended August 31, 1998. In the
opinion of management, all adjustments consisting only of normal
recurring adjustments considered necessary for a fair presentation
of financial position and results of operations have been included
therein. The results for the nine months ended May 31, 1999 are
not necessarily indicative of the results that may be expected for
a full fiscal year.
Note 2: Inventories
Inventories consisted of the following (in thousands):
May 31, August 31,
1999 1998
Raw materials . . . . . . . . . . . . $ 9,905 $9,552
Work in process . . . . . . . . . . . 1,949 2,497
Finished goods. . . . . . . . . . . . 34,831 31,524
$46,685 $43,573
Note 3: Long Term Debt
As of May 31, 1999 the Company was not in compliance with its
debt covenants to maintain a ratio of average debt to adjusted
EBITDA of 5.50 to 1.0 and the fixed charge ratio of 1.50 to 1.0.
The bank group has waived these debt compliance requirements as of
May 31, 1999 by entering into the third amendment of the credit
facility. The Company and the bank group have also amended the
loan agreement to convert the facility to an asset based lending
program based on a percentage of accounts receivable, inventories
and property, plant and equipment. The Company believes it will
successfully negotiate a new long-term loan agreement and new
covenants during the fourth quarter and accordingly it has
classified the debt as long-term on the balance sheet as of May 31,
1999.
<PAGE>
Note 4: Reclassification
Certain reclassifications have been made to the prior year
financial statements to conform with the current year presentation.
Note 5: Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued
SFAS No. 130, "Reporting Comprehensive Income" which establishes
standards for reporting and disclosure of comprehensive income and
its components. Effective September 1, 1998, the Company adopted
SFAS No. 130. For the three months ended May 31, 1999 the
comprehensive loss was $518,000 and for the three months ended May
31, 1998, comprehensive income was $970,000. Comprehensive income
for the nine months ended May 31, 1999 and 1998 was $2,491,000 and
$4,769,000, respectively.
Note 6: Aluminum Bat Recall
In May 1999, the Company recorded a $1,600,000 provision to
cover known and anticipated costs associated with the voluntary
recall of its slow pitch softball aluminum bats. The bats were
recalled to prevent injuries because of reported instances of the
tops of the bat, which have a screwed in end weight, shearing off
during use. The Company is not aware of any injuries resulting
from their bats. The provision covers the anticipated costs
associated with the return of the bats and the write-down of bats
remaining in inventory. Slow pitch softball aluminum bats are not
a major product line for the Company.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Statements made in this report that are not historical in
nature, or that state the Company's or management's intentions,
hopes, beliefs, expectations, or predictions of the future, for
example, the intent of the Company to restructure operations and to
finalize a multi-year business plan, are "forward-looking
statements" under the Private Securities Litigation Reform Act of
1995, and involve risks and uncertainties. The words "should",
"will be", "intended", "continue", "believe", "may", "expect",
"hope", "anticipate", "goal", "forecast" and similar expressions
are intended to identify such forward-looking statements. It is
important to note that any such forward-looking statements are not
guarantees of future performance, and the Company's actual results,
financial condition or business could differ materially from those
expressed in such forward-looking statements. Factors that could
cause or contribute to such differences include, but are not
limited to, those discussed below under the caption "Cautionary
Factors That May Affect Future Results or the Financial Condition
of the Business", as well as those discussed elsewhere in the
Company's reports filed with the Securities and Exchange
Commission. The Company undertakes no obligation to update or
<PAGE>revise forward-looking statements to reflect changed assumptions,
the occurrence of unanticipated events or changes in future
operating results over time.
RESULTS OF OPERATIONS
Quarter Ended May 31, 1999 Compared
with Quarter Ended May 31, 1998
Net revenues for the quarter ended May 31, 1999 were
$46,614,000, which was .9 percent higher than net revenues of
$46,204,000 for the same quarter last year. Increased net
revenues in basketballs (up $788,000), apparel (up $689,000),
baseball memorabilia (up $450,000), and baseballs (up $335,000)
were offset by a decrease in net revenues of speed-sensing
baseballs (down $1,755,000). The basketball net revenues
increase for the quarter was due to shipments being later this
year partly due to the NBA players' strike which lowered sales in
the February 28, 1999 quarter. Increased apparel net revenues
were the result of sales of the new line of outer garments.
Increased net revenues of baseball memorabilia reflect a sell-off
of closeout items. Sales of the speed-sensing baseball were
higher in the May 31, 1998 quarter due to the initial
introduction of this product compared to a relatively soft market
for this product in the May 31, 1999 quarter.
Gross margin in the quarter ended May 31, 1999 was 27.5
percent, 4.8 margin points lower than the comparable quarter last
year. The May 31, 1999 quarter cost of sales included a
$1,600,000 provision for a voluntary slow pitch softball aluminum
bat recall for safety reasons. Excluding that provision, gross
margin was 30.9 percent, 1.4 margin points lower than the
comparable quarter last year. This decline in gross margins was
due to lower net revenues of the higher margin speed-sensing
baseballs and increased net revenues of the lower margin apparel
category. Offsetting these declines was an increase in margins
for professional baseballs and wood bats due to manufacturing
efficiencies and increased sales of memorabilia wood bats, which
have a higher gross margin.
Selling, general and administrative (SG&A) expenses in the
quarter ended May 31, 1999 were $12,514,000 (26.8 percent of net
revenues) compared to SG&A expenses of $10,497,000 (22.7 percent
of net revenues) in the comparable prior year quarter. Higher
advertising and promotion, salaries and wages, professional fees
and royalties accounted for the increase. The higher advertising
costs were due primarily to increased media activity directed at
the end consumer. The increase in SG&A expenses reflects the
Company's investment in anticipation of increased net revenues
which have not yet developed.
<PAGE>
The May 1998 quarter included an unusual charge of $975,000
related to environmental remediation activities with respect to
the presence of wood pitch in the soils at the company's
Dolgeville, New York facility.
Interest expense for the quarter ended May 31, 1999 was
$1,344,000 or 15.5 percent higher than interest expense of
$1,164,000 in the comparable prior year quarter. Total debt at
May 31, 1999 was $58,763,000, which was $511,000 lower than the
total debt at May 31, 1998. The increase in interest expense was
primarily due to higher interest rates and slightly higher
average borrowings.
Nine Months Ended May 31, 1999 Compared
with Nine Months Ended May 31, 1998
Net revenues for the nine months ended May 31, 1999 were
$138,145,000 or 1.4 percent lower than net revenues of
$140,129,000 in the comparable nine month period last year. Net
revenues declined in basketballs, footballs, and total baseball
equipment. Partially offsetting was an increase in net revenues
from apparel. Basketball net revenues were down $1,152,000 or
7.4 percent due to the continued overall soft condition of the
basketball category. Total football net revenues were down
$1,039,000 or 10.7 percent due primarily to lower net revenues of
the protective equipment product line. Total baseball equipment
net revenues were down $916,000 or 1.1 percent due to lower sales
volume of baseball gloves, down $1,938,000 or 5.3 percent, speed-sensing
baseballs down $929,000 or 32.2 percent and aluminum bats
down $475,000 or 15.0 percent offset by an increase of $2,595,000
or 91.0 percent in wood bats. The increase in net revenues from
wood bats reflects sales of Mark McGwire bats and the movement of
the NCAA to wood bats from aluminum bats. Year-to-date net
revenues from the apparel product line were up $1,671,000 or 11.1
percent due to higher sales of outer garments.
Gross margin for the nine months ended May 31, 1999 was 30.8
percent, .4 margin points lower than the comparable period last
year. The May 31, 1999 quarter cost of sales included a
$1,600,000 provision for a voluntary slow pitch aluminum softball
bat recall for safety reasons. Excluding that provision gross
margin would have been 32.0 percent, an increase of .8 margin
points over the prior year. The gross margin improvement is
primarily a result of increased net revenues from higher margin
memorabilia wood bats. Partially offsetting was memorabilia
baseballs where sell-off of older items at reduced prices
resulted in lower margins.
SG&A expenses for the nine months ended May 31, 1999 were
$35,480,000, or 17.9 percent, higher than SG&A expenses of
$30,091,000 in the comparable prior year period. The increase is
primarily related to increases in salaries and wages, advertising
<PAGE>and promotion, royalties, depreciation and endorsement contracts.
SG&A expenses were 25.7 percent of net revenues, up 4.2 points
from the comparable period in the prior year. The increase in
SG&A expenses reflects the Company's investment in anticipation
of increased net revenues which have not yet developed.
The comparable prior year period included an unusual charge
of $975,000 related to environmental remediation activities with
respect to the presence of wood pitch in the soils at the
Company's Dolgeville, New York facility. Also included was an
unusual charge of $500,000 related to changes in the Chief
Executive Officer's position.
Interest expense for the nine months ended May 31, 1999 was
$3,577,000, or 9.8 percent, higher than interest expense of
$3,259,000 in the comparable prior year period. Higher average
borrowings as a result of higher working capital levels and
increased interest rates in the May 1999 quarter were primarily
responsible for the increase.
Seasonality
Net revenues of baseball equipment and team uniforms are
highly seasonal. Customers generally place orders with the
Company for baseball-related products beginning in August for
shipment beginning in November (pre-season orders). These
pre-season orders from customers generally represent approximately 50
percent to 65 percent of the customers' anticipated needs for the
entire baseball season. The amount of these pre-season orders
generally determines the Company's net revenues and profitability
between November 1 and March 31. The Company then receives
additional orders (fill-in orders) which depend upon customers'
actual sales of products during the baseball season (sell-through).
Fill-in orders are typically received by the Company
between February and May. These orders generally represent
approximately 35 percent to 50 percent of the Company's sales of
baseball-related products during a particular season. Pre-season
orders for certain baseball-related products from certain
customers are not required to be paid until early spring. These
extended terms increase the risk of collectibility of accounts
receivable. An increasing number of customers are on automatic
replenishment systems; therefore, more orders are received on a
ship-at-once basis. This change has resulted in shipments to the
customer closer to the time the products are actually sold. This
trend has and may continue to have the effect of shifting the
seasonality and quarterly results of the Company with higher
inventory and debt levels required to meet orders for immediate
delivery. The sell-through of baseball-related products also
affects the amount of inventory held by customers at the end of
the season which is carried over by the customer for sale in the
next baseball season. Customers typically adjust their pre-season
orders for the next baseball season to account for the
level of inventory carried over from the preceding <PAGE>baseball
season. Football equipment and team uniforms are both shipped by
the Company and sold by retailers primarily in the period between
March 1 and September 30. Hockey equipment and uniforms are
shipped by the Company primarily in the period from May 1 to
October 31. Basketballs and team uniforms generally are shipped
and sold throughout the year. Because the Company's sales of
baseball-related products exceed those of its other products,
Rawlings' business is seasonal, with its highest net revenues and
profitability recognized between November 1 and April 30.
Year 2000 Readiness Disclosure
Many software applications, hardware and equipment and chip
systems identify dates using only the last two digits of the
year. These products may be unable to distinguish between dates
in the Year 2000 and dates in the Year 1900. That inability
(referred to as the "Year 2000" issue), if not addressed, could
cause applications, equipment or systems to fail or provide
incorrect information after December 31, 1999, or when using
dates after December 31, 1999. This in turn could have an
adverse effect on the Company due to the Company's direct
dependence on its own applications, equipment and systems and
indirect dependence on those of other entities with which the
Company must interact.
The Company has initiated a comprehensive program to replace
its computer systems and applications with a Year 2000 compliant
enterprise-wide system. To date, all of the Company's mission
critical processes have been successfully integrated to the new
system and implementation of the new system is substantially
complete. The Company has incurred capital expenditures,
including hardware, software, outside consultants and other
expenses, of approximately $2.9 million on its new enterprise-wide
system and expects that full implementation of the system
may require an additional $100,000 over the next year. In
addition, the Company incurred approximately $300,000 in software
selection and training costs that have been expensed since the
beginning of fiscal 1997.
The Company also faces Year 2000 problems relating to
embedded computer chips which control equipment used within the
business such as telephone equipment and a limited amount of
machinery. The Company has completed assessments of equipment
considered most susceptible to Year 2000 issues and repair or
replacement has been arranged for equipment found to have Year
2000 problems. The process of assessing the remaining equipment
remains ongoing.
The Company has formally communicated with its major vendors
and suppliers to determine the extent to which the Company may be
vulnerable to those third parties' failure to remediate their own
Year 2000 issues. The first phase, which included sending Year
2000 surveys and questionnaires to customers and vendors is
complete and the response evaluation phase is currently in
progress. The Company has not had sufficient response from
vendors <PAGE>to provide an estimate of the potential impact of
non-compliance on the part of such vendors.
If a material disruption of the Company's business were to
occur it could have a material adverse impact on the Company's
results of operations, liquidity and financial condition. In an
effort to reduce the risk of such impact, management is currently
developing contingency plans which include, but are not limited
to, evaluating alternative vendors who are Year 2000 compliant
and evaluating inventory management plans. It is too early to
determine to what extent, if any, these contingency plans will
have to be implemented. Although the Company does not expect to
be materially impacted by the external environment, such future
events cannot be known with certainty. Furthermore, the
Company's estimates of future costs and completion dates are
based on presently available information and will be updated, as
additional information becomes available.
Readers are cautioned that forward-looking statements
contained in this Year 2000 Readiness Disclosure section should
be read in conjunction with the Company's cautionary notice
regarding forward-looking statements located in the first
paragraph of this Item 2.
Liquidity and Capital Resources
Working capital increased $4,849,000 during the nine months
ended May 31, 1999 primarily the result of the seasonal increase
in accounts receivable and inventories partially offset by higher
accounts payable and accrued liabilities. The current accounts
receivable and inventory levels maintained by the Company are
higher than what management believes is optimal. Management is
continuing to evaluate its existing terms and dating programs in
order to reduce the accounts receivable balance in the future.
Inventory reduction programs and improved inventory management
practices are also being initiated to reduce inventory levels and
improve cash flow.
Cash flows provided by operating activities for the nine
months ended May 31, 1999 were $270,000 compared to the
$10,687,000 used by operations in the comparable prior year
period. This improvement is primarily the result of smaller
increases in accounts receivable and inventory, partially offset
by a larger increase in accounts payable.
Capital expenditures were $1,729,000 for the nine months
ended May 31, 1999 compared to $2,523,000 in the comparable prior
year period.
Investing activities during the nine months ended May 31,
1998 included $14,098,000 use of cash related to the acquisition
of the Vic hockey business.
<PAGE>
The Company incurred additional net borrowings, primarily
related to seasonal working capital needs, of $1,654,000 in the
nine months ended May 31, 1999. This resulted in total debt as
of May 31, 1999 of $58,763,000, which is $511,000, or .9 percent,
lower than the total debt as of May 31, 1998. The decrease in
total debt from last year is due primarily to lower working
capital at May 31, 1999 compared to May 31, 1998.
As of May 31, 1999 the Company was not in compliance with
its debt covenants to maintain a ratio of average debt to
adjusted EBITDA of 5.50 to 1.0 and the fixed charge ratio of 1.50
to 1.0. The bank group has waived these debt compliance
requirements as of May 31, 1999 by entering into the third
amendment of the credit facility. The Company and the bank group
have also amended the loan agreement to convert the facility to
an asset based lending program based on a percentage of accounts
receivable, inventories and property, plant and equipment. The
Company believes it will successfully negotiate a new long-term
loan agreement and new covenants during the fourth quarter and
accordingly it has classified the debt as long-term on the
balance sheet as of May 31, 1999. Management believes that the
amended loan agreement is sufficient to finance its existing and
future operations.
Cautionary Factors That May Affect Future Results or the
Financial Condition of the Business.
The factors that could cause the Company's actual results,
financial condition or business to differ materially from any
projections by the Company include, but are not limited to,
quarterly fluctuations in results, ongoing customer changes in
buying patterns, retail sell rates for the Company's products,
demand and performance of the Company's new products which may
result in more or less orders than those anticipated, seasonal
demand volatility (discussed under Seasonality, above) and the
impact of competitive products and pricing. In addition, other
risks and uncertainties are detailed from time to time in the
Company's SEC reports, including the report on Form 10-K for the
year ended August 31, 1998.
Item 3. Quantitative and Qualitative Disclosure about Market
Risk
The Company has no material sensitivity to changes in
foreign currency exchange rates or changes in interest rates.
Part II.
OTHER INFORMATION
<PAGE>
Item 1. Legal Proceedings
None.
Item 2 Changes in Securities and Use of Proceeds
None.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amendment No. 2 to Amended and Restated
Credit Agreement by and between the
Company and the First National Bank of
Chicago, as agent and certain lenders
named therein, dated as of February 28,
1999.
10.2 Amendment No. 3 to Amended and Restated
Credit Agreement by and between the
Company and the First National Bank of
Chicago, as agent and certain lenders
named therein, dated as of July 14, 1999.
10.3 Pledge and Security Agreement by and
between the Company and the First National
Bank of Chicago, as agent and certain
lenders named therein, dated as of July
14, 1999.
10.4 Stock Pledge Agreement by and between the
Company and the First National Bank of
Chicago, as agent and certain lenders
named therein, dated as of July 14, 1999.
10.5 Intellectual Property Assignment of
Security Interest by and between the
Company and the First National Bank of
Chicago, as agent and certain lenders
named therein, dated as of July 14, 1999.
27 Financial Data Schedule.
<PAGE>
(b) Reports on Form 8-K
Form 8-K filed on April 30, 1999.
<PAGE>
SIGNATURES
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.
RAWLINGS SPORTING GOODS COMPANY, INC.
Date: July 14, 1999 /s/ STEPHEN M. O'HARA
Stephen M. O'Hara
Chairman of the Board and
Chief Executive Officer
Date: July 14, 1999 /s/ REXFORD K. PETERSON
Rexford K. Peterson
Chief Financial Officer
AMENDMENT NO. 2 TO AMENDED AND RESTATED CREDIT AGREEMENT
This Amendment No. 2 to Amended and Restated Credit Agreement
(this "Amendment Agreement") is entered into as of February 28,
1999 by and among Rawlings Sporting Goods Company, Inc. (the
"Borrower"), the undersigned lenders (the "Lenders") and The First
National Bank of Chicago, as agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders and the Agent entered into
that certain Amended and Restated Credit Agreement dated as of
September 12, 1997 and amended as of May 31, 1998 (the "Credit
Agreement"); and
WHEREAS, the Borrower, the Lenders and the Agent have agreed
to amend the Credit Agreement on the terms and conditions herein
set forth.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to such
terms in the Credit Agreement, as amended hereby.
2. AMENDMENTS TO CREDIT AGREEMENT.
2.1 Article I of the Credit Agreement is hereby amended by
(a) adding the following definitions in the proper alphabetical
order:
"Adjusted EBITDA" means (a) EBITDA, PLUS (b) charges
taken by the Borrower in its 1998 Fiscal Year in connection
with (i) inventory reserves in connection with aluminum
baseball bats and (ii) certain environmental cleanup matters,
PLUS (c) for the purposes of calculations with respect to its
1999 Fiscal Year, restructuring charges taken in the
Borrower's 1999 Fiscal Year in an amount not to exceed
$2,000,000, LESS any amount of the cash portion of such
charges in excess of $500,000.
"Applicable Base Rate Margin" means, subject to the last
sentence of this definition, for any period, the applicable of
the following percentages in effect with respect to such
period as the Average Debt to Adjusted EBITDA Ratio of the
Borrower shall fall within the indicated ranges:
<PAGE>
AVERAGE DEBT TO APPLICABLE BASE
ADJUSTED EBITDA RATIO RATE MARGIN
Greater than or Equal to 5.0:1.0 1.25%
Greater than or Equal to 4.0:1.0 but
Less than 5.0:1.0 1.00%
Greater than or Equal to 3.0:1.0 but
Less than 4.0:1.0 0.75%
Greater than or Equal to 2.5:1.0 but
Less than 3.0:1.0 0.50%
Greater than or Equal to 2.0:1.0 but
Less than 2.5:1.0 0.25%
Less than 2.0:1.0 0%
The Average Debt to Adjusted EBITDA Ratio shall be calculated
by the Borrower as of the end of each Fiscal Quarter,
commencing with the Fiscal Quarter ending February 28, 1999,
and shall be reported to the Agent pursuant to a certificate
executed by an Authorized Officer of the Borrower and
delivered in connection with Section 6.1(d) hereof. The
Applicable Base Rate Margin shall be adjusted, if necessary,
beginning on the third Business Day after the delivery of such
certificate; provided, that if such certificate, together with
the financial statements (in the form required by Section
6.1(a) or (b)) to which such certificate relates, is not
delivered to the Agent by the date on which the related
financial statements are due to be delivered to the Agent
pursuant to Section 6.1(a) or (b), as applicable, then the
Applicable Base Rate Margin shall be equal to 1.25% until the
next adjustment date. Until adjusted as provided above, the
Applicable Base Rate Margin shall be equal to 1.25%.
"Applicable Commitment Fee Percentage" means, subject to
the last sentence of this definition, for any period, the
applicable of the following percentages in effect with respect
to such period as the Average Debt to Adjusted EBITDA Ratio of
the Borrower shall fall within the indicated ranges:
AVERAGE DEBT TO APPLICABLE COMMITMENT
ADJUSTED EBITDA RATIO FEE PERCENTAGE
Greater than or Equal to 4.0:1.0 0.50%
Greater than or Equal to 3.0:1.0 but
Less than 4.0:1.0 0.375%
Greater than or Equal to 2.5:1.0 but
Less than 3.0:1.0 0.35%
Less than 2.5:1.0 0.30%
The Average Debt to Adjusted EBITDA Ratio shall be calculated
by the Borrower as of the end of each Fiscal Quarter,
commencing with the Fiscal Quarter ending February 28, 1999,
and shall be reported to the Agent pursuant to a certificate
executed by an Authorized Officer of the Borrower and
delivered in connection with Section 6.1(d) hereof. The
Applicable Commitment Fee Percentage shall be adjusted, if
necessary, beginning on the third Business Day after the
delivery of such certificate; provided, that if such
certificate, together with the financial statements (in the
form required by Section 6.1(a) or (b)) to which such
certificate relates, is not delivered to the Agent by the date
on which the related financial statements are due to be
delivered to the Agent pursuant to Section 6.1(a) or (b), as
applicable, then the Applicable Commitment Fee Percentage
shall be equal to 0.50% until the next adjustment <PAGE>date. Until
adjusted as provided above, the Applicable Commitment Fee
Percentage shall be equal to .50%.
"Applicable Eurodollar Margin" means, subject to the last
sentence of this definition, for any period, the applicable of
the following percentages in effect with respect to such
period as the Average Debt to Adjusted EBITDA Ratio of the
Borrower shall fall within the indicated ranges:
AVERAGE DEBT TO APPLICABLE
ADJUSTED EBITDA RATIO EURODOLLAR MARGIN
Greater than or Equal to 5.0:1.0 2.25%
Greater than or Equal to 4.0:1.0 but
Less than 5.0:1.0 2.00%
Greater than or Equal to 3.0:1.0 but
Less than 4.0:1.0 1.75%
Greater than or Equal to 2.5:1.0 but
Less than 3.0:1.0 1.50%
Greater than or Equal to 2.0:1.0 but
Less than 2.5:1.0 1.25%
Less than 2.0:1.0 1.00%
The Average Debt to Adjusted EBITDA Ratio shall be calculated
by the Borrower as of the end of each Fiscal Quarter,
commencing with the Fiscal Quarter ending February 28, 1999,
and shall be reported to the Agent pursuant to a certificate
executed by an Authorized Officer of the Borrower and
delivered in connection with Section 6.1(d) hereof. The
Applicable Eurodollar Margin shall be adjusted, if necessary,
with respect to each Interest Period beginning on or after the
third Business Day after the delivery of such certificate;
provided, that if such certificate, together with the
financial statements (in the form required by Section 6.1(a)
or (b)) to which such certificate relates, is not delivered to
the Agent by the date on which the related financial
statements are due to be delivered to the Agent pursuant to
Section 6.1(a) or (b), as applicable, then the Applicable
Eurodollar Margin shall be equal to 2.25% until the next
adjustment date. Until adjusted as provided above, the
Applicable Eurodollar Margin shall be deemed equal to 2.25%.
"Average Debt to Adjusted EBITDA Ratio" means, for any
applicable computation period, the ratio of (a) (i) the sum of
the consolidated Debt of the Borrower as at the end of each
Fiscal Quarter in the period of four Fiscal Quarters ending on
the date of determination, DIVIDED by (ii) four, to (b)
Adjusted EBITDA.
"Debt" of a Person means such Person's Indebtedness other
than such person's (a) Rate Hedging Obligations and (b)
Obligations for which such Person is then liable pursuant to
or in respect of a Standby Letter of Credit and the face
amount of any other Letter of Credit which is not a trade or
commercial Letter of Credit.
"Year-End Debt to Adjusted EBITDA Ratio" means, as of the
end of each Fiscal Year, the ratio of (a) the Borrower's
consolidated Debt as of the end of such Fiscal Year to (b)
Adjusted EBITDA for the Fiscal Year then ended.
<PAGE>
(b) deleting the definition of "Applicable Margin" in its
entirety, (c) amending the definitions of "Debt to Capitalization
Ratio" and "Fixed Charges" by deleting each reference therein to
"Indebtedness" and replacing it with a reference to "Debt" and (d)
amending the definition of "Fixed Charge Coverage Ratio" by
deleting the reference therein to "EBITDA" and replacing it with a
reference to "Adjusted EBITDA".
2.3 Article II of the Credit Agreement is hereby amended by
deleting the phrase "a commitment fee of thirty basis points (.30%)
per annum" from Section 2.4(a) and inserting in lieu thereof the
phrase "a per annum rate equal to the Applicable Commitment Fee
Percentage".
2.4 Article VI of the Credit Agreement is hereby amended as
follows:
(a) Section 6.20 is hereby amended by deleting the
reference to "$3,000,000" and replacing it with a reference to
"$4,000,000".
(b) Section 6.28 is hereby amended by (i) deleting
Section 6.28.3 in its entirety and replacing it with the following:
6.28.3. FIXED CHARGE COVERAGE RATIO. As of the
end of each Fiscal Quarter, maintain a Fixed Charge
Coverage Ratio for the four Fiscal Quarters then ended of
not less than (a) 1.50 to 1.0 as of the last day of the
Fiscal Quarters ended February 28, 1999, May 31, 1999 and
August 31, 1999 and (b) 1.75 to 1.0 as of the last day of
each Fiscal Quarter thereafter.
and (ii) adding Sections 6.28.4 and 6.28.5 as follows:
6.28.4. AVERAGE DEBT TO ADJUSTED EBITDA RATIO.
Maintain an Average Debt to Adjusted EBITDA Ratio as of
the end of each Fiscal Quarter of not greater than the
following:
PERIOD MAXIMUM RATIO
Fiscal Year 1999 5.5:1.0
Fiscal Year 2000 5.0:1.0
Fiscal Year 2001 4.5:1.0
Fiscal Year 2002 4.0:1.0
6.28.5. YEAR-END DEBT TO ADJUSTED EBITDA RATIO.
Maintain a Year-End Debt to Adjusted EBITDA Ratio as of
the end of each Fiscal Year of not greater than the
following:
MEASUREMENT DATE MAXIMUM RATIO
Fiscal Year End 1999 3.95:1.0
Fiscal Year End 2000 3.50:1.0
Fiscal Year End 2001 3.00:1.0
Fiscal Year End 2002 2.50:1.0
<PAGE>
2.5 Exhibit C to the Credit Agreement is hereby amended and
restated in its entirety in the form of the Exhibit C attached as
Annex I hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
3.1 The Borrower represents and warrants that the execution,
delivery and performance by the Borrower of this Amendment
Agreement have been duly authorized by all necessary corporate
action and that this Amendment Agreement is a legal, valid and
binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms, except as the enforcement
thereof may be subject to (a) the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally and (b) general principles of
equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
3.2 The Borrower hereby certifies that each of the
representations and warranties contained in the Credit Agreement is
true and correct in all material respects on and as of the date
hereof as if made on the date hereof, except to the extent that any
such representation or warranty is stated to relate solely to an
earlier date, in which case such representation or warranty shall
be true and correct on and as of such earlier date.
4. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT.
4.1 Upon the effectiveness of this Amendment Agreement, each
reference in the Credit Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import and each reference to
the Credit Agreement in each Loan Document shall mean and be a
reference to the Credit Agreement as amended hereby.
4.2 Except as specifically amended above, all of the terms,
conditions and covenants of the Credit Agreement and the other Loan
Documents shall remain unaltered and in full force and effect and
shall be binding upon the Borrower in all respects and are hereby
ratified and confirmed.
4.3 The execution, delivery and effectiveness of this
Amendment Agreement shall not operate as a waiver of (a) any right,
power or remedy of any Lender or the Agent under the Credit
Agreement or any of the Loan Documents, or (b) any Default or
Unmatured Default under the Credit Agreement.
5. COSTS AND EXPENSES. The Borrower agrees to pay on demand all
reasonable fees and out-of-pocket expenses of counsel for the Agent
in connection with the preparation, execution and delivery of this
Amendment Agreement.
6. CHOICE OF LAW. THIS AMENDMENT AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF
THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE
TO NATIONAL BANKS.
<PAGE>
7. EXECUTION IN COUNTERPARTS; EFFECTIVENESS. This Amendment
Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. This
Amendment Agreement shall become effective as of the date first
above written; provided, that (a) the Agent has received
counterparts of this Amendment Agreement duly executed by the
Borrower and the Required Lenders and (b) the Borrower has paid the
Agent, on behalf of each Lender executing this Amendment and
delivering it to the Agent by April 5, 1999, an amendment fee equal
to .10% of such Lender's Commitment.
8. HEADINGS. Section headings in this Amendment Agreement are
included herein for convenience of reference only and shall not
constitute a part of this Amendment Agreement for any other
purposes.
[signature pages to follow]
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders
have executed this Amendment Agreement as of the date first above
written.
RAWLINGS SPORTING GOODS COMPANY, INC.
By: /s/ Rexford K. Peterson
Title: Interim Chief Financial Officer
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ Stephen C. Price
Title: First Vice President
THE BANK OF NEW YORK
By: /s/ David Shedd
Title: Vice President
COMERICA BANK
By: /s/ Jeffrey E. Peck
Title: Vice President
<PAGE>
MERCANTILE BANK NATIONAL ASSOCIATION
By: /s/ Stephen M. Reese
Title: Senior Vice President
NATIONSBANK, N.A.
By: /s/ Kent M. Schmelder
Title: Senior Vice President
AMENDMENT NO. 3 TO AMENDED AND RESTATED CREDIT AGREEMENT
This Amendment No. 3 to Amended and Restated Credit
Agreement (this "Amendment Agreement") is entered into as of July
14, 1999 by and among Rawlings Sporting Goods Company, Inc. (the
"Borrower"), the undersigned lenders (the "Lenders") and The
First National Bank of Chicago, as agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders and the Agent entered
into that certain Amended and Restated Credit Agreement dated as
of September 12, 1997 and amended as of May 31, 1998 and February
28, 1999 (the "Credit Agreement"); and
WHEREAS, a Default exists under Sections 6.28.3 and 6.28.4
for the Borrower's Fiscal Quarter ending May 31, 1999 (the
"Subject Defaults"); and
WHEREAS, the Borrower, the Lenders and the Agent have agreed
to waive the Subject Defaults and amend the Credit Agreement on
the terms and conditions herein set forth.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed
to such terms in the Credit Agreement, as amended hereby.
2. AMENDMENTS TO CREDIT AGREEMENT.
a. Article I of the Credit Agreement is hereby amended by
adding the following definitions in the proper
alphabetical order:
"Borrower Intellectual Property Assignment" means that
certain Intellectual Property Assignment of Security
Interest, dated as of July 14, 1999, by and between Borrower
and the Agent, as the same may be amended, supplemented or
otherwise modified from time to time.
"Borrower Mortgage" means, collectively, the mortgages,
deeds of trust and similar instruments from time to time
duly executed and delivered by the Borrower in favor of the
Agent, on behalf of the Lenders, pledging real property of
the Borrower, as the same may be amended, supplemented or
otherwise modified from time to time.
<PAGE>
"Borrower Pledge Agreement" means that certain Pledge
Agreement, dated as of July 14, 1999, duly executed and
delivered by the Borrower pledging certain stock of its
Subsidiaries to the Agent, on behalf of the Lenders, as the
same may be amended, supplemented or otherwise modified from
time to time.
"Borrower Security Agreement" means that certain Pledge and
Security Agreement, dated as of July 14, 1999, duly executed
and delivered by the Borrower in favor of the Agent, on
behalf of the Lenders, as the same may be amended,
supplemented or otherwise modified from time to time.
"Borrower Security Documents" means the Borrower Security
Agreement, the Borrower Mortgage, the Borrower Pledge
Agreement, the Borrower Intellectual Property Assignment
and any other agreements, documents or instruments at any
time securing or guaranteeing the Obligations.
"Borrowing Base" means, at any time, an amount equal to the
sum of (a) 80% of the book value of Borrower's accounts
receivable, net of allowance, (b) 50% of the book value of
Borrower's inventory, and (c) 30% of the book value of
Borrower's net property, plant and equipment, in each case
determined from a consolidated balance sheet of the Borrower
prepared in accordance with Agreement Accounting Principles.
"Subsidiary Security Documents" means, at any time, all
agreements, documents and instruments from time to time duly
executed and delivered to the Agent, on behalf of the
Lenders, by Rawlings Canada, Incorporated securing or
guaranteeing the Obligations.
b. The definition of "Loan Documents" set forth in Article
I of the Credit Agreement is hereby amended to insert
", Borrower Security Documents, Subsidiary Security
Documents" immediately after the term "Reimbursement
Agreements."
2.3 Section 2.1(a) of the Credit Agreement is hereby
amended by adding at the end thereof the following:
"Notwithstanding the foregoing or Section 2.20.1, no
additional Advances under this Section 2.1(a) or Facility
Letters of Credit under Section 2.20.1 shall be permitted
after July 14, 1999 until the Lenders have received a
borrowing base certificate in accordance with Section 6.1(m)
for the month of June, 1999, and thereafter the aggregate
principal balance of all Loans plus the aggregate Facility
Letter of Credit Obligations outstanding at any time during
any calendar month, after giving effect to any Advances or
Facility Letters of Credit at the time <PAGE>requested by the
Borrower under this Section 2.1(a) or Section 2.20.1, shall
not be permitted to exceed the Borrowing Base as in effect
at the end of the calendar month for which the most recent
borrowing base certificate has been delivered to the Lenders
pursuant to Section 6.1(m)."
2.4 Clause (iii) of Section 2.20.1 of the Credit Agreement
is hereby amended by adding immediately after the phrase
"Facility Letter of Credit Sublimit" appearing therein the phrase
"or the limitations set forth in the last sentence of Section
2.1(a)".
2.5 Section 2.3 of the Credit Agreement is hereby amended
by adding at the end thereof ", provided that on and after July
14, 1999, the Borrower shall not be permitted to incur Eurodollar
Advances, to convert Floating Rate Advances into Eurodollar
Advances or continue any then outstanding Eurodollar Advances
beyond the Interest Periods then in effect.
2.6 Section 2.7(a) of the Credit Agreement is hereby
amended by deleting the date "September 1, 1999" appearing
therein and substituting in lieu thereof the date "July 14,
1999".
2.7 Section 2.20.6 is hereby amended by deleting the
percentage ".50%" appearing therein and substituting in lieu
thereof the percentage "1.00%."
2.8 Section 6.1(a) of the Credit Agreement is hereby
amended to add at the end thereof the following:
"In addition to the foregoing, not later than September 30 ,1999
the Borrower shall deliver to the Agent and the Lenders its
unaudited balance sheet and related statements of income and cash
flows for its Fiscal Year ended August 31, 1999, prepared in
accordance with Agreement Accounting Principles on a consolidated
and consolidating basis, and, notwithstanding Section 7.4 to the
contrary, failure to deliver such statements by such date shall
constitute an immediate Default without any requirement of notice
to Borrower or passage of time after such date."
2.9 Section 6.1 of the Credit Agreement is hereby amended
to add at the end thereof the following:
"(m) As soon as practicable and in any event not later than
15 days after the end of each calendar month, commencing
with the month of June, 1999, a certificate in the form of
Exhibit A to Amendment No. 3 to the Agreement signed by the
Borrower's chief financial officer setting forth the
calculation of the Borrowing Base as of the end of such
month and the Borrower's compliance with Section 6.32."
<PAGE>
2.10 Article VI of the Credit Agreement shall be amended
hereby by adding at the end thereof the following additional
Sections:
"6.31. BANK ACCOUNTS. The Borrower will not, nor permit
its Subsidiaries to (i) permit remittances of accounts or
other customer receivables to be made other than to
lockboxes maintained with the Agent at its main office in
Chicago, Illinois, or (ii) maintain any deposit accounts,
cash or Investments with any Person or at any location other
than with the Agent at its main office in Chicago, Illinois,
provided that the Borrower may maintain deposit accounts
with local banks in the ordinary course of business and
consistent with past practice as long as the aggregate
balance in all such accounts does not exceed at any time (x)
$100,000 for accounts maintained in the United States, and
(y) $750,000 for accounts maintained in Canada.
6.32 BORROWING BASE. On and after delivery of the first
borrowing base certificate required by Section 6.1(m), the
Borrower will not cause or permit the aggregate outstanding
principal balance of the Loans plus the aggregate
outstanding amount of all Facility Letter of Credit
Obligations at any time to exceed the Borrowing Base as in
effect at the end of the calendar month for which the most
recent such certificate has been delivered to the Lenders
pursuant to Section 6.1(m).
6.33 ADDITIONAL COLLATERAL. As soon as practicable and in
any event not later than July 30, 1999, the Borrower shall
have (i) pledged to the Agent, for the benefit of the Agent
and Lenders, a first and prior lien and security interest in
all right, title and interest of the Borrower in and to all
real property owned by it, including, without limitation,
its facilities located in Licking, Missouri; Dolgeville, New
York; Tullahoma, Tennessee; and Springfield, Missouri, all
in form and substance satisfactory to Agent, (ii) caused
Rawlings Canada, Incorporated to guaranty the Obligations
and to secure such guaranty granted (y) to the Agent, for
the benefit of the Agent and Lenders, a first and prior
mortgage and security interest in all real and personal
property of Rawlings Canada, Incorporated located in the
Province of Ontario and (z) to a financial institution
acceptable to Agent, as trustee for the benefit of the Agent
and the Lenders a first and prior moveable and immovable
hypothec in all moveable and immovable property of Rawlings
Canada, Incorporated located in the Province of Quebec,
including, without limitation, its facilities in
Daveluyville, Quebec, and (iii) in connection with the
foregoing, delivered to the Agent such additional documents,
instruments and agreements, including certified directors
resolutions, title policies, surveys and counsel opinions,
requested by Agent and as are customary in connection with
obtaining and maintaining such security in all such
property .
<PAGE>
6.34 LANDLORD WAIVERS. The Borrower shall use its best
efforts to deliver to the Agent for each location leased by
the Borrower and at which the Borrower maintains inventory
or equipment, an agreement with the landlord of such
premises, in form and substance satisfactory to Agent,
acknowledging Agent's Lien on Borrower's property,
subordinating such landlord's rent claims to such Lien, and
permitting Agent access to such premises after the
occurrence of a Default for purposes of enforcing such Lien.
6.35 RAWLINGS MISSOURI. Borrower shall not permit Rawlings
Sporting Goods Company of Missouri, a Missouri corporation,
to engage in any business, own any property or incur or
suffer to exist any Indebtedness."
2.11 Section 7.4 of the Credit Agreement shall be amended by
inserting at the end thereof ", or the occurrence of any
'Default' as defined in any Loan Document other than this
Agreement."
2.12 The first sentence of Section 9.7 of the Credit
Agreement shall be amended by restating the same in full as
follows:
"The Borrower shall reimburse the Agent for any reasonable
costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for
the Agent, which attorneys may be employees of the Agent,
and customary charges of the Agent's internal auditors) paid
or incurred by the Agent in connection with the preparation,
negotiation, execution, delivery, review, amendment,
modification and administration (including any inspection of
books and records pursuant to Section 6.9) of the Loan
Documents."
3. WAIVER. Upon the effectiveness of this Amendment Agreement,
the Agent and the Lenders hereby waive the Subject Defaults.
Such waiver shall extend solely to the Subject Defaults and
shall not be deemed a waiver of any subsequent breach of
Sections 6.28.3 or 6.28.4 for financial reporting periods
occurring after May 31, 1999.
4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
a. The Borrower represents and warrants that the
execution, delivery and performance by the Borrower of
this Amendment Agreement have been duly authorized by
all necessary corporate action and that this Amendment
Agreement is a legal, valid and binding obligation of
the Borrower, enforceable against the Borrower in
accordance with its terms, except as the enforcement
thereof may be subject to (a) the effect of any
applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights
generally and (b) general principles of equity
<PAGE>
(regardless of whether such enforcement is sought in a
proceeding in equity or at law).
b. The Borrower hereby certifies that, after giving effect
to this Amendment Agreement, each of the
representations and warranties contained in the Credit
Agreement is true and correct in all material respects
on and as of the date hereof as if made on the date
hereof, except to the extent that any such
representation or warranty is stated to relate solely
to an earlier date, in which case such representation
or warranty shall be true and correct on and as of such
earlier date, and no Default or Unmatured Default
exists and is continuing.
5. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT.
a. Upon the effectiveness of this Amendment Agreement,
each reference in the Credit Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of
like import and each reference to the Credit Agreement
in each Loan Document shall mean and be a reference to
the Credit Agreement as amended hereby.
b. Except as specifically amended above, all of the terms,
conditions and covenants of the Credit Agreement and
the other Loan Documents shall remain unaltered and in
full force and effect and shall be binding upon the
Borrower in all respects and are hereby ratified and
confirmed.
c. Except as expressly set forth herein, the execution,
delivery and effectiveness of this Amendment Agreement
shall not operate as a waiver of (a) any right, power
or remedy of any Lender or the Agent under the Credit
Agreement or any of the Loan Documents, or (b) any
Default or Unmatured Default under the Credit
Agreement.
6. COSTS AND EXPENSES. The Borrower agrees to pay on demand
all reasonable fees and out-of-pocket expenses of counsel
for the Agent in connection with the preparation, execution
and delivery of this Amendment Agreement.
7. CHOICE OF LAW. THIS AMENDMENT AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF
CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
8. EXECUTION IN COUNTERPARTS; EFFECTIVENESS. This Amendment
Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the
same agreement. This Amendment Agreement shall become
effective as of the date first above written; provided, that
Borrower shall have delivered to Agent, in form and
substance satisfactory to Agent:
(a) counterparts of this Amendment Agreement duly executed
by the Borrower and <PAGE>the Lenders;
(b) the Borrower Security Agreements (other than the
Borrower Mortgage) in form and substance satisfactory to
Agent, together with such UCC financing statements as may be
requested by Agent and all stock certificates pledged under
the Borrower Pledge Agreement with appropriate undated stock
powers endorsed in blank;
(c) certified copies of its Board of Directors resolutions
authorizing this Amendment Agreement and the Borrower
Security Documents;
(d) a certificate of its chief financial officer stating
that, after giving effect to the Amendment Agreement, no
Default or Unmatured Default exists;
(e) a written opinion of counsel to Borrower regarding the
Amendment Agreement and Borrower Security Documents; and
(f) the Borrower shall have paid all legal fees and expenses
of the Agent invoiced to Borrower.
9. HEADINGS. Section headings in this Amendment Agreement are
included herein for convenience of reference only and shall
not constitute a part of this Amendment Agreement for any
other purposes.
[signature pages to follow]
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders
have executed this Amendment Agreement as of the date first above
written.
RAWLINGS SPORTING
GOODS COMPANY, INC.
By: /s/ Rexford K. Peterson
Title: Chief Financial Officer
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ Nathan Block
Title: First Vice President
THE BANK OF NEW YORK
By: /s/ David Shedd
Title: Vice President
COMERICA BANK
By: /s/ Jeffrey Peck
Title: Vice President
MERCANTILE BANK NATIONAL
ASSOCIATION
<PAGE>
By: /s/ David Dains
Title: Vice President
NATIONSBANK, N.A.
By: /s/ Keith Schmelder
Title: Senior Vice President
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement is made as of July 14,
1999 by and between Rawlings Sporting Goods Company, Inc., a
Delaware corporation (the "Borrower"), and THE FIRST NATIONAL
BANK OF CHICAGO, as Agent (as hereinafter defined) for the
Lenders (as hereinafter defined).
R E C I T A L S:
a. Pursuant to the Credit Agreement (as hereinafter
defined) the Lenders have agreed to make certain loans
and other financial accommodations to the Borrower; and
b. As a condition to further extensions of credit under
the Credit Agreement, the Agent and the Lenders have
requested that the Borrower grant to the Agent, on
behalf of the Agent and the Lenders, a security
interest in the Collateral (as hereinafter defined);
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
i. DEFINITIONS.
As used in this Pledge and Security Agreement:
"Accounts" means presently existing and hereafter
arising or acquired accounts receivable, notes, drafts,
acceptances, choses in action and other forms of obligations and
receivables relating in any way or arising from the sale of goods
or the rendering of services by the Borrower or howsoever
otherwise arising, including the right to payment of any interest
or finance charges with respect thereto and all proceeds of
insurance with respect thereto, together with all of the
Borrower's rights as an unpaid vendor, all pledged assets and
letters of credit, guaranty claims, liens and security interests
held by or granted to the Borrower to secure payment of any
Accounts and all books, customer lists, ledgers, records and
files (whether written or stored electronically) relating to any
of the foregoing.
"Agent" means The First National Bank of Chicago, a
national banking association, as agent for the Lenders pursuant
to Section 10.1 of the Credit Agreement, and the successors and
assigns thereof as agent for the Lenders.
"Borrower" means Rawling's Sporting Goods Company,
Inc., a Delaware corporation, and its successors.
<PAGE>
"Chattel Paper" means any writing or group of writings
which evidences both a monetary obligation and a security
interest in or a lease of specific goods.
"Collateral" means all personal property, wherever
located, in which the Borrower now has or hereafter acquires any
right or interest, and the proceeds, insurance proceeds, unearned
insurance premiums and products thereof and documents of title
evidencing or issued with respect thereto, including, without
limitation, all Accounts, Chattel Paper, Documents, Equipment,
Fixtures, General Intangibles, Instruments, Inventory, Investment
Property, Pledged Deposits, Stock Rights, contract rights,
insurance policies, cash, bank accounts, and special collateral
accounts, and all books and records, customer lists, credit
files, computer files, programs, printouts and other computer
materials and records related to any of the foregoing.
"Credit Agreement" means that certain Amended and
Restated Credit Agreement dated as of September 12, 1997, among
the Borrower, the Agent and the Lenders, as heretofore or
hereafter amended, renewed, modified or supplemented from time to
time.
"Default" means any one or more of the events described
in Section 5 hereof.
"Default Rate" means the rate of interest which may be
due and owing from time to time on any Loan and payable by the
Company under the Credit Agreement pursuant to Section 2.11 of
such agreement.
"Documents" means all documents of title and goods
evidenced thereby, including, without limitation, all bills of
lading, dock warrants, dock receipts, warehouse receipts and
orders for the delivery of goods, and also any other document
which in the regular course of business or financing is treated
as adequately evidencing that the person in possession of it is
entitled to receive, hold and dispose of the document and the
goods it covers.
"Equipment" means all equipment, machinery, furniture
and goods used or useable by the Borrower in its business and all
other tangible personal property (other than Inventory), and all
accessions and additions thereto, including, without limitation,
all Fixtures.
"Fixtures" means all equipment, machinery, furniture
and goods of the Borrower which have been attached to real
property in such a manner that their removal would cause damage
to the realty and which have therefore taken on the character of
real property, including, without limitation, all trade fixtures.
"General Intangibles" means all intangible personal
property including, without limitation, all general intangibles,
contract rights, rights to receive payments of money, choses in
action, judgments, tax refunds and tax refund claims, copyrights,
copyright licenses, patents, patent licenses, trademarks,
trademark licenses, trade names, trade secrets, drawings or plans
with respect to trade secrets, copyrights, licenses, franchises,
leasehold interests in real or personal property, rights to
receive rentals of real or personal property and guarantee
claims.
<PAGE>
"Indemnitee" means any Person entitled to be
indemnified by the Borrower pursuant to Section 8 hereof.
"Instruments" means all negotiable instruments (as
defined in Section 3104 of the Uniform Commercial Code),
certificated and uncertificated securities and any replacements
therefor and Stock Rights related thereto and other writings
which evidence a right to the payment of money and which are not
themselves security agreements or leases and are of a type which
in the ordinary course of business are transferred by delivery
with any necessary endorsement or assignment, including, without
limitation, all checks, drafts, notes, bonds, debentures,
government securities, certificates of deposit, letters of
credit, preferred and common stock, options and warrants in which
the Borrower now has or hereafter acquires any rights.
"Inventory" means all inventory, raw materials,
consumable supplies, work in process, finished goods, returned or
repossessed goods, goods held for sale or lease or furnished or
to be furnished under contracts of service and goods released to
the Borrower or to third parties under trust receipts or similar
documents.
"Investment Property" means all investment property of
the Borrower (as defined in Section 9-115 of the Uniform
Commercial Code).
"Lenders" means the financial institutions signatory to
the Credit Agreement and their respective successors and assigns.
"Lien" of a Person means any security interest,
mortgage, pledge, hypothecation, lien, claim, charge,
encumbrance, title retention agreement, or lessor's interest
under a Capitalized Lease, in, of or on any property of such
Person.
"Obligations" means all "Obligations" as defined in the
Credit Agreement.
"Person" means an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization
or association or any other entity or a government or any
department or agency or political subdivision thereof.
"Pledged Deposits" means, collectively, the following
and all proceeds thereof: (a) the cash collateral accounts
referred to in Section 7.2 hereof, and (b) all time deposits of
money, whether or not evidenced by certificates, which the
Borrower may from time to time designate as pledged to the Agent,
on behalf of the Lenders, as security for any Obligation, and all
rights to receive interest on said deposits.
"Receivables" means, collectively, the Accounts,
Chattel Paper, Documents, General Intangibles, Pledged Deposits
and Instruments.
"Section" means a numbered section of this Security
Agreement, unless another document is specifically referenced.
<PAGE>
"Security Agreement" means this Pledge and Security
Agreement, as it may be amended, modified or supplemented from
time to time.
"Stock Rights" means any stock, any dividend or other
distribution and any other right or property which the Borrower
shall receive or shall become entitled to receive for any reason
whatsoever with respect to, in substitution for or in exchange
for any shares of stock constituting Collateral and any and all
stock, any right to receive stock and any right to receive
earnings, in which the Borrower now has or hereafter acquires any
right, issued by an issuer of any or all such stock.
"Uniform Commercial Code" means, unless a specific
jurisdiction is referred to, the Uniform Commercial Code as in
effect from time to time in the applicable jurisdiction.
"Unmatured Default" means an event which but for the
lapse of time or the giving of notice, or both, would constitute
a Default.
The foregoing definitions shall be equally applicable
to both the singular and plural forms of the defined terms.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Credit Agreement.
ii. GRANT OF SECURITY INTEREST.
To secure the payment, performance and observance of
the Obligations, the Borrower hereby pledges, grants, assigns and
transfers to the Agent, for the benefit of the Agent and the
ratable benefit of the Lenders, a continuing security interest
in, a right of setoff against, and an assignment to the Agent of,
the Collateral.
iii. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agent, on
behalf of the Lenders, which representations and warranties shall
survive the execution and delivery of this Security Agreement and
any investigation by or on behalf of the Agent or any Lender, as
follows:
(1) CORPORATE EXISTENCE AND STANDING. The
Borrower is a corporation duly incorporated,
validly existing and in good standing under
the laws of its jurisdiction of incorporation
and is duly qualified and in good standing as
a foreign corporation and is duly authorized
to conduct its business in each jurisdiction
in which its business is conducted or
proposed to be conducted, except where the
failure to be so qualified could not
reasonably be expected to have a Material
Adverse Effect.
(2) AUTHORIZATION AND VALIDITY. The Borrower has
the requisite power and authority (corporate
and otherwise) and legal right to execute and
deliver this Security Agreement and to
perform its obligations <PAGE>hereunder. The
execution and delivery by the Borrower of
this Security Agreement and the performance
of its obligations hereunder have been duly
authorized by proper corporate proceedings,
and this Security Agreement constitutes the
legal, valid and binding obligation of the
Borrower enforceable against the Borrower in
accordance with its terms and creates a
security interest which is enforceable
against the Borrower in all now owned
Collateral and in all hereafter acquired
Collateral at the time the Borrower hereafter
acquires such rights, in each such case
except as enforceability may be limited by
bankruptcy, insolvency or similar laws
affecting the enforcement of creditors'
rights generally and subject also to the
availability of equitable remedies if
equitable remedies are sought.
(3) NO CONFLICT; GOVERNMENT CONSENT. Neither the
execution and delivery by the Borrower of
this Security Agreement, the creation and
perfection of a security interest in the
Collateral as contemplated hereby, nor
compliance with the provisions hereof, will
violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award
binding on the Borrower or the Borrower's
articles of incorporation or by-laws or the
provisions of any indenture, instrument or
agreement to which the Borrower is a party or
is subject, or by which it, or its property,
is bound, or conflict with or constitute a
default thereunder, or result in the creation
or imposition of any Lien (except to the
extent created by this Security Agreement)
in, of or on the property of the Borrower
pursuant to the terms of any such indenture,
instrument or agreement. No authorization,
approval or other action by, and no notice to
or filing with, any governmental authority or
regulatory body is required either for the
execution and delivery by the Borrower of
this Security Agreement or for the
performance by the Borrower of its
obligations under this Security Agreement
except for filings expressly contemplated
hereby.
(4) PRINCIPAL LOCATION. The Borrower's mailing
address, and the location of its chief
executive office and the books and records
relating to the Receivables is disclosed in
Exhibit A hereto. The Borrower has no other
places of business and maintains no tangible
Collateral except as separately set forth in
Exhibit A hereto. None of said places of
business are leased by the Borrower as lessee
except those designated as such in Exhibit A
hereto.
(5) NO OTHER NAMES. Except as set forth in
Exhibit B hereto, since July 1, 1994, the
Borrower has not conducted business under any
name except the name or trade name in which
it has executed this <PAGE>Security Agreement.
(6) NO DEFAULT. No Default or Unmatured Default
exists.
(7) FILING REQUIREMENTS. Except with respect to
vehicles, none of the Equipment owned by the
Borrower is covered by any certificate of
title. None of the Collateral (other than
the Collateral defined in the Intellectual
Property Assignment of Security Interests as
of the date hereof, between Borrower and
Agent) is of a type in which security
interests or liens may be filed under any
federal statute. The legal description and
street address of the property on which any
Fixtures are located is set forth in Exhibit
C hereto, together with the name and common
address of the record owner of each such
property.
(8) NO FINANCING STATEMENTS. No financing
statement describing all or any portion of
the Collateral which has not lapsed or been
terminated naming the Borrower as debtor has
been filed in any jurisdiction except
financing statements in respect of Liens
permitted by Section 6.18 of the Credit
Agreement.
(9) NECESSARY FILINGS. All filings,
registrations and recordings necessary or
appropriate to create, preserve, protect and
perfect the security interest granted by the
Borrower to the Agent, on behalf of the
Lenders, hereby in respect of the Collateral
have been accomplished and the security
interest granted to the Agent, on behalf of
the Lenders, pursuant to this Security
Agreement in and to the Collateral
constitutes a perfected security interest, to
the extent that a security interest may be
obtained by filing, registration or
recording, except for Pledged Deposits with
other institutions not designated therein,
superior and prior to the rights of all other
Persons therein and subject to no other Liens
(except Liens permitted by Section 6.18 of
the Credit Agreement) and is entitled to all
the rights, priorities and benefits afforded
by the Uniform Commercial Code or other
relevant law as enacted in any relevant
jurisdiction which relates to perfected
security interests. Without limiting in any
way the Obligations of the Borrower set forth
herein, if the Agent or any Lender shall
notify the Borrower of any filing required to
be made pursuant to this Section, the
Borrower shall promptly, and in any event
within ten (10) Business Days from such
notice, make any such filing.
(10) TITLE TO COLLATERAL. Except as set forth in
the Credit Agreement, the Borrower has good
and marketable title, free of all Liens other
than those permitted by Section 6.18 of the
Credit Agreement, to <PAGE>all of the properties
and assets reflected in the most recent
balance sheet of the Borrower delivered to
Agent and Lenders pursuant to Section 6.1 of
the Credit Agreement as being owned by it and
to all of the properties and assets acquired
by it after the date thereof, except for
assets sold, transferred or otherwise
disposed of in the ordinary course of
business since the date of such balance sheet
or as permitted by Section 6.13 of the Credit
Agreement.
(11) RECEIVABLES. The names of the obligors,
amounts owing, due dates and other
information with respect to the Receivables
are and will be correctly stated in all
material respects in all records of the
Borrower relating thereto and in all invoices
and reports with respect thereto furnished to
the Agent by the Borrower from time to time.
(12) INSURANCE. Schedule I lists as of the date
hereof all insurance of any nature maintained
for current occurrences of Borrower and its
Subsidiaries, as well as a summary of such
insurance.
b. COVENANTS.
From the date of this Security Agreement, and thereafter
until this Security Agreement is terminated pursuant to Section
9.13:
(1) INSPECTION. The Borrower will permit the
Agent and the Lenders, by their
representatives and agents, to inspect the
Collateral, to examine and make copies of the
records of the Borrower relating thereto, and
to discuss the Collateral and the records of
the Borrower with respect thereto with, and
to be advised as to the same by, the
Borrower's officers and employees and, in the
case of any Receivable, with any person or
entity which is or may be obligated thereon,
all upon reasonable prior notice from the
Agent and at such reasonable times and
intervals as the Agent may determine, all at
the Borrower's expense with the same rights
to, and limited to, expense reimbursement as
provided in accordance with Section [9.7] of
the Credit Agreement or inspections permitted
thereby.
(2) TAXES. The Borrower will pay when due all
taxes, assessments and governmental charges
and levies upon the Collateral, except those
which are being contested in good faith by
appropriate proceedings and with respect to
which adequate reserves under Agreement
Accounting Principles have been established
and to which no material risk of enforcement
exists.
<PAGE>
(3) RECORDS AND REPORTS. The Borrower will
maintain satisfactory and appropriate books
and records with respect to the Collateral
and furnish to the Agent, with sufficient
copies for each of the Lenders, such reports
relating to the Collateral as the Agent shall
from time to time reasonably request.
(4) NOTICE OF DEFAULT. The Borrower will give
prompt notice in writing to the Agent and the
Lenders of the occurrence of any Default or
Unmatured Default and of any other
development, financial or other, of which the
Borrower has knowledge and which could
reasonably be expected to have a Material
Adverse Effect.
(5) FINANCING STATEMENTS AND OTHER ACTIONS. The
Borrower will promptly execute and deliver to
the Agent all financing statements and other
documents from time to time requested by the
Agent or any Lender in order to perfect a
security interest or to maintain a perfected
security interest in the Collateral.
(6) DISPOSITION OF COLLATERAL. The Borrower will
not sell, lease or otherwise dispose of the
Collateral except as permitted by the Credit
Agreement.
(7) LIENS. The Borrower will not create, incur,
or suffer to exist any Lien upon the
Collateral except the security interests
created by this Security Agreement and Liens
permitted pursuant to Section 6.18 of the
Credit Agreement.
(8) CHANGE IN LOCATION OR NAME. The Borrower
will not (a) maintain a place of business,
hold tangible Collateral or maintain records
with respect to any Receivable at a location
other than a location specified on Exhibit A
hereto, or maintain Inventory and Equipment
in the State of Tennessee with an aggregate
net book value in excess of $2,000,000, (b)
change its name, or (c) change its mailing
address, unless the Borrower shall have given
the Agent not less than thirty (30) days'
prior written notice thereof, and the Agent
shall have determined that after giving
effect to any such change of name, address or
location, and the making of any additional
filings, registrations or recordings as the
Agent shall determine necessary, the Agent,
for the benefit of the Lenders, shall have a
valid and continuing, first perfected
security interest in the Collateral, except
for Liens permitted pursuant to Section 6.18
of the Credit Agreement.
(9) OTHER FINANCING STATEMENTS. The Borrower
will not SIGN or <PAGE>authorize the signing on its
behalf of any financing statement naming it
as debtor covering all or any portion of the
Collateral, except financing statements
naming the Agent, on behalf of the Lenders,
as secured party and those evidencing Liens
permitted pursuant to Section 6.18 of the
Credit Agreement and covering only property
expressly permitted to be pledged in such
transactions.
(10) PROTECTION OF THE LENDERS' SECURITY. The
Borrower will do nothing to impair the rights
of the Agent or the Lenders in the
Collateral. The Borrower will at all times
keep the Collateral insured in favor of the
Agent and the Lenders in compliance with the
requirements of the Credit Agreement. The
Borrower assumes all liability and
responsibility in connection with the
Collateral acquired by it, and the liability
of the Borrower to pay its Obligations shall
in no way be affected or diminished by reason
of the fact that such Collateral may be lost,
stolen, damaged or for any reason whatsoever
unavailable to the Borrower.
(11) TITLED EQUIPMENT, ETC. The Borrower will
promptly notify the Agent in writing upon (a)
acquiring any interest hereafter in Equipment
covered by any certificate of title, (b)
ACQUIRING any interest hereafter in
Collateral that is of a type where a security
interest or lien may be registered, recorded
or filed under, or notice thereof given
under, any federal statute or regulation and
(c) acquiring any interest hereafter in any
property that constitutes "Collateral" under
the form of Intellectual Property Assignment
attached as Exhibit D hereto.
(12) INSTRUMENTS, CHATTEL PAPER, DOCUMENTS AND
PLEDGED DEPOSITS. Promptly upon request of
the Agent, the Borrower will deliver to the
Agent (a) the originals of all Instruments,
Documents, Chattel Paper and Pledged Deposits
which are evidenced by certificates included
in the Collateral endorsed in blank, marked
with such legends and assigned as the Agent
shall specify, and (b) hold in trust for the
Agent, on behalf of the Lenders, upon receipt
and immediately thereafter deliver to the
Agent, on behalf of the Lenders, any
Instrument or Document evidencing or
constituting Collateral (except, prior to the
occurrence of a Default, ordinary cash
dividends paid with respect to the
Instruments which are stock and the Stock
Rights).
(13) UNCERTIFICATED SECURITIES. The Borrower will
permit the Agent and the Lenders from time to
time to cause the appropriate issuers of
uncertificated securities constituting
Instruments to mark their <PAGE>books and records
with the numbers and face amounts of all
uncertificated securities constituting
Instruments and all rollovers and
replacements therefor to reflect the Lien of
the Agent, on behalf of the Lenders, granted
pursuant to this Security Agreement.
(14) PLEDGED DEPOSITS. The Borrower will not
withdraw all or any portion of any Pledged
Deposit or fail to rollover said Pledged
Deposit without the prior consent of the
Agent.
(15) FEDERAL CLAIMS. The Borrower will notify the
Agent of any Collateral which, to its
knowledge, constitutes a claim against the
United States government or any
instrumentality or agency thereof (except for
claims against any state government, unless
requested by the Agent), the assignment of
which claim is restricted by federal law.
Promptly upon the request of the Agent, the
Borrower will take such steps as may be
necessary to comply with any applicable
federal assignment of claims laws.
(16) MAINTENANCE OF RECORDS. The Borrower will
keep and maintain at its own cost and expense
satisfactory and appropriate records of each
Receivable for at least two (2) years from
the date on which such Receivable comes into
existence, including, without limitation,
records of all payments received, all credits
granted thereon and all other documentation
relating thereto, and the Borrower will make
the same available to the Agent for
inspection, at the Borrower's own cost and
expense, at any and all reasonable times.
Upon the occurrence and during the
continuance of a Default, the Borrower shall,
at its own cost and expense, upon request of
the Agent deliver all tangible evidence of
its Receivables (including, without
limitation, all documents evidencing the
Receivables) and such books and records to
the Agent or to its representatives (copies
of which evidence, books and records may be
retained by the Agent) at any time upon its
demand. At the request of the Agent, the
Borrower shall legend, in form and manner
reasonably satisfactory to the Agent, the
Receivables and other books, records and
documents of the Borrower evidencing or
pertaining to the Receivables with an
appropriate reference to the fact that the
Receivables have been pledged to the Agent
for the benefit of the Lenders and that the
Agent has a security interest therein. The
Borrower expressly agrees that, upon the
occurrence and during the continuance of a
Default, the Agent may transfer a full and
complete copy of the Borrower's books,
records, credit information, reports,
memoranda and all other writings relating to
the Receivables to and for the use <PAGE>by any
Person that has acquired or is contemplating
acquisition of an interest in the Receivables
or the Agent's security interest therein
without the consent of the Borrower.
(17) CERTAIN AGREEMENTS ON RECEIVABLES. The
Borrower will not make or agree to make any
discount, credit, rebate or other reduction
in the original amount owing on a Receivable
or accept in satisfaction of a Receivable
less than the original amount thereof other
than, prior to the occurrence of a Default,
in the ordinary course of business and in
amounts which are not material to the
Borrower.
(18) COLLECTION OF RECEIVABLES. Except as
otherwise provided in this Security
Agreement, the Borrower will collect and
enforce, at the Borrower's sole expense, all
amounts due or hereafter due to the Borrower
under the Receivables.
(19) FURTHER ACTIONS. The Borrower will, at its
own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Agent
from time to time such vouchers, invoices,
schedules, confirmatory assignments,
conveyances, financing statements, transfer
endorsements, powers of attorney,
certificates, reports and other assurances or
instruments and take such further steps
relating to the Receivables and other
property or rights covered by the security
interest hereby granted, as the Agent may
reasonably require.
(20) DISCLOSURE OF COUNTERCLAIM ON RECEIVABLES.
If any discount, credit or agreement to make
a rebate or to otherwise reduce the amount
owing on an individual Receivable in excess
of $100,000 or a group of Receivables at any
time aggregating in excess of $200,000 exists
or if, to the knowledge of the Borrower, any
dispute, setoff, claim, counterclaim or
defense exists or has been asserted or
threatened with respect to an individual
Receivable in excess of $100,000 or a group
of Receivables at any time aggregating in
excess of $200,000 the Borrower will disclose
such fact to the Agent in writing in
connection with the inspection by the Agent
or any Lender of any record of the Borrower
relating to such Receivable and in connection
with any invoice or report furnished by the
Borrower to the Agent relating to such
Receivable or a group of Receivables.
(21) INSTRUMENTS. If any Receivable in excess of
$350,000 becomes evidenced by an Instrument
(other than a check payable to the order of
the Borrower which is promptly cashed by the
Borrower), the Borrower will within ten (10)
days notify the Agent thereof, <PAGE>and upon
request by the Agent promptly deliver such
Instrument to the Agent appropriately
endorsed to the order of the Agent as further
security hereunder.
(22) MAINTENANCE OF GOODS. The Borrower will do
all things necessary to maintain, preserve,
protect and keep the Inventory and the
Equipment in good repair and working and
saleable condition as shall be consistent
with past practice.
(23) INSURANCE. The Borrower will (a) maintain
insurance on the Inventory and Equipment as
required by Section 6.6 of the Credit
Agreement, (b) maintain such other insurance
on the Inventory and Equipment for the
benefit of the Agent and the Lenders as the
Agent shall from time to time request, and
(c) furnish to the Agent, upon the request of
the Agent, from time to time duplicates of
all policies of insurance on the Inventory
and Equipment and certificates with respect
to such insurance.
Without limiting the generality of the foregoing,
Borrower shall deliver to Lender as soon as practicable after the
date hereof but in any event not later than July 30, 1999
certified copies and endorsements to all of its and its
Subsidiaries (a) "All Risk" and business interruption insurance
policies, naming Agent, for the benefit of itself and Lenders,
loss payee, and (b) general liability and other liability
policies naming Agent, for the benefit of itself and Lenders, as
an additional insured. All policies of insurance on real and
personal property will contain an endorsement, in form and
substance acceptable to Agent, showing loss payable to Agent, for
the benefit of itself and Lenders (Form 438 BFU or equivalent)
and extra expense and business interruption endorsements. Such
endorsement, or an independent instrument furnished to Agent,
will provide that the insurance companies will give Agent at
least 30 days prior written notice before any such policy or
policies of insurance shall be altered or canceled and that no
act or default of Borrower or any other Person shall affect the
right of Agent and Lenders to recover under such policy or
policies of insurance in case of loss or damage. Borrower shall
direct all present and future insurers under its "All Risk"
policies of insurance to pay all proceeds payable thereunder
directly to Agent. If any insurance proceeds are paid by check,
draft or other instrument payable to any Borrower and Agent
jointly, Agent may endorse such Borrower's name thereon and do
such other things as Agent may deem advisable to reduce the same
to cash. Agent reserves the right at any time, upon review of
each Borrower's risk profile, to require additional forms and
limits of insurance. Each Borrower shall, on each anniversary of
the date hereof and from time to time at Agent's request, deliver
to Agent a report by a reputable insurance broker, satisfactory
to Agent, with respect to such Person's insurance policies.
(24) TITLED VEHICLES. Upon request, the Borrower
will give the Agent information as to ownership
of any vehicle covered by a certificate of title.
Promptly upon request of the Agent, the Borrower
will deliver any such certificate of title to
the Agent and/or will cause the lien of the Agent,
on behalf of the Lenders, to be noted <PAGE>
thereupon.
v. DEFAULT.
(1) The occurrence of any one or more of the following
events shall constitute a Default:
(a) Any representation or warranty made by or on
behalf of the Borrower to the Agent or the
Lenders under or in connection with this
Security Agreement shall be false in any
material respect as of the date on which
made.
(b) The breach by the Borrower of any of the
terms or provisions of Section 4.4, 4.5, 4.6,
4.7, 4.8, 4.9, 4.12, 4.13, 4.14, 4.21, 7 or
8.1 hereof.
(c) The breach by the Borrower (other than a
breach which constitutes a Default under
Section 5.1.1 or 5.1.2 hereof) of any of the
terms or provisions of this Security
Agreement which is not remedied within twenty
(20) days after the giving of written notice
by the Agent.
(d) Any Collateral shall be transferred or
otherwise disposed of, either voluntarily or
involuntarily, in any manner not permitted by
Section 4.6 or 9.7 hereof or shall be lost,
stolen, damaged or destroyed.
(e) The occurrence of any "Default" under, and as
defined in, the Credit Agreement.
(2) ACCELERATION AND REMEDIES. If any Default
described in Section 7.6 or 7.7 of the Credit
Agreement occurs, the Obligations shall
immediately become due and payable without any
election or action on the part of the Agent or any
Lender. If any other Default occurs, the
Obligations may be declared to be due and payable
in accordance with the Credit Agreement, whereupon
the Obligations shall become immediately due and
payable, without presentment, demand, protest or
notice of any kind, all of which the Borrower
hereby expressly waives.
(3) REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT.
The Borrower agrees that, if any Default shall
have occurred and be continuing, then and in every
such case, subject to any mandatory requirements
of applicable law then in effect, the Agent may:
<PAGE>
(i) personally, or by agents or attorneys,
immediately take possession of the Collateral
or any part thereof, from the Borrower or any
other Person who then has possession of any
part thereof with or without notice or
process of law (unless the same shall be
required by applicable law), and for that
purpose may enter in an orderly and lawful
manner upon the Borrower's premises where any
of the Collateral is located and remove the
same and use in connection with such removal
any and all services, supplies, aids and
other facilities of the Borrower;
(ii) instruct the obligor or obligors on any
contract, agreement, instrument or other
obligation (including, without limitation,
the Receivables) constituting the Collateral
to make any payment required by the terms of
such instrument or agreement directly to the
Agent, on behalf of the Lenders;
(iii) sell or otherwise liquidate, or direct the
Borrower to sell or otherwise liquidate, any
or all investments made in whole or in part
with the Collateral or any part thereof, and
take possession of the proceeds of any such
sale or liquidation;
(iv) with respect to Obligations which are
contingent and cannot be accelerated by their
nature, require the Borrower to deposit cash
or other acceptable collateral in an amount
sufficient to cover principal, interest and
fees which will have accrued by the maturity
date on said Obligations to be held as
security for said Obligations in the special
collateral account referred to in Section 7.2
hereof; and
(v) take possession of the Collateral or any part
thereof, by directing the Borrower in writing
to deliver the same to the Agent, on behalf
of the Lenders, at any reasonable place or
places designated by the Agent, in which
event the Borrower shall at its own expense:
1) forthwith cause the same to be moved to
the place or places so designated by the
Agent and there delivered to the Agent,
on behalf <PAGE>of the Lenders;
2) store and keep any Collateral so
delivered to the Agent, on behalf of the
Lenders, at such place or places pending
further action by the Agent; and
3) while the Collateral shall be so stored
and kept, provide such guards and
maintenance services as shall be
necessary to protect the same and to
preserve and maintain them in good
condition;
it being understood that the Borrower's obligation so to deliver
the Collateral is of the essence of this Security Agreement and
that, accordingly, upon application to a court of equity having
jurisdiction, the Agent, on behalf of the Lenders, shall be
entitled to a decree requiring specific performance by the
Borrower of said obligation.
(4) DISPOSITION OF THE COLLATERAL.
(i) Any Collateral repossessed by the Agent,
on behalf of the Lenders, under or
pursuant to Section 5.3 hereof and any
other Collateral whether or not so
repossessed by the Agent, on behalf of
the Lenders, upon the occurrence of a
Default may be sold, leased or otherwise
disposed of under one or more contracts
or as an entirety and without the
necessity of gathering at the place of
sale the property to be sold, and in
general in such manner, at such time or
times, at such place or places and on
such terms and for such prices as the
Agent may, in compliance with any
mandatory requirements of applicable
law, determine to be commercially
reasonable. Upon the occurrence and
during the continuance of any Default,
the Agent, on behalf of the Lenders,
shall have the power to foreclose the
Borrower's right of redemption in the
Collateral by sale, lease or other
disposition of the Collateral in
accordance with the Uniform Commercial
Code as enacted in each state where the
Collateral is located. Any of the
Collateral may be sold, leased or
otherwise disposed of in the condition
in which the same existed when taken by
the Agent, on behalf of the Lenders, or
after any overhaul or repair which the
Agent shall determine to be commercially
<PAGE> reasonable and the Agent shall be
entitled to reimbursement for the
payment of any costs or expenses of such
overhaul or repair. Any such
disposition which shall be a private
sale or other private proceeding
permitted by the requirements of
applicable law shall be made after
written notice to the Borrower
specifying the time at which such
disposition is to be made and the
intended sale price or other
consideration therefor. Any such
disposition which shall be a public sale
permitted by such requirements of
applicable law shall be made after
written notice to the Borrower
specifying the time and place of such
sale and, in the absence of applicable
requirements of law, shall be by public
auction. To the extent permitted by any
such requirement of law, the Agent, on
behalf of the Lenders, may itself bid
for and become the purchaser of the
Collateral or any item thereof, offered
for sale in accordance with this Section
5.4 without accountability to the
Borrower. In the payment of the
purchase price of the Collateral the
purchaser shall be entitled to have
credit on account of the purchase price
thereof of amounts owing to such
purchaser on account of any of the
Obligations held by such purchaser and
any such purchaser may deliver notes,
claims for interest, or claims for other
payment with respect to such Obligations
in lieu of cash up to the amount which
would, upon distribution of the net
proceeds of such sale, be payable
thereon. Such notes, if the amount
payable hereunder shall be less than the
amount due thereon, shall be returned to
the holder thereof after being
appropriately stamped to show partial
payment. If, under mandatory
requirements of applicable law, the
Agent, on behalf of the Lenders, shall
be required to make disposition of the
Collateral within a period of time which
does not permit the giving of notice to
the Borrower as hereinabove specified,
the Agent need give the Borrower only
such notice of disposition as shall be
reasonably practicable in view of such
mandatory requirements of applicable
law.
(ii) No notification need be given to the
Borrower if it has signed, after an
Unmatured Default or Default, <PAGE>a
statement renouncing or modifying any
right to notification of sale or other
intended disposition. In addition to
the rights and remedies granted to it in
this Security Agreement and in the
Credit Agreement, the Agent, on behalf
of the Lenders, shall have all the
rights and remedies of a secured party
under the Uniform Commercial Code of the
state in which the Collateral is
located.
vi. WAIVERS, AMENDMENTS AND REMEDIES.
No delay or omission of the Agent or any Lender to
exercise any right or remedy granted under this Security
Agreement shall impair such right or remedy or be construed to be
a waiver of any Default or Unmatured Default or an acquiescence
therein, and any single or partial exercise of any such right or
remedy shall not preclude other or further exercise thereof or
the exercise of any other right or remedy, and no waiver,
amendment or other variation of the terms, conditions or
provisions of this Security Agreement whatsoever shall be valid
unless in writing signed by the Agent and the Required Lenders
(if so required by the Credit Agreement), and then only to the
extent specifically set forth in such writing; provided, however,
that any amendment purporting to release all or substantially all
of the Collateral shall be valid only if consented to by each of
the Lenders. All rights and remedies contained in this Security
Agreement or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have
been paid in full.
vii. PROCEEDS; COLLECTION OF RECEIVABLES.
(1) COLLECTION OF RECEIVABLES. The Agent may at
any time when a Default has occurred and is
continuing in its sole discretion by giving
the Borrower written notice, elect to require
that the Receivables be paid directly to the
Agent, on behalf of the Lenders. In such
event, the Borrower shall, and shall permit
the Agent to, promptly notify the account
debtors or obligors under the Receivables of
the Agent's and the Lenders' interest therein
and direct such account debtors or obligors
to make payment of all amounts then or
thereafter due under the Receivables directly
to the Agent. Upon receipt of any such
notice from the Agent, the Borrower shall
thereafter hold in trust for the Agent and
the Lenders all amounts and proceeds received
by it with respect to the Receivables and
other Collateral and immediately and at all
times thereafter deliver to the Agent, on
behalf of the Lenders, all such amounts and
proceeds in the same form as so received,
whether by cash, check, draft or otherwise,
with any necessary endorsements. The Agent
shall hold and apply funds so received as
provided by the terms of Sections 7.3 and 7.4
hereof.
<PAGE>
(2) SPECIAL COLLATERAL ACCOUNT. The Agent may
require all cash proceeds of the Collateral
received by the Agent, on behalf of the
Lenders, to be deposited in a special
interest bearing cash collateral account with
the Agent and held there as security for the
Obligations. Prior to a Default or Unmatured
Default, the Borrower, upon advance written
notice to the Agent, may direct investment of
the collected balances in said cash
collateral account with the Agent in
investments permitted by Section 6.16 of the
Credit Agreement; provided, however, upon the
occurrence and during the continuance of a
Default or Unmatured Default, the Borrower
shall have no control whatsoever over said
cash collateral account or the investment
thereof. The Agent shall from time to time,
in its sole discretion, either deposit the
collected balances in said cash collateral
account into the Borrower's general operating
account with the Agent or apply the collected
balances in said cash collateral account to
the payment of the Obligations whether or not
the Obligations shall then be due.
(3) APPLICATION OF PROCEEDS. The proceeds of the
Collateral shall be applied by the Agent to
payment of the Obligations in the following
order unless a court of competent
jurisdiction shall otherwise direct:
(i) FIRST, to payment of all reasonable
costs and expenses of the Agent and
the Lenders incurred in connection
with the collection and enforcement
of the Obligations or of the
security interest granted to the
Agent and the Lenders pursuant to
this Security Agreement, including
all costs and expenses of any sale
pursuant to Sections 5.3 and 5.4
hereof, and of any judicial or
private proceedings in which such
sale may be made, and of all other
expenses, liabilities and advances
made or incurred by the Agent, the
Lenders and the agents and
attorneys of each of them, together
with interest at the Default Rate
on such costs, expenses and
liabilities and on all advances
made by the Agent or any Lender
from the date any such cost,
expense or liability is due, owing
or unpaid or any such advance is
made, in each case until paid in
full;
(ii) SECOND, to payment of that portion
of the Obligations constituting
accrued and unpaid interest and
fees, together with interest owing
thereon at the Default Rate from
the date due, owing or unpaid <PAGE>until
paid in full;
(iii) THIRD, ratably to payment (i) of
the principal of the Obligations,
then due, owing or unpaid in
respect of any Advances pursuant to
the Credit Agreement or the Notes
with interest on such unpaid
principal at the Default Rate from
and after the happening of any
Default until paid in full, and
(ii) any Rate Hedging Obligations
due, owing or unpaid to the
Lenders;
(iv) FOURTH, to cash collateralize the
undrawn portion of all Letters of
Credit by deposit with the Agent an
amount equal to 110% of the
aggregate amount thereof;
(v) FIFTH, to payment of any other
Obligations due, owing or unpaid
until paid in full including,
without limitation, any Obligations
incurred pursuant to Section 9.3
hereof; and
(vi) SIXTH, the balance, if any, after
all of the Obligations have been
satisfied, shall be remitted to the
Borrower or as required by law.
(4) REMEDIES CUMULATIVE. Each and every
right, power and remedy hereby
specifically given to the Agent, for the
benefit of the Lenders, shall be in
addition to every other right, power and
remedy specifically given under this
Security Agreement, the Credit Agreement
or any other Loan Document now or
hereafter existing at law or in equity,
or by statute and each and every right,
power and remedy whether specifically
herein given or otherwise existing may
be exercised from time to time or
simultaneously and as often and in such
order as may be deemed expedient by the
Agent. All such rights, powers and
remedies shall be cumulative and the
exercise or the beginning of exercise of
one shall not be deemed a waiver of the
right to exercise any of the others. No
delay or omission of the Agent in the
exercise of any such right, power or
remedy and no renewal or extension of
any of the Obligations shall impair any
such right, power or remedy or shall be
construed to be a waiver of any Default
or an acquiescence therein. In the
event that the Agent or any Lender shall
bring any suit to enforce any of its
rights hereunder and shall be entitled
to judgment, then in such suit the Agent
or such Lender may recover reasonable
expenses, including attorneys' fees,
which attorneys <PAGE>may be employees of the
Agent, and the amounts thereof shall be
included in such judgment.
(5) DISCONTINUANCE OF PROCEEDINGS. In case
the Agent or any Lender shall have
instituted any proceeding to enforce any
right, power or remedy under this
Security Agreement by foreclosure, sale,
entry or otherwise, and such proceeding
shall have been discontinued or
abandoned for any reason or shall have
been determined adversely to the Agent
or such Lender, then and in every such
case the Borrower and the Agent or such
Lender shall be restored to their
respective former positions and rights
hereunder with respect to the
Collateral, and all rights, remedies and
powers of the Agent or such Lender shall
continue as if no such proceeding had
been instituted.
viii. INDEMNITY.
(1) INDEMNITY.
(i) The Borrower agrees to indemnify the
Agent, the Lenders and their respective
successors, assigns, employees, agents
and servants (each an "Indemnitee") as
provided by Section 9.7 of the Credit
Agreement as if such Section 9.7 were
fully set forth herein.
(ii) Without limiting the application of
Section 8.1(a) hereof, the Borrower
agrees to pay, or reimburse the Agent
for any and all reasonable fees
(including, without limitation,
reasonable attorneys' fees, which
attorneys may be employees of the
Agent), costs and expenses of whatever
kind or nature incurred in connection
with the creation, preservation or
protection of the Agent's security
interest in the Collateral, including,
without limitation, all fees and taxes
in connection with the recording or
filing of instruments and documents in
public offices, payment or discharge of
any taxes (excluding income, franchise
taxes or other taxes levied on gross
earnings, profits or the like) or Liens
upon or in respect of the Collateral,
premiums for insurance with respect to
the Collateral (except to the extent
that the Borrower has already paid any
such premiums in compliance with the
Credit Agreement) and all other
reasonable fees, costs and <PAGE>expenses in
connection with preparing, executing,
delivering or administering this
Security Agreement and in connection
with protecting, maintaining or
preserving the Collateral and the
Agent's interest therein, whether
through judicial proceedings or
otherwise, or in defending or
prosecuting any actions, suits or
proceedings arising out of or relating
to the Collateral.
(iii) Without limiting the application of
Section 8.1(a) or (b) hereof, the
Borrower agrees to pay, indemnify and
hold each Indemnitee harmless from and
against any losses, costs, damages and
expenses which such Indemnitee may
suffer, expend or incur as a consequence
or growing out of any misrepresentation
by the Borrower in this Security
Agreement or the Credit Agreement or in
any statement or writing contemplated
by, made or delivered pursuant to or in
connection with this Security Agreement
or the Credit Agreement, except to the
extent that any such loss arises out of
the gross negligence or willful
misconduct of such Indemnitee.
(iv) If and to the extent that the
Obligations of the Borrower under this
Section are unenforceable for any
reason, the Borrower hereby agrees to
make the maximum contribution to the
payment and satisfaction of such
Obligations which is permissible under
applicable law.
(v) The Obligations of the Borrower
contained in this Section 8.1 shall
survive the termination of this Security
Agreement and the discharge of the
Borrower's other Obligations hereunder.
(2) INDEMNITY OBLIGATION SECURED BY COLLATERAL;
SURVIVAL. Any amounts paid by any Indemnitee
as to which such Indemnitee has the right to
reimbursement shall constitute Obligations
secured by the Collateral. The indemnity
obligations of the Borrower contained in this
Security Agreement shall continue in full
force and effect notwithstanding the full
payment of all amounts owing under the Credit
Agreement and all of the other Obligations
and notwithstanding the discharge thereof and
the termination of this Security Agreement.
<PAGE>
ix. GENERAL PROVISIONS.
(1) NOTICE OF DISPOSITION OF COLLATERAL. The Borrower
hereby agrees that any notice of the time and
place of any public sale or the time after which
any private sale or other disposition of all or
any part of the Collateral shall be deemed
reasonable if sent to the Borrower, addressed as
set forth in Section 10 hereof, at least ten (10)
days prior to any such public sale or the time
after which any such private sale or other
disposition may be made.
(2) Compromises and Collection of Collateral. The
Borrower, the Agent and the Lenders recognize that
setoffs, counterclaims, defenses and other claims
may be asserted by obligors with respect to
certain of the Receivables, that certain of the
Receivables may be or become uncollectible in
whole or in part and that the expense and
probability of success in litigating a disputed
Receivable may exceed the amount that reasonably
may be expected to be recovered with respect to a
Receivable. In view of the foregoing, the
Borrower agrees that the Agent, on behalf of the
Lenders, may at any time and from time to time, if
a Default has occurred and is continuing,
compromise with the obligor on any Receivable,
accept in full payment of any Receivable such
amount as the Agent in its sole discretion shall
determine or abandon any Receivable, and any such
action by the Agent shall be commercially
reasonable so long as the Agent acts in good faith
based on information known to it at the time it
takes any such action.
(3) SECURED PARTY PERFORMANCE OF BORROWER OBLIGATIONS.
Without having any obligation to do so, upon
either (a) notice to the Borrower or (b) the
occurrence of an Unmatured Default or a Default,
the Agent may perform or pay any obligation which
the Borrower has agreed to perform or pay in this
Security Agreement and the Borrower shall
reimburse the Agent for any amounts paid by the
Agent or such Lender pursuant to this Section 9.3.
The Borrower's obligation to reimburse the Agent
pursuant to the preceding sentence shall be an
Obligation payable on demand.
(4) AUTHORIZATION FOR SECURED PARTY TO TAKE CERTAIN
ACTION. The Borrower irrevocably authorizes the
Agent, at any time and from time to time, in the
sole discretion of the Agent, and appoints the
Agent as its attorney-in-fact to act on behalf of
the Borrower, (a) to execute on behalf of the
Borrower as debtor and to file financing
statements necessary or desirable in the Agent's
sole <PAGE>discretion to perfect and to maintain the
perfection and priority of the Agent's security
interest in the Collateral, on behalf of the
Lenders, (b) to endorse and collect any cash
proceeds of the Collateral, (c) to file a carbon,
photographic or other reproduction of this
Security Agreement or any financing statement with
respect to the Collateral as a financing statement
in such offices as the Agent in its sole
discretion deems necessary or desirable to perfect
and to maintain the perfection and priority of the
Agent's and the Lenders' security interest in the
Collateral, (d) to enforce payment of the
Receivables in the name of the Agent, any Lender
or the Borrower, and (e) to apply the proceeds of
any Collateral received by the Agent to the
Obligations as provided in Section 7 hereof. This
appointment as attorney-in-fact is coupled with an
interest and shall be irrevocable for so long as
any Obligations are outstanding.
(5) SPECIFIC PERFORMANCE OF CERTAIN COVENANTS. The
Borrower acknowledges and agrees that a breach of
any of the covenants contained in Sections 4.1,
4.5, 4.6, 4.12, 4.21, 5.3, 7 and 9.7 hereof will
cause irreparable injury to the Agent and the
Lenders and that the Agent and the Lenders have no
adequate remedy at law in respect of such breaches
and therefore agrees, without limiting the right
of the Agent and the Lenders to seek and obtain
specific performance of other obligations of the
Borrower contained in this Security Agreement,
that the covenants of the Borrower contained in
the Sections referred to in this Section 9.5 shall
be specifically enforceable against the Borrower.
(6) USE AND POSSESSION OF CERTAIN PREMISES. Upon the
occurrence of a Default or Unmatured Default, the
Agent or any Lender shall be entitled to occupy
and use any premises owned or leased by the
Borrower where records relating to the Collateral
are located until the Obligations are paid,
without any obligation to pay the Borrower or any
other Person for such use and occupancy.
(7) DISPOSITIONS NOT AUTHORIZED. The Borrower is not
authorized to sell or otherwise dispose of the
Collateral except as permitted in the Credit
Agreement and notwithstanding any course of
dealing between the Borrower and the Agent or any
Lender or other conduct of the Agent or any
Lender, no authorization to sell or otherwise
dispose of the Collateral (except as set forth in
the Credit Agreement) shall be binding upon the
Agent or any Lender unless such authorization is
in writing signed as required by Section 6 hereof.
<PAGE>
(8) DEFINITION OF CERTAIN TERMS. Terms defined in the
Illinois Uniform Commercial Code which are not
otherwise defined in this Security Agreement are
used in this Security Agreement as defined in the
Illinois Uniform Commercial Code as in effect on
the date hereof.
(9) BENEFIT OF AGREEMENT. The terms and provisions of
this Security Agreement shall be binding upon and
inure to the benefit of the Borrower, the Agent
and the Lenders and each such Person's successors
and assigns, except that the Borrower shall not
have the right to assign its rights under this
Security Agreement or any interest herein without
the prior written consent of the Agent.
(10) SURVIVAL OF REPRESENTATIONS. All representations
and warranties of the Borrower contained in this
Security Agreement shall survive the execution and
delivery of this Security Agreement.
(11) TAXES AND EXPENSES. Any taxes (excluding income
taxes, franchise taxes or other taxes levied on
gross earnings, profits or the like) payable or
ruled payable by any Federal or State authority in
respect of this Security Agreement shall be paid
by the Borrower, together with interest and
penalties, if any. The Borrower shall reimburse
the Agent for any and all reasonable outofpocket
expenses and internal charges (including
reasonable attorneys', auditors' and accountants'
fees and reasonable time charges of attorneys,
auditors and accountants who may be employees of
the Agent or the Lenders) paid or incurred by the
Agent in connection with the preparation,
execution, delivery, administration, collection
and enforcement of this Security Agreement and in
the audit, analysis, administration, collection,
preservation or sale of the Collateral (including
the expenses and charges associated with any
periodic or special audit of the Collateral). The
Borrower shall reimburse the other Lenders for any
and all reasonable outofpocket expenses and
internal charges (including reasonable attorneys',
auditors' and accountants' fees and reasonable
time charges of attorneys, auditors and
accountants who may be employees of the Agent or
the Lenders) paid or incurred by any Lender in
connection with the enforcement of this Security
Agreement.
(12) HEADINGS. The title of and section headings in
this Security Agreement are for convenience of
reference only, and shall not govern the
interpretation of any of the terms and provisions
of this Security Agreement.
<PAGE>
(13) TERMINATION. This Security Agreement and the
Liens arising hereunder shall continue in effect
(notwithstanding the fact that from time to time
there may be no Obligations or commitments
therefor outstanding) until the payment in full of
the Obligations and the termination of the Credit
Agreement in accordance with its terms and all
commitments of the Lenders thereunder, at which
time the security interests granted hereby shall
terminate and any and all rights to the Collateral
shall revert to the Borrower. Upon such
termination, the Agent shall promptly return to
the Borrower, at the Borrower's expense, such of
the Collateral held by the Agent as shall not have
been sold or otherwise applied pursuant to the
terms hereof. The Agent will promptly execute and
deliver to the Borrower such other documents as
the Borrower shall reasonably request to evidence
such termination.
(14) ENTIRE AGREEMENT. This Security Agreement, the
Credit Agreement and the other Loan Documents
embody the entire agreement and understanding
among the Borrower, the Agent and the Lenders
relating to the Collateral and supersede all prior
written and oral agreements and understandings
among the Borrower, the Agent and the Lenders
relating to the subject matter hereof.
(15) CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS,
WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS, OF
THE STATE OF ILLINOIS, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
(16) RELEASES. Upon termination of this Security
Agreement in accordance with the provisions of
Section 9.13 hereof, the Agent and the Lenders
shall, at the Borrower's request and expense,
execute such releases as the Borrower may
reasonably request, in form and upon terms
acceptable to the Agent and the Lenders in all
respects.
(17) WAIVERS. Except to the extent expressly otherwise
provided herein or in any other Loan Document, the
Borrower waives, to the extent permitted by
applicable law, (a) any right to require either
the Agent or any Lender to proceed against any
other person, to exhaust its rights in any other
collateral, or to pursue any other right which
either the Agent or any Lender may have, and (b)
with respect to the Obligations, presentment and
demand for payment, protest, notice of protest and
nonpayment, and notice of the intention to
accelerate.
(18) COUNTERPARTS. This Security Agreement may be
executed in any number of counterparts, all of
which taken together shall constitute <PAGE>one
agreement, and any of the parties hereto may
execute this Security Agreement by signing any
such counterpart. This Security Agreement shall
be effective when it has been executed by the
Borrower and the Agent.
(19) DISTRIBUTION OF REPORTS. The Borrower authorizes
the Agent and each Lender, as the Agent or such
Lender may elect in its sole discretion, to
discuss with and furnish to any other Person
having an interest in the Obligations (whether as
a guarantor, pledgor of collateral, participant or
otherwise) all financial statements, audit reports
and other information pertaining to the Borrower
or the Collateral whether such information was
provided by the Borrower or prepared or obtained
by the Agent or such Lender. Neither the Agent
nor any Lender, nor any of such Person's
employees, officers, directors or agents makes any
representation or warranty regarding any audit
reports or other analyses of the Borrower's
condition which the Agent or such Lender may in
its sole discretion prepare and elect to
distribute, nor shall the Agent or any Lender, nor
any such Person's employees, officers, directors
or agents be liable to any person or entity
receiving a copy of such reports or analyses for
any inaccuracy or omission contained in or
relating thereto.
x. NOTICES.
(1) SENDING NOTICES. Any notice required or permitted
to be given under this Security Agreement shall be
given in accordance with Section 13.1 of the
Credit Agreement.
(2) CHANGE IN ADDRESS FOR NOTICES. Each of the
Borrower and the Agent may change the address for
service of notice upon it by a notice in writing
to the other party hereto.
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed this Security
Agreement as of the date first above written.
RAWLING'S SPORTING GOODS
COMPANY, INC.
By:/s/ Rexford K. Peterson
Title: Chief Financial Officer
ACCEPTED AND AGREED TO:
THE FIRST NATIONAL BANK
OF CHICAGO, as Agent for the Lenders
By:/s/ Nathan Block
Title: First Vice President
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement, dated as of July 14, 1999, is
by and between Rawling's Sporting Goods Company, Inc., and THE
FIRST NATIONAL BANK OF CHICAGO, as Agent.
R E C I T A L S:
1. Pursuant to the Credit Agreement (as hereinafter defined) the
Lenders have agreed to make certain loans and other financial
accommodations to the Borrower (as hereinafter defined); and
2. As a condition to further extensions of credit under the Credit
Agreement, the Agent and the Lenders have requested that the
Borrower grant to the Agent, on behalf of the Agent and the
Lenders, a security interest in the Collateral (as hereinafter
defined);
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
a. DEFINITIONS.
As used in this Pledge Agreement:
"Agent" means The First National Bank of Chicago in its
capacity as Agent for the Lenders and not in its individual
capacity, and any successor Agent appointed pursuant to Article X
of the Credit Agreement.
"Borrower" means Rawling's Sporting Goods Company, Inc., a
Delaware corporation, and its successors and assigns.
"Collateral" means the Pledged Stock, the Stock Rights and
all proceeds of the foregoing.
"Credit Agreement" means that certain Amended and Restated
Credit Agreement dated as September 12, 1997 among the Borrower,
the Lenders and the Agent, heretofore and hereafter amended,
supplemented, restated or otherwise modified from time to time.
"Default" means an event described in Section 6.1.
"Default Rate" means the rate of interest which may be due
and owing from time to time on any Loan and payable to the
Borrower under the Credit Agreement pursuant to Section 2.11 of
such agreement.
"Lien" means any security interest, mortgage, pledge,
hypothecation, assignment, lien, claim, charge, encumbrance,
title retention agreement, or lessor's interest, in, of or on the
Collateral or any <PAGE>portion thereof.
"Pledge Agreement" means this Stock Pledge Agreement, as it
may be amended, supplemented, restated or otherwise modified from
time to time.
"Pledged Stock" means all of the outstanding shares of
capital stock set forth on Schedule A hereto and any additional
capital stock pledged pursuant to Section 5.1 hereof.
"Section" means a numbered section of this Pledge Agreement,
unless another document is specifically referenced.
"Stock Rights" means any stock, any dividend or other
distribution and any other right or property which the Borrower
shall receive or shall become entitled to receive for any reason
whatsoever with respect to, in substitution for or in exchange
for any shares of Pledged Stock and any stock, any right to
receive stock and any right to receive earnings, in which the
Borrower now has or hereafter acquires any right, issued by an
issuer of the Pledged Stock.
"Unmatured Default" means an event which but for the lapse
of time or the giving of notice, or both, would constitute a
Default.
The foregoing definitions shall be equally applicable to
both the singular and plural forms of the defined terms.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings attributed to such terms in the Credit
Agreement.
b. PLEDGE AND SECURITY INTEREST. In order to secure the
full and complete payment and performance by the
Borrower of the Obligations when due, the Borrower
hereby pledges and grants to the Agent for the benefit
of the Agent and the Lenders, equally and ratably in
proportion to the total Obligations owing at any time
to the Agent and the Lenders, a first priority lien on,
and security interest in, all of the Borrower's right,
title and interest in and to the Collateral.
c. DEPOSIT OF CERTIFICATES FOR PLEDGED STOCK. The
certificates representing the Pledged Stock listed on
Schedule A attached hereto shall be delivered to the
Agent contemporaneously herewith together with
appropriate undated stock powers duly executed in
blank. Neither the Agent nor the Lenders shall be
obligated to preserve or protect any rights with
respect to the Pledged Stock or to receive or give any
notice with respect thereto whether or not the Agent or
any Lender are deemed to have knowledge of such
matters.
d. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agent and the
Lenders that:
i. EXISTENCE AND STANDING. The Borrower is duly
organized and is validly <PAGE>existing and in good
standing under the laws of its jurisdiction of
incorporation, and the Borrower has all requisite
authority to conduct its business in each
jurisdiction in which its business is conducted.
ii. AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The
execution, delivery and performance by the
Borrower of this Pledge Agreement has been duly
authorized by proper corporate proceedings, and
this Pledge Agreement constitutes a legal, valid
and binding obligation of the Borrower,
enforceable against the Borrower in accordance
with its terms, and creates a security interest
which is enforceable against the Borrower in all
now owned and hereafter acquired Collateral except
as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the
enforcement of creditors' rights generally and
subject also to the availability of equitable
remedies if equitable remedies are sought. No
consent or approval of any Governmental Authority
which has not been obtained is required in
connection with the execution, delivery and
performance by the Borrower of this Pledge
Agreement.
iii. CONFLICTING LAWS AND CONTRACTS. Neither the
execution and delivery by the Borrower of this
Pledge Agreement, nor the creation and perfection
of the security interest in the Collateral granted
hereunder, nor compliance by the Borrower with the
terms and provisions hereof will violate any law,
rule, regulation, order, writ, judgment,
injunction, decree or award binding on the
Borrower or the Borrower's articles of
incorporation or bylaws, the provisions of any
indenture, instrument or agreement to which the
Borrower is a party or is subject, or by which it,
or its property, is bound, or conflict with or
constitute a default thereunder, or result in the
creation or imposition of any Lien (except to the
extent created by the Pledge Agreement) pursuant
to the terms of any such indenture, instrument or
agreement.
iv. NO DEFAULT. No Default or Unmatured Default
exists.
v. PLEDGED STOCK. The Borrower is the direct and
beneficial owner of each share of the Pledged
Stock and the Pledged Stock represents the
percentage (on a fully diluted basis) of the
issued and outstanding capital stock of its issuer
as set forth on Schedule A hereto. All of the
shares of the Pledged Stock are duly authorized,
validly issued, fully paid and nonassessable. The
Borrower has good and marketable title to the
Pledged Stock and has all requisite rights, power,
and authority to execute, deliver and comply with
the terms of this Pledge Agreement and to pledge
and deliver the Collateral to the Agent pursuant
hereto. The Pledged Stock is free and clear of
all Liens, options, warrants, puts, calls, or
other rights of third persons, and restrictions,
other than (i) those liens arising under this
Pledge Agreement and (ii) restrictions on
transferability <PAGE>imposed by applicable state and
Federal securities laws, rules and regulations.
Assuming the Agent has possession of the Pledged
Stock, the pledge, assignment and delivery of the
Pledged Stock pursuant to this Pledge Agreement
creates a valid, continuing, first perfected Lien
on the Pledged Stock in favor of the Agent, for
the benefit of the Agent and the Lenders, subject
to no prior Lien of any other Person.
e. COVENANTS.
From the date hereof and continuing thereafter until this
Pledge Agreement is terminated pursuant to Section 8.10, the
Borrower covenants and agrees with the Agent and the Lenders as
follows:
i. PLEDGE OF ADDITIONAL STOCK. If the Borrower shall
at any time acquire any additional shares of the
capital stock of any class of the Pledged Stock,
whether such acquisition shall be by purchase,
exchange, reclassification, dividend, or
otherwise, or acquire any new shares of capital
stock of any newly formed or acquired Subsidiary
(to the extent permitted by the Credit Agreement),
the Borrower shall forthwith (and without the
necessity for any request or demand by the Agent
or any Lender) deliver the certificates
representing such shares to the Agent, in the same
manner as described in Section 3, provided,
Borrower shall be obligated to pledge hereunder
not more than 65% of each class of stock held by
it in Rawlings de Costa Rica, S.A. The Borrower
will hold in trust for the Agent and the Lenders
upon receipt and immediately thereafter deliver to
the Agent any other instrument evidencing or
constituting Collateral (except, prior to the
occurrence of an Unmatured Default or a Default,
ordinary cash dividends, if any, paid with respect
to the Pledged Stock and the Stock Rights and
permitted by the Credit Agreement).
ii. TITLE; SECURITY INTEREST AND LIEN. The Borrower
(a) will preserve, warrant, and defend title to
and ownership of the Pledged Stock and the Lien in
the Collateral created hereby against the claims
of all Persons whomsoever; (b) will not at any
time assign, transfer, or otherwise dispose of its
right, title and interest in and to any of the
Collateral; (c) will not do or suffer any matter
or thing whereby the Lien created by this Pledge
Agreement in and to the Collateral might or could
be impaired; and (d) will not at any time,
directly or indirectly, create, assume, or suffer
to exist any Lien, warrant, put, option, or other
rights of third Persons and restrictions in and to
the Collateral or any part thereof other than (i)
those Liens arising under this Pledge Agreement
and (ii) restrictions on transferability imposed
by applicable state and Federal securities laws,
rules and regulations.
iii. FURTHER ASSURANCES. The Borrower, at its expense,
shall from time to time execute and deliver to the
Agent all such other assignments, certificates,
supplemental documents and financing statements,
and do all other acts or <PAGE>things as the Agent may
reasonably request in order to more fully create,
evidence, perfect, continue and preserve the
priority of the Lien created hereby.
iv. Pledged Stock.
(1) CHANGES IN CAPITAL STRUCTURE OF ISSUERS. The
Borrower will not (i) permit or suffer any
issuer of Pledged Stock to dissolve,
liquidate, retire any of its capital stock,
reduce its capital or merge or consolidate
with any other entity, except for a merger
permitted by Section 6.12 of the Credit
Agreement, or (ii) vote any of the Pledged
Stock in favor of any of the foregoing.
(2) ISSUANCE OF ADDITIONAL STOCK. The Borrower
will not permit or suffer the issuer of any
of the Pledged Stock to issue any stock, any
right to receive stock or any right to
receive earnings, except to the Borrower.
(3) DISPOSITION OF COLLATERAL. The Borrower will
not sell or otherwise dispose of all or any
part of the Collateral.
(4) REGISTRATION OF PLEDGED STOCK. After the
occurrence of a Default, the Borrower will,
to the extent permitted by applicable law,
permit any registerable Collateral to be
registered in the name of the Agent or its
nominee at any time at the option of the
Required Lenders.
(5) EXERCISE OF RIGHTS IN PLEDGED STOCK. The
Borrower will permit the Agent or its nominee
at any time after the occurrence of a
Default, without notice, to exercise all
voting and corporate rights relating to the
Collateral, including, without limitation,
exchange, subscription or any other rights,
privileges, or options pertaining to any
shares of the Pledged Stock and the Stock
Rights as if it were the absolute owner
thereof.
v. NOTICE OF DEFAULT. The Borrower will give prompt
notice in writing to the Agent and the Lenders of
the occurrence of any Default or Unmatured Default
and of any other development, financial or
otherwise, which might materially adversely affect
the Collateral.
f. RIGHTS OF BORROWER, AGENT AND THE LENDERS.
i. DEFAULT; EXERCISE OF STOCKHOLDER RIGHTS.
(a) Unless and until a Default shall occur and be
continuing, <PAGE>the Borrower shall be entitled to
receive all cash dividends or other
distributions on the Pledged Stock except (i)
distributions made in capital stock on the
Pledged Stock resulting from stock dividends
or on subdivision, combination, or
reclassification of the outstanding capital
stock of any corporation or as a result of
any merger, consolidation, acquisition or
other exchange of assets of any corporation;
and (ii) all sums paid on any Pledged Stock
upon liquidation or dissolution or reduction
of capital, repurchase, retirement or
redemption. All such sums, dividends,
distributions, proceeds or property described
in the immediately preceding clauses (i) and
(ii) shall, if received by any Person other
than the Agent, be held in trust for the
benefit of the Agent and the Lenders and
shall forthwith be delivered to the Agent for
the benefit of the Agent and the Lenders
(accompanied by proper instruments of
assignment and/or stock powers executed by
the Borrower in accordance with the Agent's
instructions) to be held subject to the terms
of this Pledge Agreement. Upon the
occurrence of a Default, the Agent, for the
benefit of the Agent and the Lenders, shall
be entitled to receive all payments of
whatever kind made upon or with respect to
any Collateral and to hold such payments as
Collateral or apply such payments pursuant to
the terms of this Agreement and the Credit
Agreement. The relative rights of the Agent
and the Lenders to receive such payments
shall be in proportion to the relative
amounts of all Obligations owing to the Agent
and the Lenders and the aggregate amount of
all Obligations then outstanding. As used
herein, the term "Default" shall mean the
occurrence of any one or more of the
following events:
(i) Any representation or warranty made by
or on behalf of the Borrower to the
Agent or the Lenders under or in
connection with this Pledge Agreement
shall be false in any material respect
as of the date on which made.
(ii) The breach by the Borrower of any of the
terms or provisions of Section 5.1, 5.3,
5.4.1, 5.4.2, 5.4.3, 5.4.5, 5.5 or 7(b).
(iii) The breach by the Borrower (other than a
breach which constitutes a Default under
Section 6.1(a)(A) or 6.1(a)(B)) of any
of the terms or provisions of <PAGE>this
Pledge Agreement which is not remedied
within 20 days after the giving of
written notice by the Agent.
(iv) The Agent shall not have a first
perfected security interest in the
Collateral, other than cash dividends
and other distributions which the
Borrower is entitled to retain pursuant
to Section 6.1 hereof.
(v) The occurrence of any "Default" under,
and as defined in, the Credit Agreement.
(b) Prior to the occurrence of a Default, the
Borrower shall have the sole and exclusive
right to vote and give consents with respect
to all of the Collateral and to consent to,
ratify, or waive notice of any and all
meetings. Upon the occurrence of a Default,
the Agent, shall have the exclusive right,
but shall not be obligated, at the election
of the Required Lenders (A) to vote and give
consents with respect to the issuer of any
Pledged Stock and to join in and become a
party to any plan of recapitalization,
reorganization, or readjustment (whether
voluntary or involuntary) as shall seem
desirable to the Agent, on behalf of the
Lenders, to protect or further their
interests in respect of the Collateral, (B)
to deposit the Collateral under any such
plan, and (C) to make any exchange,
substitution, cancellation, or surrender of
the Collateral required by any such plan and
to take such action with respect to the
Collateral as may be required by any such
plan or for the accomplishment thereof, and
no such disposition, exchange, substitution,
cancellation, or surrender shall be deemed to
constitute a release of the Collateral from
the Lien of this Pledge Agreement.
ii. RIGHT OF SALE AFTER DEFAULT. Upon the occurrence
and during the continuance of a Default the Agent
on behalf of the Lenders may exercise any or all
of the rights and remedies provided (i) in this
Pledge Agreement, (ii) to a secured party when a
debtor is in default under a security agreement by
the Illinois Uniform Commercial Code and (iii) by
any other applicable law including, without
limitation, any law governing the exercise of a
bank's right of setoff or bankers' lien. Without
limiting the generality of the foregoing, upon the
occurrence and continuance of a Default, the Agent
may sell, without recourse to judicial
proceedings, with the right to bid for and buy,
free from any right of redemption, the Collateral
or any part thereof, upon ten days' notice (which
notice is <PAGE>agreed to be reasonable notice for the
purposes hereof) to the Borrower of the time and
place of sale, for cash, upon credit or for future
delivery, at the Lenders' option and in the
Lenders' complete discretion:
(a) At public sale, including a sale at any
broker's board or exchange;
(b) At private sale in any commercially
reasonable manner which will not require
the Collateral, or any part thereof, to
be registered in accordance with the
Securities Act of 1933, as amended, or
the rules and regulations promulgated
thereunder, or any other law or
regulation. The Agent and the Lenders
are also hereby authorized, but not
obligated, to take such actions, give
such notices, obtain such consents, and
do such other things as they may deem
required or appropriate in the event of
sale or disposition of any of the
Collateral. The Borrower understands
that the Agent, on behalf of the
Lenders, may in its discretion approach
a restricted number of potential
purchasers and that a sale under such
circumstances may yield a lower price
for the Collateral, or any portion
thereof, than would otherwise be
obtainable if the same were registered
and sold in the open market. The
Borrower agrees that (i) in the event
the Agent shall so sell the Collateral,
or any portion thereof, at such private
sale or sales, the Agent and the Lenders
shall have the right to rely upon the
advice and opinion of any Person who
regularly deals in or evaluates stock of
the type constituting the Collateral as
to the price obtainable in a
commercially reasonable manner upon such
a private sale thereof, and (ii) such
reliance shall be conclusive evidence
that the Agent and the Lenders handled
such matter in a commercially reasonable
manner.
In the case of any sale by the Agent on behalf of the
Lenders of the Collateral on credit or for future delivery, the
Collateral sold may be retained by the Agent until the selling
price is paid by the purchaser, but neither the Agent nor any
Lender shall incur liability in case of failure of the purchaser
to take up and pay for the Collateral so sold.
In the event that the Agent and the Lenders reasonably
determine that a private sale is not economically practical, and
if in the opinion of the Agent and the Lenders it is necessary or
advisable to have such securities registered under the provisions
of such Act, or any similar law relating to the registration of
securities, the Borrower agrees, at its own expense, to (i)
execute and deliver all such instruments and documents, and do or
cause to be done such other acts and things, as may be necessary
or, in the opinion of the Agent, advisable to register such
securities under the provisions of such Act or any applicable
similar law relating to the registration of securities, and the
<PAGE>Borrower will use its best efforts to cause the registration
statement relating thereto to become effective and to remain
effective for such period as the Agent shall request, and to make
all amendments thereto and/or to the related prospectus which, in
the opinion of the Agent, are necessary or desirable, all in
conformity with the requirements of such Act and the rules and
regulations of the Securities and Exchange Commission applicable
thereto; (ii) use its best efforts to qualify such securities
under state "blue sky" or securities laws, all as reasonably
requested by the Agent; and (iii) at the request of the Agent,
indemnify and hold harmless the Lenders, the Agent, any
underwriters (and any Person controlling any of the foregoing),
and their respective employees, officers, agents, attorneys, and
accountants (collectively, the "Indemnified Parties") from and
against any loss, liability, claim, damage, and expense
(including, without limitation, fees of counsel incurred in
connection therewith) under such Act or otherwise, insofar as
such loss, liability, claim, damage, or expense arises out of or
is based upon any untrue statement or alleged untrue statement of
any material fact furnished by the Borrower contained in any
registration statement under which such securities were
registered under such Act or other securities laws, any
preliminary prospectus or final prospectus contained therein, or
arise out of or are based upon any omission or alleged omission
by the Borrower to state therein a material fact required to be
stated or necessary to make the statements therein not
misleading, such indemnification to remain operative regardless
of any investigation made by or on behalf of any Indemnified
Party; provided, however, that the Borrower shall not be liable
in any case to the extent that any such loss, liability, claim,
damage, or expense arises out of or is based upon an untrue
statement or alleged untrue statement or an omission or an
alleged omission made in reliance upon and in conformity with
written information furnished to the Borrower by an Indemnified
Party specifically for use in such registration statement or
preliminary or final prospectus.
iii. APPLICATION OF PROCEEDS. The Agent shall apply
the proceeds of the Collateral, including the
proceeds of any sales or other disposition of the
Collateral, or any part thereof, under Section 6,
in the following order unless a court of competent
jurisdiction shall otherwise direct:
(a) FIRST, to payment of all reasonable
costs and expenses of the Agent and the
Lenders incurred in connection with the
collection and enforcement of the
Obligations or of the security interest
granted to the Agent and the Lenders
pursuant to this Pledge Agreement,
including all costs and expenses of any
sale pursuant hereto, and of any
judicial or private proceedings in which
such sale may be made, and of all other
expenses, liabilities and advances made
or incurred by the Agent, the Lenders
and the agents and attorneys of each of
them, together with interest at the
Default Rate on such costs, expenses and
liabilities and on all advances made by
the Agent or any Lender from the date
any such cost, expense or liability is
due, owing or unpaid or any such advance
is made, in each case until paid in
full;
<PAGE>
(b) (SECOND, for application in accordance
with Section 7.3 of the Borrower
Security Agreement; and
(c) THIRD, the balance, if any, after all of
the Obligations have been satisfied,
shall be remitted to the Borrower.
iv. GOVERNANCE. All rights and remedies available to
the Agent or the Lenders with respect to the
grant, foreclosure and enforcement of the security
interest and lien granted hereby and with respect
to any action permitted hereunder may be exercised
solely by the Agent acting with the concurrence of
the Required Lenders.
g. WAIVERS, AMENDMENTS AND REMEDIES.
No delay or omission of the Agent to exercise any right or
remedy granted under this Pledge Agreement shall impair such
right or remedy or be construed to be a waiver of any Default or
an acquiescence therein, and any single or partial exercise of
any such right or remedy shall not preclude other or further
exercise thereof or the exercise of any other right or remedy,
and no waiver, amendment or other variation of the terms,
conditions or provisions of this Pledge Agreement whatsoever
shall be valid unless in writing signed by the Agent with the
concurrence of the Required Lenders, and then only to the extent
in such writing specifically set forth; provided, however, that
any amendment purporting to release all or any portion of the
Collateral shall be valid only if signed by the Agent with the
concurrence of all of the Lenders. All rights and remedies
contained in this Pledge Agreement or by law afforded shall be
cumulative and all shall be available to the Agent and the
Lenders until the Obligations have been paid in full.
h. GENERAL PROVISIONS.
i. INDEMNITY. The Borrower hereby agrees to assume
liability for, and does hereby agree to indemnify
and keep harmless the Agent and the Lenders, and
their respective successors, assigns, agents and
employees, from and against any and all
liabilities, damages, penalties, suits, costs and
expenses of any kind and nature, imposed on,
incurred by or asserted against the Agent or the
Lenders, or their respective successors, assigns,
agents and employees, in any way relating to or
arising out of any action taken or failure to act
by the Borrower under or in respect of this Pledge
Agreement, provided that no such Person shall be
entitled to indemnification for liabilities,
damages, penalties, suits, costs and expenses
caused by its or their own gross negligence or
willful misconduct.
ii. SECURED PARTY PERFORMANCE OF BORROWER OBLIGATIONS.
Without having any obligation to do so, if a
Default has occurred and is continuing the Agent
may perform or pay any obligation which the
Borrower has agreed to perform or pay in this
Pledge Agreement and the Borrower shall <PAGE>reimburse
the Agent for any amounts paid by the Agent
pursuant to this Section 8.2. The Borrower's
obligation to reimburse the Agent pursuant to the
preceding sentence shall constitute an Obligation
payable on demand.
iii. AUTHORIZATION FOR SECURED PARTY TO TAKE CERTAIN
ACTION. The Borrower irrevocably authorizes the
Agent at any time and from time to time in the
sole discretion of the Agent and appoints the
Agent as its attorney in fact to act on behalf of
the Borrower (i) to execute on behalf of the
Borrower as debtor and to file financing
statements necessary or desirable in the Agent's
sole discretion to perfect and to maintain the
perfection and priority of the Agent's security
interest in the Collateral, (ii) to indorse and
collect any cash proceeds of the Collateral, (iii)
to file a carbon, photographic or other
reproduction of this Pledge Agreement or any
financing statement with respect to the Collateral
as a financing statement in such offices as the
Agent in its sole discretion deems necessary or
desirable to perfect and to maintain the
perfection and priority of the Agent's and the
Lenders' security interest in the Collateral, and
(iv) to apply the proceeds of any Collateral
received by the Agent to the Obligations as
provided in Section 6.3 if a Default has occurred
and is continuing.
iv. SPECIFIC PERFORMANCE OF CERTAIN COVENANTS. The
Borrower acknowledges and agrees that a breach of
any of the covenants contained in Sections 5.1 and
5.3 will cause irreparable injury to the Agent and
the Lenders, that the Agent and Lenders have no
adequate remedy at law in respect of such breaches
and therefore agrees, without limiting the right
of the Agent or the Lenders to seek and obtain
specific performance of other obligations of the
Borrower contained in this Pledge Agreement, that
the covenants of the Borrower contained in the
Sections referred to in this Section 8.4 shall be
specifically enforceable against the Borrower.
v. DEFINITION OF CERTAIN TERMS. Terms defined in the
Illinois Uniform Commercial Code which are not
otherwise defined in this Pledge Agreement are
used in this Pledge Agreement as defined in the
Illinois Commercial Code as in effect on the date
hereof.
vi. BENEFIT OF AGREEMENT. The terms and provisions of
this Pledge Agreement shall be binding upon and
inure to the benefit of the Borrower, the Agent
and the Lenders and their respective successors
and assigns, except that the Borrower shall not
have the right to assign its rights under this
Pledge Agreement or any interest herein, without
the prior written consent of the Agent.
vii. SURVIVAL OF REPRESENTATIONS. All representations
and warranties of the <PAGE>Borrower contained in this
Pledge Agreement shall survive the execution and
delivery of this Pledge Agreement.
viii. TAXES AND EXPENSES. Any taxes (including income
taxes other than taxes on the overall net income
of the Lenders) payable or ruled payable by
Federal or State authority in respect of this
Pledge Agreement shall be paid by the Borrower,
together with interest and penalties, if any. The
Borrower shall reimburse the Agent for any and all
outofpocket expenses and internal charges
(including reasonable attorneys' fees and
reasonable time charges of attorneys and
paralegals who may be employees of the Agent) paid
or incurred by the Agent in connection with the
preparation, execution, delivery, administration,
collection and enforcement of this Pledge
Agreement or in the collection, preservation or
sale of the Collateral.
ix. HEADINGS. The title of and section headings in
this Pledge Agreement are for convenience of
reference only, and shall not govern the
interpretation of any of the terms and provisions
of this Pledge Agreement.
x. TERMINATION. This Pledge Agreement and the Liens
arising hereunder shall (i) become effective as of
the date hereof upon the execution hereof and (ii)
continue in effect (notwithstanding the fact that
from time to time there may be no Obligations
outstanding) until no Obligations or commitments
of the Agent or the Lenders which could give rise
to any Obligations shall be outstanding. Such
delivery shall be without warranty of, or recourse
to, the Agent.
xi. RELEASES; PARTIAL RELEASES. Any cash dividends
received by the Borrower in accordance with the
terms of Section 6.1(a) shall be deemed released
from the Lien of this Pledge Agreement and shall
be held by the Borrower (or any transferee of
Borrower) free and clear of the Lien created by
this Pledge Agreement. Upon termination of this
Pledge Agreement in accordance with the provisions
of Section 8.10, the Agent shall, at the
Borrower's request and expense, execute such
release as the Borrower may reasonably request, in
form and upon terms acceptable to the Agent in all
respects, and shall deliver all certificates
representing the Pledged Stock and other property
held in respect thereof hereunder which is in the
Agent's possession, together with all stock powers
or other instruments of transfer reasonably
required to effect delivery to the Borrower.
xii. ENTIRE AGREEMENT. This Pledge Agreement embodies
the entire agreement and understanding among the
Borrower, the Lenders and the Agent relating to
the Collateral and supersedes all prior agreements
and understandings among the Borrower, the Lenders
and the Agent relating to the Collateral.
<PAGE>
xiii. CHOICE OF LAW. THIS PLEDGE AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
(AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
xiv. WAIVERS. Except to the extent expressly otherwise
provided herein or in any Loan Document, the
Borrower waives, to the extent permitted by
applicable law, (i) any right to require the Agent
or any Lender to proceed against any other Person,
to exhaust their rights in any other collateral,
or to pursue any other right which the Agent or
any Lender may have, (ii) with respect to the
Obligations, presentment and demand for payment,
protest, notice of protest and nonpayment, and
notice of the intention to accelerate, and (iii)
all rights of marshalling in respect of any and
all of the Collateral.
xv. AGENT APPOINTED ATTORNEY-IN-FACT. The Borrower
hereby irrevocably appoints the Agent as
Borrower's attorney-in-fact, with full authority
in the place and stead of the Borrower and in the
name of the Borrower or otherwise, from time to
time in the Agent's discretion reasonably
exercised, to take any action and to execute any
instrument that the Agent deems reasonably
necessary or advisable to receive, endorse and
collect all instruments made payable to the
Borrower representing any dividend, interest
payment or other distribution in respect of the
Collateral or any part thereof and to give full
discharge for the same, when and to the extent
permitted by this Pledge Agreement.
xvi. SEVERABILITY. The provisions of this Pledge
Agreement are severable and if any clause or
provision hereof shall be held invalid or
unenforceable in whole or in part, then such
invalidity or unenforceability shall attach only
to such clause or provision, or part thereof, and
shall not in any manner affect such clause or
provision in any other jurisdiction or any other
clause or provision in this Pledge Agreement or
any jurisdiction.
i. NOTICES.
i. SENDING NOTICES. Any notice required or permitted
to be given under this Agreement may be, and shall
be deemed, given and sent in accordance with the
provisions of Section 13.1 of the Credit Agreement
when deposited in the United States mail, postage
prepaid, or by telegraph or telex when delivered
to the appropriate office for transmission,
charges prepaid, addressed to the Borrower and the
Agent at the addresses set forth in the Credit
Agreement.
<PAGE>
ii. CHANGE IN ADDRESS FOR NOTICES. Each of the
Borrower and the Agent may change the address for
service of notice upon it by a notice in writing
to the other party.
iii. COUNTERPARTS. This Pledge Agreement may be
executed in any number of counterparts, all of
which taken together shall constitute one
agreement, and any of the parties hereto may
execute this Pledge Agreement by signing any such
counterpart. This Pledge Agreement shall be
effective when it has been executed by the
Borrower and the Agent.
j. THE AGENT.
The First National Bank of Chicago has been appointed Agent
hereunder pursuant to Article X of the Credit Agreement, and the
Agent has agreed to act (and any successor Agent shall act) as
such only upon the express conditions contained in such Article
X. Any successor Agent appointed pursuant to Article X of the
Credit Agreement shall be entitled to all the rights, interests
and benefits of the Agent hereunder.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Stock
Pledge Agreement as of the date first above written.
RAWLING'S SPORTING GOODS
COMPANY, INC.
By: /s/ Rexford K. Peterson
Name: Rexford K. Peterson
Title: Chief Financial Officer
THE FIRST NATIONAL BANK OF
CHICAGO, as Agent
By: /s/ Nathan Block
Name: Nathan Block
Title: First Vice President
<PAGE>
STATE OF )
) SS:
COUNTY OF )
The foregoing Stock Pledge Agreement was executed and
acknowledged before me this _____ day of _________, ____ by
_______________, personally known to me to be the
________________ of ____________________, a ____________________,
corporation, on behalf of such corporation.
NOTARY PUBLIC
My Commission Expires:
(SEAL)
INTELLECTUAL PROPERTY ASSIGNMENT OF SECURITY INTEREST
This Intellectual Property Assignment of Security Interest
(this "Assignment") is dated as of July 14, 1999 by and between
Rawling's Sporting Goods Company, Inc. (the "Assignor"), and THE
FIRST NATIONAL BANK OF CHICAGO, as agent (the "Agent") for the
Lenders (as hereinafter defined).
R E C I T A L S:
1. Pursuant to that certain Amended and Restated Credit
Agreement dated as of September 12, 1997 among the Assignor,
the financial institutions signatory thereto (the
"Lenders"), and the Agent (as heretofore and hereafter
restated, amended or modified, the "Credit Agreement"), the
Lenders have agreed to make certain loans and other
financial accommodations to the Assignor; and
2. As a condition to further extensions of credit under the
Credit Agreement the Lenders have required that the Assignor
grant to the Agent, on behalf of the Lenders and at the
Agent's request, a security interest in certain of the
Assignor's assets;
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
a. DEFINITIONS AND EFFECT.
i. GENERAL TERMS. As used in this Assignment:
"Assignment" means this Intellectual Property
Assignment of Security Interest, as it may be amended, modified
or restated from time to time.
"Collateral" has the meaning ascribed to it by Section
2 hereof.
"Copyrights" has the meaning ascribed to it by Section
2(a) hereof.
"Default" means an event described in Section 5 hereof.
"Default Rate" means the rate of interest which may be
due and owing from time to time on any Loan and payable by the
Assignor under the Credit Agreement pursuant to Section 2.11 of
such agreement.
"Licenses" has the meaning ascribed to it by Section
2(c) hereof.
"Lien" means any security interest, mortgage, pledge,
hypothecation, lien, claim, charge, encumbrance, title retention
agreement, or lessor's interest, in or on the Collateral or any
<PAGE>portion thereof.
"Obligations" means all "Obligations" as defined in the
Credit Agreement.
"Patents" has the meaning ascribed to it by Section
2(d) hereof.
"Related Documents" means, collectively, all documents
and things in the Assignor's possession related to the production
and sale by the Assignor, or any Affiliate, Subsidiary, licensee
or subcontractor thereof, of products or services sold by or
under the authority of the Assignor in connection with the
Patents, Trademarks, Copyrights or Licenses including, without
limitation, all product and service specification documents and
production and quality control manuals used in the manufacture of
products or provision of services sold under or in connection
with the Trademarks.
"Section" means a numbered section of this Assignment,
unless another document is specifically referenced.
"Trademarks" has the meaning ascribed to it by Section
2(b) hereof.
"Unmatured Default" means an event which but for the
lapse of requisite time or the giving of requisite notice, or
both, would constitute a Default.
The foregoing definitions shall be equally applicable
to both the singular and plural forms of the defined terms.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Credit Agreement.
b. GRANT OF SECURITY INTEREST.
The Assignor hereby sells, assigns, transfers and sets
over to the Agent, for the benefit of itself and the Lenders, and
grants to the Agent, for the benefit of itself and the Lenders, a
security interest in all of the Assignor's right, title and
interest in and to all of its now owned or existing and hereafter
acquired or arising property described as follows (collectively,
the "Collateral") to secure payment of the Obligations:
(a) all United States and foreign
copyrights, including, without
limitation, the copyright
registrations listed on Exhibit A
hereto, and applications therefor
and renewals thereof and all
income, royalties, damages and
payments now and hereafter due
and/or payable under and with
respect to all United States and
foreign copyrights including,
without limitation, damages and
payments for past and future
infringements thereof (all of the
foregoing are sometimes hereinafter
individually and/or collectively
referred to as the "Copyrights");
(b) all United States and foreign
trademarks, tradenames, <PAGE>service
marks, trademark and service mark
registrations and renewals, and
trademark and service mark
applications, including, without
limitation, the U.S. trademark and
service mark applications and
registrations listed on Exhibit B
hereto, as well as any renewals
thereof and the trademarks and
service marks covered thereby, and
all income, royalties, damages and
payments now and hereafter due
and/or payable under and with
respect to all trademarks,
tradenames and service marks
including, without limitation,
damages and payments for past and
future infringements thereof
against third parties (all of the
foregoing are sometimes hereinafter
individually and/or collectively
referred to as the "Trademarks");
(c) all license agreements in which the
Assignor is or becomes licensed (or
grants or permits, whether now or
in the future a license) to use a
copyright, trademark, service mark,
tradename, patent or the related
knowhow including, without
limitation, the license agreements
listed on Exhibit C hereto (the
"Licenses");
(d) all United States and foreign
patents and patent applications,
whether in the United States or any
foreign jurisdiction, and the
inventions and improvements
described and claimed therein and
trade secrets and know-how related
thereto, including, without
limitation, the patents and patent
applications listed on Exhibit D
hereto, and the re-issues,
divisions, renewals, extensions and
continuations-in-part thereof and
all income, royalties, damages and
payments now and hereafter due
and/or payable thereunder and with
respect thereto, including, without
limitation, damages and payments
for past and future infringements
thereof, the right to sue for past,
present and future infringements
thereof and all rights
corresponding thereto throughout
the world (all of the foregoing
being sometimes hereinafter
individually and/or collectively
referred to as the "Patents");
(e) the goodwill of the Assignor's
business connected with the use of
and symbolized by the Trademarks;
(f) the Related Documents; and
(g) all products and proceeds,
including, without limitation,
insurance proceeds, of any of the
foregoing.
<PAGE>
c. REPRESENTATIONS AND WARRANTIES.
The Assignor represents and warrants to the Agent and
the Lenders that:
i. EXISTENCE AND STANDING. The Assignor is duly
organized, validly existing and in good standing
under the laws of its jurisdiction of
incorporation, and the Assignor has all requisite
authority to conduct its business and is qualified
to do business in each jurisdiction in which its
business is conducted except those jurisdictions
in which the failure to so qualify could not
reasonably be expected to have a Material Adverse
Effect.
ii. AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The
execution, delivery and performance by the
Assignor of this Assignment have been duly
authorized by proper corporate proceedings, and
this Assignment constitutes a legal, valid and
binding obligation of the Assignor and creates a
security interest which is enforceable against the
Assignor in all now owned and hereafter acquired
Collateral except as enforceability may be limited
by bankruptcy, insolvency or similar laws
affecting enforcement of creditors' rights
generally and subject also to the availability of
equitable remedies if equitable remedies are
sought.
iii. CONFLICTING LAWS AND CONTRACTS. Neither the
execution and delivery by the Assignor of this
Assignment, the creation and perfection of the
security interest in the Collateral granted
hereunder, nor compliance with the terms and
provisions hereof, will violate any law, rule,
regulation, order, writ, judgment, injunction,
decree or award binding on the Assignor or the
Assignor's articles of incorporation or bylaws,
the provisions of any indenture, instrument or
agreement to which the Assignor is a party or is
subject, or by which it, or its property, is
bound, or conflict therewith or constitute a
default thereunder, or result in the creation or
imposition of any Lien (except to the extent
created by this Assignment) pursuant to the terms
of any such indenture, instrument or agreement.
iv. PRINCIPAL LOCATION. As of the date hereof, the
Assignor's mailing address, and the location of
its chief executive office and the books and
records relating to the Collateral are disclosed
in Exhibit E hereto.
v. NO OTHER NAMES. Except as set forth in Exhibit F
hereto, since July 1, 1994, the Assignor has not
conducted business under any name except the names
in which it has executed this Assignment or as
otherwise disclosed pursuant to the Loan
Documents.
vi. NO DEFAULT. No Default or Unmatured Default
exists.
<PAGE>
vii. NO FINANCING STATEMENTS. Upon the making of the
filings and recordings specified in clauses (a)
and (b) of Section 3.8 below, the Agent will have
a first priority perfected security interest in
the Collateral. No financing statement or similar
document describing all or any portion of the
Collateral which has not lapsed or been terminated
naming the Assignor as debtor or assignor has been
filed in any jurisdiction or office, including,
without limitation, the United States Patent and
Trademark Office or the United States Copyright
Office except financing statements or similar
documents permitted by Section 6.18 of the Credit
Agreement.
viii. SECURITY INTEREST. This Assignment creates a
valid security interest in and collateral
assignment of the Collateral, enforceable against
the Assignor and all third parties, securing
payment of the Obligations, which security
interest will be perfected, with respect to rights
in the United States, upon (a) the recording of
this Assignment in the Office of the Commissioner
of Patents and Trademarks and the United States
Copyright Office, and (b) the filing of Uniform
Commercial Code financing statements with the
Secretary of State of Missouri.
ix. REGISTRATIONS. To the knowledge of Assignor's
officers, the Assignor has duly and properly
applied for registration of the Copyrights,
Trademarks and Patents listed in Exhibits A, B and
D hereto as indicated thereon, respectively, in
the United States Patent and Trademark Office or
the Copyright Office, as applicable.
x. LITIGATION. There has been no litigation,
arbitration, governmental investigation,
proceeding or inquiry pending or, to the knowledge
of any of the Assignor's officers, threatened
against or affecting the Assignor or its
Subsidiaries challenging the Assignor's right,
title and interest in the Collateral or alleging
that the Assignor's use of any Collateral violates
the rights of any Person which could reasonably be
expected to have a Material Adverse Effect. To
the knowledge of Assignor's officers, the
Assignor's use of the Collateral does not infringe
upon the rights of any third party.
xi. COMPLETE LISTING. The Copyright, Trademark, and
Patent applications and registrations and the
Licenses set forth on the Schedules hereto
constitute, as of the date hereof, all such
applications, registrations and Licenses of the
Assignor and Assignor has good and marketable
title to all such property, free and clear of all
Liens other than those in favor of the Agent and
the Lenders or permitted under Section 6.18 of the
Credit Agreement.
d. COVENANTS.
<PAGE>
From the date of this Assignment, and thereafter until
this Assignment is terminated:
i. INSPECTION. The Assignor will permit the Agent,
by representatives and agents, to examine and make
copies of the records of the Assignor relating to
the Collateral, and to discuss the Collateral and
the records of the Assignor with respect thereto
with, and to be advised as to the same by, the
Assignor's officers and employees at such
reasonable times and intervals as the Agent may
designate.
ii. TAXES. The Assignor will pay when due all taxes,
assessments and governmental charges and levies
upon the Collateral to the extent permitted
pursuant to clauses (a) and (b) of Section 6.5 of
the Credit Agreement.
iii. RECORDS AND REPORTS. The Assignor will maintain
complete and accurate books and records with
respect to the Collateral, and furnish to the
Agent, with sufficient copies for each of the
Lenders, such reports relating to the Collateral
as the Agent shall from time to time reasonably
request.
iv. NOTICE OF DEFAULT. The Assignor will give prompt
notice in writing to the Agent and the Lenders of
the occurrence of any Default or Unmatured Default
and of any other development, financial or other,
which would have a Material Adverse Effect.
v. FINANCING STATEMENTS AND OTHER ACTIONS. The
Assignor will execute and deliver to the Agent all
financing statements and other documents from time
to time requested by the Agent or any Lender in
order to maintain and/or perfect a first perfected
security interest in the Collateral.
vi. DISPOSITION OF COLLATERAL. Except for
non-exclusive licensing agreements or as permitted
under the Credit Agreement, the Assignor will not
sell, lease or otherwise dispose of the Collateral
without the prior consent of Agent, which consent
shall not be unreasonably withheld.
vii. LIENS. The Assignor will not create, incur or
suffer to exist any Lien upon the Collateral
except the security interest created by this
Assignment and as otherwise permitted by Section
6.18 of the Credit Agreement.
viii. OTHER FINANCING STATEMENTS. The Assignor will not
sign or authorize the signing on its behalf of any
financing statement naming it as debtor covering
all or any portion of the Collateral, except
financing statements naming the Agent, on behalf
of the Lenders, as secured parties.
ix. PRESERVATION OF VALUE. The Assignor agrees to
protect and preserve the value and integrity of
all material Trademarks, Patents, Copyrights and<PAGE>
Licenses and, to that end, shall maintain the
quality of any and all of its products or services
bearing the trademarks or service marks included
in such Trademarks, Patents, Copyrights or
Licenses consistent with the quality of such
products and services of such marks as of the date
of this Assignment.
x. COLLATERAL ROYALTIES; TERM. The Assignor hereby
agrees that any use by the Agent, on behalf of the
Lenders, of any Patents, Copyrights, Trademarks
and Licenses as described above shall be
worldwide, to the extent possessed by the
Assignor, and without any liability for royalties
or other related charges from the Agent or any
Lender to the Assignor. The term of the
assignments and grants of security interests
granted herein shall extend until the expiration
of each of the respective Copyrights, Trademarks,
Patents and Licenses assigned or pledged
hereunder, or until the Obligations have been
indefeasibly paid in full, no commitment by the
Agent or any Lender exists that could give rise to
any Obligations and the Credit Agreement and this
Assignment have been terminated, whichever first
occurs.
xi. ANNUAL REPORT. The Assignor shall provide the
Agent upon request, and in any event within 15
days after the end of each calendar quarter, with
a list of all new applications for United States
and foreign copyright registrations, patents and
trademark registrations, which new applications
shall be subject to the terms and conditions of
this Assignment. The Assignor hereby authorizes
the Agent to modify this Assignment by amending
the Exhibits hereto to include any such new
Trademarks, Patents, Copyrights or Licenses and to
re-record this Assignment from time to time as the
Agent sees fit.
xii. DUTIES OF ASSIGNOR. The Assignor shall have the
duty (a) to prosecute diligently any application
to register any material Patents, Trademarks and
Copyrights pending as of the date hereof or
thereafter until all Obligations have been
indefeasibly paid in full, (b) to make application
on unpatented but patentable material inventions
and on material Trademarks and Copyrights, as the
Borrower may determine, in its sole discretion, to
be appropriate, and (c) to preserve and maintain
all rights in all applications to register
material Patents, Trademarks and Copyrights. Any
expenses incurred in connection with such
applications shall be borne by the Assignor. The
Assignor shall not abandon any filed application
to register material Patents, Trademarks and
Copyrights without the prior written consent of
the Agent.
xiii. DELIVERY OF CERTIFICATES. Upon the request of the
Agent, the Assignor shall deliver to the Agent
copies of all existing and future official
Certificates of Registration for the Patents,
Trademarks and Copyrights.
<PAGE>
xiv. NOTICE OF PROCEEDINGS. The Assignor shall
promptly notify the Agent and the Lenders of the
institution of, and any adverse determination in,
any proceeding in the United States Patent and
Trademark Office or any agency of any state or any
court regarding the Assignor's right, title and
interest in any material Patent, Trademark or
Copyright or the Assignor's right to register any
material Patent, Trademark or Copyright.
e. DEFAULT.
i. The occurrence of any one or more of the following
events shall constitute a Default:
(1) Any representation or warranty made or deemed
made by or on behalf of the Assignor to the
Agent or the Lenders under or in connection
with this Assignment shall be false in any
material respect as of the date on which made
or deemed made.
(2) The breach by the Assignor of any of the
terms or provisions of Section 4.4, 4.5, 4.6,
4.7, 4.8, 4.9 or 8.5 hereof.
(3) The breach by the Assignor (other than a
breach which constitutes a Default under
Section 5.1.1 or 5.1.2 hereof) of any of the
terms or provisions of this Assignment which
is not remedied within twenty (20) days after
the giving of written notice by the Agent.
(4) The occurrence of any "Default" under and as
defined in the Credit Agreement.
ii. ACCELERATION AND REMEDIES. If any Default
described in the Credit Agreement occurs with
respect to the Assignor, the obligations of the
Lenders to make Loans thereunder and the right of
the Lenders to declare the Obligations to be due
and payable shall be determined in accordance with
the Credit Agreement.
iii. ASSIGNOR'S OBLIGATIONS UPON DEFAULT. Upon the
request of the Agent after a Default occurs and is
continuing, the Assignor will:
(1) ASSEMBLY OF COLLATERAL. Assemble and make
available to the Agent the Collateral and all
records relating thereto at the main office
of the Assignor or at such other place or
places reasonably specified by the Agent.
(2) SECURED PARTY ACCESS. Permit the Agent, by
the Agent's representatives and agents, to
enter and remain on any premises <PAGE>where all or
any part of the books and records relating
thereto, or both, are located, to take
possession of all or any part of the
Collateral or such books and records and to
remove all or any part of the Collateral or
such books and records.
f. WAIVERS, AMENDMENTS AND REMEDIES.
i. REMEDIES. In the event that any Default has
occurred and is continuing, the Agent, without
demand of performance or other demand,
advertisement or notice of any kind (except the
notice specified below of time and place of public
or private sale) to or upon the Assignor or any
other person (all and each of which demands,
advertisements and/or notices are hereby expressly
waived), may forthwith collect, receive,
appropriate and realize upon the Collateral, or
any part thereof, and/or may forthwith sell,
assign, give option or options to purchase,
contract to sell or otherwise dispose of and
deliver said Collateral, or any part thereof, in
one or more portions at public or private sale or
sales or dispositions, at any exchange, broker's
board or at any of the Agent's offices or
elsewhere upon such terms and conditions as the
Agent may deem advisable and at such prices as the
Agent may deem best, for any combination of cash
or on credit or for future delivery without
assumption of any credit risk, with the right to
the Agent or any Lender upon any such sale or
sales or dispositions, public or private, to
purchase the whole or any part of said Collateral
so sold, free of any right or equity of redemption
in the Assignor, which right or equity is hereby
expressly waived and released.
ii. WAIVERS AND AMENDMENTS. No delay or omission of
the Agent or any Lender to exercise any right or
remedy granted under this Assignment shall impair
such right or remedy or be construed to be a
waiver of any Unmatured Default or Default or an
acquiescence therein, and any single or partial
exercise of any such right or remedy shall not
preclude other or further exercise thereof or the
exercise of any other right or remedy, and no
waiver, amendment or other variation of the terms,
conditions or provisions of this Assignment
whatsoever shall be valid unless in writing signed
by the Agent and the Required Lenders (if so
required by the Credit Agreement), and then only
to the extent specifically set forth in such
writing; provided, however, that any amendment
purporting to release all or substantially all of
the Collateral shall be valid only if signed by
the Agent and all of the Lenders. All rights and
remedies contained in this Assignment or by law
afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the
Obligations have been indefeasibly paid in full.
g. PROCEEDS.
<PAGE>
i. SPECIAL COLLATERAL ACCOUNT. After a Default has
occurred and is continuing, all cash proceeds of
the Collateral received by the Agent shall be
deposited in a special cash collateral account
with the Agent and held there as security for the
Obligations.
ii. APPLICATION OF PROCEEDS. The proceeds of the
Collateral received by Agent pursuant to Section
7.1 shall be applied by the Agent to payment of
the Obligations in the following order unless a
court of competent jurisdiction shall otherwise
direct:
(a) FIRST, to payment of all reasonable
costs and expenses of the Agent and the
Lenders incurred in connection with the
collection and enforcement of the
Obligations or of the security interest
granted to the Agent and the Lenders
pursuant to this Assignment, including
all costs and expenses of any sale
pursuant hereto, and of any judicial or
private proceedings in which such sale
may be made, and of all other expenses,
liabilities and advances made or
incurred by the Agent, the Lenders and
the agents and attorneys of each of
them, together with interest at the
Default Rate on such costs, expenses and
liabilities and on all advances made by
the Agent or any Lender from the date
any such cost, expense or liability is
due, owing or unpaid or any such advance
is made, in each case until paid in
full;
(b) SECOND, for application of in accordance
with Section 7.3 to the Borrower
Security Agreement; and
(c) THIRD, the balance, if any, after all of
the Obligations have been satisfied,
shall be remitted to the Assignor or as
required by law.
h. GENERAL PROVISIONS.
i. NOTICE OF DISPOSITION OF COLLATERAL. The Assignor
hereby waives notice of the time and place of any
public sale or the time after which any private
sale or other disposition of all or any part of
the Collateral may be made. To the extent such
notice may not be waived under applicable law, any
notice made shall be deemed reasonable if sent to
the Assignor, addressed as set forth in Section 10
hereof, at least ten (10) days prior to any such
public sale or the time after which any such
private sale or other disposition may be made.
ii. AGENT PERFORMANCE OF ASSIGNOR OBLIGATIONS.
Without having any <PAGE>obligation to do so, upon
either (a) notice to the Assignor or (b) the
occurrence of an Unmatured Default or a Default,
the Agent may perform or pay any obligation which
the Assignor has agreed to perform or pay in this
Assignment and the Assignor shall reimburse the
Agent for any amounts paid by the Agent pursuant
to this Section 8.2. The Assignor's obligation to
reimburse the Agent pursuant to the preceding
sentence shall be an Obligation payable on demand.
iii. AUTHORIZATION FOR AGENT TO TAKE CERTAIN ACTION.
The Assignor irrevocably authorizes the Agent at
any time and from time to time, in the sole
discretion of the Agent, upon either (a) notice to
the Assignor or (b) the occurrence of an Unmatured
Default or a Default: (i) to execute on behalf of
the Assignor as debtor and to file financing
statements and other documents with the United
States Patent and Trademark Office or Copyright
Office or otherwise which are necessary or
desirable in the Agent's sole discretion to
perfect and to maintain the perfection and
priority of the Agent's and Lenders' security
interest in the Collateral; (ii) to endorse and
collect any cash proceeds of the Collateral; or
(iii) to file a carbon, photographic or other
reproduction of this Assignment or any financing
statement with respect to the Collateral as a
financing statement in such offices as the Agent
in its sole discretion deems necessary or
desirable to perfect and to maintain the
perfection and priority of the Agent's and the
Lenders' security interest in the Collateral. At
any time and from time to time after the
Obligations have been declared or become due and
payable in accordance with the Credit Agreement,
the Assignor authorizes the Agent to apply the
proceeds of any Collateral received by the Agent
to the Obligations as provided in Section 7
hereof.
iv. SPECIFIC PERFORMANCE OF CERTAIN COVENANTS. The
Assignor acknowledges and agrees that a breach of
any of the covenants contained in Sections 4.1,
4.5, 4.6, 4.13, 5.3 and 8.5 hereof will cause
irreparable injury to the Agent and the Lenders
and that the Agent and the Lenders have no
adequate remedy at law in respect of such breaches
and therefore agree, without limiting the right of
the Agent or the Lenders to seek and obtain
specific performance of other obligations of the
Assignor contained in this Assignment, that the
covenants of the Assignor contained in the
Sections referred to in this Section 8.4 shall be
specifically enforceable against the Assignor.
v. DISPOSITIONS NOT AUTHORIZED. Except as provided
for by the Credit Agreement, the Assignor is not
authorized to sell or otherwise dispose of the
Collateral and notwithstanding any course of
dealing between the Assignor and the Agent or
other conduct of the Agent, no authorization to
sell or otherwise dispose of the Collateral shall
be binding upon the Agent or the Lenders unless
such authorization is in writing signed by the
Agent <PAGE>with the consent of the Required Lenders or
all Lenders, as required by the Credit Agreement.
vi. DEFINITION OF CERTAIN TERMS. Terms defined in the
Illinois Uniform Commercial Code which are not
otherwise defined in this Assignment are used in
this Assignment as defined in the Illinois Uniform
Commercial Code as in effect on the date hereof.
vii. BENEFIT OF AGREEMENT. The terms and provisions of
this Assignment shall be binding upon and inure to
the benefit of the Assignor, the Agent and the
Lenders and their respective successors and
assigns, except that the Assignor shall not have
the right to assign its rights or obligations
under this Assignment or any interest herein,
without the prior written consent of the Agent and
the Lenders.
viii. SURVIVAL OF REPRESENTATIONS. All representations
and warranties of the Assignor contained in this
Assignment shall survive the execution and
delivery of this Assignment.
ix. TAXES AND EXPENSES. Any taxes (including, without
limitation, any sales, gross receipts, general
corporation, personal property, privilege or
license taxes, but not including any federal or
other taxes imposed upon the Agent or any Lender,
with respect to its gross or net income or profits
arising out of this Assignment) payable or ruled
payable by any Federal or State authority in
respect of this Assignment shall be paid by the
Assignor, together with interest and penalties, if
any. The Assignor shall reimburse (a) the Agent
for any and all reasonable outofpocket expenses
and internal charges (including reasonable
attorneys', auditors' and accountants' fees and
reasonable time charges of attorneys, paralegals,
auditors and accountants who may be employees of
the Agent) paid or incurred by the Agent in
connection with the preparation, execution,
delivery, administration, collection and
enforcement of this Assignment and in the audit,
analysis, administration, collection, preservation
or sale of the Collateral (including the expenses
and charges associated with any periodic or
special audit of the Collateral), and (b) the
Agent and each Lender for any and all reasonable
outofpocket expenses and internal charges
(including reasonable attorneys', auditors' and
accountants' fees and reasonable time charges of
attorneys, paralegals, auditors and accountants
who may be employees of the Agent or such Lender)
paid or incurred by the Agent or such Lender in
connection with the collection and enforcement of
this Assignment.
x. HEADINGS. The title of and section headings in
this Assignment are for convenience of reference
only, and shall not govern the interpretation of
any of the terms and provisions of this
Assignment.
<PAGE>
xi. TERMINATION. This Assignment and the Liens
arising hereunder shall continue in effect
(notwithstanding the fact that from time to time
there may be no Obligations or commitments
therefor outstanding) until the payment in full of
the Obligations and the termination of the Credit
Agreement in accordance with its terms and all
commitments of the Lenders thereunder, at which
time the security interests granted hereby shall
terminate and any and all rights to the Collateral
shall revert to the Assignor. Upon such
termination, the Agent shall promptly return to
the Assignor, at the Assignor's expense, such of
the Collateral held by the Agent as shall not have
been sold or otherwise applied pursuant to the
terms hereof. The Agent will promptly execute and
deliver to the Assignor such other documents as
the Assignor shall reasonably request to evidence
such termination.
xii. ENTIRE AGREEMENT. This Assignment, the Credit
Agreement and the other Loan Documents embody the
entire agreement and understanding between the
Assignor and the Agent relating to the Collateral
and supersede all prior agreements and
understandings between the Assignor and the Agent
relating to the Collateral.
xiii. INDEMNITY. The Assignor hereby agrees to assume
liability for, and does hereby agree to indemnify
and keep harmless the Agent and each Lender, its
successors, assigns, agents and employees, from
and against any and all liabilities, damages,
penalties, suits, costs, and expenses of any kind
and nature, imposed on, incurred by or asserted
against the Agent or any Lender, or its
successors, assigns, agents and employees, in any
way relating to or arising out of this Assignment,
or the manufacture, purchase, acceptance,
rejection, ownership, delivery, lease, possession,
use, operation, condition, sale, return or other
disposition of any Collateral (other than
liability resulting from the gross negligence or
wilful misconduct of the Agent or any such
Lender).
xiv. RELEASES. Upon termination of this Assignment in
accordance with the provisions of Section 8.11
hereof, the Agent and the Lenders shall, at the
Assignor's request and expense, execute such
releases as the Assignor may reasonably request,
in form and upon terms acceptable to the Agent and
the Lenders in all respects.
xv. WAIVERS. Except to the extent expressly otherwise
provided herein or in any other Loan Document, the
Assignor waives, to the extent permitted by
applicable law, (a) any right to require either
the Agent or any Lender to proceed against any
other person, to exhaust its rights in any other
collateral, or to pursue any other right which
either the Agent or any Lender may have, and (b)
with respect to the Obligations, presentment <PAGE>and
demand for payment, protest, notice of protest and
nonpayment, and notice of the intention to
accelerate.
xvi. COUNTERPARTS. This Assignment may be executed in
any number of counterparts, all of which taken
together shall constitute one agreement, and any
of the parties hereto may execute this Assignment
by signing any such counterpart. This Assignment
shall be effective when it has been executed by
the Assignor and the Agent.
xvii. CHOICE OF LAW. THIS ASSIGNMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS, WITHOUT
REGARD TO CONFLICT OF LAWS PROVISIONS, OF THE
STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL
LAWS APPLICABLE TO NATIONAL BANKS.
xviii. MARSHALLING. Neither the Agent nor any Lender
shall be under any obligation to marshall any
assets in favor of the Assignor or any other party
or against or in payment of any or all of the
Obligations.
i. THE AGENT.
The First National Bank of Chicago has been appointed
as Agent for the Lenders hereunder pursuant to Article X of the
Credit Agreement, and the Agent has agreed to act (and any
successor Agent shall act) as such hereunder only on the express
conditions contained in such Article X. Any successor Agent
appointed pursuant to Article X of the Credit Agreement shall be
entitled to all the rights, interests and benefits of the Agent
hereunder.
j. NOTICES.
i. SENDING NOTICES. Any notice required or permitted
to be given under this Assignment shall be given
in accordance with Section 13.1 of the Credit
Agreement.
ii. CHANGE IN ADDRESS FOR NOTICES. The Assignor and
the Agent or any Lender may change the address for
service of notice upon it by a notice in writing
to the other.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this
Assignment to be executed by their duly authorized
representatives as of the date first set forth above.
RAWLING'S SPORTING GOODS
COMPANY, INC.
By:/s/Rexford K. Peterson
Its:Chief Financial Officer
THE FIRST NATIONAL BANK OF
CHICAGO, as Agent
By:/s/Nathan Block
Its:First Vice President
<PAGE>
STATE OF )
) SS:
COUNTY OF )
The foregoing Intellectual Property Assignment of Security
Interest was executed and acknowledged before me this _____ day
of _________, ____ by _______________, personally known to me to
be the ________________ of _____________ , a ___________________,
corporation, on behalf of such corporation.
NOTARY PUBLIC
My Commission Expires:
(SEAL)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RAWLINGS SPORTING GOODS COMPANY, INC. CONTAINED IN ITS
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MAY 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> MAY-31-1999
<CASH> 1,815
<SECURITIES> 0
<RECEIVABLES> 47,034
<ALLOWANCES> 2,469
<INVENTORY> 46,685
<CURRENT-ASSETS> 98,775
<PP&E> 28,363
<DEPRECIATION> 15,354
<TOTAL-ASSETS> 138,741
<CURRENT-LIABILITIES> 25,175
<BONDS> 66,065
0
0
<COMMON> 79
<OTHER-SE> 47,422
<TOTAL-LIABILITY-AND-EQUITY> 138,741
<SALES> 138,145
<TOTAL-REVENUES> 138,145
<CGS> 95,568
<TOTAL-COSTS> 95,568
<OTHER-EXPENSES> 35,480
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,577
<INCOME-PRETAX> 3,401
<INCOME-TAX> 1,258
<INCOME-CONTINUING> 2,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,143
<EPS-BASIC> .27
<EPS-DILUTED> .27
</TABLE>
