SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 28, 1999
RAWLINGS SPORTING GOODS COMPANY, INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-24450 43-1674348
(State or other jurisdiction (Commission File (I.R.S. Employer
of Incorporation Number) Identification No.)
1859 Intertech Drive, Fenton, Missouri 63026
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 349-5000
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
On December 28, 1999, the Company refinanced its
long-term credit facility by entering into a five year term, $75,000,000
credit agreement with a new lender. The credit facility is asset-based
and is supported by the Company's receivables, inventory and
property, plant and equipment. The proceeds from this new facility
were used to pay-off the existing credit facility.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED: None
(b) PRO FORMA FINANCIAL INFORMATION: None
(c) EXHIBITS:
10 Credit Agreement, dated as of December 28, 1999,
by and among the Company as Borrower, certain
other credit parties named therein, and certain
Lenders signatory thereto.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
99 Report of Arthur Andersen and accompanying
consolidated balance sheets of the Company and its
subsidiaries as of August 31, 1999 and 1998 and
the related consolidated statements of income,
stockholders' equity and cash flows for each of
the three years in the period ended August 31,
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, hereto duly authorized.
RAWLINGS SPORTING GOODS
COMPANY, INC.
Date: December 30, 1999 By: /s/ Michael L. Luetkemeyer
Michael L. Luetkemeyer
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
10 Credit Agreement, dated as of December 28, 1999,
by and among the Company as Borrower, certain other
credit parties named therein, and certain Lenders
signatory thereto.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
99 Report of Arthur Andersen and accompanying
consolidated balance sheets of the Company
and its subsidiaries as of August 31, 1999
and 1998 and the related consolidated statements
of income, stockholders' equity and cash flows
for each of the three years in the period
ended August 31, 1999.
<PAGE>
_________________________________________________________________
CREDIT AGREEMENT
Dated as of December __, 1999
among
RAWLINGS SPORTING GOODS COMPANY, INC.
as Borrower,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender
_________________________________________________________________
<PAGE>
TABLE OF CONTENTS
1. AMOUNT AND TERMS OF CREDIT
1.1. Credit Facilities................................. 1
1.2. Letters of Credit................................. 1
1.3. Prepayments....................................... 4
1.4. Use of Proceeds................................... 4
1.5. Interest and Applicable Margins................... 6
1.6. Eligible Accounts................................. 9
1.7. Eligible Inventory................................11
1.8. Cash Management Systems...........................13
1.9. Fees..............................................13
1.10. Receipt of Payments...............................14
1.11. Application and Allocation of Payments............14
1.12. Loan Account and Accounting.......................14
1.13. Indemnity.........................................15
1.14. Access............................................16
1.15. Taxes.............................................17
1.16. Capital Adequacy; Increased Costs; Illegality.....17
1.17. Single Loan.......................................19
2. CONDITIONS PRECEDENT......................................19
2.1. Conditions to the Initial Loans...................19
2.2. Further Conditions to Each Loan...................20
3. REPRESENTATIONS AND WARRANTIES............................21
3.1. Corporate Existence; Compliance with Law..........21
3.2. Executive Offices; FEIN...........................22
3.3. Corporate Power, Authorization, Enforceable
Obligations.......................................22
3.4. Financial Statements and Projections..............22
3.5. Material Adverse Effect...........................23
3.6. Ownership of Property; Liens......................23
3.7. Labor Matters.....................................24
3.8. Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness............................24
3.9. Government Regulation.............................24
3.10. Margin Regulations................................25
3.11. Taxes.............................................25
3.12. ERISA.............................................26
3.13. No Litigation.....................................27
3.14. Brokers...........................................27
3.15. Intellectual Property.............................27
3.16. Full Disclosure...................................27
<PAGE>
3.17. Environmental Matters.............................27
3.18. Insurance.........................................28
3.19. Deposit and Disbursement Accounts.................28
3.20. Government Contracts..............................28
3.21. Customer and Trade Relations......................29
3.22. Agreements and Other Documents....................29
3.23. Solvency..........................................29
3.24. Year 2000 Representations.........................29
3.25. Tax Sharing Agreement.............................29
3.26. License Agreements................................29
3.27. Player Contracts..................................30
4. FINANCIAL STATEMENTS AND INFORMATION......................30
4.1. Reports and Notices...............................30
4.2. Communication with Accountants....................30
5. AFFIRMATIVE COVENANTS.....................................30
5.1. Maintenance of Existence and Conduct of Business..31
5.2. Payment of Obligations............................31
5.3. Books and Records.................................31
5.4. Insurance; Damage to or Destruction of
Collateral........................................32
5.5. Compliance with Laws..............................33
5.6. Supplemental Disclosure...........................33
5.7. Intellectual Property.............................34
5.8. Environmental Matters.............................34
5.9. Landlords' Agreements, Mortgagee Agreements and
Bailee Letters....................................34
5.10. Further Assurances................................35
6. NEGATIVE COVENANTS........................................36
6.1. Mergers, Subsidiaries, Etc........................36
6.2. Investments; Loans and Advances...................36
6.3. Indebtedness......................................36
6.4. Employee Loans and Affiliate Transactions.........37
6.5. Capital Structure and Business....................38
6.6. Guaranteed Indebtedness...........................38
6.7. Liens.............................................38
6.8. Sale of Stock and Assets..........................39
6.9. ERISA.............................................39
6.10. Financial Covenants...............................39
6.11. Hazardous Materials...............................39
6.12. Sale-Leasebacks...................................39
6.13. Cancellation of Indebtedness......................39
6.14. Restricted Payments...............................39
6.15. Change of Corporate Name or Location; Change of
Fiscal Year.......................................40
<PAGE>
6.16. No Impairment of Intercompany Transfers...........40
6.17. No Speculative Transactions.......................40
6.18. Leases............................................40
6.19. Tax Sharing Agreement.............................40
7. TERM......................................................41
7.1. Termination.......................................41
7.2. Survival of Obligations Upon Termination of
Financing Arrangements............................41
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES....................41
8.1. Events of Default.................................41
8.2. Remedies..........................................43
8.3. Waivers by Credit Parties.........................44
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT.......44
9.1. Assignment and Participations.....................44
9.2. Appointment of Agent..............................46
9.3. Agent's Reliance, Etc.............................47
9.4. GE Capital and Affiliates.........................47
9.5. Lender Credit Decision............................47
9.6. Indemnification...................................48
9.7. Successor Agent...................................48
9.8. Setoff and Sharing of Payments....................49
9.9. Advances; Payments; Non-Funding Lenders;
Information; Actions in Concert...................49
10. SUCCESSORS AND ASSIGNS....................................52
10.1. Successors and Assigns............................52
11. MISCELLANEOUS.............................................52
11.1. Complete Agreement; Modification of Agreement.....52
11.2. Amendments and Waivers............................52
11.3. Fees and Expenses.................................54
11.4. No Waiver.........................................55
11.5. Remedies..........................................56
11.6. Severability......................................56
11.7. Conflict of Terms.................................56
11.8. Confidentiality...................................56
11.9. GOVERNING LAW.....................................57
11.10. Notices...........................................57
11.11. Section Titles....................................58
11.12. Counterparts......................................58
11.13. WAIVER OF JURY TRIAL..............................58
11.14. Press Releases....................................58
11.15. Reinstatement.....................................59
<PAGE>
11.16. Advice of Counsel.................................59
11.17. No Strict Construction............................59
INDEX OF APPENDICES
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit
Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b) - Form of Swing Line Note
Exhibit 1.5(e) - Form of Notice of
Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Schedule 1.1 - Responsible Individual
Schedule 1.4 - Sources and Uses; Funds Flow
Memorandum
Schedule 3.2 - Executive Offices; FEIN
Schedule 3.4(A) - Financial Statements
Schedule 3.4(B) - Pro Forma
Schedule 3.4(C) - Projections
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Labor Matters
Schedule 3.8 - Ventures, Subsidiaries and
Affiliates; Outstanding Stock
Schedule 3.11 - Tax Matters
Schedule 3.12 - ERISA Plans
Schedule 3.13 - Litigation
Schedule 3.15 - Intellectual Property
Schedule 3.17 - Hazardous Materials
Schedule 3.18 - Insurance
Schedule 3.19 - Deposit and Disbursement Accounts
Schedule 3.20 - Government Contracts
Schedule 3.22 - Material Agreements
Schedule 3.26 - License Agreements
Schedule 3.27 - Material Player Contracts
Schedule 5.1 - Trade Names
Schedule 6.3 - Indebtedness
Schedule 6.4(a) - Transactions with Affiliates
Schedule 6.7 - Existing Liens
Annex A (Recitals) - Definitions
Annex B (SECTION 1.2) - Letters of Credit
Annex C (SECTION 1.8) - Cash Management System
Annex D (SECTION 2.1(A)) - Schedule of Additional Closing
Documents
Annex E (SECTION 4.1(A)) - Financial Statements and
Projections - Reporting
Annex F (SECTION 4.1(B)) - Collateral Reports
Annex G (SECTION 6.10) - Financial Covenants
<PAGE>
Annex H (SECTION 9.9(A)) - Lenders' Wire Transfer Information
Annex I (SECTION 11.10) - Notice Addresses
Annex J (from Annex A) - Revolving Loan Commitments and
Swing Line Commitments as of
Closing Date
<PAGE>
CREDIT AGREEMENT, dated as of December 28, 1999 among
RAWLINGS SPORTING GOODS COMPANY, INC., a Delaware corporation
("Borrower"); the other Credit Parties signatory hereto; GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation (in its
individual capacity, "GE Capital"), for itself, as Lender, and as
Agent for Lenders, and the other Lenders signatory hereto from
time to time.
RECITALS
WHEREAS, Borrower desires that Lenders extend revolving
credit facilities to Borrower of up to Seventy-Five Million
Dollars ($75,000,000.00) in the aggregate for the purpose of
refinancing certain indebtedness of Borrower and to provide (a)
working capital financing for Borrower, and (b) funds for other
general corporate purposes of Borrower; and for these purposes,
Lenders are willing to make certain loans and other extensions of
credit to Borrower of up to such amount upon the terms and
conditions set forth herein; and
WHEREAS, Borrower desires to secure all of its
obligations under the Loan Documents by granting to Agent, for
the benefit of Agent and Lenders, a security interest in and lien
upon all of its existing and after-acquired personal and real
property; and
WHEREAS, each Subsidiary of Borrower is willing to
guaranty all of the obligations of Borrower to Lenders under the
Loan Documents and, in the case of Rawlings Canada, to secure
such guaranty, to grant to Agent, for the benefit of Agent and
Lenders, a security interest in and lien upon all of its existing
and after-acquired personal and real property; and
WHEREAS, capitalized terms used in this Agreement shall
have the meanings ascribed to them in ANNEX A. All Annexes,
Disclosure Schedules, Exhibits and other attachments
(collectively, "Appendices") hereto, or expressly identified to
this Agreement, are incorporated herein by reference, and taken
together, shall constitute but a single agreement. These
Recitals shall be construed as part of the Agreement.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants hereinafter contained, and for other good
and valuable consideration, the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities.
(a) Revolving Credit Facility.
(i) Subject to the terms and conditions hereof,
each Lender agrees to make available from time to time until the
Commitment Termination Date its Pro Rata Share of advances (each,
a "Revolving Credit Advance"). The Pro Rata Share of the
Revolving Loan of<PAGE> any Lender shall not at any time exceed
its separate Revolving Loan Commitment. The obligations of each
Lender hereunder shall be several and not joint. The aggregate
amount of Revolving Credit Advances outstanding shall not exceed
at any time the lesser of (A) the Maximum Amount and (B) the
Borrowing Base, in each case less the sum of the Letter of Credit
Obligations and the Swing Line Loan outstanding at such time
("Borrowing Availability"). Until the Commitment Termination
Date, Borrower may from time to time borrow, repay and reborrow
under this SECTION 1.1(a). Each Revolving Credit Advance shall
be made on notice by Borrower to the representative of Agent
identified on SCHEDULE 1.1 at the address specified thereon.
Those notices must be given no later than (1) 11:00 a.m. (Chicago
time) on the Business Day of the proposed Revolving Credit
Advance, in the case of an Index Rate Loan, or (2) 11:00 a.m.
(Chicago time) on the date which is three (3) Business Days prior
to the proposed Revolving Credit Advance, in the case of a LIBOR
Loan. Each such notice (a "Notice of Revolving Credit Advance")
must be given in writing (by telecopy or overnight courier)
substantially in the form of EXHIBIT 1.1(a)(i), and shall include
the information required in such Exhibit and such other
information as may be required by Agent. If Borrower desires to
have the Revolving Credit Advances bear interest by reference to
a LIBOR Rate, it must comply with SECTION 1.5(e).
Borrower shall execute and deliver to each Lender a
note to evidence the Revolving Loan Commitment of that Lender.
Each note shall be in the principal amount of the Revolving Loan
Commitment of the applicable Lender, dated the Closing Date and
substantially in the form of EXHIBIT 1.1(a)(ii) (each a
"Revolving Note" and, collectively, the "Revolving Notes"). Each
Revolving Note shall represent the obligation of Borrower to pay
the amount of each Lender's Revolving Loan Commitment or, if
less, the applicable Lender's Pro Rata Share of the aggregate
unpaid principal amount of all Revolving Credit Advances to
Borrower together with interest thereon as prescribed in SECTION
1.5. The entire unpaid balance of the Revolving Loan and all
other non-contingent Obligations shall be immediately due and
payable in full in immediately available funds on the Commitment
Termination Date.
(b) SWING LINE FACILITY.
(i) Agent shall notify the Swing Line Lender upon
Agent's receipt of any Notice of Revolving Credit Advance.
Subject to the terms and conditions hereof, the Swing Line Lender
may, in its discretion, make available from time to time until
the Commitment Termination Date advances (each, a "Swing Line
Advance") in accordance with any such notice. The aggregate
amount of Swing Line Advances outstanding shall not exceed the
lesser of (A) the Swing Line Commitment and (B) the lesser of the
Maximum Amount and (except for Overadvances) the Borrowing Base,
in each case, less the outstanding balance of the Revolving Loan
at such time ("Swing Line Availability"). Until the Commitment
Termination Date, Borrower may from time to time borrow, repay
and reborrow under this SECTION 1.1(b). Each Swing Line Advance
shall be made pursuant to a Notice of Revolving Credit advance
delivered by Borrower to Agent in accordance with SECTION 1.1(a).
Unless the Swingline Lender has received at least one Business
Day's prior written notice from Agent or Requisite Lenders
instructing it not to make the Swingline Advance, the Swingline
Lender shall, notwithstanding<PAGE> the failure of any condition
precedent set forth in Section 2.2(e) of this Agreement, be
entitled to fund such Swingline Advance and, in connection with
such Swingline Advance, to have each Lender make Revolving Credit
Advances in accordance with Section 1.1(b)(iii) or to purchase
participating interests in accordance with Section 1.1(b)(iv).
Those notices must be given no later than 11:00 a.m. (Chicago
time) on the Business Day of the proposed Swing Line Advance.
Notwithstanding any other provision of this Agreement or the
other Loan Documents, the Swing Line Loan shall constitute an
Index Rate Loan. Borrower shall repay the aggregate outstanding
principal amount of the Swing Line Loan upon demand therefor by
Agent.
(ii) Borrower shall execute and deliver to the
Swing Line Lender a promissory note to evidence the Swing Line
Commitment. Such note shall be in the principal amount of the
Swing Line Commitment of the Swing Line Lender, dated the Closing
Date and substantially in the form of EXHIBIT 1.1(b)(ii) (the
"Swing Line Note"). The Swing Line Note shall represent the
obligation of Borrower to pay the amount of the Swing Line
Commitment or, if less, the aggregate unpaid principal amount of
all Swing Line Advances made to Borrower together with interest
thereon as prescribed in SECTION 1.5. The entire unpaid balance
of the Swing Line Loan and all other non-contingent Obligations
shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date if not sooner
paid in full.
(iii) REFUNDING OF SWING LINE LOANS. The Swing
Line Lender, at any time and from time to time in its sole and
absolute discretion, may on behalf of Borrower (and Borrower
hereby irrevocably authorizes the Swing Line Lender to so act on
its behalf) request each Lender (including the Swing Line Lender)
to make a Revolving Credit Advance to Borrower (which shall be an
Index Rate Loan) in an amount equal to such Lender's Pro Rata
Share of the principal amount of the Swing Line Loan (the
"Refunded Swing Line Loan") outstanding on the date such notice
is given. Unless any of the events described in SECTIONS 8.1(h)
or 8.1(i) shall have occurred (in which event the procedures of
SECTION 1.1(b)(iv) shall apply) and regardless of whether the
conditions precedent set forth in this Agreement to the making of
a Revolving Credit Advance are then satisfied, each Lender shall
disburse directly to Agent, its Pro Rata Share of a Revolving
Credit Advance on behalf of the Swing Line Lender, prior to 2:00
p.m. (Chicago time), in immediately available funds on the
Business Day next succeeding the date such notice is given. The
proceeds of such Revolving Credit Advances shall be immediately
paid to the Swing Line Lender and applied to repay the Refunded
Swing Line Loan.
(iv) PARTICIPATION IN SWING LINE LOANS. If, prior
to refunding a Swing Line Loan with a Revolving Credit Advance
pursuant to SECTION 1.1(b)(iii), one of the events described in
SECTIONS 8.1(h) or 8.1(i) shall have occurred, then, subject to
the provisions of SECTION 1.1(b)(v) below, each Lender will, on
the date such Revolving Credit Advance was to have been made for
the benefit of Borrower, purchase from the Swing Line Lender an
undivided participation interest in the Swing Line Loan in an
amount equal to its Pro Rata Share of such Swing Line Loan. Upon
request, each Lender will promptly transfer to the Swing Line
Lender, in immediately available funds, the amount of its
participation.
<PAGE>
(v) LENDERS' OBLIGATIONS UNCONDITIONAL. Each
Lender's obligation to make Revolving Credit Advances in
accordance with SECTION 1.1(b)(iii) and to purchase participating
interests in accordance with SECTION 1.1(b)(iv) shall be absolute
and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or
other right which such Lender may have against the Swing Line
Lender, Borrower or any other Person for any reason whatsoever;
(B) the occurrence or continuance of any Default or Event of
Default; (C) any inability of Borrower to satisfy the conditions
precedent to borrowing set forth in this Agreement on the date
upon which such participating interest is to be purchased or (D)
any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing. If any Lender does not make
available to Agent or the Swing Line Lender, as applicable, the
amount required pursuant to SECTION 1.1(c)(iii) or 1.1(c)(iv), as
the case may be, the Swing Line Lender shall be entitled to
recover such amount on demand from such Lender, together with
interest thereon for each day from the date of non-payment until
such amount is paid in full at the Federal Funds Rate for the
first two Business Days and at the Index Rate thereafter.
(c) RELIANCE ON NOTICES. Agent shall be entitled
to rely upon, and shall be fully protected in relying upon, any
Notice of Revolving Credit Advance, Notice of
Conversion/Continuation or similar notice believed by Agent to be
genuine. Agent may assume that each Person executing and
delivering such a notice was duly authorized, unless the
responsible individual acting thereon for Agent has actual
knowledge to the contrary.
1.2 LETTERS OF CREDIT. Subject to and in accordance with
the terms and conditions contained herein and in ANNEX B,
Borrower shall have the right to request, and Lenders agree to
incur, or purchase participations in, Letter of Credit
Obligations in respect of Borrower.
1.3 PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Borrower may at any time
on at least ten (10) days' prior written notice to Agent
terminate the Revolving Loan Commitment; provided that upon such
termination, all Loans and other Obligations shall be immediately
due and payable in full. Any such voluntary prepayment and any
such termination of the Revolving Loan Commitment must be
accompanied by the payment of the fee required by SECTION 1.9(b),
if any, plus the payment of any LIBOR funding breakage costs in
accordance with SECTION 1.13(b). Upon any such prepayment and
termination of the Revolving Loan Commitment, Borrower's right to
request Revolving Credit Advances, or request that Letter of
Credit Obligations be incurred on its behalf, or request Swing
Line Advances, shall simultaneously be terminated.
(b) MANDATORY PREPAYMENTS.
(i) If at any time the outstanding balance of the
Revolving Loan exceeds the lesser of (A) the Maximum Amount and
(B) the Borrowing Base, LESS, in each case, the outstanding Swing
Line Loan at such time, Borrower shall immediately repay the
aggregate outstanding Revolving Credit Advances to the extent
required to eliminate such excess. If any<PAGE> such excess
remains after repayment in full of the aggregate outstanding
Revolving Credit Advances, Borrower shall provide cash collateral
for the Letter of Credit Obligations in the manner set forth in
ANNEX B to the extent required to eliminate such excess.
(ii) Immediately upon receipt by any Credit Party
of proceeds of any asset disposition (including condemnation
proceeds, but excluding proceeds of asset dispositions permitted
by SECTION 6.8(a)) or any sale of Stock of any Subsidiary of any
Credit Party, Borrower shall prepay the Loans in an amount equal
to all such proceeds (and, in the case of a Credit Party other
than Borrower, such Credit Party shall distribute such proceeds
to Borrower immediately prior thereto), net of (A) commissions
and other reasonable and customary transaction costs, fees and
expenses properly attributable to such transaction and payable by
Borrower in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts payable to
holders of senior Liens (to the extent such Liens constitute
Permitted Encumbrances hereunder), if any, and (D) an appropriate
reserve for income taxes in accordance with GAAP in connection
therewith. Any such prepayment shall be applied in accordance
with CLAUSE (c) below.
(iii) If any Credit Party issues Stock no later
than the Business Day following the date of receipt of the
proceeds thereof, Borrower shall prepay the Loans in an amount
equal to all such proceeds, net of underwriting discounts and
commissions and other reasonable costs paid to non-Affiliates in
connection therewith. Any such prepayment shall be applied in
accordance with CLAUSE (c) below.
(c) Application of Certain Mandatory Prepayments. Any
prepayments made by Borrower pursuant to CLAUSES (b)(ii) or
(b)(iii) above shall be applied as follows: FIRST, to Fees and
reimbursable expenses of Agent then due and payable pursuant to
any of the Loan Documents; SECOND, to interest then due and
payable on the Swing Line Loan; THIRD, to the principal balance
of the Swing Line Loan until the same shall have been repaid in
full; FOURTH, to interest then due and payable on the Revolving
Credit Advances; FIFTH, to the outstanding principal balance of
Revolving Credit Advances until the same shall have been paid in
full; and SIXTH, to any Letter of Credit Obligations, to provide
cash collateral therefor in the manner set forth in ANNEX B,
until all such Letter of Credit Obligations have been fully cash
collateralized in the manner set forth in ANNEX B. Neither the
Revolving Loan Commitment nor the Swing Line Commitment shall be
permanently reduced by the amount of any such prepayments.
(d) APPLICATION OF PREPAYMENTS FROM INSURANCE
PROCEEDS. Prepayments from insurance proceeds in accordance with
SECTION 5.4(c) shall be applied first, to the Swing Line Loans
and, second, to the Revolving Credit Advances. Neither the
Revolving Loan Commitment nor the Swing Line Loan Commitment
shall be permanently reduced by the amount of any such
prepayments.
(e) Nothing in this SECTION 1.3 shall be construed to
constitute Agent's or any Lender's consent to any transaction
referred to in CLAUSES (b)(ii) and (b)(iii) above which is not
permitted by other provisions of this Agreement or the other Loan
Documents.
<PAGE>
1.4 USE OF PROCEEDS. Borrower shall utilize the proceeds
of the Revolving Loan and the Swing Line Loan solely for the
Refinancing (and to pay any related transaction expenses), and
for the financing of Borrower's ordinary working capital and
general corporate needs (but excluding in any event the making of
any Restricted Payment not specifically permitted by SECTION
6.14). DISCLOSURE SCHEDULE (1.4) contains a description of
Borrower's sources and uses of funds as of the Closing Date,
including Loans and Letter of Credit Obligations to be made or
incurred on that date, and a funds flow memorandum detailing how
funds from each source are to be transferred to particular uses.
1.5 INTEREST AND APPLICABLE MARGINS.
(a) Borrower shall pay interest to Agent, for the
ratable benefit of Lenders in accordance with the various Loans
being made by each Lender, in arrears on each applicable Interest
Payment Date, at the following rates: (i) with respect to the
Revolving Credit Advances, the Index Rate plus the Applicable
Index Margin per annum or, at the election of Borrower, the
applicable LIBOR Rate plus the Applicable LIBOR Margin per annum,
based on the aggregate Revolving Credit Advances outstanding from
time to time; and (ii) with respect to the Swing Line Loan, the
Index Rate plus the Applicable Index Margin per annum.
The Applicable Index Margin, Applicable LIBOR Margin,
Applicable L/C Margin and Applicable Unused Line Fee Margin will
be 0.75%, 2.25%, 2.25% and 0.50% per annum, respectively, as of
the Closing Date. The Applicable Margins will be adjusted (up or
down) prospectively on a quarterly basis as determined by
Borrower's consolidated financial performance, commencing with
the first day of the first calendar month that occurs more than
five (5) days after delivery of Borrower's quarterly Financial
Statements to Lenders for the Fiscal Quarter ending February 28,
2001. Adjustments in Applicable Margins will be determined by
reference to the following grids:
<PAGE>
LEVEL OF
IF LEVERAGE RATIO IS: APPLICABLE MARGINS:
>3.0 Level I
<3.0 Level II
APPLICABLE MARGINS
LEVEL I LEVEL II
Applicable Index Margin 0.75% 0.50%
Applicable LIBOR Margin 2.25% 2.00%
Applicable L/C Margin 2.25% 2.00%
Applicable Unused Line 0.50% 0.50%
Fee Margin
All adjustments in the Applicable Margins after
February 28, 2001 will be implemented quarterly on a prospective
basis, for each calendar month commencing at least five (5) days
after the date of delivery to Lenders of the quarterly unaudited
or annual audited (as applicable) Financial Statements of
Borrower evidencing the need for an adjustment. Concurrently
with the delivery of those Financial Statements, Borrower shall
deliver to Agent and Lenders a certificate, signed by its chief
financial officer, setting forth in reasonable detail the basis
for the continuance of, or any change in, the Applicable Margins.
Failure to timely deliver such Financial Statements shall, in
addition to any other remedy provided for in this Agreement,
result in an increase in the Applicable Margins to the highest
level set forth in the foregoing grid, until the first day of the
first calendar month following the delivery of those Financial
Statements demonstrating that such an increase is not required.
If a Default or an Event of Default shall have occurred or be
continuing at the time any reduction in the Applicable Margins is
to be implemented, that reduction shall be deferred until the
first day of the first calendar month following the date on which
such Default or Event of Default is waived or cured.
(b) If any payment on any Loan becomes due and payable
on a day other than a Business Day, the maturity thereof will be
extended to the next succeeding Business Day (except as set forth
in the definition of LIBOR Period) and, with respect to payments
of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(c) All computations of Fees calculated on a per annum
basis and interest shall be made by Agent on the basis of a three
hundred and sixty (360) day year, in each case for the actual
number of days occurring in the period for which such interest
and Fees are payable. The Index Rate shall be determined each
day based upon the Index Rate as in effect each day. Each
determination by Agent of an interest rate and Fees hereunder
shall be conclusive, absent manifest error.
(d) So long as an Event of Default shall have occurred
and be continuing under Section 8.1(a), (h) or (i), or so long as
any other Default or Event of Default shall have occurred and be
continuing and at the election of Agent (or upon the written
request of Requisite<PAGE> Lenders) confirmed by written notice
from Agent to Borrower, the interest rates applicable to the
Loans and the Letter of Credit Fees shall be increased by two
percent (2%) per annum above the rates of interest or the rate of
such Fees otherwise applicable hereunder ("Default Rate"), and
all outstanding Obligations shall bear interest at the Default
Rate applicable to such Obligations. Interest and Letter of
Credit Fees at the Default Rate shall accrue from the initial
date of such Default or Event of Default until that Default or
Event of Default is cured or waived and shall be payable upon
demand.
(e) So long as no Default or Event of Default shall
have occurred and be continuing, and subject to the additional
conditions precedent set forth in SECTION 2.2, Borrower shall
have the option to (i) request that any Revolving Credit Advances
be made as a LIBOR Loan, (ii) convert at any time all or any part
of outstanding Loans (other than the Swing Line Loan) from Index
Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an
Index Rate Loan, subject to payment of LIBOR breakage costs in
accordance with SECTION 1.13(b) if such conversion is made prior
to the expiration of the LIBOR Period applicable thereto, or (iv)
continue all or any portion of any Loan (other than the Swing
Line Loan) as a LIBOR Loan upon the expiration of the applicable
LIBOR Period and the succeeding LIBOR Period of that continued
Loan shall commence on the last day of the LIBOR Period of the
Loan to be continued. Any Loan to be made or continued as, or
converted into, a LIBOR Loan must be in a minimum amount of
$5,000,000 and integral multiples of $500,000 in excess of such
amount. Any such election must be made by 11:00 a.m. (Chicago
time) on the third (3rd) Business Day prior to (1) the date of
any proposed Advance which is to bear interest at the LIBOR Rate,
(2) the end of each LIBOR Period with respect to any LIBOR Loans
to be continued as such, or (3) the date on which Borrower wishes
to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period
designated by Borrower in such election. If no election is
received with respect to a LIBOR Loan by 11:00 a.m. (Chicago
time) on the third (3rd) Business Day prior to the end of the
LIBOR Period with respect thereto (or if a Default or an Event of
Default shall have occurred and be continuing or the additional
conditions precedent set forth in SECTION 2.2 shall not have been
satisfied), that LIBOR Loan shall be converted to an Index Rate
Loan at the end of its LIBOR Period. Borrower must make such
election by notice to Agent in writing, by telecopy or overnight
courier. In the case of any conversion or continuation, such
election must be made pursuant to a written notice (a "Notice of
Conversion/Continuation") in the form of EXHIBIT 1.5(e). No
Loan may be made as or converted into a LIBOR Loan until
forty-five (45) days after the Closing Date.
(f) Notwithstanding anything to the contrary set forth
in this SECTION 1.5, if a court of competent jurisdiction
determines in a final order that the rate of interest payable
hereunder exceeds the highest rate of interest permissible under
law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable
hereunder shall be equal to the Maximum Lawful Rate; provided,
however, that if at any time thereafter the rate of interest
payable hereunder is less than the Maximum Lawful Rate, Borrower
shall continue to pay interest hereunder at the Maximum Lawful
Rate until such time as the total interest received by Agent, on
behalf of Lenders, is equal to the total interest which would
have been received had the interest rate payable hereunder been
(but for the operation of<PAGE> this paragraph) the interest rate
payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, interest hereunder shall be paid at the
rate(s) of interest and in the manner provided in SECTIONS 1.5(a)
through (e) above, unless and until the rate of interest again
exceeds the Maximum Lawful Rate, and at that time this paragraph
shall again apply. In no event shall the total interest received
by any Lender pursuant to the terms hereof exceed the amount
which such Lender could lawfully have received had the interest
due hereunder been calculated for the full term hereof at the
Maximum Lawful Rate. If the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at
a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made.
If, notwithstanding the provisions of this SECTION 1.5(f), a
court of competent jurisdiction shall finally determine that a
Lender has received interest hereunder in excess of the Maximum
Lawful Rate, Agent shall, to the extent permitted by applicable
law, promptly apply such excess in the order specified in SECTION
1.11 and thereafter shall refund any excess to Borrower or as a
court of competent jurisdiction may otherwise order.
1.6 ELIGIBLE ACCOUNTS. Based on the most recent Borrowing
Base Certificate delivered by Borrower to Agent and on other
information available to Agent, Agent shall in its reasonable
credit judgment determine which Accounts of Borrower and Rawlings
Canada shall be "Eligible Accounts" for purposes of this
Agreement. In determining whether a particular Account
constitutes an Eligible Account, Agent shall not include any such
Account to which any of the exclusionary criteria set forth below
applies. Agent reserves the right, at any time and from time to
time after the Closing Date, to adjust any such criteria, to
establish new criteria and to adjust advance rates with respect
to Eligible Accounts in its reasonable credit judgment, subject
to the approval of Supermajority Lenders in the case of
adjustments, new criteria or changes in advance rates which have
the effect of making more credit available. Eligible Accounts
shall not include any Account of Borrower or, as applicable,
Rawlings Canada:
(a) which does not arise from the sale of goods or the
performance of services by Borrower or Rawlings Canada in the
ordinary course of its business;
(b) (i) upon which Borrower's or Rawlings Canada's
right to receive payment is not absolute or is contingent upon
the fulfillment of any condition whatsoever or (ii) as to which
Borrower or Rawlings Canada is not able to bring suit or
otherwise enforce its remedies against the Account Debtor through
judicial process, or (iii) if the Account represents a progress
billing consisting of an invoice for goods sold or used or
services rendered pursuant to a contract under which the Account
Debtor's obligation to pay that invoice is subject to Borrower's
or Rawlings Canada's completion of further performance under such
contract or is subject to the equitable lien of a surety bond
issuer;
(c) in the event that any defense, counterclaim,
setoff or dispute is asserted as to such Account;
<PAGE>
(d) that is not a true and correct statement of bona
fide indebtedness incurred in the amount of the Account for
merchandise sold to or services rendered and accepted by the
applicable Account Debtor;
(e) with respect to which an invoice, acceptable to
Agent in form and substance, has not been sent to the applicable
Account Debtor;
(f) that (i) is not owned by Borrower or Rawlings
Canada, or (ii) is subject to any right, claim, security interest
or other interest of any other Person, other than Liens in favor
of Agent, on behalf of itself and Lenders and Prior Claims that
are unregistered and that secure amounts that are not yet due and
payable;
(g) that arises from a sale to any director, officer,
other employee or Affiliate of any Credit Party, or to any entity
which has any common officer or director with any Credit Party;
(h) that is the obligation of an Account Debtor that
is the United States government or a political subdivision
thereof, or any state or municipality or department, agency or
instrumentality thereof or that is the Canadian government (Her
Majesty in Right of Canada) or a political subdivision thereof,
or department, agency or instrumentality thereof, unless Agent,
in its sole discretion, has agreed to the contrary in writing,
the Account is assignable by way of security and Borrower or
Rawlings Canada, if necessary or desirable, has complied with the
Federal Assignment of Claims Act of 1940, and any amendments
thereto, or any applicable state statute or municipal ordinance
of similar purpose and effect with respect to such obligation,
or, the Borrower, if necessary or desirable, has complied with
the Financial Administration Act (Canada) or any applicable
provincial or territorial statute or municipal ordinances of
similar purpose with respect to such obligation, as applicable;
(i) that is the obligation of an Account Debtor
located in a foreign country other than Canada (excluding the
Northwest Territories and Nunavut) unless payment thereof is
assured by a letter of credit assigned and delivered to Agent,
satisfactory to Agent as to form, amount and issuer;
(j) to the extent Borrower or any Subsidiary thereof
(including Rawlings Canada) is liable for goods sold or services
rendered by the applicable Account Debtor to Borrower or any
Subsidiary thereof (including Rawlings Canada) but only to the
extent of the potential offset;
(k) that arises with respect to goods which are
delivered on a bill-and-hold, cash-on-delivery basis or placed on
consignment, guaranteed sale or other terms by reason of which
the payment by the Account Debtor is or may be conditional;
(l) that is in default; provided, that, without
limiting the generality of the foregoing, an Account shall be
deemed in default upon the occurrence of any of the following:
<PAGE>
(i) it is not paid within the earlier of: (A) in
the case of Seasonal Accounts, thirty (30) days following its due
date or one-hundred eighty (180) days following its original
invoice date and (B) in the case of all other Accounts, sixty
(60) days following its due date or ninety (90) days following
its original invoice date;
(ii) if any Account Debtor obligated upon such
Account suspends business, makes a general assignment for the
benefit of creditors or fails to pay its debts generally as they
come due; or
(iii) if any petition is filed by or against
any Account Debtor obligated upon such Account under any
bankruptcy law or any other federal, state or foreign (including
any provincial) receivership, insolvency relief or other law or
laws for the relief of debtors;
(m) which is the obligation of an Account Debtor if
fifty percent (50%) or more of the dollar amount of all Accounts
owing by that Account Debtor are ineligible under the other
criteria set forth in this SECTION 1.6;
(n) as to which Agent's Lien thereon, on behalf of
itself and Lenders, is not a first priority perfected Lien;
(o) as to which any of the representations or
warranties pertaining to Accounts set forth in this Agreement or
the applicable Security Agreement is untrue;
(p) to the extent such Account is evidenced by a
judgment, Instrument or Chattel Paper;
(q) to the extent such Account exceeds any credit
limit established by Agent in its reasonable discretion, after
prior notice thereof to Borrower;
(r) to the extent that such Account, together with all
other Accounts owing by such Account Debtor and its Affiliates as
of any date of determination exceed ten percent (10%) (or fifteen
percent (15%) in the case of WalMart) of all Eligible Accounts;
(s) which is payable in any currency other than
Dollars or Canadian Dollars (to the extent properly converted
into Dollars in the applicable Borrowing Base Certificate in
accordance herewith); or
(t) which is unacceptable to Agent in its reasonable
credit judgment.
1.7 ELIGIBLE INVENTORY. Based on the most recent Borrowing
Base Certificate delivered by Borrower to Agent and on other
information available to Agent, Agent shall in its reasonable
credit judgment determine which Inventory of Borrower and
Rawlings Canada shall be "Eligible Inventory" for purposes of
this Agreement. In determining whether any particular Inventory
constitutes Eligible Inventory, Agent shall not include any such
Inventory to which any of the exclusionary criteria set forth
below applies. Agent reserves the right, at any time and<PAGE>
from time to time after the Closing Date, to adjust any such
criteria, to establish new criteria and to adjust advance rates
with respect to Eligible Inventory in its reasonable credit
judgment, subject to the approval of Supermajority Lenders in the
case of adjustments, new criteria or changes in advance rates
which have the effect of making more credit available. Eligible
Inventory shall not include any Inventory of Borrower or, as
applicable, Rawlings Canada that:
(a) is not owned by Borrower or Rawlings Canada free
and clear of all Liens and rights of any other Person (including
the rights of a purchaser that has made progress payments and the
rights of a surety that has issued a bond to assure Borrower's or
Rawlings Canada's performance with respect to that Inventory),
except the Liens in favor of Agent, on behalf of itself and
Lenders and Prior Claims (excluding the rights of unpaid
suppliers under Section 81.1 of the Bankruptcy and Insolvency Act
(Canada));
(b) is (i) not located on premises owned or leased by
Borrower or Rawlings Canada or (ii) stored with a bailee,
warehouseman or similar Person, unless Agent has given its prior
consent thereto and unless (x) a satisfactory bailee letter or
landlord waiver has been delivered to Agent, or (y) Reserves
satisfactory to Agent have been established with respect thereto,
or (iii) located at any site if the aggregate book value of
Inventory at any such location is less than $100,000;
(c) is placed on consignment or is in transit (except
for Inventory not in excess of $2,000,000 in the aggregate at any
time which is in transit by third-party ground carrier in the
continental United States);
(d) is covered by a negotiable document of title,
unless such document has been delivered to Agent with all
necessary endorsements, free and clear of all Liens except those
in favor of Agent and Lenders;
(e) in Agent's reasonable determination, is excess,
obsolete, unsalable, shopworn, seconds, damaged or unfit for
sale;
(f) consists of display items or packing or shipping
materials, manufacturing supplies, work-in-process Inventory or
replacement parts;
(g) consists of goods which have been returned by the
buyer;
(h) is not of a type held for sale in the ordinary
course of Borrower's or Rawlings Canada's business;
(i) as to which Agent's Lien, on behalf of itself and
Lenders, therein is not a first priority perfected Lien;
(j) as to which any of the representations or
warranties pertaining to Inventory set forth in this Agreement or
the applicable Security Agreement is untrue;
<PAGE>
(k) consists of any costs associated with "freight-in"
charges;
(l) consists of Hazardous Materials or goods that can
be transported or sold only with licenses that are not readily
available;
(m) is not covered by casualty insurance acceptable to
Agent; or
(n) the value of which is not properly converted into
Dollars in the applicable Borrowing Base Certificate in
accordance herewith; or
(o) is otherwise unacceptable to Agent in its
reasonable credit judgment.
1.8. CASH MANAGEMENT SYSTEMS. On or prior to the Closing
Date, Borrower will establish and will maintain until the
Termination Date, the cash management systems described on ANNEX
C (the "Cash Management Systems").
1.9. FEES.
(a) Borrower shall pay to GE Capital, individually,
the Fees specified in that certain fee letter dated as of
December 13, 1999 between Borrower and GE Capital (the "GE
Capital Fee Letter"), at the times specified for payment therein.
(b) As additional compensation for the Lenders,
Borrower agrees to pay to Agent, for the ratable benefit of such
Lenders, in arrears, on the first Business Day of each month
prior to the Commitment Termination Date and on the Commitment
Termination Date, a fee for Borrower's non-use of available funds
in an amount equal to the Applicable Unused Line Fee Margin per
annum (calculated on the basis of a 360 day year for actual days
elapsed) of the difference between (x) the Maximum Amount (as it
may be reduced from time to time) and (y) the average for the
period of the daily closing balances of the Revolving Loan and
the Swing Line Loan outstanding during the period for which the
such fee is due.
(c) If Borrower prepays the Revolving Loan and
terminates the Revolving Loan Commitment, whether voluntarily or
involuntarily and whether before or after acceleration of the
Obligations, Borrower shall pay to Agent, for the benefit of
Lenders, as liquidated damages and compensation for the costs of
being prepared to make funds available hereunder an amount
determined by multiplying the Applicable Percentage (as defined
below) by the amount of the Revolving Loan Commitment. As used
herein, the term "Applicable Percentage" shall mean (x) two
percent (2%), in the case of a prepayment on or prior to the
first anniversary of the Closing Date, and (y) one percent (1%),
in the case of a prepayment after the first anniversary of the
Closing Date but on or prior to the second anniversary.
Notwithstanding the foregoing, no prepayment fee shall be payable
by Borrower upon a mandatory prepayment made pursuant to SECTIONS
1.3(b) or 1.16(c); provided that, in the case of prepayments made
pursuant to SECTION 1.3(b)(ii) or (b)(iii), the transaction
giving rise to the applicable prepayment is expressly permitted
under SECTION 6.
<PAGE>
1.10. RECEIPT OF PAYMENTS. Borrower shall make each
payment under this Agreement not later than 1:00 p.m. (Chicago
time) on the day when due in immediately available funds in
Dollars to the Collection Account. For purposes of computing
interest and Fees and determining Borrowing Availability or Net
Borrowing Availability as of any date, all payments shall be
deemed received on the day of receipt of immediately available
funds therefor in the Collection Account prior to 1:00 p.m.
Chicago time. Payments received after 1:00 p.m. Chicago time on
any Business Day shall be deemed to have been received on the
following Business Day.
1.11. APPLICATION AND ALLOCATION OF PAYMENTS
(a) So long as no Default or Event of Default shall
have occurred and be continuing, (i) payments consisting of
proceeds of Accounts received in the ordinary course of business
shall be applied to the Swing Line Loan and the Revolving Loan
and (iv) mandatory prepayments shall be applied as set forth in
SECTIONS 1.3(c) and 1.3(d). Borrower hereby irrevocably waives
the right to direct the application of any and all payments
received from or on behalf of Borrower, and Borrower hereby
irrevocably agrees that Agent shall have the continuing exclusive
right to apply any and all such payments against the Obligations
as Agent may deem advisable notwithstanding any previous entry by
Agent in the Loan Account or any other books and records. In the
absence of a specific determination by Agent with respect
thereto, payments shall be applied to amounts then due and
payable in the following order: (1) to Fees and Agent's expenses
reimbursable hereunder; (2) to interest on the Swing Line Loan;
(3) to principal payments on the Swing Line Loan; (4) to interest
on the Revolving Loan; (5) to principal payments on the Revolving
Loan and to provide cash collateral for Letter of Credit
Obligations in the manner described in ANNEX B, ratably to the
aggregate, combined principal balance of the other Loans and
outstanding Letter of Credit Obligations; and (6) to all other
Obligations including expenses of Lenders to the extent
reimbursable under SECTION 11.3.
(b) Agent is authorized to, and at its sole election
may, charge to the Revolving Loan balance on behalf of Borrower
and cause to be paid all Fees, expenses, Charges, costs
(including insurance premiums in accordance with SECTION 5.4(a))
and interest and principal, other than principal of the Revolving
Loan, owing by Borrower under this Agreement or any of the other
Loan Documents if and to the extent Borrower fails to promptly
pay any such amounts as and when due, even if such charges would
cause the aggregate balance of the Revolving Loan and the Swing
Line Loan to exceed Borrowing Availability. At Agent's option
and to the extent permitted by law, any charges so made shall
constitute part of the Revolving Loan hereunder.
1.12. LOAN ACCOUNT AND ACCOUNTING. Agent shall maintain
a loan account (the "Loan Account") on its books to record: all
Advances, all payments made by Borrower, and all other debits
and credits as provided in this Agreement with respect to the
Loans or any other Obligations. All entries in the Loan Account
shall be made in accordance with Agent's customary accounting
practices as in effect from time to time. The balance in the Loan
Account, as recorded on Agent's most recent printout or other
written statement, shall, absent manifest error, be presumptive
evidence of the amounts due and owing to Agent and Lenders
by<PAGE> Borrower; provided that any failure to so record or any
error in so recording shall not limit or otherwise affect
Borrower's duty to pay the Obligations. Agent shall render to
Borrower a monthly accounting of transactions with respect to the
Loans setting forth the balance of the Loan Account. Unless
Borrower notifies Agent in writing of any objection to any such
accounting (specifically describing the basis for such
objection), within thirty (30) days after the date thereof, each
and every such accounting shall, absent manifest error, be deemed
final, binding and conclusive upon Borrower in all respects as to
all matters reflected therein. Only those items expressly
objected to in such notice shall be deemed to be disputed by
Borrower. Notwithstanding any provision herein contained to the
contrary, any Lender may elect (which election may be revoked) to
dispense with the issuance of Notes to that Lender and may rely
on the Loan Account as evidence of the amount of Obligations from
time to time owing to it.
1.13. INDEMNITY.
(a) Each Credit Party that is a signatory hereto shall
jointly and severally indemnify and hold harmless each of Agent,
Lenders and their respective Affiliates, and each such Person's
respective officers, directors, employees, attorneys, agents and
representatives (each, an "Indemnified Person"), from and against
any and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including reasonable attorneys' fees
and disbursements and other costs of investigation or defense,
including those incurred upon any appeal) which may be instituted
or asserted against or incurred by any such Indemnified Person as
the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents and
the administration of such credit, and in connection with or
arising out of the transactions contemplated hereunder and
thereunder and any actions or failures to act in connection
therewith, including any and all Environmental Liabilities and
legal costs and expenses arising out of or incurred in connection
with disputes between or among ANY PARTIES to any of the Loan
Documents (collectively, "Indemnified Liabilities"); provided,
that no such Credit Party shall be liable for any indemnification
to an Indemnified Person to the extent that any such suit,
action, proceeding, claim, damage, loss, liability or expense
results from that Indemnified Person's gross negligence or
willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE
OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY
BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED
OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER
TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
(b) To induce Lenders to provide the LIBOR Rate option
on the terms provided herein, if (i) any LIBOR Loans are repaid
in whole or in part prior to the last day of any applicable LIBOR
Period (whether that repayment is made pursuant to any provision
of this Agreement or any other Loan Document or is the result of
acceleration, by operation of law or otherwise); (ii) Borrower
shall default in payment when due of the principal amount of
or<PAGE> interest on any LIBOR Loan; (iii) Borrower shall default
in making any borrowing of, conversion into or continuation of
LIBOR Loans after Borrower has given notice requesting the same
in accordance herewith; or (iv) Borrower shall fail to make any
prepayment of a LIBOR Loan after Borrower has given a notice
thereof in accordance herewith, Borrower shall indemnify and hold
harmless each Lender from and against all losses, costs and
expenses resulting from or arising from any of the foregoing.
Such indemnification shall include any loss (including loss of
margin) or expense arising from the reemployment of funds
obtained by it or from fees payable to terminate deposits from
which such funds were obtained. For the purpose of calculating
amounts payable to a Lender under this subsection, each Lender
shall be deemed to have actually funded its relevant LIBOR Loan
through the purchase of a deposit bearing interest at the LIBOR
Rate in an amount equal to the amount of that LIBOR Loan and
having a maturity comparable to the relevant LIBOR Period;
provided, however, that each Lender may fund each of its LIBOR
Loans in any manner it sees fit, and the foregoing assumption
shall be utilized only for the calculation of amounts payable
under this subsection. This covenant shall survive the
termination of this Agreement and the payment of the Notes and
all other amounts payable hereunder. As promptly as practicable
under the circumstances, each Lender shall provide Borrower with
its written calculation of all amounts payable pursuant to this
SECTION 1.13(b), and such calculation shall be binding on the
parties hereto unless Borrower shall object in writing within ten
(10) Business Days of receipt thereof, specifying the basis for
such objection in detail.
1.14. ACCESS. Each Credit Party which is a party hereto
shall, during normal business hours, from time to time upon one
(1) Business Day's prior notice as frequently as Agent determines
to be appropriate: (a) provide Agent and any of its officers,
employees and agents access to its properties, facilities,
advisors and employees (including officers) of each Credit Party
and to the Collateral, (b) permit Agent, and any of its officers,
employees and agents, to inspect, audit and make extracts from
any Credit Party's books and records, and (c) permit Agent, and
its officers, employees and agents, to inspect, review, evaluate
and make test verifications and counts of the Accounts, Inventory
and other Collateral of any Credit Party. If a Default or Event
of Default shall have occurred and be continuing or if access is
necessary to preserve or protect the Collateral as determined by
the Agent, each such Credit Party shall provide such access to
Agent and to each Lender at all times and without advance notice.
Furthermore, so long as any Event of Default shall have occurred
and be continuing, Borrower shall provide Agent and each Lender
with access to its suppliers and customers. Each Credit Party
shall make available to Agent and its counsel, as quickly as is
possible under the circumstances, originals or copies of all
books and records which Agent may request. Each Credit Party
shall deliver any document or instrument necessary for Agent, as
it may from time to time request, to obtain records from any
service bureau or other Person which maintains records for such
Credit Party, and shall maintain duplicate records or supporting
documentation on media, including computer tapes and discs owned
by such Credit Party. Agent will give Lenders at least ten (10)
days' prior written notice of regularly scheduled audits.
Representatives of other Lenders may accompany Agent's
representatives on regularly scheduled audits at no charge to
Borrower.
<PAGE>
1.15. TAXES.
(a) Any and all payments by Borrower hereunder or
under the Notes shall be made, in accordance with this SECTION
1.15, free and clear of and without deduction for any and all
present or future Taxes. If Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder
or under the Notes, (i) the sum payable shall be increased as
much as shall be necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this SECTION 1.15), Agent or Lenders, as
applicable, receive an amount equal to the sum they would have
received had no such deductions been made, (ii) Borrower shall
make such deductions, and (iii) Borrower shall pay the full
amount deducted to the relevant taxing or other authority in
accordance with applicable law. Within thirty (30) days after
the date of any payment of Taxes, Borrower shall furnish to Agent
the original or a certified copy of a receipt evidencing payment
thereof.
(b) Each Credit Party that is a signatory hereto shall
indemnify and, within ten (10) days of demand therefor, pay Agent
and each Lender for the full amount of Taxes (including any Taxes
imposed by any jurisdiction on amounts payable under this SECTION
1.15) paid by Agent or such Lender, as appropriate, and any
liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes were
correctly or legally asserted.
(c) Each Lender organized under the laws of a
jurisdiction outside the United States (a "Foreign Lender") as to
which payments to be made under this Agreement or under the Notes
are exempt from United States withholding tax under an applicable
statute or tax treaty shall provide to Borrower and Agent a
properly completed and executed IRS Form 4224 or Form 1001 or
other applicable form, certificate or document prescribed by the
IRS or the United States certifying as to such Foreign Lender's
entitlement to such exemption (a "Certificate of Exemption").
Any foreign Person that seeks to become a Lender under this
Agreement shall provide a Certificate of Exemption to Borrower
and Agent prior to becoming a Lender hereunder. No foreign
Person may become a Lender hereunder if such Person is unable to
deliver a Certificate of Exemption.
1.16. CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY.
(a) If any Lender shall have determined that any law,
treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy, reserve
requirements or similar requirements or compliance by any Lender
with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the
force of law), in each case, adopted after the Closing Date, from
any central bank or other Governmental Authority increases or
would have the effect of increasing the amount of capital,
reserves or other funds required to be maintained by such Lender
and thereby reducing the rate of return on such Lender's capital
as a consequence of its obligations hereunder, then Borrower
shall from time to time upon demand by such Lender (with a copy
of such demand to Agent) pay to Agent, for the account of such
Lender, additional amounts sufficient to compensate such<PAGE>
Lender for such reduction. A certificate as to the amount of
that reduction and showing the basis of the computation thereof
submitted by such Lender to Borrower and to Agent shall, absent
manifest error, be final, conclusive and binding for all
purposes.
(b)If, due to either (i) the introduction of or
any change in any law or regulation (or any change in the
interpretation thereof) or (ii) the compliance with any guideline
or request from any central bank or other Governmental Authority
(whether or not having the force of law), in each case adopted
after the Closing Date, there shall be any increase in the cost
to any Lender of agreeing to make or making, funding or
maintaining any Loan, then Borrower shall from time to time,
upon demand by such Lender (with a copy of such demand to Agent),
pay to Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to
Borrower and to Agent by such Lender, shall be conclusive and
binding on Borrower for all purposes, absent manifest error.
Each Lender agrees that, as promptly as practicable after it
becomes aware of any circumstances referred to above which would
result in any such increased cost, the affected Lender shall, to
the extent not inconsistent with such Lender's internal policies
of general application, use reasonable commercial efforts to
minimize costs and expenses incurred by it and payable to it by
Borrower pursuant to this SECTION 1.16(b).
(c) Notwithstanding anything to the contrary
contained herein, if the introduction of or any change in any law
or regulation (or any change in the interpretation thereof) shall
make it unlawful, or any central bank or other Governmental
Authority shall assert that it is unlawful, for any Lender to
agree to make or to make or to continue to fund or maintain any
LIBOR Loan, then, unless that Lender is able to make or to
continue to fund or to maintain such LIBOR Loan at another branch
or office of that Lender without, in that Lender's opinion,
adversely affecting it or its Loans or the income obtained
therefrom, on notice thereof and demand therefor by such Lender
to Borrower through Agent, (i) the obligation of such Lender to
agree to make or to make or to continue to fund or maintain LIBOR
Loans shall terminate and (ii) Borrower shall forthwith prepay in
full all outstanding LIBOR Loans owing to such Lender, together
with interest accrued thereon, UNLESS Borrower, within five (5)
Business Days after the delivery of such notice and demand,
converts all such Loans into a Loan bearing interest based on the
Index Rate.
(d) REPLACEMENT OF LENDER IN RESPECT OF INCREASED
COSTS. Within fifteen (15) days after receipt by Borrower of
written notice and demand from any Lender (an "Affected Lender")
for payment of additional amounts or increased costs as provided
in SECTION 1.15(a), 1.16(a) or 1.16(b), Borrower may, at its
option, notify Agent and such Affected Lender of its intention to
replace the Affected Lender. So long as no Default or Event of
Default shall have occurred and be continuing, Borrower, with the
consent of Agent, may obtain, at Borrower's expense, a
replacement Lender ("Replacement Lender") for the Affected
Lender, which Replacement Lender must be satisfactory to Agent.
If Borrower obtains a Replacement Lender within ninety (90) days
following notice of its intention to do so, the Affected Lender
must sell and assign its Loan and Revolving Loan Commitment to
such Replacement Lender for an amount equal to the principal
balance of all Loans held by the Affected Lender and all
accrued<PAGE> interest and Fees with respect thereto through the
date of such sale, provided that Borrower shall have reimbursed
such Affected Lender for the additional amounts or increased
costs that it is entitled to receive under this Agreement through
the date of such sale and assignment.
Notwithstanding the foregoing, Borrower shall not have the right
to obtain a Replacement Lender if the Affected Lender rescinds
its demand for increased costs or additional amounts within
fifteen (15) days following its receipt of Borrower's notice of
intention to replace such Affected Lender. Furthermore, if
Borrower gives a notice of intention to replace and does not so
replace such Affected Lender within ninety (90) days thereafter,
Borrower's rights under this SECTION 1.16(d) shall terminate as
to such Affected Lender with respect to the specific notice and
demand given and Borrower shall promptly pay all increased costs
or additional amounts demanded by such Affected Lender pursuant
to SECTIONS 1.15(a), 1.16(a) and 1.16(b).
1.17. SINGLE LOAN. All Loans to Borrower and all of the
other Obligations of Borrower arising under this Agreement and
the other Loan Documents shall constitute one general obligation
of Borrower secured, until the Termination Date, by all of its
Collateral.
1.18 CURRENT DOLLAR EQUIVALENT. All obligations,
valuations or other amounts expressed in currency and which are
contained in any Loan Document, Financial Statement or any other
item or communication referred to therein (including SECTION 3.16
hereof and ANNEXES E and F hereof) shall be expressed in such
Loan Document, Financial Statement, item or communication at the
Current Dollar Equivalent of such obligation, valuation or
amount, as applicable.
2. CONDITIONS PRECEDENT
2.1. CONDITIONS TO THE INITIAL LOANS. No Lender shall be
obligated to make any Loan or incur any Letter of Credit
Obligations on the Closing Date, or to take, fulfill, or perform
any other action hereunder, until the following conditions have
been satisfied or provided for in a manner satisfactory to Agent,
or waived in writing by Agent and Lenders:
(a) CREDIT AGREEMENT; LOAN DOCUMENTS. This Agreement
or counterparts hereof shall have been duly executed by, and
delivered to, Borrower, Agent and Lenders; and Agent shall have
received such documents, instruments, agreements and legal
opinions as Agent shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan
Documents, including all those listed in the Closing Checklist
attached hereto as ANNEX D, each in form and substance
satisfactory to Agent.
(b) REPAYMENT OF PRIOR LENDER OBLIGATIONS;
SATISFACTION OF OUTSTANDING L/Cs. (i) Agent shall have received
a fully executed original of a pay-off letter satisfactory to
Agent confirming that all of the Prior Lender Obligations will be
repaid in full from the proceeds of the initial Revolving Credit
Advance and all Liens upon any of the property of Borrower or any
of its Subsidiaries in favor of Prior Lenders shall be terminated
by Prior Lenders immediately upon such payment; and (ii) all
letters of credit issued or guaranteed by Prior Lenders shall
have been<PAGE> cash collateralized, supported by a guaranty of
Agent or supported by a Letter of Credit issued pursuant to ANNEX
B, as mutually agreed upon by Agent, Borrower and Prior Lenders.
(c) APPROVALS. Agent shall have received (i)
satisfactory evidence that the Credit Parties have obtained all
required consents and approvals of all Persons including all
requisite Governmental Authorities, to the execution, delivery
and performance of this Agreement and the other Loan Documents
and the consummation of the Related Transactions or (ii) an
officer's certificate in form and substance satisfactory to Agent
affirming that no such consents or approvals are required.
(d) OPENING AVAILABILITY. The Eligible Accounts and
Eligible Inventory of Borrower supporting the initial Revolving
Credit Advance and the initial Letter of Credit Obligations
incurred and the amount of the Reserves to be established on the
Closing Date shall be sufficient in value, as determined by
Agent, to provide Borrower with Net Borrowing Availability, after
giving effect to the initial Revolving Credit Advance, the
incurrence of any initial Letter of Credit Obligations and the
consummation of the Related Transactions (on a pro forma basis,
with trade payables being paid currently, and expenses and
liabilities being paid in the ordinary course of business and
without acceleration of sales) of at least $5,000,000.
(e) PAYMENT OF FEES. Borrower shall have paid the Fees
required to be paid on the Closing Date in the respective amounts
specified in SECTION 1.9 (including the Fees specified in the GE
Capital Fee Letter), and shall have reimbursed Agent for all
fees, costs and expenses of closing presented as of the Closing
Date.
(f) CAPITAL STRUCTURE: OTHER INDEBTEDNESS. The
capital structure of each Credit Party and the terms and
conditions of all Indebtedness of each Credit Party shall be
acceptable to Agent in its sole discretion. On the Closing Date,
after giving effect to the Related Transactions (on a pro forma
basis) (i) Total Indebtedness of the Credit Parties on a
consolidated basis shall not exceed $63,500,000 and (ii) total
stockholders' equity of Borrower shall in an amount which is
acceptable to Agent in its sole discretion.
2.2. FURTHER CONDITIONS TO EACH LOAN. Except as otherwise
expressly provided herein, no Lender shall be obligated to fund
any Loan, convert or continue any Loan as a LIBOR Loan or incur
any Letter of Credit Obligation, if, as of the date thereof:
(a) Any representation or warranty by any Credit Party
contained herein or in any of the other Loan Documents shall be
untrue or incorrect as of such date, except to the extent that
such representation or warranty expressly relates to an earlier
date and except for changes therein expressly permitted or
expressly contemplated by this Agreement, and Agent or Requisite
Lenders shall have determined not to make such Loan, convert or
continue such Loan as a LIBOR Loan, or incur such Letter of
Credit Obligation due to the fact that such warranty or
representation is untrue or incorrect; or
<PAGE>
(b) Any event or circumstance having a Material
Adverse Effect shall have occurred since the date hereof as
determined by the Requisite Lenders; or
(c) Any Default or Event of Default shall have
occurred and be continuing or would result after giving effect to
any Loan or the incurrence of any Letter of Credit Obligation,
and Agent or Requisite Lenders shall have determined not to make
such Loan, convert or continue such Loan as a LIBOR Loan, or
incur such Letter of Credit Obligation on the basis of such
Default or Event of Default;
(d) After giving effect to any Advance (or the
incurrence of any Letter of Credit Obligations), the outstanding
principal amount of the Revolving Loan would exceed the lesser of
the Borrowing Base and the Maximum Amount, LESS, in each case,
the then outstanding principal amount of the Swing Line Loan; or
(e) After giving effect to any Swing Line Advance, the
outstanding principal amount of the Swing Line Loan would exceed
Swing Line Availability.
The request and acceptance by Borrower of the proceeds of any
Loan, the incurrence of any Letter of Credit Obligations or the
conversion or continuation of any Loan into, or as, a LIBOR Loan,
as the case may be, shall be deemed to constitute, as of the date
of such request or acceptance, (i) a representation and warranty
by Borrower that the conditions in this SECTION 2.2 have been
satisfied and (ii) a reaffirmation by Borrower of the granting
and continuance of Agent's Liens, on behalf of itself and
Lenders, pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties executing this Agreement, jointly
and severally, make the following representations and warranties
to Agent and each Lender with respect to all Credit Parties, each
and all of which shall survive the execution and delivery of this
Agreement.
3.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Credit
Party (a) is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation; (b) is duly qualified to conduct business and is
in good standing in each other jurisdiction where its ownership
or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would
not result in exposure to losses, damages or liabilities in
excess of $50,000; (c) has the requisite corporate power and
authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the
property it operates under lease and to conduct its business as
now, heretofore and proposed to be conducted; (d) subject to
specific representations regarding Environmental Laws, has all
licenses, permits, consents or approvals from or by, and has made
all filings with, and has given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (e) is in compliance with its
charter and bylaws; and (f) subject to specific representations
set forth herein regarding ERISA,<PAGE> Environmental Laws, tax
and other laws, is in compliance with all applicable provisions
of law, except where the failure to comply, individually or in
the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.2. EXECUTIVE OFFICES; FEIN. As of the Closing Date, the
current location of each Credit Party's chief executive office,
domicile (within the meaning of the Quebec Civil Code) and
principal place of business is set forth in DISCLOSURE SCHEDULE
(3.2), and none of such locations have changed within the twelve
(12) months preceding the Closing Date. In addition, DISCLOSURE
SCHEDULE (3.2) lists the federal employer identification number
of each Credit Party.
3.3. CORPORATE POWER, AUTHORIZATION, ENFORCEABLE
OBLIGATIONS. The execution, delivery and performance by each
Credit Party of the Loan Documents to which it is a party and the
creation of all Liens provided for therein: (a) are within such
Person's corporate power; (b) have been duly authorized by all
necessary or proper corporate and shareholder action; (c) do not
contravene any provision of such Person's charter or bylaws; (d)
do not violate any law or regulation, or any order or decree of
any court or Governmental Authority; (e) do not conflict with or
result in the breach or termination of, constitute a default
under or accelerate or permit the acceleration of any performance
required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which such Person is a party or
by which such Person or any of its property is bound; (f) do not
result in the creation or imposition of any Lien upon any of the
property of such Person other than those in favor of Agent, on
behalf of itself and Lenders, pursuant to the Loan Documents; and
(g) do not require the consent or approval of any Governmental
Authority or any other Person, except those referred to in
SECTION 2.1(c), all of which will have been duly obtained, made
or complied with prior to the Closing Date. On or prior to the
Closing Date, each of the Loan Documents shall have been duly
executed and delivered by each Credit Party thereto and each such
Loan Document shall then constitute a legal, valid and binding
obligation of such Credit Party enforceable against it in
accordance with its terms.
3.4. FINANCIAL STATEMENTS AND PROJECTIONS. Except for the
Projections, all Financial Statements concerning Borrower and its
Subsidiaries which are referenced below have been prepared in
accordance with GAAP consistently applied throughout the periods
covered (except as disclosed therein and except, with respect to
unaudited Financial Statements, for the absence of footnotes and
normal year-end audit adjustments) and present fairly in all
material respects the financial position of the Persons covered
thereby as at the dates thereof and the results of their
operations and cash flows for the periods then ended.
(a) The following Financial Statements attached hereto
as DISCLOSURE SCHEDULE (3.4(A)) have been delivered on the date
hereof: (i) the audited consolidated and consolidating balance
sheets at August 31, 1998 and August 31, 1999 and the related
statements of income and cash flows of Borrower and its
Subsidiaries for the Fiscal Years then ended, certified by Arthur
Andersen LLP and (ii) the unaudited balance sheets at October 31,
1999 and the related statements of income and cash flows of
Borrower and its Subsidiaries for the two months then ended.
<PAGE>
(b) The Pro Forma delivered on the date hereof and
attached hereto as DISCLOSURE SCHEDULE (3.4(B)) was prepared by
Borrower giving PRO FORMA effect to the Related Transactions, was
based on the unaudited consolidated and consolidating balance
sheets of Borrower and its Subsidiaries dated October 31, 1999,
and was prepared in accordance with GAAP, with only such
adjustments thereto as would be required in accordance with GAAP.
(c) PROJECTIONS. The Projections delivered on the
date hereof and attached hereto as DISCLOSURE SCHEDULE (3.4(C))
have been prepared by Borrower in light of the past operations of
its businesses, but including future payments of known contingent
liabilities, and reflect projections for the five year period
beginning on September 1, 1999 on a month by month basis for the
first year and on a year by year basis thereafter. The
Projections are based upon estimates and assumptions stated
therein, all of which Borrower believes to be reasonable and fair
in light of current conditions and current facts known to
Borrower and, as of the Closing Date, reflect Borrower's good
faith and reasonable estimates of the future financial
performance of Borrower and of the other information projected
therein for the period set forth therein.
3.5. MATERIAL ADVERSE EFFECT. Between August 31, 1999 and
the Closing Date, (a) no Credit Party has incurred any
obligations, contingent or non-contingent liabilities,
liabilities for Charges, long-term leases or unusual forward or
long-term commitments which are not reflected in the Pro Forma
and which, alone or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, (b) no contract,
lease or other agreement or instrument has been entered into by
any Credit Party or has become binding upon any Credit Party's
assets and no law or regulation applicable to any Credit Party
has been adopted which has had or could reasonably be expected to
have a Material Adverse Effect, and (c) no Credit Party is in
default and to the best of Borrower's knowledge no third party is
in default under any material contract, lease or other agreement
or instrument, which alone or in the aggregate could reasonably
be expected to have a Material Adverse Effect. Between August
31, 1999 and the Closing Date no event has occurred, which alone
or together with other events, could reasonably be expected to
have a Material Adverse Effect.
3.6. OWNERSHIP OF PROPERTY; LIENS. As of the Closing Date,
the real estate ("Real Estate") listed on DISCLOSURE SCHEDULE
(3.6) constitutes all of the real property owned, leased,
subleased, or used by any Credit Party. Each Credit Party owns
good and marketable fee simple title to all of its owned real
estate, and valid and marketable leasehold interests in all of
its leased Real Estate, all as described on DISCLOSURE SCHEDULE
(3.6), and copies of all such leases or a summary of terms
thereof satisfactory to Agent have been delivered to Agent.
DISCLOSURE SCHEDULE (3.6) further describes any Real Estate with
respect to which any Credit Party is a lessor, sublessor or
assignor as of the Closing Date. Each Credit Party also has good
and marketable title to, or valid leasehold interests in, all of
its personal properties and assets. As of the Closing Date, none
of the properties and assets of any Credit Party are subject to
any Liens other than Permitted Encumbrances, and there are no
facts, circumstances or conditions known to any Credit Party
that may result in any Liens (including Liens arising under
Environmental Laws) other than Permitted Encumbrances. Each
Credit Party has received all deeds, assignments, waivers,
consents, nondisturbance and recognition or similar agreements,
bills of<PAGE> sale and other documents, and has duly effected
all recordings, filings and other actions necessary to establish,
protect and perfect such Credit Party's right, title and interest
in and to all such Real Estate and other properties and assets.
DISCLOSURE SCHEDULE (3.6) also describes any purchase options,
rights of first refusal or other similar contractual rights
pertaining to any Real Estate. As of the Closing Date, no
portion of any Credit Party's Real Estate has suffered any
material damage by fire or other casualty loss which has not
heretofore been repaired and restored in all material respects to
its original condition or otherwise remedied. As of the Closing
Date, all material permits required to have been issued or
appropriate to enable the Real Estate to be lawfully occupied and
used for all of the purposes for which they are currently
occupied and used have been lawfully issued and are in full force
and effect.
3.7 LABOR MATTERS. As of the Closing Date (a) no strikes
or other material labor disputes against any Credit Party are
pending or, to any Credit Party's knowledge, threatened; (b)
hours worked by and payment made to employees of each Credit
Party comply with the Fair Labor Standards Act and each other
federal, state, local or foreign law applicable to such matter;
(c) all payments due from any Credit Party for employee health
and welfare insurance have been paid or accrued as a liability on
the books of such Credit Party; (d) except as set forth in
DISCLOSURE SCHEDULE (3.7), no Credit Party is a party to or bound
by any collective bargaining agreement, management agreement,
consulting agreement or any employment agreement (and true and
complete copies of any agreements described on DISCLOSURE
SCHEDULE (3.7) have been delivered to Agent); (e) there is no
organizing activity involving any Credit Party pending or, to any
Credit Party's knowledge, threatened by any labor union or group
of employees; (f) there are no representation proceedings pending
or, to any Credit Party's knowledge, threatened with the National
Labor Relations Board or any other labor relations board, and no
labor organization or group of employees of any Credit Party has
made a pending demand for recognition; and (g) except as set
forth in DISCLOSURE SCHEDULE (3.7), there are no complaints or
charges against any Credit Party pending or, to the knowledge of
any Credit Party, threatened to be filed with any Governmental
Authority or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of
employment by any Credit Party of any individual.
3.8 VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING
STOCK AND INDEBTEDNESS. Except as set forth in DISCLOSURE
SCHEDULE (3.8), no Credit Party has any Subsidiaries, engaged in
any joint venture or partnership with any other Person, or is an
Affiliate of any other Person. All of the issued and outstanding
Stock of each Credit Party is owned by each of the stockholders
(of five percent (5%) or more of such issued and outstanding
Stock, in the case of Borrower) and in the amounts set forth on
DISCLOSURE SCHEDULE (3.8). Except as set forth in DISCLOSURE
SCHEDULE (3.8) in the case of Borrower, there are no outstanding
rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Credit Party may be required to
issue, sell, repurchase or redeem any of its Stock or other
equity securities or any Stock or other equity securities of its
Subsidiaries. All outstanding Indebtedness of each Credit Party
as of the Closing Date is described in SECTION 6.3 (including
DISCLOSURE SCHEDULE (6.3)).
3.9 GOVERNMENT REGULATION. No Credit Party is an
"investment company" or an "affiliated person" of, or "promoter"
or "principal underwriter" for, an "investment company," as<PAGE>
such terms are defined in the Investment Company Act of 1940 as
amended. No Credit Party is subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power
Act, or any other domestic or foreign federal, state or
provincial statute that restricts or limits its ability to incur
Indebtedness or to perform its obligations hereunder. The making
of the Loans by Lenders to Borrower, the incurrence of the Letter
of Credit Obligations on behalf of Borrower, the application of
the proceeds thereof and repayment thereof and the consummation
of the Related Transactions will not violate any provision of any
such statute or any rule, regulation or order issued by the
Securities and Exchange Commission.
3.10. MARGIN REGULATIONS. No Credit Party is engaged,
nor will it engage, principally or as one of its important
activities, in the business of extending credit for the purpose
of "purchasing" or "carrying" any "margin security" as such terms
are defined in Regulation U of the Federal Reserve Board as now
and from time to time hereafter in effect (such securities being
referred to herein as "Margin Stock"). No Credit Party owns any
Margin Stock, and none of the proceeds of the Loans or other
extensions of credit under this Agreement will be used, directly
or indirectly, for the purpose of purchasing or carrying any
Margin Stock, for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry
any Margin Stock or for any other purpose which might cause any
of the Loans or other extensions of credit under this Agreement
to be considered a "purpose credit" within the meaning of
Regulation T, U or X of the Federal Reserve Board. No Credit
Party will take or permit to be taken any action which might
cause any Loan Document to violate any regulation of the Federal
Reserve Board.
3.11. TAXES. All tax returns, reports and statements,
including information returns, required by any Governmental
Authority to be filed by any Credit Party have been filed with
the appropriate Governmental Authority and all Charges have been
paid prior to the date on which any fine, penalty, interest or
late charge may be added thereto for nonpayment thereof (or any
such fine, penalty, interest, late charge or loss has been paid),
excluding Charges or other amounts being contested in accordance
with SECTION 5.2(b). Proper and accurate amounts have been
withheld by each Credit Party from its respective employees for
all periods in full and complete compliance with all applicable
federal, state, local and foreign law and such withholdings have
been timely paid to the respective Governmental Authorities.
DISCLOSURE SCHEDULE (3.11) sets forth as of the Closing Date
those taxable years for which any Credit Party's tax returns are
currently being audited by the IRS or any other applicable
Governmental Authority and any assessments or threatened
assessments in connection with such audit, or otherwise currently
outstanding. Except as described on DISCLOSURE SCHEDULE (3.11),
no Credit Party has executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending,
or having the effect of extending, the period for assessment or
collection of any Charges. None of the Credit Parties and their
respective predecessors are liable for any Charges: (a) under any
agreement (including any tax sharing agreements) or (b) to each
Credit Party's knowledge, as a transferee. As of the Closing
Date, no Credit Party has agreed or been requested to make any
adjustment under IRC Section 481(a), by reason of a change in
accounting method or otherwise, which would have a Material
Adverse Effect.
<PAGE>
3.12. ERISA AND CANADIAN PENSION AND BENEFIT PLANS.
(a) DISCLOSURE SCHEDULE (3.12) lists and separately
identifies all Title IV Plans, Multiemployer Plans, ESOPs and
Retiree Welfare Plans. Copies of all such listed Plans, together
with a copy of the latest form 5500 for each such Plan, have been
delivered to Agent. Except with respect to Multiemployee Plans,
each Qualified Plan has been determined by the IRS to qualify
under Section 401 of the IRC, and the trusts created thereunder
have been determined to be exempt from tax under the provisions
of Section 501 of the IRC, and nothing has occurred which would
cause the loss of such qualification or tax-exempt status. Each
Plan is in compliance with the applicable provisions of ERISA and
the IRC, including the filing of reports required under the IRC
or ERISA. No Credit Party or ERISA Affiliate has failed to make
any contribution or pay any amount due as required by either
Section 412 of the IRC or Section 302 of ERISA or the terms of
any such Plan. No Credit Party or ERISA Affiliate has engaged in
a prohibited transaction, as defined in Section 4975 of the IRC,
in connection with any Plan, which would subject any Credit Party
to a material tax on prohibited transactions imposed by Section
4975 of the IRC.
(b) Except as set forth in DISCLOSURE SCHEDULE (3.12):
(i) no Title IV Plan has any Unfunded Pension Liability; (ii) no
ERISA Event or event described in Section 4062(e) of ERISA with
respect to any Title IV Plan has occurred or is reasonably
expected to occur; (iii) there are no pending, or to the
knowledge of any Credit Party, threatened claims (other than
claims for benefits in the normal course), sanctions, actions or
lawsuits, asserted or instituted against any Plan or any Person
as fiduciary or sponsor of any Plan; (iv) no Credit Party or
ERISA Affiliate has incurred or reasonably expects to incur any
liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV
Plan with Unfunded Pension Liabilities has been transferred
outside of the "controlled group" (within the meaning of Section
4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate; and
(vi) no liability under any Title IV Plan has been satisfied with
the purchase of a contract from an insurance company that is not
rated AAA by the Standard & Poor's Corporation or the equivalent
by another nationally recognized rating agency. DISCLOSURE
SCHEDULE (3.12) lists all Canadian Benefit Plans (other than, for
greater certainty, universal plans created by and to which any
Credit Party is obligated to contribute by statute) and Canadian
Pension Plans adopted by any Credit Party. The Canadian Pension
Plans are duly registered under the ITA and all other applicable
laws which require registration and no event has occurred which
is reasonably likely to cause the loss of such registered status.
All material obligations of any Credit Party (including
fiduciary, funding, investment and administration obligations)
required to be performed in connection with the Canadian Pension
Plans and the funding agreements therefor have been performed in
a timely fashion. There have been no improper withdrawals or
applications of the assets of the Canadian Pension Plans or the
Canadian Benefit Plans. There are no outstanding disputes
concerning the assets of the Canadian Pension Plans or the
Canadian Benefit Plans. Each of the Canadian Pension Plans is
fully funded on a solvency basis (using actuarial methods and
assumptions which are consistent with the valuations last filed
with the applicable Governmental Authorities and which are
consistent with generally accepted actuarial principles).<PAGE>
3.13. NO LITIGATION. No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge
of any Credit Party, threatened against any Credit Party, before
any Governmental Authority or before any arbitrator or panel of
arbitrators (collectively, "Litigation"), (a) which challenges
any Credit Party's right or power to enter into or perform any of
its obligations under the Loan Documents to which it is a party,
or the validity or enforceability of any Loan Document or any
action taken thereunder, or (b) which has a reasonable risk of
being determined adversely to any Credit Party and which, if so
determined, could have a Material Adverse Effect. Except as set
forth on DISCLOSURE SCHEDULE (3.13), as of the Closing Date there
is no Litigation pending or threatened which seeks damages in
excess of $100,000 or injunctive relief or alleges criminal
misconduct of any Credit Party.
3.14. BROKERS. No broker or finder acting on behalf of
any Credit Party brought about the obtaining, making or closing
of the Loans or the Related Transactions, and no Credit Party has
any obligation to any Person in respect of any finder's or
brokerage fees in connection therewith.
3.15. INTELLECTUAL PROPERTY. As of the Closing Date,
each Credit Party owns or has rights to use all Intellectual
Property necessary to continue to conduct its business as now or
heretofore conducted by it or proposed to be conducted by it, and
each Patent, Design, Trademark, Copyright and License is listed,
together with application or registration numbers, as applicable,
in DISCLOSURE SCHEDULE (3.15) hereto. Each Credit Party conducts
its business and affairs without infringement of or interference
with any Intellectual Property of any other Person.
3.16. FULL DISCLOSURE. No information contained in this
Agreement, any of the other Loan Documents, any Projections,
Financial Statements or Collateral Reports or other reports from
time to time delivered hereunder or any written statement
furnished by or on behalf of any Credit Party to Agent or any
Lender pursuant to the terms of this Agreement contains or will
contain any untrue statement of a material fact or omits or will
omit to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the
circumstances under which they were made. The Liens granted to
Agent, on behalf of itself and Lenders, pursuant to the
Collateral Documents will at all times be fully perfected first
priority Liens in and to the Collateral described therein,
subject, as to priority, only to Permitted Encumbrances with
respect to the Collateral other than Accounts.
3.17. ENVIRONMENTAL MATTERS.
(a) Except as set forth in DISCLOSURE SCHEDULE (3.17),
as of the Closing Date: (i) the Real Estate is free of
contamination from any Hazardous Material except for such
contamination that would not adversely impact the value or
marketability of such Real Estate and which would not result in
Environmental Liabilities which could reasonably be expected to
exceed $500,000; (ii) no Credit Party has caused or
suffered to occur any Release of Hazardous Materials on, at, in,
under, above, to, from or about any of its Real Estate; (iii) the
Credit Parties are and have been in compliance with all
Environmental Laws, except for such noncompliance which would not
result in Environmental Liabilities which could reasonably be
expected to<PAGE> exceed $500,000; (iv) the Credit Parties have
obtained, and are in compliance with, all Environmental Permits
required by Environmental Laws for the operations of their
respective businesses as presently conducted or as proposed to be
conducted, except where the failure to so obtain or comply with
such Environmental Permits would not result in Environmental
Liabilities which could reasonably be expected to exceed
$500,000, and all such Environmental Permits are valid,
uncontested and in good standing; (v) no Credit Party is involved
in operations or knows of any facts, circumstances or conditions,
including any Releases of Hazardous Materials, that are likely to
result in any Environmental Liabilities of such Credit Party
which could reasonably be expected to exceed $500,000, and no
Credit Party has permitted any current or former tenant or
occupant of the Real Estate to engage in any such operations;
(vi) there is no Litigation arising under or related to any
Environmental Laws, Environmental Permits or Hazardous Material
which seeks damages, penalties, fines, costs or expenses in
excess of $100,000 or injunctive relief, or which alleges
criminal misconduct by any Credit Party; (vii) no notice has been
received by any Credit Party identifying it as a "potentially
responsible party" or requesting information under CERCLA or
analogous state statutes, and to the knowledge of the Credit
Parties, there are no facts, circumstances or conditions that may
result in any Credit Party being identified as a "potentially
responsible party" under CERCLA or analogous state statutes; and
(viii) the Credit Parties have provided to Agent copies of all
existing environmental reports, reviews and audits and all
written information pertaining to actual or potential
Environmental Liabilities, in each case relating to any Credit
Party.
(b) Each Credit Party hereby acknowledges and agrees
that Agent (i) is not now, and has not ever been, in control of
any of the Real Estate or any Credit Party's affairs, and (ii)
does not have the capacity through the provisions of the Loan
Documents or otherwise to influence any Credit Party's conduct
with respect to the ownership, operation or management of any of
its Real Estate or compliance with Environmental Laws or
Environmental Permits.
3.18. INSURANCE. DISCLOSURE SCHEDULE (3.18) lists all
insurance policies of any nature maintained, as of the Closing
Date, for current occurrences by each Credit Party, as well as a
summary of the terms of each such policy.
3.19. DEPOSIT AND DISBURSEMENT ACCOUNTS. DISCLOSURE
SCHEDULE (3.19) lists all banks and other financial institutions
at which any Credit Party maintains deposits and/or other
accounts as of the Closing Date, including any Disbursement
Accounts, and such Schedule correctly identifies the name,
address and telephone number of each depository, the name in
which the account is held, a description of the purpose of the
account, and the complete account number.
3.20. GOVERNMENT CONTRACTS. Except as set forth in
DISCLOSURE SCHEDULE (3.20), as of the Closing Date, no Credit
Party is a party to any contract or agreement with any
Governmental Authority and no Credit Party's Accounts are subject
to the Federal Assignment of Claims Act, as amended (31 U.S.C.
Section 3727), the Financial Administration Act (Canada) or any
similar state, provincial or local law.
<PAGE>
3.21. CUSTOMER AND TRADE RELATIONS. As of the Closing
Date, there exists no actual or, to the knowledge of any Credit
Party, threatened termination or cancellation of, or any
material adverse modification or change in: the business
relationship of any Credit Party with any customer or group of
customers whose purchases during the preceding twelve (12) months
caused them to be ranked among the ten largest customers of such
Credit Party; or the business relationship of any Credit Party
with any supplier material to its operations.
3.22. AGREEMENTS AND OTHER DOCUMENTS. As of the Closing
Date, each Credit Party has provided to Agent or its counsel, on
behalf of Lenders, accurate and complete copies (or summaries) of
all of the following agreements or documents to which it is
subject and each of which are listed on DISCLOSURE SCHEDULE
(3.22): supply agreements and purchase agreements not terminable
by such Credit Party within sixty (60) days following written
notice issued by such Credit Party and involving transactions in
excess of $1,000,000 per annum; any lease of Equipment having a
remaining term of one year or longer and requiring aggregate
rental and other payments in excess of $500,000 per annum;
licenses and permits held by the Credit Parties, the absence of
which could be reasonably likely to have a Material Adverse
Effect; instruments or documents evidencing Indebtedness of such
Credit Party and any security interest granted by such Credit
Party with respect thereto; and instruments and agreements
evidencing the issuance of any equity securities, warrants,
rights or options to purchase equity securities of such Credit
Party.
3.23. SOLVENCY. Both before and after giving effect to
(a) the Loans and Letter of Credit Obligations to be made or
extended on the Closing Date or such other date as Loans and
Letter of Credit Obligations requested hereunder are made or
extended, (b) the disbursement of the proceeds of such Loans
pursuant to the instructions of Borrower, (c) the Refinancing
and the consummation of the other Related Transactions and (d)
the payment and accrual of all transaction costs in connection
with the foregoing, each Credit Party is Solvent.
3.24. YEAR 2000 REPRESENTATIONS. Each Credit Party has
eliminated all Year 2000 Problems, except where the failure to
correct the same could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate. Each
Credit Party has delivered to Agent all documentation requested
by Agent as necessary to substantiate the foregoing.
3.25. TAX SHARING AGREEMENT. Borrower has delivered to
Agent a complete and correct copy of the Tax Sharing Agreement
(including all schedules, exhibits, amendments, supplements,
modifications, assignments and all other documents delivered
pursuant thereto in connection therewith). No Credit Party and
no other Person party thereto is in default in the performance or
compliance with any provisions thereof. The Tax Sharing
Agreement is in full force and effect and has not been
terminated, rescinded or withdrawn. The provisions of the Tax
Sharing Agreement are enforceable by Borrower and its successors
and assigns (including Agent and Lenders as collateral assignees)
against the other Persons party thereto.
3.26. LICENSE AGREEMENTS. DISCLOSURE SCHEDULE (3.26)
includes a description of each License Agreement and Borrower has
delivered to Agent a complete and correct copy of each<PAGE>
License Agreement (including all schedules, exhibits, amendments,
supplements, modifications, assignments and all other documents
delivered pursuant thereto or in connection therewith). No
Credit Party and no other Person party thereto is in default in
the performance or compliance with any provisions of any License
Agreement. Each License Agreement is in full force and effect
and has not been terminated, rescinded or withdrawn. The
provisions of each License Agreement are enforceable by Borrower
and each other Credit Party thereto and, except as expressly
identified in DISCLOSURE SCHEDULE (3.26), their respective
successors and assigns (including Agent and Lenders as collateral
assignees) against the other Persons party thereto.
3.27. PLAYER CONTRACTS. DISCLOSURE SCHEDULE (3.27)
includes a list of each Material Player Contract. No Credit
Party and no other Person party thereto is in default in the
performance or compliance with any provisions of any Material
Player Contract. Each Material Player Contract is in full force
and effect and has not been terminated, rescinded or withdrawn.
The provisions of each Material Player Contract are enforceable
by Borrower and each other Credit Party thereto and, except as
expressly identified in DISCLOSURE SCHEDULE (3.27), their
respective successors and assigns (including Agent and Lenders as
collateral assignees) against the other Persons party thereto.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1. REPORTS AND NOTICES.
(a) Each Credit Party executing this Agreement hereby
agrees that from and after the Closing Date and until the
Termination Date, it shall deliver to Agent and/or Lenders, as
required, the Financial Statements, notices, Projections and
other information at the times, to the Persons and in the manner
set forth in ANNEX E.
(b) Each Credit Party executing this Agreement hereby
agrees that from and after the Closing Date and until the
Termination Date, it shall deliver to Agent and/or Lenders, as
required, the various Collateral Reports (including Borrowing
Base Certificates in the form of EXHIBIT 4.1(b)) at the times, to
the Persons and in the manner set forth in ANNEX F.
4.2. COMMUNICATION WITH ACCOUNTANTS. Each Credit Party
executing this Agreement authorizes Agent and, so long as a
Default or Event of Default shall have occurred and be
continuing, each Lender, to communicate directly with its
independent certified public accountants including Arthur
Andersen LLP, and authorizes and shall instruct those accountants
and advisors to disclose and make available to Agent and each
Lender any and all Financial Statements and other supporting
financial documents, schedules and information relating to any
Credit Party (including copies of any issued management letters)
with respect to the business, financial condition and other
affairs of any Credit Party.
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties that from and after the date
hereof and until the Termination Date:
<PAGE>
5.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each
Credit Party shall: do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate
existence and its rights and franchises; continue to conduct its
business substantially as now conducted or as otherwise permitted
hereunder; at all times maintain, preserve and protect all of
its assets and properties used or useful in the conduct of its
business, and keep the same in good repair, working order and
condition in all material respects (taking into consideration
ordinary wear and tear) and from time to time make, or cause to
be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices; and
transact business only in such corporate and trade names as are
set forth in DISCLOSURE SCHEDULE (5.1).
5.2. PAYMENT OF OBLIGATIONS.
(a) Subject to SECTION 5.2(b), each Credit Party shall
pay and discharge or cause to be paid and discharged promptly all
Charges payable by it, including (A) Charges imposed upon it, its
income and profits, or any of its property (real, personal or
mixed) and all Charges with respect to tax, social security and
unemployment withholding with respect to its employees, and (B)
lawful claims for labor, materials, supplies and services or
otherwise, before any thereof shall become past due.
(b) Each Credit Party may in good faith contest, by
appropriate proceedings, the validity or amount of any Charges or
claims described in SECTION 5.2(a); provided, that (i) adequate
reserves with respect to such contest are maintained on the books
of such Credit Party, in accordance with GAAP, (ii) no Lien shall
be imposed or otherwise arise to secure payment of such Charges
that is superior to any of the Liens securing payment of the
Obligations and such contest is maintained and prosecuted
continuously and with diligence and operates to suspend
collection or enforcement of such Charges, (iii) none of the
Collateral becomes subject to forfeiture or loss as a result of
such contest, (iv) such Credit Party shall promptly pay or
discharge such contested Charges or claims and all additional
charges, interest, penalties and expenses, if any, and shall
deliver to Agent evidence acceptable to Agent of such compliance,
payment or discharge, if such contest is terminated or
discontinued adversely to such Credit Party or the conditions set
forth in this SECTION 5.2(b) are no longer met, and (v) Agent has
not advised Borrower in writing that Agent reasonably believes
that nonpayment or nondischarge thereof could have or result in a
Material Adverse Effect.
(c) Each Credit Party shall perform its obligations
(including the making of payments due in respect thereof) under
each Material Player Contract to which it is a party.
5.3. BOOKS AND RECORDS. Each Credit Party shall keep
adequate books and records with respect to its business
activities in which proper entries, reflecting all financial
transactions, are made in accordance with GAAP and on a basis
consistent with the Financial Statements attached as DISCLOSURE
SCHEDULE (3.4(A)). To the extent Financial Statements or general
ledger of Rawlings Canada are maintained outside of the
continental United States, a duplicate of such Financial
Statements and general ledger shall be maintained at the location
where the Borrower's Financial Statements are maintained.
<PAGE>
5.4. INSURANCE; DAMAGE TO OR DESTRUCTION OF COLLATERAL.
(a) The Credit Parties shall, at their sole cost and
expense, maintain the policies of insurance described on
DISCLOSURE SCHEDULE (3.18) as in effect on the date hereof or
otherwise in form and amounts and with insurers acceptable to
Agent. If any Credit Party at any time or times hereafter shall
fail to obtain or maintain any of the policies of insurance
required above or to pay all premiums relating thereto, Agent may
at any time or times thereafter obtain and maintain such policies
of insurance and pay such premiums and take any other action with
respect thereto which Agent deems advisable. Agent shall have no
obligation to obtain insurance for any Credit Party or pay any
premiums therefor. By doing so, Agent shall not be deemed to
have waived any Default or Event of Default arising from any
Credit Party's failure to maintain such insurance or pay any
premiums therefor. All sums so disbursed, including attorneys'
fees, court costs and other charges related thereto, shall be
payable on demand by Borrower to Agent and shall be additional
Obligations hereunder secured by the Collateral.
(b) Agent reserves the right at any time upon any
change in any Credit Party's risk profile (including any change
in the product mix maintained by any Credit Party or any laws
affecting the potential liability of such Credit Party) to
require additional forms and limits of insurance to, in Agent's
opinion, adequately protect both Agent's and Lenders' interests
in all or any portion of the Collateral and to ensure that each
Credit Party is protected by insurance in amounts and with
coverage customary for its industry. If requested by Agent, each
Credit Party shall deliver to Agent from time to time a report of
a reputable insurance broker, satisfactory to Agent, with respect
to its insurance policies.
(c) Each Credit Party shall deliver to Agent, in form
and substance satisfactory to Agent, endorsements to (i) all "All
Risk" and business interruption insurance naming Agent, on behalf
of itself and Lenders, as loss payee, and (ii) all general
liability and other liability policies naming Agent, on behalf of
itself and Lenders, as additional insured. Each Credit Party
irrevocably makes, constitutes and appoints Agent (and all
officers, employees or agents designated by Agent), so long as
any Default or Event of Default shall have occurred and be
continuing or the anticipated insurance proceeds exceed $500,000,
as each Credit Party's true and lawful agent and attorney-in-fact
for the purpose of making, settling and adjusting claims under
such "All Risk" policies of insurance, endorsing the name of each
Credit Party on any check or other item of payment for the
proceeds of such "All Risk" policies of insurance and for making
all determinations and decisions with respect to such "All Risk"
policies of insurance. Agent shall have no duty to exercise any
rights or powers granted to it pursuant to the foregoing
power-of-attorney. Borrower shall promptly notify Agent of any
loss, damage, or destruction to the Collateral in the amount of
$500,000 or more, whether or not covered by insurance. After
deducting from such proceeds the expenses, if any, incurred by
Agent in the collection or handling thereof, Agent may, at its
option, apply such proceeds to the reduction of the Obligations
in accordance with SECTION 1.3(d), provided that in the case of
insurance proceeds pertaining to any Credit Party other than
Borrower, such insurance proceeds shall be applied to the Loans
owing by Borrower, or permit or require each Credit Party to use
such money, or any part thereof, to replace, repair, restore or
rebuild the Collateral in a diligent and expeditious<PAGE> manner
with materials and workmanship of substantially the same quality
as existed before the loss, damage or destruction.
Notwithstanding the foregoing, if the casualty giving rise to
such insurance proceeds would not reasonably be expected to have
a Material Adverse Effect and such insurance proceeds do not
exceed $500,000 in the aggregate, Agent shall permit the
applicable Credit Party to replace, restore, repair or rebuild
the property; provided that if such Credit Party has not
completed or entered into binding agreements to complete such
replacement, restoration, repair or rebuilding within 180 days of
such casualty, Agent may apply such insurance proceeds to the
Obligations in accordance with SECTION 1.3(d); provided further
that in the case of insurance proceeds pertaining to any Credit
Party other than Borrower, such insurance proceeds shall be
applied to the Loans owing by Borrower. All insurance proceeds
which are to be made available to Borrower to replace, repair,
restore or rebuild the Collateral shall be applied by Agent to
reduce the outstanding principal balance of the Revolving Loan
(which application shall not result in a permanent reduction of
the Revolving Loan Commitment) and upon such application, Agent
shall establish a Reserve against the Borrowing Base in an amount
equal to the amount of such proceeds so applied. All insurance
proceeds made available to any Credit Party that is not a
Borrower to replace, repair, restore or rebuild Collateral shall
be deposited in a cash collateral account. Thereafter, such
funds shall be made available to such Credit Party to provide
funds to replace, repair, restore or rebuild the Collateral as
follows: (i) Borrower shall request a Revolving Credit Advance or
release from the cash collateral account be made to such Credit
Party in the amount requested to be released; (ii) so long as the
conditions set forth in SECTION 2.2 have been met, Lenders shall
make such Revolving Credit Advance or Agent shall release funds
from the cash collateral account; and (iii) in the case of
insurance proceeds applied against the Revolving Loan, the
Reserve established with respect to such insurance proceeds shall
be reduced by the amount of such Revolving Credit Advance. To
the extent not used to replace, repair, restore or rebuild the
Collateral, such insurance proceeds shall be applied in
accordance with SECTION 1.3(d); provided that in the case of
insurance proceeds pertaining to any Credit Party other than
Borrower, such insurance proceeds shall be applied to the Loans
owing by Borrower.
5.5. COMPLIANCE WITH LAWS. Each Credit Party shall comply
with all federal, state, local and foreign laws and regulations
applicable to it, including those relating to ERISA and labor
matters and Environmental Laws and Environmental Permits, except
to the extent that the failure to comply, individually or in the
aggregate, could not reasonably be expected to have a Material
Adverse Effect.
5.6. SUPPLEMENTAL DISCLOSURE. From time to time as may be
requested by Agent (which request will not be made more
frequently than once each year absent the occurrence and
continuance of a Default or an Event of Default), the Credit
Parties shall supplement each Disclosure Schedule hereto, or any
representation herein or in any other Loan Document, with respect
to any matter hereafter arising which, if existing or occurring
at the date of this Agreement, would have been required to be set
forth or described in such Disclosure Schedule or as an exception
to such representation or which is necessary to correct any
information in such Disclosure Schedule or representation which
has been rendered inaccurate thereby (and, in the case of any
supplements to any Disclosure Schedule, such Disclosure Schedule
shall be<PAGE> appropriately marked to show the changes made
therein); provided that (a) no such supplement to any such
Disclosure Schedule or representation shall be or be deemed a
waiver of any Default or Event of Default resulting from the
matters disclosed therein, except as consented to by Agent and
Requisite Lenders in writing; and (b) no supplement shall be
required as to representations and warranties that relate solely
to the Closing Date.
5.7. INTELLECTUAL PROPERTY. Each Credit Party will conduct
its business and affairs without infringement of or interference
with any Intellectual Property of any other Person in any
material respect.
5.8. ENVIRONMENTAL MATTERS. Each Credit Party shall and
shall cause each Person within its control to: (a) conduct its
operations and keep and maintain its Real Estate in compliance
with all Environmental Laws and Environmental Permits other than
noncompliance which could not reasonably be expected to have a
Material Adverse Effect; (b) implement any and all investigation,
remediation, removal and response actions which are appropriate
or necessary to maintain the value and marketability of the Real
Estate or to otherwise comply with Environmental Laws and
Environmental Permits pertaining to the presence, generation,
treatment, storage, use, disposal, transportation or Release of
any Hazardous Material on, at, in, under, above, to, from or
about any of its Real Estate; (c) notify Agent promptly after
such Credit Party becomes aware of any violation of Environmental
Laws or Environmental Permits or any Release on, at, in, under,
above, to, from or about any Real Estate which is reasonably
likely to result in Environmental Liabilities in excess of
$100,000; and (d) promptly forward to Agent a copy of any order,
notice, request for information or any communication or report
received by such Credit Party in connection with any such
violation or Release or any other matter relating to any
Environmental Laws or Environmental Permits that could reasonably
be expected to result in Environmental Liabilities in excess of
$100,000, in each case whether or not the Environmental
Protection Agency or any Governmental Authority has taken or
threatened any action in connection with any such violation,
Release or other matter. If Agent at any time has a reasonable
basis to believe that there may be a violation of any
Environmental Laws or Environmental Permits by any Credit Party
or any Environmental Liability arising thereunder, or a Release
of Hazardous Materials on, at, in, under, above, to, from or
about any of its Real Estate, which, in each case, could
reasonably be expected to have a Material Adverse Effect, then
each Credit Party shall, upon Agent's written request (i) cause
the performance of such environmental audits including subsurface
sampling of soil and groundwater, and preparation of such
environmental reports, at Borrower's expense, as Agent may from
time to time reasonably request, which shall be conducted by
reputable environmental consulting firms reasonably acceptable to
Agent and shall be in form and substance acceptable to Agent, and
(ii) permit Agent or its representatives to have access to all
Real Estate for the purpose of conducting such environmental
audits and testing as Agent deems appropriate, including
subsurface sampling of soil and groundwater. Borrower shall
reimburse Agent for the costs of such audits and tests and the
same will constitute a part of the Obligations secured
hereunder.
5.9. LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS AND BAILEE
LETTERS. Each Credit Party shall obtain a landlord's agreement,
mortgagee agreement or bailee letter, as applicable,<PAGE> from
the lessor of each leased property or mortgagee of owned property
or with respect to any warehouse, processor or converter facility
or other location where Collateral is located, which agreement or
letter shall contain a waiver or subordination of all Liens or
claims that the landlord, mortgagee or bailee may assert against
the Inventory or Collateral at that location, and shall otherwise
be satisfactory in form and substance to Agent. With respect to
such locations or warehouse space leased or owned as of the
Closing Date and thereafter, if Agent has not received a landlord
or mortgagee agreement or bailee letter as of the Closing Date
(or, if later, as of the date such location is acquired or
leased), Borrower's Eligible Inventory at that location shall, in
Agent's discretion, be excluded from the Borrowing Base or be
subject to such Reserves as may be established by Agent in its
reasonable credit judgment. After the Closing Date, no real
property or warehouse space shall be leased or acquired by any
Credit Party and no Inventory shall be shipped to a processor or
converter under arrangements established after the Closing Date
without the prior written consent of Agent (which consent, in
Agent's discretion, may be conditioned upon the exclusion from
the Borrowing Base of Eligible Inventory at that location or the
establishment of Reserves acceptable to Agent) or, unless and
until a satisfactory landlord or mortgagee agreement or bailee
letter, as appropriate, shall first have been obtained with
respect to such location. Each Credit Party shall timely and
fully pay and perform its obligations under all leases and other
agreements with respect to each leased location or public
warehouse where any Collateral is or may be located.
5.10. FURTHER ASSURANCES. Each Credit Party executing
this Agreement agrees that it shall and shall cause each other
Credit Party to, at such Credit Party's expense and upon request
of Agent, duly execute and deliver, or cause to be duly executed
and delivered, to Agent such further instruments and do and cause
to be done such further acts as may be necessary or proper in the
reasonable opinion of Agent to carry out more effectively the
provisions and purposes of this Agreement or any other Loan
Document.
5.11. CANADIAN PENSION AND BENEFIT PLANS.
(a) For each existing Canadian Pension Plan, each
Credit Party shall ensure that such plan retains its registered
status under and is administered in a timely manner in all
material respects in accordance with the applicable pension plan
text, funding agreement, the ITA and all other applicable laws.
(b) For each Canadian Pension Plan hereafter adopted
by any Credit Party which is required to be registered under the
ITA or any other applicable laws, that Credit Party shall use its
best efforts to seek and receive confirmation in writing from the
applicable Governmental Authorities to the effect that such plan
is unconditionally registered under the ITA and such other
applicable laws.
(c) For each existing and hereafter adopted Canadian
Pension Plan and Canadian Benefit Plan, each Credit Party shall
in a timely fashion perform in all material respects all
obligations (including fiduciary, funding, investment and
administration obligations) required to be performed in
connection with such plan and the funding media therefor.
<PAGE>
(d) Each Credit Party shall deliver to Agent if
requested by Agent, promptly after the filing thereof by any
Credit Party with any applicable Governmental Authority, copies
of each annual and other return, report or valuation with respect
to each Canadian Pension Plan; promptly after receipt thereof, a
copy of any direction, order, notice, ruling or opinion that any
Credit Party may receive from any applicable Governmental
Authority with respect to any Canadian Pension Plan; and
notification within 30 days of any increases having a cost to
such Credit Party in excess of $50,000 per annum, in the benefits
of any existing Canadian Pension Plan or Canadian Benefit Plan,
or the establishment of any new Canadian Pension Plan or Canadian
Benefit Plan, or the commencement of contributions to any such
plan to which any Credit Party was not previously contributing.
6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and
severally agrees as to all Credit Parties that, without the
prior written consent of Agent and the Requisite Lenders, from
and after the date hereof until the Termination Date:
6.1. MERGERS, SUBSIDIARIES, ETC. No Credit Party shall
directly or indirectly, by operation of law or otherwise, (a)
form or acquire any Subsidiary, or (b) merge with, consolidate
with, acquire all or substantially all of the assets or capital
stock of, or otherwise combine with or acquire, any Person.
6.2. INVESTMENTS; LOANS AND ADVANCES. Except as otherwise
expressly permitted by this SECTION 6, no Credit Party shall make
or permit to exist any investment in, or make, accrue or permit
to exist loans or advances of money to, any Person, through the
direct or indirect lending of money, holding of securities or
otherwise, except that (a) Borrower may hold investments
comprised of notes payable, or stock or other securities issued
by Account Debtors to Borrower pursuant to negotiated agreements
with respect to settlement of such Account Debtor's Accounts in
the ordinary course of business, so long as the aggregate amount
of such Accounts so settled by Borrower does not exceed $250,000;
and (b) each Credit Party may maintain its existing investments
in its Subsidiaries as of the Closing Date.
6.3. INDEBTEDNESS.
(a) No Credit Party shall create, incur, assume or
permit to exist any Indebtedness, except (without duplication)
(i) Indebtedness secured by purchase money security interests and
Capitalized Leases permitted in CLAUSE (c) of SECTION 6.7, (ii)
the Loans and the other Obligations, (iii) unfunded pension fund
and other employee benefit plan obligations and liabilities to
the extent they are permitted to remain unfunded under applicable
law, (iv) existing Indebtedness described in DISCLOSURE SCHEDULE
(6.3) and (other than in the case of the Tax Sharing Agreement)
refinancings thereof or amendments or modifications thereof which
do not have the effect of increasing the principal amount thereof
or changing the amortization thereof (other than to extend the
same) and which are otherwise on terms and conditions no less
favorable to any Credit Party, Agent or any Lender, as determined
by Agent, than the terms of<PAGE> the Indebtedness being
refinanced, amended or modified, (v) Indebtedness specifically
permitted under SECTION 6.1, and (vi) Indebtedness consisting of
intercompany loans and advances made by Borrower to any other
Credit Party that is a Guarantor or by any such Guarantor to
Borrower, provided that (A) Borrower shall have executed and
delivered to each such Guarantor, and each such Guarantor shall
have executed and delivered to Borrower, on the Closing Date, a
demand note (collectively, the "Intercompany Notes") to evidence
any such intercompany Indebtedness owing at any time by Borrower
to such Guarantor or by such Guarantor to Borrower, which
Intercompany Notes shall be in form and substance satisfactory to
Agent and shall be pledged and delivered to Agent pursuant to the
applicable Pledge Agreement or Security Agreement as additional
collateral security for the Obligations; (B) Borrower shall
record all intercompany transactions on its books and records in
a manner satisfactory to Agent; (C) the obligations of Borrower
under any such Intercompany Notes shall be subordinated to the
Obligations of Borrower hereunder in a manner satisfactory to
Agent; (D) at the time any such intercompany loan or advance is
made by Borrower and after giving effect thereto, Borrower shall
be Solvent; (E) no Default or Event of Default would occur and be
continuing after giving effect to any such proposed intercompany
loan; (F) in the case of any such intercompany loans made by
Borrower, Borrower shall have Net Borrowing Availability of not
less than $3,000,000 after giving effect to such intercompany
loan; (G) the aggregate amount of such intercompany loans owing
by Borrower to all such Guarantors shall not exceed $2,500,000 at
any one time outstanding; (G) the aggregate balance of all such
intercompany loans owing to Borrower shall not exceed $2,500,000
at any time; and (H) the recipient of any such intercompany loans
shall be creditworthy as determined by Agent.
(b) No Credit Party shall, directly redeem, defease or
prepay any principal of, premium, if any, interest or other
amount payable in respect of any Indebtedness, other than (i) the
Obligations and (ii) Indebtedness secured by a Permitted
Encumbrance if the asset securing such Indebtedness has been sold
or otherwise disposed of in accordance with SECTIONS 6.8(b) or
(c).
6.4. EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS.
(a) Except as otherwise expressly permitted in this
SECTION 6 with respect to Affiliates, no Credit Party shall enter
into or be a party to any transaction with any other Credit Party
or any Affiliate thereof except in the ordinary course of and
pursuant to the reasonable requirements of such Credit Party's
business and upon fair and reasonable terms that are no less
favorable to such Credit Party than would be obtained in a
comparable arm's length transaction with a Person not an
Affiliate of such Credit Party and in compliance with the
restrictions on granting financial assistance under applicable
laws. In addition, if any such transaction or series of related
transactions involves payments in excess of $250,000 in the
aggregate, the terms of these transactions must be disclosed in
advance to Agent and Lenders. All such transactions existing as
of the date hereof are described on DISCLOSURE SCHEDULE (6.4(a)).
(b) No Credit Party shall enter into any lending or
borrowing transaction with any employees of any Credit Party,
except loans to their respective employees on an<PAGE>
arm's-length basis in the ordinary course of business consistent with
past practices for travel expenses, relocation costs and similar
purposes (excluding obligations of salespersons of a Credit Party
which purchase or have agreed to return sample merchandise used
by such salespersons in such Credit Party's ordinary course of
business) up to a maximum of $100,000 to any employee and up to a
maximum of $250,000 in the aggregate at any one time outstanding.
6.5. CAPITAL STRUCTURE AND BUSINESS. No Credit Party shall
(a) make any changes in any of its business objectives, purposes
or operations which could in any way adversely affect the
repayment of the Loans or any of the other Obligations or could
reasonably be expected to have or result in a Material Adverse
Effect, (b) make any change in its capital structure as described
on DISCLOSURE SCHEDULE (3.8), including the issuance of any
shares of Stock, warrants or other securities convertible into
Stock or any revision of the terms of its outstanding Stock, or
(c) amend its charter or bylaws in a manner which would adversely
affect Agent or Lenders or such Credit Party's duty or ability to
repay the Obligations. No Credit Party shall engage in any
business other than the businesses currently engaged in by it.
Borrower shall not permit net cash outflows (as indicated on
Borrower's Financial Statements in accordance with GAAP)
Restructuring Charges to exceed $2,000,000 in the aggregate on a
cumulative basis.
6.6. GUARANTEED INDEBTEDNESS. No Credit Party shall create,
incur, assume or permit to exist any Guaranteed Indebtedness
except (a) by endorsement of instruments or items of payment for
deposit to the general account of any Credit Party, and (b) for
Guaranteed Indebtedness incurred for the benefit of any other
Credit Party if the primary obligation is expressly permitted by
this Agreement.
6.7. LIENS. No Credit Party shall create, incur, assume or
permit to exist any Lien on or with respect to its Accounts or
any of its other properties or assets (whether now owned or
hereafter acquired) except for (a) Permitted Encumbrances; (b)
Liens in existence on the date hereof and summarized on
DISCLOSURE SCHEDULE (6.7); and (c) Liens created after the date
hereof by conditional sale or other title retention agreements
(including Capital Leases) or in connection with purchase money
Indebtedness with respect to Equipment and Fixtures acquired by
any Credit Party in the ordinary course of business, involving
the incurrence of an aggregate amount of purchase money
Indebtedness and Capital Lease Obligations such that the current
portion of each thereof does not exceed $2,500,000 outstanding at
any one time (LESS the aggregate amount of all operating lease
payments payable in any twelve month period in which any such
current portion of purchase money Indebtedness or current portion
of Capital Lease Obligations are outstanding) for all such Liens
(provided that such Liens attach only to the assets subject to
such purchase money debt and such Indebtedness is incurred within
twenty (20) days following such purchase and does not exceed 100%
of the purchase price of the subject assets). In addition, no
Credit Party shall become a party to any agreement, note,
indenture or instrument, or take any other action, which would
prohibit the creation of a Lien on any of its properties or other
assets in favor of Agent, on behalf of itself and Lenders, as
additional collateral for the Obligations, except operating
leases, Capital Leases or Licenses which prohibit Liens upon the
assets that are subject thereto.
<PAGE>
6.8. SALE OF STOCK AND ASSETS. No Credit Party shall sell,
transfer, convey, assign or otherwise dispose of any of its
properties or other assets, including the capital Stock of any of
its Subsidiaries (whether in a public or a private offering or
otherwise) or any of their Accounts, other than (a) the sale of
Inventory in the ordinary course of business, and (b) the sale,
transfer, conveyance or other disposition by a Credit Party of
Equipment, Fixtures or Real Estate that are obsolete or no longer
used or useful in such Credit Party's business and having a value
not exceeding $250,000 in any single transaction or $500,000 in
the aggregate in any Fiscal Year and (c) other Equipment and
Fixtures having a value not exceeding $50,000 in any single
transaction or $100,000 in the aggregate in any Fiscal Year.
With respect to any disposition of assets or other properties
permitted pursuant to CLAUSE (b) and CLAUSE (c) above, Agent
agrees on reasonable prior written notice to release its Lien on
such assets or other properties in order to permit the applicable
Credit Party to effect such disposition and shall execute and
deliver to Borrower, at Borrower's expense, appropriate UCC-3
termination statements and other releases as reasonably requested
by Borrower.
6.9. ERISA. No Credit Party shall, or shall cause or permit
any ERISA Affiliate to, cause or permit to occur an event which
could result in the imposition of a Lien under Section 412 of the
IRC or Section 302 or 4068 of ERISA or cause or permit to occur
an ERISA Event to the extent such ERISA Event could reasonably be
expected to have a Material Adverse Effect.
6.10. FINANCIAL COVENANTS. Borrower shall not breach or
fail to comply with any of the Financial Covenants (the
"Financial Covenants") set forth in ANNEX G.
6.11. HAZARDOUS MATERIALS. No Credit Party shall cause
or permit a Release of any Hazardous Material on, at, in, under,
above, to, from or about any of the Real Estate where such
Release would (a) violate in any respect, or form the basis for
any Environmental Liabilities under, any Environmental Laws or
Environmental Permits or (b) otherwise adversely impact the value
or marketability of any of the Real Estate or any of the
Collateral, other than such violations or Environmental
Liabilities which could not reasonably be expected to have a
Material Adverse Effect.
6.12. SALE-LEASEBACKs. No Credit Party shall engage in
any sale-leaseback, synthetic lease or similar transaction
involving any of its assets.
6.13. CANCELLATION OF INDEBTEDNESS. No Credit Party
shall cancel any claim or debt owing to it, except for reasonable
consideration negotiated on an arm's-length basis and in the
ordinary course of its business consistent with past practices.
6.14. RESTRICTED PAYMENTS. No Credit Party shall make
any Restricted Payment, except (a) intercompany loans and
advances between Borrower and Guarantors to the extent permitted
by SECTION 6.3 above, (b) dividends and distributions by
Subsidiaries of Borrower paid to Borrower and (c) employee loans
permitted under SECTION 6.4(b) above.
<PAGE>
6.15. CHANGE OF CORPORATE NAME OR LOCATION; CHANGE OF
FISCAL YEAR. No Credit Party shall (a) change its corporate
name, or (b) change its chief executive office, domicile (within
the meaning of the Quebec Civil Code) principal place of
business, corporate offices or warehouses or locations at which
Collateral is held or stored, or the location of its records
concerning the Collateral, in any case without at least thirty
(30) days prior written notice to Agent and after Agent's written
acknowledgment that any reasonable action requested by Agent in
connection therewith, including to continue the perfection of any
Liens in favor of Agent, on behalf of Agent and Lenders, in any
Collateral, has been completed or taken, and provided that any
such new location shall be in the continental United States or,
in the case of Rawlings Canada, Canada. Without limiting the
foregoing, no Credit Party shall change its name, identity or
corporate structure in any manner which might make any financing
or continuation statement filed in connection herewith seriously
misleading within the meaning of Section 9-402(7) of the Code or
any other then applicable provision of the Code or materially
misleading within the meaning of any other applicable law except
upon prior written notice to Agent and Lenders and after Agent's
written acknowledgment that any reasonable action requested by
Agent in connection therewith, including to continue the
perfection of any Liens in favor of Agent, on behalf of Agent and
Lenders, in any Collateral, has been completed or taken. No
Credit Party shall change its Fiscal Year.
6.16. NO IMPAIRMENT OF INTERCOMPANY TRANSFERS. No
Credit Party shall directly or indirectly enter into or become
bound by any agreement, instrument, indenture or other obligation
(other than this Agreement and the other Loan Documents) which
could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or
distributions or the making or repayment of intercompany loans by
a Subsidiary of Borrower to Borrower.
6.17. NO SPECULATIVE TRANSACTIONS. No Credit Party
shall engage in any transaction involving commodity options,
futures contracts or similar transactions, except solely to hedge
against fluctuations in the prices of commodities owned or
purchased by it and the values of foreign currencies receivable
or payable by it and interest swaps, caps or collars.
6.18. LEASES. No Credit Party shall enter into any
operating lease for Equipment or Real Estate, if the aggregate of
all operating lease payments payable in any twelve month period
for Borrower and its Subsidiaries on a consolidated basis would
exceed $2,500,000 (LESS the aggregate amount of the current
portion of all purchase money Indebtedness and the current
portion of Capital Lease Obligations outstanding at any one time
in such period).
6.19. TAX SHARING AGREEMENT. No Credit Party shall
amend or otherwise change the terms of the Tax Sharing Agreement
if such amendment or change would in the Agent's determination
increase the obligations thereunder of any Credit Party or confer
additional rights thereunder to any other Person party thereto.
Any payment or other distribution made by any Credit Party
pursuant to the Tax Sharing Agreement shall be made (a) no
earlier than thirty (30) days after Agent has received the
calculation of such payment or distribution, accompanied by
supporting documentation in form and substance satisfactory to
Agent, certified by Borrower's<PAGE> Chief Financial Officer as
being true, accurate, correct and complete and (b) on a date
which permits the delivery of Financial Statements necessary to
determine current compliance with the financial covenants set
forth in ANNEX G prior to such payment or distribution.
7. TERM
7.1. TERMINATION. The financing arrangements contemplated
hereby shall be in effect until the Commitment Termination Date,
and the Loans and all other Obligations shall be automatically
due and payable in full on such date.
7.2. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING
ARRANGEMENTS. Except as otherwise expressly provided for in the
Loan Documents, no termination or cancellation (regardless of
cause or procedure) of any financing arrangement under this
Agreement shall in any way affect or impair the obligations,
duties and liabilities of the Credit Parties or the rights of
Agent and Lenders relating to any unpaid portion of the Loans or
any other Obligations, due or not due, liquidated, contingent or
unliquidated or any transaction or event occurring prior to such
termination, or any transaction or event, the performance of
which is required after the Commitment Termination Date. Except
as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all
rights of Agent and each Lender, all as contained in the Loan
Documents, shall not terminate or expire, but rather shall
survive any such termination or cancellation and shall continue
in full force and effect until the Termination Date; provided
however, that in all events the provisions of SECTION 11, the
payment obligations under SECTIONS 1.15 and 1.16, and the
indemnities contained in the Loan Documents shall survive the
Termination Date.
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1. EVENTS OF DEFAULT. The occurrence of any one or more
of the following events (regardless of the reason therefor) shall
constitute an "Event of Default" hereunder:
(a) Borrower (i) fails to make any payment of
principal of, or interest on, or Fees owing in respect of, the
Loans or any of the other Obligations when due and payable, or
(ii) fails to pay or reimburse Agent or Lenders for any expense
reimbursable hereunder or under any other Loan Document within
ten (10) days following Agent's demand for such reimbursement or
payment of expenses.
(b) Any Credit Party shall fail or neglect to perform,
keep or observe any of the provisions of SECTIONS 1.4, 1.8, 5.4,
5.11 or 6, or any of the provisions set forth in ANNEXES C or G,
respectively.
(c) Borrower shall fail or neglect to perform, keep or
observe any of the provisions of SECTION 4 or any provisions set
forth in ANNEXES E or F, respectively, and the same shall remain
unremedied for three (3) days or more.
<PAGE>
(d) Any Credit Party shall fail or neglect to perform,
keep or observe any other provision of this Agreement or of any
of the other Loan Documents (other than any provision embodied in
or covered by any other clause of this SECTION 8.1) and the same
shall remain unremedied for twenty (20) days or more.
(e) A default or breach shall occur under any other
agreement, document or instrument to which any Credit Party is a
party which is not cured within any applicable grace period, and
such default or breach (i) involves the failure to make any
payment when due in respect of any Indebtedness or Guaranteed
Indebtedness (in each case other than the Obligations) of any
Credit Party in excess of $500,000 in the aggregate (including
undrawn committed or available amounts and including amounts
owing to all creditors under any combined or syndicated credit
arrangement), or (ii) causes, or permits any holder or
beneficiary of any Indebtedness or Guaranteed Indebtedness or a
trustee to cause, such Indebtedness or a portion thereof in
excess of $500,000 in the aggregate to become due prior to its
stated maturity or prior to its regularly scheduled dates of
payment, or such guaranteed Indebtedness to become payable or
cash collateral in respect thereof to be demanded, in each case
regardless of whether such default is waived, or such right is
exercised, by such holder, beneficiary or trustee.
(f) Any information contained in any Borrowing Base
Certificate is untrue or incorrect in any respect (except if DE
MINIMIS), or any representation or warranty herein or in any Loan
Document or in any written statement, report, financial statement
or certificate (other than a Borrowing Base Certificate) made or
delivered to Agent or any Lender by any Credit Party is untrue or
incorrect in any material respect as of the date when made or
deemed made.
(g) Assets of any Credit Party with a fair market
value of $500,000 or more shall be attached, seized, levied upon
or subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of any Credit Party and such condition
continues for thirty (30) days or more.
(h) A case or proceeding shall have been commenced
against any Credit Party seeking a decree or order in respect of
any Credit Party (i) under Title 11 of the United States Code, as
now constituted or hereafter amended or any other applicable
federal, state or foreign bankruptcy or other similar law, (ii)
appointing a custodian, receiver, liquidator, assignee, trustee
or sequestrator (or similar official) for any Credit Party or of
any substantial part of any such Person's assets, or (iii)
ordering the windingup or liquidation of the affairs of any
Credit Party, and such case or proceeding shall remain
undismissed or unstayed for sixty (60) days or more or such court
shall enter a decree or order granting the relief sought in such
case or proceeding.
(i) Any Credit Party (i) shall file a petition seeking
relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable
federal, state or foreign bankruptcy or other similar law, (ii)
shall fail to contest in a timely and appropriate manner or shall
consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) of any Credit Party
or of any<PAGE> substantial part of any such Person's assets,
(iii) shall make an assignment for the benefit of creditors, (iv)
files a proposal or a notice of intention to file a proposal
under any applicable Insolvency Law, (v) shall take any corporate
action in furtherance of any of the foregoing, (vi) shall admit
in writing its inability to, or shall be generally unable to, pay
its debts as such debts become due, or (vii) is not Solvent.
(j) A final judgment or judgments for the payment of
money in excess of $500,000 in the aggregate at any time
outstanding shall be rendered against any Credit Party and the
same shall not, within thirty (30) days after the entry thereof,
have been discharged or execution thereof stayed or bonded
pending appeal, or shall not have been discharged prior to the
expiration of any such stay.
(k) Any material provision of any Loan Document shall
for any reason cease to be valid, binding and enforceable in
accordance with its terms (or any Credit Party shall challenge
the enforceability of any Loan Document or shall assert in
writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has
ceased to be or otherwise is not valid, binding and enforceable
in accordance with its terms), or any security interest created
under any Loan Document shall cease to be a valid and perfected
first priority security interest or Lien (except as otherwise
permitted herein or therein) in any of the Collateral purported
to be covered thereby.
(l) Any Change of Control shall occur.
(m) Any event shall occur, whether or not insured or
insurable, as a result of which revenue-producing activities
cease or are substantially curtailed at any facility of Borrower
or Rawlings Canada generating more than ten percent (10%) of
Borrower's or Rawlings Canada's revenues for the Fiscal Year
preceding such event and such cessation or curtailment continues
for more than 20 days.
8.2. REMEDIES. (a) If any Event of Default shall have
occurred and be continuing, Agent may (and at the written request
of the Requisite Lenders shall), without notice, suspend the
Revolving Loan facility with respect to further Advances and/or
the incurrence of further Letter of Credit Obligations whereupon
any further Advances and Letter of Credit Obligations shall be
made or extended in Agent's sole discretion (or in the sole
discretion of the Requisite Lenders, if such suspension occurred
at their direction) so long as such Default or Event of Default
is continuing. If any Default or Event of Default shall have
occurred and be continuing, Agent may (and at the written request
of Requisite Lenders shall), without notice except as otherwise
expressly provided herein, increase the rate of interest
applicable to the Loans and the Letter of Credit Fees to the
Default Rate.
(b) If any Event of Default shall have occurred and be
continuing, Agent may (and at the written request of the
Requisite Lenders shall), without notice, (i) terminate the
Revolving Loan facility with respect to further Advances or the
incurrence of further Letter of Credit Obligations; (ii) declare
all or any portion of the Obligations, including all or any
portion<PAGE> of any Loan to be forthwith due and payable, and
require that the Letter of Credit Obligations be cash
collateralized as provided in ANNEX B, all without presentment,
demand, protest or further notice of any kind, all of which are
expressly waived by Borrower and each other Credit Party; and
(iii) exercise any rights and remedies provided to Agent under
the Loan Documents and/or at law or equity, including all
remedies provided under the Code; provided, however, that upon
the occurrence of an Event of Default specified in SECTIONS
8.1(g), (h) or (i), the Revolving Loan facility shall be
immediately terminated and all of the Obligations, including the
Revolving Loan, shall become immediately due and payable without
declaration, notice or demand by any Person.
8.3. WAIVERS BY CREDIT PARTIES. Except as otherwise
provided for in this Agreement or by applicable law, each Credit
Party waives: (a) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of
acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by
Agent on which any Credit Party may in any way be liable, and
hereby ratifies and confirms whatever Agent may do in this
regard, (b) all rights to notice and a hearing prior to Agent's
taking possession or control of, or to Agent's replevy,
attachment or levy upon, the Collateral or any bond or security
which might be required by any court prior to allowing Agent to
exercise any of its remedies, and (c) the benefit of all
valuation, appraisal, marshaling and exemption laws.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1. ASSIGNMENT AND PARTICIPATIONS.
(a) The Credit Parties signatory hereto consent to
any Lender's assignment of, and/or sale of participations in, at
any time or times, the Loan Documents, Loans, Letter of Credit
Obligations and any Revolving Loan Commitment or of any portion
thereof or interest therein, including any Lender's rights,
title, interests, remedies, powers or duties thereunder, whether
evidenced by a writing or not. Any assignment by a Lender shall
(i) require the consent of Agent (which shall not be unreasonably
withheld or delayed) and the execution of an assignment agreement
(an "Assignment Agreement" substantially in the form attached
hereto as EXHIBIT 9.1(a) and otherwise in form and substance
satisfactory to, and acknowledged by, Agent; (ii) be conditioned
on such assignee Lender representing to the assigning Lender and
Agent that it is purchasing the applicable Loans to be assigned
to it for its own account, for investment purposes and not with a
view to the distribution thereof; (iii) if a partial assignment,
be in an amount at least equal to $5,000,000 and, after giving
effect to any such partial assignment, the assigning Lender shall
have retained a Revolving Loan Commitment in an amount at least
equal to $5,000,000; and (iv) include a payment to Agent of an
assignment fee of $3,500. In the case of an assignment by a
Lender under this SECTION 9.1, the assignee shall have, to the
extent of such assignment, the same rights, benefits and
obligations as it would if it were a Lender hereunder. The
assigning Lender shall be relieved of its obligations hereunder
with respect to its Revolving Loan Commitment or assigned portion
thereof from and after the date of such<PAGE> assignment.
Borrower hereby acknowledges and agrees that any assignment will
give rise to a direct obligation of Borrower to the assignee and
that the assignee shall be considered to be a "Lender". In all
instances, each Lender's liability to make Loans hereunder shall
be several and not joint and shall be limited to such Lender's
Pro Rata Share of its Revolving Loan Commitment. In the event
Agent or any Lender assigns or otherwise transfers all or any
part of the Obligations, Agent or any such Lender shall so notify
Borrower and Borrower shall, upon the request of Agent or such
Lender, execute new Notes in exchange for the Notes, if any,
being assigned. Notwithstanding the foregoing provisions of this
SECTION 9.1(a), any Lender may at any time pledge the Obligations
held by it and such Lender's rights under this Agreement and the
other Loan Documents to a Federal Reserve Bank, and any lender
that is an investment fund may assign the Obligations held by it
and such Lender's rights under this Agreement and the other Loan
Documents to another investment fund managed by the same
investment advisor; provided, however, that no such pledge to a
Federal Reserve Bank shall release such Lender from such Lender's
obligations hereunder or under any other Loan Document.
(b) Any participation by a Lender of all or any part
of its Revolving Loan Commitment shall be made with the
understanding that all amounts payable by Borrower hereunder
shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation
shall not be entitled to require such Lender to take or omit to
take any action hereunder except actions directly affecting (i)
any reduction in the principal amount of, or interest rate or
Fees payable with respect to, any Loan in which such holder
participates, (ii) any extension of the scheduled amortization of
the principal amount of any Loan in which such holder
participates or the final maturity date thereof, and (iii) any
release of all or substantially all of the Collateral (other than
in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents). Solely for purposes of
SECTIONS 1.13, 1.15, 1.16 and 9.8, Borrower acknowledges and
agrees that a participation shall give rise to a direct
obligation of Borrower to the participant and the participant
shall be considered to be a "Lender". Except as set forth in the
preceding sentence neither Borrower nor any other Credit Party
shall have any obligation or duty to any participant. Neither
Agent nor any Lender (other than the Lender selling a
participation) shall have any duty to any participant and may
continue to deal solely with the Lender selling a participation
as if no such sale had occurred.
(c) Except as expressly provided in this SECTION 9.1,
no Lender shall, as between Borrower and that Lender, or Agent
and that Lender, be relieved of any of its obligations hereunder
as a result of any sale, assignment, transfer or negotiation of,
or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall
assist any Lender permitted to sell assignments or participations
under this SECTION 9.1 as reasonably required to enable the
assigning or selling Lender to effect any such assignment or
participation, including the execution and delivery of any and
all agreements, notes and other documents and instruments as
shall be requested and the preparation of informational materials
for, and the participation of management in meetings with,
potential assignees or participants. Each Credit Party executing
this Agreement shall certify the correctness, completeness and
accuracy of all descriptions of the<PAGE> Credit Parties and
their affairs contained in any selling materials provided by it
and all other information provided by it and included in such
materials, except that any Projections delivered by Borrower
shall only be certified by Borrower as having been prepared by
Borrower in compliance with the representations contained in
SECTION 3.4(c).
(e) A Lender may furnish any information concerning
Credit Parties in the possession of such Lender from time to time
to assignees and participants (including prospective assignees
and participants). Each Lender shall obtain from assignees or
participants confidentiality covenants substantially equivalent
to those contained in SECTION 11.8.
(f) So long as no Event of Default shall have occurred
and be continuing, no Lender shall assign or sell participations
in any portion of its Loan or Revolving Loan Commitment to a
potential Lender or participant, if, as of the date of the
proposed assignment or sale, the assignee Lender or participant
would be subject to capital adequacy or similar requirements
under SECTION 1.16(a), increased costs under SECTION 1.16(b), an
inability to fund LIBOR Loans under SECTION 1.16(c), or
withholding taxes in accordance with SECTION 1.15(a).
9.2. APPOINTMENT OF AGENT. GE Capital is hereby appointed
to act on behalf of all Lenders as Agent under this Agreement and
the other Loan Documents. The provisions of this SECTION 9.2 are
solely for the benefit of Agent and Lenders and no Credit Party
nor any other Person shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement and the other Loan
Documents, Agent shall act solely as an agent of Lenders and does
not assume and shall not be deemed to have assumed any obligation
toward or relationship of agency or trust with or for any Credit
Party or any other Person. Agent shall have no duties or
responsibilities except for those expressly set forth in this
Agreement and the other Loan Documents. The duties of Agent
shall be mechanical and administrative in nature and Agent shall
not have, or be deemed to have, by reason of this Agreement, any
other Loan Document or otherwise a fiduciary relationship in
respect of any Lender. Neither Agent nor any of its Affiliates
nor any of their respective officers, directors, employees,
agents or representatives shall be liable to any Lender for any
action taken or omitted to be taken by it hereunder or under any
other Loan Document, or in connection herewith or therewith,
except for damages caused by its or their own gross negligence or
willful misconduct.
If Agent shall request instructions from Requisite Lenders,
Supermajority Lenders or all affected Lenders with respect to any
act or action (including failure to act) in connection with this
Agreement or any other Loan Document, then Agent shall be
entitled to refrain from such act or taking such action unless
and until Agent shall have received instructions from Requisite
Lenders, Supermajority Lenders, or all affected Lenders, as the
case may be, and Agent shall not incur liability to any Person by
reason of so refraining. Agent shall be fully justified in
failing or refusing to take any action hereunder or under any
other Loan Document (a) if such action would, in the opinion of
Agent, be contrary to law or the terms of this Agreement or any
other Loan Document, (b) if such action would, in the opinion of
Agent, expose Agent to Environmental Liabilities or (c) if Agent
shall not first be indemnified to its satisfaction against any
and all liability and expense which may be incurred by it by
reason of taking or continuing to<PAGE> take any such action.
Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Agent as a result of Agent acting or
refraining from acting hereunder or under any other Loan Document
in accordance with the instructions of Requisite Lenders,
Supermajority Lenders or all affected Lenders, as applicable.
9.3. AGENT'S RELIANCE, ETC. Neither Agent nor any of its
Affiliates nor any of their respective directors, officers,
agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with
this Agreement or the other Loan Documents, except for damages
caused by its or their own gross negligence or willful
misconduct. Without limitation of the generality of the
foregoing, Agent: (a) may treat the payee of any Note as the
holder thereof until Agent receives written notice of the
assignment or transfer thereof signed by such payee and in form
satisfactory to Agent; (b) may consult with legal counsel,
independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (c) makes no warranty or
representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made in
or in connection with this Agreement or the other Loan Documents;
(d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or
conditions of this Agreement or the other Loan Documents on the
part of any Credit Party or to inspect the Collateral (including
the books and records) of any Credit Party; (e) shall not be
responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of
this Agreement or the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; and
(f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice,
consent, certificate or other instrument or writing (which may be
by telecopy, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
9.4. GE CAPITAL AND AFFILIATES. With respect to its
Revolving Loan Commitment hereunder, GE Capital shall have the
same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though
it were not Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include GE Capital in its
individual capacity. GE Capital and its Affiliates may lend
money to, invest in, and generally engage in any kind of business
with, any Credit Party, any of their Affiliates and any Person
who may do business with or own securities of any Credit Party or
any such Affiliate, all as if GE Capital were not Agent and
without any duty to account therefor to Lenders. GE Capital and
its Affiliates may accept fees and other consideration from any
Credit Party for services in connection with this Agreement or
otherwise without having to account for the same to Lenders.
Each Lender acknowledges the potential conflict of interest
between GE Capital as a Lender holding disproportionate interests
in the Loans and GE Capital as Agent.
9.5. LENDER CREDIT DECISION. Each Lender acknowledges that
it has, independently and without reliance upon Agent or any
other Lender and based on the Financial Statements referred to in
SECTION 3.4(a) and such other documents and information as it has
deemed appropriate, made its own credit and financial analysis of
the Credit Parties and its own decision<PAGE> to enter into this
Agreement. Each Lender also acknowledges that it will,
independently and without reliance upon Agent or any other Lender
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement.
Each Lender acknowledges the potential conflict of interest of
each other Lender as a result of Lenders holding disproportionate
interests in the Loans, and expressly consents to, and waives any
claim based upon, such conflict of interest.
9.6. INDEMNIFICATION. Lenders agree to indemnify Agent (to
the extent not reimbursed by Credit Parties and without limiting
the obligations of Borrower hereunder), ratably according to
their respective Pro Rata Shares, from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or
asserted against Agent in any way relating to or arising out of
this Agreement or any other Loan Document or any action taken or
omitted by Agent in connection therewith; provided, however, that
no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's
gross negligence or willful misconduct. Without limiting the
foregoing, each Lender agrees to reimburse Agent promptly upon
demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and each other
Loan Document, to the extent that Agent is not reimbursed for
such expenses by Credit Parties.
9.7. SUCCESSOR AGENT. Agent may resign at any time by
giving not less than thirty (30) days' prior written notice
thereof to Lenders and Borrower. Upon any such resignation, the
Requisite Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the
Requisite Lenders and shall have accepted such appointment within
30 days after the resigning Agent's giving notice of resignation,
then the resigning Agent may, on behalf of Lenders, appoint a
successor Agent, which shall be a Lender, if a Lender is willing
to accept such appointment, or otherwise shall be a commercial
bank or financial institution or a subsidiary of a commercial
bank or financial institution if such commercial bank or
financial institution is organized under the laws of the United
States of America or of any State thereof and has a combined
capital and surplus of at least $300,000,000. If no successor
Agent has been appointed pursuant to the foregoing, by the 30th
day after the date such notice of resignation was given by the
resigning Agent, such resignation shall become effective and the
Requisite Lenders shall thereafter perform all the duties of
Agent hereunder until such time, if any, as the Requisite Lenders
appoint a successor Agent as provided above. Any successor Agent
appointed by Requisite Lenders hereunder shall be subject to the
approval of Borrower, such approval not to be unreasonably
withheld or delayed; provided that such approval shall not be
required if a Default or an Event of Default shall have occurred
and be continuing. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall
succeed to and become vested with all the rights, powers,
privileges and duties of the resigning Agent. Upon the earlier
of the acceptance of any appointment as Agent hereunder by a
successor Agent or the effective date of the resigning Agent's
resignation, the resigning Agent<PAGE> shall be discharged from
its duties and obligations under this Agreement and the other
Loan Documents, except that any indemnity rights or other rights
in favor of such resigning Agent shall continue. After any
resigning Agent's resignation hereunder, the provisions of this
SECTION 9 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement
and the other Loan Documents.
9.8. SETOFF AND SHARING OF PAYMENTS. In addition to any
rights now or hereafter granted under applicable law and not by
way of limitation of any such rights, upon the occurrence and
during the continuance of any Event of Default, each Lender and
each holder of any Note is hereby authorized at any time or from
time to time, without notice to any Credit Party or to any other
Person, any such notice being hereby expressly waived, to set off
and to appropriate and to apply any and all balances held by it
at any of its offices for the account of Borrower or any
Guarantor (regardless of whether such balances are then due to
Borrower or any Guarantor) and any other properties or assets any
time held or owing by that Lender or that holder to or for the
credit or for the account of Borrower or any Guarantor against
and on account of any of the Obligations which are not paid when
due. Any Lender or holder of any Note exercising a right to set
off or otherwise receiving any payment on account of the
Obligations in excess of its Pro Rata Share thereof shall
purchase for cash (and the other Lenders or holders shall sell)
such participations in each such other Lender's or holder's Pro
Rata Share of the Obligations as would be necessary to cause such
Lender to share the amount so set off or otherwise received with
each other Lender or holder in accordance with their respective
Pro Rata Shares. Each Lender's obligation under this SECTION 9.8
shall be in addition to and not limitation of its obligations to
purchase a participation in an amount equal to its Pro Rata Share
of the Swing Line Loans under SECTION 1.1. Borrower and each
Guarantor agrees, to the fullest extent permitted by law, that
(a) any Lender or holder may exercise its right to set off with
respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such amount so set off
to other Lenders and holders and (b) any Lender or holders so
purchasing a participation in the Loans made or other Obligations
held by other Lenders or holders may exercise all rights of
setoff, bankers' lien, counterclaim or similar rights with
respect to such participation as fully as if such Lender or
holder were a direct holder of the Loans and the other
Obligations in the amount of such participation. Notwithstanding
the foregoing, if all or any portion of the set-off amount or
payment otherwise received is thereafter recovered from the
Lender that has exercised the right of set-off, the purchase of
participations by that Lender shall be rescinded and the purchase
price restored without interest.
9.9. ADVANCES; PAYMENTS; NON-FUNDING LENDERS; INFORMATION;
ACTIONS IN CONCERT.
(a) ADVANCES; PAYMENTS. Lenders shall refund or
participate in the Swing Line Loan in accordance with CLAUSES
(iii) and (iv) of SECTION 1.1(c). If the Swing Line Lender
declines to make a Swing Line Loan or if Swing Line Availability
is zero, Agent shall notify Lenders, promptly after receipt of a
Notice of Revolving Advance and in any event prior to 1:00 p.m.
(New York time) on the date such Notice of Revolving Advance is
received, by telecopy, telephone or other similar form of
transmission. Each Lender shall make the amount of such Lender's
Pro Rata Share of such Revolving Credit Advance available to
Agent in same day<PAGE> funds by wire transfer to Agent's account
as set forth in ANNEX H not later than 3:00 p.m. (New York time)
on the requested funding date, in the case of an Index Rate Loan
and not later than 11:00 a.m. (New York time) on the requested
funding date in the case of a LIBOR Loan. After receipt of such
wire transfers (or, in the Agent's sole discretion, before
receipt of such wire transfers), subject to the terms hereof,
Agent shall make the requested Revolving Credit Advance to
Borrower. All payments by each Lender shall be made without
setoff, counterclaim or deduction of any kind.
(i) On the second (2nd) Business Day of each
calendar week or more frequently as aggregate cumulative payments
in excess of $2,000,000 are received with respect to the Loans
(other than the Swing Line Loan) (each, a "Settlement Date"),
Agent will advise each Lender by telephone, or telecopy of the
amount of such Lender's Pro Rata Share of principal, interest and
Fees paid for the benefit of Lenders with respect to each
applicable Loan. Provided that such Lender has funded all
payments and Advances required to be made by it and purchased all
participations required to be purchased by it under this
Agreement and the other Loan Documents as of such Settlement
Date, Agent will pay to each Lender such Lender's Pro Rata Share
of principal, interest and Fees paid by Borrower since the
previous Settlement Date for the benefit of that Lender on the
Loans held by it. To the extent that any Lender (a "Non-Funding
Lender") has failed to fund all such payments and Advances or
failed to fund the purchase of all such participations, Agent
shall be entitled to set off the funding shortfall against that
Non-Funding Lender's Pro Rata Share of all payments received from
Borrower. Such payments shall be made by wire transfer to such
Lender's account (as specified by such Lender in ANNEX H or the
applicable Assignment Agreement) not later than 2:00 p.m. (New
York time) on the next Business Day following each Settlement
Date.
(b) AVAILABILITY OF LENDER'S PRO RATA SHARE. Agent
may assume that each Lender will make its Pro Rata Share of each
Revolving Credit Advance available to Agent on each funding date.
If such Pro Rata Share is not, in fact, paid to Agent by such
Lender when due, Agent will be entitled to recover such amount on
demand from such Lender without setoff, counterclaim or deduction
of any kind. If any Lender fails to pay the amount of its Pro
Rata Share forthwith upon Agent's demand, Agent shall promptly
notify Borrower and Borrower shall immediately repay such amount
to Agent. Nothing in this SECTION 9.9(b) or elsewhere in this
Agreement or the other Loan Documents shall be deemed to require
Agent to advance funds on behalf of any Lender or to relieve any
Lender from its obligation to fulfill its Revolving Loan
Commitment hereunder or to prejudice any rights that Borrower may
have against any Lender as a result of any default by such Lender
hereunder. To the extent that Agent advances funds to Borrower
on behalf of any Lender and is not reimbursed therefor on the
same Business Day as such Advance is made, Agent shall be
entitled to retain for its account all interest accrued on such
Advance until reimbursed by the applicable Lender.
(c) RETURN OF PAYMENTS.
(i) If Agent pays an amount to a Lender under
this Agreement in the belief or expectation that a related
payment has been or will be received by Agent from Borrower<PAGE>
and such related payment is not received by Agent, then Agent
will be entitled to recover such amount from such Lender on
demand without setoff, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any
amount received by Agent under this Agreement must be returned to
Borrower or paid to any other Person pursuant to any insolvency
law or otherwise, then, notwithstanding any other term or
condition of this Agreement or any other Loan Document, Agent
will not be required to distribute any portion thereof to any
Lender. In addition, each Lender will repay to Agent on demand
any portion of such amount that Agent has distributed to such
Lender, together with interest at such rate, if any, as Agent is
required to pay to Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.
(d) NON-FUNDING LENDERS. The failure of any
Non-Funding Lender to make any Revolving Credit Advance or any
payment required by it hereunder, or to purchase any
participation in any Swing Line Loan to be made or purchased by
it on the date specified therefor shall not relieve any other
Lender (each such other Lender, an "Other Lender") of its
obligations to make such Advance or purchase such participation
on such date, but neither any Other Lender nor Agent shall be
responsible for the failure of any Non-Funding Lender to make an
Advance or to purchase a participation required hereunder.
Notwithstanding anything set forth herein to the contrary, a
Non-Funding Lender shall not have any voting or consent rights
under or with respect to any Loan Document or constitute a
"Lender" (or be included in the calculation of "Requisite
Lenders" or "Supermajority Lenders" hereunder) for any voting or
consent rights under or with respect to any Loan Document.
(e) DISSEMINATION OF INFORMATION. Agent will use
reasonable efforts to provide Lenders with any notice of Default
or Event of Default received by Agent from, or delivered by Agent
to, any Credit Party, with notice of any Event of Default of
which Agent has actually become aware and with notice of any
action taken by Agent following any Event of Default; provided,
however, that Agent shall not be liable to any Lender for any
failure to do so, except to the extent that such failure is
attributable to Agent's gross negligence or willful misconduct.
Lenders acknowledge that Borrower is required to provide
Financial Statements and Collateral Reports to Lenders in
accordance with ANNEXES E and F hereto and agree that Agent shall
have no duty to provide the same to Lenders.
(f) ACTIONS IN CONCERT. Anything in this Agreement to
the contrary notwithstanding, each Lender hereby agrees with each
other Lender that no Lender shall take any action to protect or
enforce its rights arising out of this Agreement or the Notes
(including exercising any rights of set-off) without first
obtaining the prior written consent of Agent and Requisite
Lenders, it being the intent of Lenders that any such action to
protect or enforce rights under this Agreement and the Notes
shall be taken in concert and at the direction or with the
consent of Agent.
<PAGE>
10. SUCCESSORS AND ASSIGNS
10.1. SUCCESSORS AND ASSIGNS. This Agreement and the
other Loan Documents shall be binding on and shall inure to the
benefit of each Credit Party, Agent, Lenders and their respective
successors and assigns (including, in the case of any Credit
Party, a debtor-in-possession on behalf of such Credit Party),
except as otherwise provided herein or therein. No Credit Party
may assign, transfer, hypothecate or otherwise convey its rights,
benefits, obligations or duties hereunder or under any of the
other Loan Documents without the prior express written consent of
Agent and Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by any Credit Party without the
prior express written consent of Agent and Lenders shall be void.
The terms and provisions of this Agreement are for the purpose of
defining the relative rights and obligations of each Credit
Party, Agent and Lenders with respect to the transactions
contemplated hereby and no Person shall be a third party
beneficiary of any of the terms and provisions of this Agreement
or any of the other Loan Documents.
11. MISCELLANEOUS
11.1. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT.
The Loan Documents constitute the complete agreement between the
parties with respect to the subject matter thereof and may not be
modified, altered or amended except as set forth in SECTION 11.2
below. Any letter of interest, commitment letter, fee letter
(other than the GE Capital Fee Letter) and/or confidentiality
agreement between any Credit Party and Agent or any Lender or any
of their respective affiliates, predating this Agreement and
relating to a financing of substantially similar form, purpose or
effect shall be superseded by this Agreement.
11.2. AMENDMENTS AND WAIVERS. (a) Except for actions
expressly permitted to be taken by Agent, no amendment,
modification, termination or waiver of any provision of this
Agreement or any of the Notes, or any consent to any departure by
any Credit Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by Agent and
Borrower, and by Requisite Lenders, Supermajority Lenders or all
affected Lenders, as applicable. Except as set forth in CLAUSES
(b) and (c) below, all such amendments, modifications,
terminations or waivers requiring the consent of any Lenders
shall require the written consent of Requisite Lenders.
(b) No amendment, modification, termination or waiver
of or consent with respect to any provision of this Agreement
which increases the percentage advance rates set forth in the
definition of the Borrowing Base, or which makes less restrictive
the nondiscretionary criteria for exclusion from Eligible
Accounts and Eligible Inventory set forth in SECTIONS 1.6 and
1.7, shall be effective unless the same shall be in writing and
signed by Agent, Supermajority Lenders and Borrower. No
amendment, modification, termination or waiver of or consent with
respect to any provision of this Agreement which waives
compliance with the conditions precedent set forth in SECTION 2.2
to the making of any Loan or the incurrence of any Letter of
Credit Obligations shall be effective unless the same shall be in
writing and signed by Agent, Requisite Lenders and Borrower.
Notwithstanding anything contained in this Agreement to the<PAGE>
contrary, no waiver or consent with respect to any Default (if in
connection therewith Agent or Requisite Lenders, as the case may
be, have exercised its or their right to suspend the making or
incurrence of further Advances or Letter of Credit Obligations
pursuant to SECTION 8.2(a)) or any Event of Default shall be
effective for purposes of the conditions precedent to the making
of Loans or the incurrence of Letter of Credit Obligations set
forth in SECTION 2.2 unless the same shall be in writing and
signed by Agent, Requisite Lenders and Borrower.
(c) No amendment, modification, termination or waiver
shall, unless in writing and signed by Agent and each Lender
directly affected thereby, do any of the following: (i) increase
the principal amount of any Lender's Revolving Loan Commitment
(which action shall be deemed to directly affect all Lenders);
(ii) reduce the principal of, rate of interest on or Fees payable
with respect to any Loan or Letter of Credit Obligations of any
affected Lender; (iii) extend any scheduled payment date or final
maturity date of the principal amount of any Loan of any affected
Lender; (iv) waive, forgive, defer, extend or postpone any
payment of interest or Fees as to any affected Lender; (v)
release any Guaranty or, except as otherwise permitted herein or
in the other Loan Documents, release, or permit any Credit Party
to sell or otherwise dispose of, any Collateral with a value
exceeding $5,000,000 in the aggregate (which action shall be
deemed to directly affect all Lenders); (vi) change the
percentage of the Revolving Loan Commitments or of the aggregate
unpaid principal amount of the Loans which shall be required for
Lenders or any of them to take any action hereunder; and (vii)
amend or waive this SECTION 11.2 or the definitions of the terms
"Requisite Lenders" or "Supermajority Lenders" insofar as such
definitions affect the substance of this SECTION 11.2.
Furthermore, no amendment, modification, termination or waiver
affecting the rights or duties of Agent under this Agreement or
any other Loan Document shall be effective unless in writing and
signed by Agent, in addition to Lenders required hereinabove to
take such action. Each amendment, modification, termination or
waiver shall be effective only in the specific instance and for
the specific purpose for which it was given. No amendment,
modification, termination or waiver shall be required for Agent
to take additional Collateral pursuant to any Loan Document. No
amendment, modification, termination or waiver of any provision
of any Note shall be effective without the written concurrence of
the holder of that Note. No notice to or demand on any Credit
Party in any case shall entitle such Credit Party or any other
Credit Party to any other or further notice or demand in similar
or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this
SECTION 11.2 shall be binding upon each holder of the Notes at
the time outstanding and each future holder of the Notes.
(d) If, in connection with any proposed amendment,
modification, waiver or termination (a "Proposed Change"):
(i) requiring the consent of all affected
Lenders, the consent of Requisite Lenders is obtained, but the
consent of other Lenders whose consent is required is not
obtained (any such Lender whose consent is not obtained as
described this CLAUSE (i) and in CLAUSES (ii), (iii) and (iv)
below being referred to as a "Non-Consenting Lender"), or
<PAGE>
(ii) requiring the consent of Supermajority
Lenders, the consent of Requisite Lenders is obtained, but the
consent of Supermajority Lenders is not obtained, or
(iii) requiring the consent of Requisite Lenders,
the consent of Lenders holding 51% or more of the aggregate
Revolving Loan Commitments is obtained, but the consent of
Requisite Lenders is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at
Borrower's request Agent, or a Person acceptable to Agent,
shall have the right with Agent's consent and in Agent's
sole discretion (but shall have no obligation) to purchase
from such Non-Consenting Lenders, and such Non-Consenting
Lenders agree that they shall, upon Agent's request, sell
and assign to Agent or such Person, all of the Revolving
Loan Commitment of such Non-Consenting Lender for an amount
equal to the principal balance of all Loans held by the
Non-Consenting Lender and all accrued interest and Fees with
respect thereto through the date of sale, such purchase and
sale to be consummated pursuant to an executed Assignment
Agreement.
(e) Upon indefeasible payment in full in cash and
performance of all of the Obligations (other than indemnification
Obligations under SECTION 1.13), termination of the Revolving
Loan Commitments and a release of all claims against Agent and
Lenders, and so long as no suits, actions proceedings, or claims
are pending or threatened against any Indemnified Person
asserting any damages, losses or liabilities that are Indemnified
Liabilities, Agent shall deliver to Borrower termination
statements, mortgage releases and other documents necessary or
appropriate to evidence the termination of the Liens securing
payment of the Obligations.
11.3. FEES AND EXPENSES. Borrower shall reimburse Agent
for all out-of-pocket expenses incurred in connection with the
preparation of the Loan Documents (including the reasonable fees
and expenses of all of its special loan counsel, advisors,
consultants and auditors retained in connection with the Loan
Documents and the Related Transactions and advice in connection
therewith). Borrower shall reimburse Agent (and, with respect to
CLAUSES (c) and (d) below, all Lenders) for all fees, costs and
expenses, including the reasonable fees, costs and expenses of
counsel or other advisors (including environmental and management
consultants and appraisers) for advice, assistance, or other
representation in connection with:
(a) the forwarding to Borrower or any other Person on
behalf of Borrower by Agent of the proceeds of the Loans;
(b) any amendment, modification or waiver of, or
consent with respect to, any of the Loan Documents or Related
Transactions Documents or advice in connection with the
administration of the Loans made pursuant hereto or its rights
hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding
or action (whether instituted by Agent, any Lender, Borrower or
any other Person) in any way relating to the<PAGE> Collateral,
any of the Loan Documents or any other agreement to be executed
or delivered in connection therewith or herewith, whether as
party, witness, or otherwise, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or
review thereof, in connection with a case commenced by or against
Borrower or any other Person that may be obligated to Agent by
virtue of the Loan Documents; including any such litigation,
contest, dispute, suit, proceeding or action arising in
connection with any work-out or restructuring of the Loans during
the pendency of one or more Events of Default; provided that in
the case of reimbursement of counsel for Lenders other than
Agent, such reimbursement shall be limited to one counsel for all
such Lenders;
(d) any attempt to enforce any remedies of Agent or
any Lender against any or all of the Credit Parties or any other
Person that may be obligated to Agent or any Lender by virtue of
any of the Loan Documents; including any such attempt to enforce
any such remedies in the course of any work-out or restructuring
of the Loans during the pendency of one or more Events of
Default; provided that in the case of reimbursement of counsel
for Lenders other than Agent, such reimbursement shall be limited
to one counsel for all such Lenders;
(e) any work-out or restructuring of the Loans during
the pendency of one or more Events of Default;
(f) efforts to (i) monitor the Loans or any of the
other Obligations, (ii) evaluate, observe or assess any of the
Credit Parties or their respective affairs, and (iii) verify,
protect, evaluate, assess, appraise, collect, sell, liquidate or
otherwise dispose of any of the Collateral;
including, as to each of clauses (a) through (f) above, all
attorneys' and other professional and service providers' fees
arising from such services, including those in connection with
any appellate proceedings; and all expenses, costs, charges and
other fees incurred by such counsel and others in any way or
respect arising in connection with or relating to any of the
events or actions described in this SECTION 11.3 shall be
payable, on demand, by Borrower to Agent. Without limiting the
generality of the foregoing, such expenses, costs, charges and
fees may include: fees, costs and expenses of accountants,
environmental advisors, appraisers, investment bankers,
management and other consultants and paralegals; court costs and
expenses; photocopying and duplication expenses; court reporter
fees, costs and expenses; long distance telephone charges; air
express charges; telegram or telecopy charges; secretarial
overtime charges; and expenses for travel, lodging and food paid
or incurred in connection with the performance of such legal or
other advisory services.
11.4. NO WAIVER. Agent's or any Lender's failure, at
any time or times, to require strict performance by the Credit
Parties of any provision of this Agreement and any of the other
Loan Documents shall not waive, affect or diminish any right of
Agent or such Lender thereafter to demand strict compliance and
performance therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of
Default whether the same is prior or subsequent thereto and
whether the same or of a different type. Subject to the
provisions of<PAGE> Section 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any
Credit Party contained in this Agreement or any of the other Loan
Documents and no Default or Event of Default by any Credit Party
shall be deemed to have been suspended or waived by Agent or any
Lender, unless such waiver or suspension is by an instrument in
writing signed by an officer of or other authorized employee of
Agent and the applicable required Lenders and directed to
Borrower specifying such suspension or waiver.
11.5. REMEDIES. Agent's and Lenders' rights and
remedies under this Agreement shall be cumulative and
nonexclusive of any other rights and remedies which Agent or any
Lender may have under any other agreement, including the other
Loan Documents, by operation of law or otherwise. Recourse to
the Collateral shall not be required.
11.6. SEVERABILITY. Wherever possible, each provision
of this Agreement and the other Loan Documents shall be
interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
11.7. CONFLICT OF TERMS. Except as otherwise provided
in this Agreement or any of the other Loan Documents by specific
reference to the applicable provisions of this Agreement, if any
provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern
and control.
11.8. CONFIDENTIALITY. Agent and each Lender agree to
use commercially reasonable efforts (equivalent to the efforts
Agent or such Lender applies to maintain the confidentiality of
its own confidential information) to maintain as confidential all
confidential information provided to them by the Credit Parties
and designated as confidential for a period of two (2) years
following the Commitment Termination Date (and no disclosure
thereafter shall be intentional), except that Agent and each
Lender may disclose such information (a) to Persons employed or
engaged by Agent or such Lender in evaluating, approving,
structuring or administering the Loans and the Revolving Loan
Commitments; (b) to any bona fide assignee or participant or
potential assignee or participant that has agreed to comply with
the covenant contained in this SECTION 11.8 (and any such bona
fide assignee or participant or potential assignee or participant
may disclose such information to Persons employed or engaged by
them as described in CLAUSE (a) above); (c) as required or
requested by any Governmental Authority or reasonably believed by
Agent or such Lender to be compelled by any court decree,
subpoena or legal or administrative order or process; (d) as, on
the advise of Agent's or such Lender's counsel, required by law;
(e) in connection with the exercise of any right or remedy under
the Loan Documents or in connection with any Litigation to which
Agent or such Lender is a party; or (f) which ceases to be
confidential through no fault of Agent or such Lender.
<PAGE>
11.9. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN
DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH
CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN COOK COUNTY, CITY OF CHICAGO, ILLINOIS SHALL
HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS PERTAINING
TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND THE
CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY, CITY
OF CHICAGO, ILLINOIS AND, PROVIDED, FURTHER NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES
ANY OBJECTION WHICH SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE
OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT
THE ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
11.10. NOTICES. Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request,
consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by any other
parties, or whenever any of the parties desires to give or serve
upon any other parties any communication with respect to this
Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall
be deemed to have been validly served, given or delivered (a)
upon the earlier of actual receipt and three (3) Business Days
after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage<PAGE>
prepaid, (b) upon transmission, when sent by telecopy or other
similar facsimile transmission (with such telecopy or facsimile
promptly confirmed by delivery of a copy by personal delivery or
United States Mail as otherwise provided in this SECTION 11.10),
(c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile
number indicated on ANNEX I or to such other address (or
facsimile number) as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice.
Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to
any Person (other than Borrower or Agent) designated on ANNEX I
to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
11.11. SECTION TITLES. The Section titles and Table of
Contents contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not
a part of the agreement between the parties hereto.
11.12. COUNTERPARTS. This Agreement may be executed in
any number of separate counterparts, each of which shall
collectively and separately constitute one agreement.
11.13. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY
AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND
THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT
TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14. PRESS RELEASES. Each Credit Party executing this
Agreement agrees that neither it nor its Affiliates will in the
future issue any press releases or other public disclosure using
the name of GE Capital or its affiliates or referring to this
Agreement, the other Loan Documents or the Related Transactions
Documents without at least two (2) Business Days' prior notice to
GE Capital and without the prior written consent of GE Capital
unless (and only to the extent that) such Credit Party or
Affiliate is required to do so under law and then, in any event,
such Credit Party or Affiliate will consult with GE Capital
before issuing such press release or other public disclosure.
Each Credit Party consents to the publication by Agent or any
Lender of a tombstone or similar advertising material relating to
the financing transactions contemplated by this<PAGE> Agreement.
Agent or such Lender shall provide a draft of any such tombstone
or similar advertising material to each Credit Party for review
and comment prior to the publication thereof. Agent reserves the
right to provide to industry trade organizations information
necessary and customary for inclusion in league table
measurements with Borrower's consent which shall not be
unreasonably withheld or delayed.
11.15. REINSTATEMENT. This Agreement shall remain in
full force and effect and continue to be effective should any
petition be filed by or against Borrower for liquidation or
reorganization, should Borrower become insolvent or make an
assignment for the benefit of any creditor or creditors or should
a receiver or trustee be appointed for all or any significant
part of Borrower's assets, and shall continue to be effective or
to be reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant
to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the
Obligations, whether as a "voidable preference," "fraudulent
conveyance," or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned,
the Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or
returned.
11.16. ADVICE OF COUNSEL. Each of the parties represents
to each other party hereto that it has discussed this Agreement
and, specifically, the provisions of SECTIONS 11.9 and 11.13,
with its counsel.
11.17. NO STRICT CONSTRUCTION. The parties hereto have
participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
[signature pages follow]
614276.5
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly
executed as of the date first written above.
RAWLINGS SPORTING GOODS
COMPANY, INC.
By: /s/ Michael L. Luetkemeyer
Title: Chief Financial Officer
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By: /s/ Geoffrey K. Hall
Title: Duly Authorized Signatory
<PAGE>
The following Persons are signatories to this Agreement
in their capacity as Credit Parties and not as Borrowers:
RAWLINGS CANADA,
INCORPORATED
By: /s/ Stephen M. O'Hara
Title: President
RAWLINGS de COSTA RICA, S.A.
By: /s/ Stephen M. O'Hara
Title: Chief Executive Officer
<PAGE>
ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have
(unless otherwise provided elsewhere in the Loan Documents) the
following respective meanings and all section references in the
following definitions shall refer to Sections of the Agreement:
"Account Debtor" shall mean any Person who has become
obligated to any Credit Party under, with respect to, or on
account of, an Account.
"Accounts" shall mean all "accounts," as such term is
defined in the Code, and all "claims", as such term is defined in
the Quebec Civil Code now owned or hereafter acquired by any
Credit Party and, in any event, including (a) all accounts
receivable, other receivables, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel
Paper, Documents or Instruments) now owned or hereafter received
or acquired by or belonging or owing to any Credit Party, whether
arising out of goods sold or services rendered by it or from any
other transaction (including any such obligations which may be
characterized as an account or contract right under the Code),
(b) all of each Credit Party's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it
for goods or services, (c) all of each Credit Party's rights to
any goods represented by any of the foregoing (including unpaid
sellers' rights of rescission, replevin, reclamation and stoppage
in transit and rights to returned, reclaimed or repossessed
goods), (d) all monies due or to become due to any Credit Party,
under all purchase orders and contracts for the sale of goods or
the performance of services or both by such Credit Party or in
connection with any other transaction (whether or not yet earned
by performance on the part of such Credit Party) now or hereafter
in existence, including the right to receive the proceeds of said
purchase orders and contracts, and (e) all collateral security
and guarantees of any kind, now or hereafter in existence, given
by any Person with respect to any of the foregoing.
"Advance" shall mean any Revolving Credit Advance or
Swing Line Advance, as the context may require.
"Affiliate" shall mean, with respect to any Person, (a)
each Person that, directly or indirectly, owns or controls,
whether beneficially, or as a trustee, guardian or other
fiduciary, five percent (5%) or more of the Stock having ordinary
voting power in the election of directors of such Persons, (b)
each Person that controls, is controlled by or is under common
control with such Person, (c) each of such Person's officers,
directors, joint venturers and partners and (d) in the case of
Borrower, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of Borrower. For
the purposes of this definition, "control" of a Person shall mean
the possession, directly or indirectly, of the power to direct or
cause the direction of its management or policies, whether
through the ownership of voting securities, by<PAGE> contract or
otherwise; provided, however, that the term "Affiliate" shall
specifically exclude Agent and each Lender.
"Agent" shall mean GE Capital or its successor
appointed pursuant to SECTION 9.7.
"Agreement" shall mean the Credit Agreement by and
among Borrower, the other Credit Parties named therein, GE
Capital, as Agent and Lender and the other Lenders signatory from
time to time to the Agreement.
"Appendices" shall have the meaning assigned to it in
the recitals to the Agreement.
"Applicable Index Margin" shall mean the per annum
interest rate margin from time to time in effect and payable in
addition to the Index Rate applicable to the Revolving Loan, as
determined by reference to SECTION 1.5(a) of the Agreement.
"Applicable L/C Margin" shall mean the per annum fee,
from time to time in effect, payable with respect to outstanding
Letter of Credit Obligations as determined by reference to
SECTION 1.5(a).
"Applicable LIBOR Margin" shall mean the per annum
interest rate from time to time in effect and payable in addition
to the LIBOR Rate applicable to the Revolving Loan, as determined
by reference to SECTION 1.5(a) of the Agreement.
"Applicable Margins" means collectively the Applicable
L/C Margin, the Applicable Unused Line Fee Margin, the Applicable
Index Margin and the Applicable LIBOR Margin.
"Applicable Unused Line Fee Margin" shall mean the per
annum fee, from time to time in effect, payable in respect to
Borrower's non-use of committed funds pursuant to SECTION 1.9(b),
which fee is determined by reference to SECTION 1.5(a).
"Assignment Agreement" shall have the meaning assigned
to it in SECTION 9.1(a).
"Borrower" shall have the meaning assigned thereto in
the recitals to the Agreement.
"Borrower Accounts" shall have the meaning assigned to
it in ANNEX C.
"Borrower Pledge Agreement" shall mean the Pledge
Agreement of even date herewith executed by Borrower in favor of
Agent, on behalf of itself and Lenders, pledging all Stock of its
Subsidiaries, if any, and all Intercompany Notes owing to or held
by it.
"Borrowing Availability" shall have the meaning
assigned to it in SECTION 1.1(a)(i).
<PAGE>
"Borrowing Base" shall mean, as of any date of
determination by Agent, from time to time, an amount equal to the
sum at such time of:
(a) eighty-five percent (85%) of the book value of
Borrower's and Rawlings Canada's Eligible Accounts, less any
Reserves established by Agent at such time;
(b) sixty percent (60%) of the book value of
Borrower's and Rawlings Canada's Eligible Inventory valued on a
first-in, first-out basis (at the lower of cost or market), less
any Reserves established by Agent at such time; and
(c) during an Overadvance Period, the amount set forth
below opposite such Overadvance Period:
OVERADVANCE PERIOD COMMENCING AMOUNT
November 1, 1999 $15,000,000
November 1, 2000 $14,000,000
November 1, 2001 $13,000,000
November 1, 2002 $12,000,000
November 1, 2003 $11,000,000
November 1, 2004 $10,000,000
"Borrowing Base Certificate" shall mean a certificate
to be executed and delivered from time to time by Borrower in the
form attached to the Agreement as EXHIBIT 4.1(b).
"Business Day" shall mean any day that is not a
Saturday, a Sunday or a day on which banks are required or
permitted to be closed in the State of Illinois or New York and
in reference to LIBOR Loans shall mean any such day that is also
a LIBOR Business Day.
"Canadian Benefit Plans" shall mean all material
employee benefit plans of any nature or kind whatsoever that are
not Canadian Pension Plans and are maintained or contributed to
by any Credit Party having employees in Canada.
"Canadian Dollars" and "C$" shall each mean lawful
money of Canada.
"Canadian Pension Plans" shall mean each plan which is
considered to be a pension plan for the purposes of any
applicable pension benefits standards statute and/or regulation
in Canada established, maintained or contributed to by any Credit
Party for its employees or former employees.
"Capital Expenditures" shall mean, with respect to any
Person, all expenditures (by the expenditure of cash or the
incurrence of Indebtedness) by such Person during any measuring
period for any fixed assets or improvements or for replacements,
substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under
GAAP.
<PAGE>
"Capital Lease" shall mean, with respect to any Person,
any lease of any property (whether real, personal or mixed) by
such Person as lessee that, in accordance with GAAP, would be
required to be classified and accounted for as a capital lease on
a balance sheet of such Person.
"Capital Lease Obligation" shall mean, with respect to
any Capital Lease of any Person, the amount of the obligation of
the lessee thereunder that, in accordance with GAAP, would appear
on a balance sheet of such lessee in respect of such Capital
Lease.
"Cash Management Systems" shall have the meaning
assigned to it in SECTION 1.8.
"Change of Control" means any of the following: (a)
any person or group of persons (within the meaning of the
Securities Exchange Act of 1934, as amended) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended) of 20% or more of
the issued and outstanding shares of capital Stock of Borrower
having the right to vote for the election of directors of
Borrower under ordinary circumstances; (b) during any period of
twelve consecutive calendar months, individuals who at the
beginning of such period constituted the board of directors of
Borrower (together with any new directors whose election by the
board of directors of Borrower or whose nomination for election
by the stockholders of Borrower was approved by a vote of at
least two-thirds of the directors then still in office who either
were directors at the beginning of such period or whose elections
or nomination for election was previously so approved) cease for
any reason other than death or disability to constitute a
majority of the directors then in office, (c) Borrower shall
cease to own and control all of the economic and voting rights
associated with all of the outstanding capital Stock of any of
its Subsidiaries.
"Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental taxes (including
taxes owed to the PBGC at the time due and payable), levies,
assessments, charges, liens, claims or encumbrances upon or
relating to (a) the Collateral, (b) the Obligations, (c) the
employees, payroll, income or gross receipts of any Credit Party,
(d) any Credit Party's ownership or use of any properties or
other assets, or (e) any other aspect of any Credit Party's
business.
"Chattel Paper" shall mean any "chattel paper," as such
term is defined in the Code, now owned or hereafter acquired by
any Credit Party, wherever located.
"Closing Date" shall mean December __, 1999.
"Closing Checklist" shall mean the schedule, including
all appendices, exhibits or schedules thereto, listing certain
documents and information to be delivered in connection with the
Agreement, the other Loan Documents and the transactions
contemplated thereunder, substantially in the form attached
hereto as ANNEX D.
<PAGE>
"Code" shall mean the Uniform Commercial Code as the
same may, from time to time, be enacted and in effect in the
State of Illinois; provided, however, in the event that, by
reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of Agent's or any Lender's
security interest in any Collateral is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other
than the State of Illinois or by foreign personal security laws
as enacted and in full effect in a foreign jurisdiction, the term
"Code" shall mean the Uniform Commercial Code or such foreign
personal property security laws as enacted and in effect in such
other jurisdiction solely for purposes of the provisions hereof
relating to such attachment, perfection or priority and for
purposes of definitions related to such provisions.
"Collateral" shall mean the property covered by the
Security Agreements, the Mortgages and the other Collateral
Documents and any other property, real or personal, tangible or
intangible, now existing or hereafter acquired, that may at any
time be or become subject to a security interest or Lien in favor
of Agent, on behalf of itself and Lenders, to secure the
Obligations.
"Collateral Documents" shall mean the Security
Agreements, the Pledge Agreements, the Guaranties, the Mortgages,
the Patent Security Agreements, the Trademark Security
Agreements, the Copyright Security Agreements and all similar
agreements entered into guaranteeing payment of, or granting a
Lien upon property as security for payment of, the Obligations.
"Collateral Reports" shall mean the reports with
respect to the Collateral referred to in ANNEX F.
"Collection Account" shall mean that certain account of
Agent, account number 502-328-54 in the name of Agent at Bankers
Trust Company in New York, New York or such other account as
Agent shall specify.
"Commitment Termination Date" shall mean the earliest
of (a) December 1, 2004, (b) the date of termination of Lenders'
obligations to make Advances and/or incur Letter of Credit
Obligations or permit existing Loans to remain outstanding
pursuant to SECTION 8.2(b), and (c) the date of indefeasible
prepayment in full by Borrower of the Loans and the cancellation
and return (or stand-by guarantee) of all Letters of Credit or
the cash collateralization of all Letter of Credit Obligations
pursuant to ANNEX B, and the permanent reduction of the Revolving
Loan Commitment and the Swing Line Commitment to zero dollars
($0).
"Compliance Certificate" shall have the meaning
assigned to it in ANNEX E.
"Concentration Account" shall have the meaning assigned
to it in ANNEX C.
"Contracts" shall mean all "contracts," as such term is
defined in the Code, now owned or hereafter acquired by any
Credit Party, in any event, including each License Agreement and
Material Player Contract and all contracts, undertakings, or
agreements (other<PAGE> than rights evidenced by Chattel Paper,
Documents or Instruments) in or under which any Credit Party may
now or hereafter have any right, title or interest, including any
agreement relating to the terms of payment or the terms of
performance of any Account.
"Control Letter" means a letter agreement between Agent
and (i) the issuer of uncertificated securities with respect to
uncertificated securities in the name of any Credit Party, (ii) a
securities intermediary with respect to securities, whether
certificated or uncertificated, securities entitlements and other
financial assets held in a securities account in the name of any
Credit Party, (iii) a futures commission merchant or clearing
house with respect to commodity accounts and commodity contracts
held by any Credit Party, whereby, among other things, the
issuer, securities intermediary or futures commission merchant
disclaims any security interest in the applicable financial
assets, acknowledges the Lien of Agent, on behalf of itself and
Lenders, on such financial assets, and agrees to follow the
instructions or entitlement orders of Agent without further
consent by the affected Credit Party.
"Copyright License" shall mean any and all rights now
owned or hereafter acquired by any Credit Party under any written
agreement granting any right to use any Copyright or Copyright
registration.
"Copyright Security Agreements" shall mean the
Copyright Security Agreements made in favor of Agent, on behalf
of itself and Lenders, by each applicable Credit Party.
"Copyrights" shall mean all of the following now owned
or hereafter acquired by any Credit Party: (a) all copyrights and
general intangibles of like nature (whether registered or
unregistered), now owned or existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all
applications in connection therewith, including all
registrations, recordings and applications in the United States
Copyright Office or in any similar office or agency of the United
States, any state or territory thereof, or any other country or
any political subdivision thereof, and (b) all reissues,
extensions or renewals thereof.
"Credit Parties" shall mean Borrower and each of its
Subsidiaries.
"Current Dollar Equivalent" shall mean, on any date of
determination, with respect to obligations or valuations
denominated in Canadian Dollars, the amount of Dollars which
would result from the conversion of the relevant amount of
Canadian Dollars into Dollars at the 12:00 noon rate quoted on
the Reuters Monitor Screen (Page BOFC or such other Page as may
replace such Page for the purpose of displaying such exchange
rates) on such date or, if such date is not a Business Day, on
the Business Day immediately preceding such date of
determination, or at such other rate as may have been agreed in
writing between Borrower and Agent.
"Default" shall mean any event which, with the passage
of time or notice or both, would, unless cured or waived, become
an Event of Default.
"Default Rate" shall have the meaning assigned to it in
SECTION 1.5(d).
<PAGE>
"Design License" shall mean rights under any written
agreement now owned or hereafter acquired by any Credit Party
granting any right to use any Design.
"Designs" shall mean the following now owned or
hereafter acquired by any Credit Party: (a) all industrial
designs, design patents and other designs now owned or existing
or hereafter adopted or acquired, all registrations and
recordings thereof and all applications in connection therewith
including all registrations, recordings and applications in the
Canadian Industrial Designs Office or any similar office in any
country and all records thereof and (b) all reissues, extensions
or renewals thereof.
"Disbursement Accounts" shall have the meaning assigned
to it on ANNEX C.
"Disclosure Schedules" shall mean the Schedules
prepared by Borrower and denominated as DISCLOSURE SCHEDULES 1.4
through 6.7 in the Index to the Agreement.
"Documents" shall mean any "documents," as such term is
defined in the Code, now owned or hereafter acquired by any
Credit Party, wherever located.
"Dollars" or "$" shall mean lawful currency of the
United States of America.
"EBITDA" shall mean, with respect to any Person for any
fiscal period, an amount equal to (a) consolidated net income of
such Person for such period, MINUS (b) the sum of (i) income tax
credits, (ii) interest income, (iii) gain from extraordinary
items for such period, (iv) any aggregate net gain (but not any
aggregate net loss) during such period arising from the sale,
exchange or other disposition of capital assets by such Person
(including any fixed assets, whether tangible or intangible, all
inventory sold in conjunction with the disposition of fixed
assets and all securities), and (v) any other non-cash gains
which have been added in determining consolidated net income, in
each case to the extent included in the calculation of
consolidated net income of such Person for such period in
accordance with GAAP, but without duplication, PLUS (c) the sum
of (i) any provision for income taxes, (ii) Interest Expense,
(iii) loss from extraordinary items for such period, (iv) the
amount of non-cash charges (including depreciation and
amortization) for such period, (v) amortized debt discount for
such period, and (vi) the amount of any deduction to consolidated
net income as the result of any grant to any members of the
management of such Person of any Stock, in each case to the
extent included in the calculation of consolidated net income of
such Person for such period in accordance with GAAP, but without
duplication. For purposes of this definition, the following
items shall be excluded in determining consolidated net income of
a Person: (1) the income (or deficit) of any other Person accrued
prior to the date it became a Subsidiary of, or was merged or
consolidated into, such Person or any of such Person's
Subsidiaries; (2) the income (or deficit) of any other Person
(other than a Subsidiary) in which such Person has an ownership
interest, except to the extent any such income has actually been
received by such Person in the form of cash dividends or
distributions; (3) the undistributed earnings of any Subsidiary
of such Person to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at
the time permitted by the terms of any contractual obligation or
requirement of law applicable to<PAGE> such Subsidiary; (4) any
restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of income
accrued during such period; (5) any write-up of any asset; (6)
any net gain from the collection of the proceeds of life
insurance policies; (7) any net gain arising from the acquisition
of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of such Person, (8) in the case of a successor to
such Person by consolidation or merger or as a transferee of its
assets, any earnings of such successor prior to such
consolidation, merger or transfer of assets, and (9) any deferred
credit representing the excess of equity in any Subsidiary of
such Person at the date of acquisition of such Subsidiary over
the cost to such Person of the investment in such Subsidiary.
"Eligible Accounts" shall have the meaning assigned to
it in SECTION 1.6 of the Agreement.
"Eligible Inventory" shall have the meaning assigned to
it in SECTION 1.7 of the Agreement.
"Environmental Laws" shall mean all applicable federal,
state, local and foreign laws, statutes, ordinances, codes,
rules, standards, orders-in-council and regulations, now or
hereafter in effect, and in each case as amended or supplemented
from time to time, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or
administrative order, consent decree, order or judgment, imposing
liability or standards of conduct for or relating to the
regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation). Environmental Laws
include the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.)
("CERCLA"); the Hazardous Materials Transportation Authorization
Act of 1994 (49 U.S.C. Sections 5101 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sections
136 et seq.); the Solid Waste Disposal Act (42 U.S.C. Sections
6901 et seq.); the Toxic Substance Control Act (15 U.S.C.
Sections 2601 et seq.); the Clean Air Act (42 U.S.C. Sections
7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C.
Sections 1251 et seq.); the Occupational Safety and Health Act
(29 U.S.C. Sections 651 et seq.); and the Safe Drinking Water Act
(42 U.S.C. Sections 300(f) et seq.), each as from time to time
amended, and any and all regulations promulgated thereunder, and
all analogous state, local and foreign counterparts or
equivalents and any transfer of ownership notification or
approval statutes.
"Environmental Liabilities" shall mean, with respect to any
Person, all liabilities, obligations, responsibilities, response,
remedial and removal costs, investigation and feasibility study
costs, capital costs, operation and maintenance costs, losses,
damages, punitive damages, property damages, natural resource
damages, consequential damages, treble damages, costs and
expenses (including all fees, disbursements and expenses of
counsel, experts and consultants), fines, penalties, sanctions
and interest incurred as a result of or related to any claim,
suit, action, investigation, proceeding or demand by any Person,
whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law,
including any arising under or related to any Environmental Laws,
Environmental Permits, or in connection with any<PAGE> Release or
threatened Release or presence of a Hazardous Material whether
on, at, in, under, from or about or in the vicinity of any real
or personal property.
"Environmental Permits" shall mean all permits,
licenses, authorizations, certificates, approvals or
registrations required by any Governmental Authority under any
Environmental Laws.
"Equipment" shall mean all "equipment," as such term is
defined in the Code, now owned or hereafter acquired by any
Credit Party, wherever located and, in any event, including all
such Credit Party's machinery and equipment, including processing
equipment, conveyors, machine tools, data processing and computer
equipment with software and peripheral equipment (other than
software constituting part of the Accounts), and all engineering,
processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments,
accessories, automotive equipment, trailers, trucks, forklifts,
molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature, trade fixtures and fixtures
not forming a part of real property, all whether now owned or
hereafter acquired, and wherever situated, together with all
additions and accessions thereto, replacements therefor, all
parts therefor, all substitutes for any of the foregoing, fuel
therefor, and all manuals, drawings, instructions, warranties and
rights with respect thereto, and all products and proceeds
thereof and condemnation awards and insurance proceeds with
respect thereto.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974 (or any successor legislation thereto), as
amended from time to time, and any regulations promulgated
thereunder.
"ERISA Affiliate" shall mean, with respect to any
Credit Party, any trade or business (whether or not incorporated)
which, together with such Credit Party, are treated as a single
employer within the meaning of Sections 414(b), (c), (m) or (o)
of the IRC.
"ERISA Event" shall mean, with respect to any Credit
Party or any ERISA Affiliate, (a) any event described in Section
4043(c) of ERISA with respect to a Title IV Plan; (b) the
withdrawal of any Credit Party or ERISA Affiliate from a Title IV
Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer, as defined in Section 4001(a)(2)
of ERISA; (c) the complete or partial withdrawal of any Credit
Party or any ERISA Affiliate from any Multiemployer Plan; (d) the
filing of a notice of intent to terminate a Title IV Plan or the
treatment of a plan amendment as a termination under Section 4041
of ERISA; (e) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any
Credit Party or ERISA Affiliate to make when due required
contributions to a Multiemployer Plan or Title IV Plan unless
such failure is cured within 30 days; (g) any other event or
condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Title IV Plan or
Multiemployer Plan or for the imposition of liability under
Section 4069 or 4212(c) of ERISA; (h) the termination of a
Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under
Section 4241 of ERISA; (i) the loss<PAGE> of a Qualified Plan's
qualification or tax exempt status; or (j) the termination of a
Plan described in Section 4064 of ERISA.
"Event of Default" shall have the meaning assigned to
it in SECTION 8.1.
"Federal Funds Rate" shall mean, for any day, a
floating rate equal to the weighted average of the rates on
overnight federal funds transactions among members of the Federal
Reserve System, as determined by Agent.
"Federal Reserve Board" means the Board of Governors of
the Federal Reserve System, or any successor thereto.
"Fees" shall mean any and all fees payable to Agent or
any Lender pursuant to the Agreement or any of the other Loan
Documents.
"Financial Statements" shall mean the consolidated and
consolidating income statements, statements of cash flows and
balance sheets of Borrower delivered in accordance with SECTION
3.4 of the Agreement and ANNEX E to the Agreement.
"Fiscal Month" shall mean any of the monthly accounting
periods of Borrower.
"Fiscal Quarter" shall mean any of the quarterly
accounting periods of Borrower, ending on the last day of
February, May, August and November of each year.
"Fiscal Year" shall mean any of the annual accounting
periods of Borrower ending on August 31 of each year.
"Fixed Charges" shall mean, with respect to any Person
for any fiscal period, (a) the aggregate of all Interest Expense
paid or accrued during such period, plus (b) scheduled payments
of principal with respect to Indebtedness (or, in the case of the
Tax Sharing Agreement, any payments made pursuant thereto) during
such period, plus (c) Capital Expenditures during such period,
plus (d) Lease Expenses paid or accrued during such period.
"Fixed Charge Coverage Ratio" shall mean, with respect
to any Person for any fiscal period, the ratio of EBITDA plus
Lease Expenses to Fixed Charges. In computing Fixed Charges for
any fiscal period, interest and principal payments (or, in the
case of the Tax Sharing Agreement, payments thereunder) that are
due within one week after the end of that fiscal period, without
duplication, shall be deemed to have been paid on the last day of
that fiscal period.
"Fixtures" shall mean any "fixtures" as such term is
defined in the Code, now owned or hereafter acquired by any
Credit Party.
"Funded Debt" shall mean, with respect to any Person,
all Indebtedness for borrowed money evidenced by notes, bonds,
debentures, or similar evidences of Indebtedness and which by its
terms matures more than one year from, or is directly or
indirectly renewable or<PAGE> extendible at such Person's option
under a revolving credit or similar agreement obligating the
lender or lenders to extend credit over a period of more than one
year from the date of creation thereof, and specifically
including Capital Lease Obligations, current maturities of
long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including
Obligations under the Tax Sharing Agreement and, in the case of
Borrower, the Obligations and, without duplication, Guaranteed
Indebtedness consisting of guaranties of Funded Debt of other
Persons.
"GAAP" shall mean generally accepted accounting
principles in the United States of America, consistently applied,
as such term is further defined in ANNEX G to the Agreement.
"GE Capital Fee Letter" shall have the meaning assigned
to it in SECTION 1.9(a).
"General Intangibles" shall mean any "general
intangibles," as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, and, in any event,
including all right, title and interest which such Credit Party
may now or hereafter have in or under any Contract, all customer
lists, Licenses, Copyrights, Trademarks, Patents, and all
applications therefor and reissues, extensions or renewals
thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or
confidential information, inventions (whether or not patented or
patentable), technical information, procedures, designs,
knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records,
goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance
policies (including insurance for fire, damage, loss and
casualty, whether covering personal property, real property,
tangible rights or intangible rights, all liability, life, key
man and business interruption insurance, and all unearned
premiums), uncertificated securities, choses in action, deposit,
checking and other bank accounts, rights to receive tax refunds
and other payments (including royalty and other payments under
License Agreement), rights of indemnification, all books and
records, correspondence, credit files, invoices and other papers,
including without limitation all tapes, cards, computer runs and
other papers and documents in the possession or under the control
of such Credit Party or any computer bureau or service company
from time to time acting for such Credit Party.
"Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof, and
any agency, department or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person,
any obligation of such Person guaranteeing any indebtedness,
lease, dividend, or other obligation ("primary obligations") of
any other Person (the "primary obligor") in any manner, including
any obligation or arrangement of such Person (a) to purchase or
repurchase any such primary obligation, (b) to advance or supply
funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital
of the primary obligor or otherwise<PAGE> to maintain the net
worth or solvency or any balance sheet condition of the primary
obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner
of such primary obligation against loss in respect thereof. The
amount of any Guaranteed Indebtedness at any time shall be deemed
to be an amount equal to the lesser at such time of (x) the
stated or determinable amount of the primary obligation in
respect of which such Guaranteed Indebtedness is made and (y) the
maximum amount for which such Person may be liable pursuant to
the terms of the instrument embodying such Guaranteed
Indebtedness; or, if not stated or determinable, the maximum
reasonably anticipated liability (assuming full performance) in
respect thereof.
"Guaranties" shall mean, collectively, each Subsidiary
Guaranty and any other guaranty executed by any Guarantor in
favor of Agent and Lenders in respect of the Obligations.
"Guarantors" shall mean each Subsidiary of Borrower,
and each other Person, if any, which executes a guarantee or
other similar agreement in favor of Agent in connection with the
transactions contemplated by the Agreement and the other Loan
Documents.
"Hazardous Material" shall mean any substance, material
or waste which is regulated by or forms the basis of liability
now or hereafter under, any Environmental Laws, including any
material or substance which is (a) defined as a "solid waste,"
"hazardous waste," "hazardous material," "hazardous substance,"
"dangerous good," "extremely hazardous waste," "restricted
hazardous waste," "pollutant," "contaminant," "hazardous
constituent," "special waste," "toxic substance" or other similar
term or phrase under any Environmental Laws, (b) petroleum or any
fraction or byproduct thereof, asbestos, polychlorinated
biphenyls (PCB's), or any radioactive substance.
"Indebtedness" of any Person shall mean without
duplication (a) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property payment for
which is deferred six (6) months or more, but excluding
obligations to trade creditors incurred in the ordinary course of
business that are not overdue by more than six (6) months unless
being contested in good faith, (b) all reimbursement and other
obligations with respect to letters of credit, bankers'
acceptances and surety bonds, whether or not matured, (c) all
obligations evidenced by notes, bonds, debentures or similar
instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect
to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such
property), (e) all Capital Lease Obligations and the present
value (discounted at the Index Rate as in effect on the Closing
Date) of future rental payments under all synthetic leases, (f)
all obligations of such Person under commodity purchase or option
agreements or other commodity price hedging arrangements, in each
case whether contingent or matured, (g) all obligations of such
Person under any foreign exchange contract, currency swap
agreement, interest rate swap, cap or collar agreement or other
similar agreement or arrangement designed to alter the risks of
that Person arising from fluctuations in currency values or
interest rates, in each case whether contingent or<PAGE> matured,
(h) all obligations under the Tax Sharing Agreement and (i) all
Indebtedness referred to above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property or
other assets (including accounts and contract rights) owned by
such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, and (i) the
Obligations.
"Indemnified Liabilities" shall have the meaning
assigned to it in SECTION 1.13.
"Index Rate" shall mean, for any day, a floating rate
equal to the higher of (i) the rate publicly quoted from time to
time by THE WALL STREET JOURNAL as the "base rate on corporate
loans at large U.S. money center commercial banks" (or, if THE
WALL STREET JOURNAL ceases quoting a base rate of the type
described, the highest per annum rate of interest published by
the Federal Reserve Board in Federal Reserve statistical release
H.15 (519) entitled "Selected Interest Rates" as the Bank prime
loan rate or its equivalent), and (ii) the Federal Funds Rate
plus fifty (50) basis points per annum. Each change in any
interest rate provided for in the Agreement based upon the Index
Rate shall take effect at the time of such change in the Index
Rate.
"Index Rate Loan" shall mean a Loan or portion thereof
bearing interest by reference to the Index Rate.
"Insolvency Laws" shall mean any of the Bankruptcy
Code, the Bankruptcy and Insolvency Act (Canada) and the
Companies' Creditors Arrangement Act (Canada), each as now and
hereafter in effect, any successors to such statutes and any
other applicable insolvency or other similar law of any
jurisdiction including, without limitation, any law of any
jurisdiction permitting a debtor to obtain a stay or a compromise
of the claims of its creditors against it.
"Instruments" shall mean any "instrument," as such term
is defined in the Code, now owned or hereafter acquired by any
Credit Party, wherever located, and, in any event, including all
certificated securities, all certificates of deposit, and all
notes and other, without limitation, evidences of indebtedness,
other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
"Intellectual Property" shall mean any and all
Licenses, Patents, Designs, Copyrights, Trademarks, trade secrets
and customer lists.
"Intercompany Notes" shall have the meaning assigned to
it in SECTION 6.3.
"Interest Expense" shall mean, with respect to any
Person for any fiscal period, interest expense (whether cash or
non-cash) of such Person determined in accordance with GAAP for
the relevant period ended on such date, including, in any event,
interest expense with respect to any Funded Debt of such Person
and interest expense for the relevant period that has been
capitalized on the balance sheet of such Person.
<PAGE>
"Interest Payment Date" means (a) as to any Index Rate
Loan, the first Business Day of each month to occur while such
Loan is outstanding, (b) as to any LIBOR Loan, the last day of
the applicable LIBOR Period; provided that, in addition to the
foregoing, each of (x) the date upon which all of the Revolving
Loan Commitments have been terminated and the Loans have been
paid in full and (y) the Commitment Termination Date shall be
deemed to be an "Interest Payment Date" with respect to any
interest which is then accrued under the Agreement.
"Inventory" shall mean any "inventory," as such term is
defined in the Code, now or hereafter owned or acquired by any
Credit Party, wherever located, and in any event including
inventory, merchandise, goods and other personal property which
are held by or on behalf of any Credit Party for sale or lease or
are furnished or are to be furnished under a contract of service,
or which constitute raw materials, work in process or materials
used or consumed or to be used or consumed in such Credit Party's
business or in the processing, production, packaging, promotion,
delivery or shipping of the same, including other supplies.
"Investment Property" shall have the meaning ascribed
thereto in Section 9-115 of the Code in those jurisdictions in
which such definition has been adopted and shall include (i) all
securities, whether certificated or uncertificated, including
stocks, bonds, interests in limited liability companies,
partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any
Credit Party, including the rights of such Credit Party to any
securities account and the financial assets held by a securities
intermediary in such securities account and any free credit
balance or other money owing by any securities intermediary with
respect to that account; (iii) all securities accounts held by
any Credit Party; (iv) all commodity contracts held by any Credit
Party; and (v) all commodity accounts held by any Credit Party.
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"ITA" shall mean the INCOME TAX ACT (Canada) as the
same may, from time to time, be in effect.
"L/C Issuer" shall have the meaning assigned to such
term in ANNEX B.
"Lease Expenses" shall mean, with respect to any Person
for any fiscal period, the aggregate rental obligations of such
Person determined in accordance with GAAP which are payable in
respect of such period under leases of real and/or personal
property (net of income from subleases thereof, but including
taxes, insurance, maintenance and similar expenses which the
lessee is obligated to pay under the terms of such leases),
whether or not such obligations are reflected as liabilities or
commitments on a consolidated balance sheet of such Person or in
the notes thereto, excluding, however, any such obligations under
Capital Leases.
<PAGE>
"Lenders" shall mean GE Capital, the other Lenders
named on the signature page of the Agreement, and, if any such
Lender shall decide to assign all or any portion of the
Obligations, such term shall include such assignee.
"Letter of Credit Fee" has the meaning ascribed thereto
in ANNEX B.
"Letter of Credit Obligations" shall mean all
outstanding obligations incurred by Agent and Lenders at the
request of Borrower, whether direct or indirect, contingent or
otherwise, due or not due, in connection with the issuance of a
reimbursement agreement or guaranty by Agent or purchase of a
participation as set forth in ANNEX B with respect to any Letter
of Credit. The amount of such Letter of Credit Obligations shall
equal the maximum amount which may be payable by Agent or Lenders
thereupon or pursuant thereto.
"Letters of Credit" shall mean commercial or standby
letters of credit issued for the account of Borrower by any L/C
Issuer, and bankers' acceptances issued by Borrower, for which
Agent and Lenders have incurred Letter of Credit Obligations.
"Leverage Ratio" shall mean, with respect to Borrower,
on a consolidated basis, the ratio of (a) Funded Debt as of any
date of determination, to (b) the sum of EBITDA LESS Capital
Expenditures for the twelve months ending on that date of
determination.
"LIBOR Business Day" shall mean a Business Day on which
banks in the city of London are generally open for interbank or
foreign exchange transactions.
"LIBOR Loan" shall mean a Loan or any portion thereof
bearing interest by reference to the LIBOR Rate.
"LIBOR Period" shall mean, with respect to any LIBOR
Loan, each period commencing on a LIBOR Business Day selected by
Borrower pursuant to the Agreement and ending one, two or three
months thereafter, as selected by Borrower's irrevocable notice
to Agent as set forth in SECTION 1.5(e); provided that the
foregoing provision relating to LIBOR Periods is subject to the
following:
(a) if any LIBOR Period would otherwise end on a day
that is not a LIBOR Business Day, such LIBOR Period shall be
extended to the next succeeding LIBOR Business Day unless the
result of such extension would be to carry such LIBOR Period into
another calendar month in which event such LIBOR Period shall end
on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend
beyond the Commitment Termination Date shall end two (2) LIBOR
Business Days prior to such date;
(c) any LIBOR Period pertaining to a LIBOR Loan that
begins on the last LIBOR Business Day of a calendar month (or on
a day for which there is no numerically corresponding<PAGE> day
in the calendar month at the end of such LIBOR Period) shall end
on the last LIBOR Business Day of a calendar month;
(d) Borrower shall select LIBOR Periods so as not to
require a payment or prepayment of any LIBOR Loan during a LIBOR
Period for such Loan; and
(e) Borrower shall select LIBOR Periods so that there
shall be no more than five (5) separate LIBOR Loans in existence
at any one time.
"LIBOR Rate" shall mean for each LIBOR Period, a rate
of interest determined by Agent equal to:
(a) the offered rate for deposits in United States
Dollars for the applicable LIBOR Period which appears on Telerate
Page 3750 as of 11:00 a.m., London time, on the second full LIBOR
Business Day next preceding the first day of each LIBOR Period
(unless such date is not a Business Day, in which event the next
succeeding Business Day will be used); divided by
(b) a number equal to 1.0 MINUS the aggregate (but
without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on the day which is
two (2) LIBOR Business Days prior to the beginning of such LIBOR
Period (including basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the
Federal Reserve system or other governmental authority having
jurisdiction with respect thereto, as now and from time to time
in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency liabilities" in Regulation D of such Board which
are required to be maintained by a member bank of the Federal
Reserve System.
If such interest rates shall cease to be available from
Telerate News Service, the LIBOR Rate shall be determined from
such financial reporting service or other information as shall be
mutually acceptable to Agent and Borrower.
"License" shall mean any Copyright License, Patent
License, Trademark License, Design License or other license of
rights or interests now held or hereafter acquired by any Credit
Party.
"License Agreements" shall mean those agreements
pursuant to which a Credit Party receives royalty or similar
payments in exchange for another Person's use of a Credit Party's
Intellectual Property.
"Lien" shall mean any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien,
charge, claim, security interest, easement or encumbrance, or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing,
and the filing of, or<PAGE> agreement to give, any financing
statement perfecting a security interest under the Code or
comparable law of any jurisdiction).
"Litigation" shall have the meaning assigned to it in
SECTION 3.13.
"Loan Account" shall have the meaning assigned to it in
SECTION 1.12.
"Loan Documents" shall mean the Agreement, the Notes,
the Collateral Documents and all other agreements, instruments,
documents and certificates identified in the Closing Checklist
executed and delivered to, or in favor of, Agent and/or Lenders
and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, and all other written matter
whether heretofore, now or hereafter executed by or on behalf of
any Credit Party, or any employee of any Credit Party, and
delivered to Agent or any Lender in connection with the Agreement
or the transactions contemplated hereby. Any reference in the
Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all
amendments, restatements, supplements or other modifications
thereto, and shall refer to such Agreement as the same may be in
effect at any and all times such reference becomes operative.
"Loans" shall mean the Revolving Loan and the Swing
Line Loan.
"Material Adverse Effect" shall mean a material adverse
effect on (a) the business, assets, operations, prospects or
financial or other condition of any Credit Party, (b) Borrower's
ability to pay any of the Loans or any of the other Obligations
in accordance with the terms of the Agreement, (c) Rawlings
Canada's ability to honor its Obligations under the Subsidiary
Guaranty to which it is a party in accordance with the terms
thereof, (d) the Collateral or Agent's Liens, on behalf of itself
and Lenders, on the Collateral or the priority of such Liens, or
(e) Agent's or any Lender's rights and remedies under the
Agreement and the other Loan Documents. Without limiting the
foregoing, any event or occurrence adverse to one or more Credit
Parties which results or could reasonably be expected to result
in costs and/or liabilities and/or loss of revenues,
individually, or in the aggregate, to any Credit Party in any
30-day period in excess of the lesser of $500,000 and 10% of
Borrowing Availability as of any date of determination shall be
deemed to have had Material Adverse Effect.
"Material Player Contracts" shall mean any endorsement,
equipment, player royalty or similar agreement between a Credit
Party and an athlete or athletic coach pursuant to which a Credit
Party may be obligated to make annual payments in excess of
$250,000.
"Maximum Amount" shall mean, at any particular time, an
amount equal to the Revolving Loan Commitment of all Lenders.
"Mortgaged Properties" shall have the meaning assigned
to it in ANNEX D.
"Mortgages" shall mean each of the mortgages, deeds of
trust, deeds of hypothec (including related debentures and
pledges), leasehold mortgages, leasehold deeds of trust,<PAGE>
collateral assignments of leases or other real estate security
documents delivered by any Credit Party to Agent with respect to
the Mortgaged Properties, all in form and substance satisfactory
to Agent.
"Multiemployer Plan" shall mean a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA, and to which any
Credit Party or ERISA Affiliate is making, is obligated to make,
has made or been obligated to make, contributions on behalf of
participants who are or were employed by any of them.
"Net Borrowing Availability" shall mean as of any date
of determination, the lesser of (i) the Maximum Amount and (ii)
the Borrowing Base, in each case LESS the sum of the Revolving
Loan and Swing Line Loan then outstanding.
"Non-Funding Lender" shall have the meaning assigned to
it in SECTION 9.9(a)(ii).
"Notes" shall mean the Revolving Notes and the Swing
Line Note, collectively.
"Notice of Conversion/Continuation" shall have the
meaning assigned to it in Section 1.5(e).
"Notice of Revolving Credit Advance" shall have the
meaning assigned to it in Section 1.1(a).
"Obligations" shall mean all loans, advances, debts,
liabilities and obligations, for the performance of covenants,
tasks or duties or for payment of monetary amounts (whether or
not such performance is then required or contingent, or such
amounts are liquidated or determinable) owing by any Credit Party
to Agent or any Lender, and all covenants and duties regarding
such amounts, of any kind or nature, present or future, whether
or not evidenced by any note, agreement or other instrument,
arising under the Agreement or any of the other Loan Documents.
This term includes all principal, interest (including all
interest which accrues after the commencement of any case or
proceeding in bankruptcy after the insolvency of, or for the
reorganization of any Credit Party, whether or not allowed in
such proceeding), Fees, Charges, expenses, attorneys' fees and
any other sum chargeable to any Credit Party under the Agreement
or any of the other Loan Documents.
"Overadvance Period" shall mean the period from
November 1 until April 30 of each Fiscal Year.
"Patent Security Agreements" shall mean the Patent
Security Agreements made in favor of Agent, on behalf of itself
and Lenders, by each applicable Credit Party.
"Patent License" shall mean rights under any written
agreement now owned or hereafter acquired by any Credit Party
granting any right with respect to any invention on which a
Patent is in existence.
<PAGE>
"Patents" shall mean all of the following in which any
Credit Party now holds or hereafter acquires any interest: (a)
all letters patent of the United States or any other country, all
registrations and recordings thereof, and all applications for
letters patent of the United States or any other country,
including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar
office or agency of the United States, any State or Territory
thereof, or any other country, and (b) all reissues,
continuations, continuations-in-part or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any successor thereto.
"Permitted Encumbrances" shall mean the following
encumbrances: (a) Liens for taxes or assessments or other
governmental Charges not yet due and payable; (b) pledges or
deposits of money securing statutory obligations under workmen's
compensation, unemployment insurance, social security or public
liability laws or similar legislation (excluding Liens under
ERISA); (c) pledges or deposits of money securing bids, tenders,
contracts (other than contracts for the payment of money) or
leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected
workers', mechanics' or similar liens arising in the ordinary
course of business, so long as such Liens attach only to
Equipment, Fixtures and/or Real Estate; (e) carriers',
warehousemen's, suppliers' or other similar possessory liens
arising in the ordinary course of business and securing
liabilities in an outstanding aggregate amount not in excess of
$100,000 at any time, so long as such Liens attach only to
Inventory; (f) deposits securing, or in lieu of, surety, appeal
or customs bonds in proceedings to which any Credit Party is a
party; (g) any attachment or judgment lien not constituting an
Event of Default under SECTION 8.1(j); (h) zoning restrictions,
easements, licenses, or other restrictions on the use of any Real
Estate or other minor irregularities in title (including
leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such Real Estate; (i)
presently existing or hereinafter created Liens in favor of
Agent, on behalf of Agent and Lenders, or in favor of Agent and
Lenders, as applicable; (j) Liens expressly permitted under
CLAUSES (b) and (c) of SECTION 6.7 of the Agreement; and (k) to
the extent not included in clauses (a) (d) or (e) of this
definition, Prior Claims that are unregistered and that secure
amounts that are not yet due and payable.
"Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability
company, institution, public benefit corporation, other entity or
government (whether federal, state, county, city, municipal,
local, foreign, or otherwise, including any instrumentality,
division, agency, body or department thereof).
"Plan" shall mean, at any time, an employee benefit
plan, as defined in Section 3(3) of ERISA, which any Credit Party
maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any Credit
Party.
<PAGE>
"Pledge Agreements" shall mean the Borrower Pledge
Agreement, and any other pledge agreement entered into after the
Closing Date by any Credit Party (as required by the Agreement or
any other Loan Document).
"Prior Claims" shall mean all Liens created by
applicable law (in contrast with Liens voluntarily granted) which
rank or are capable of ranking prior or pari passu with Agent's
security interests or Agent's and Lenders' hypothecs (or the
applicable equivalent of such Liens), as applicable, against all
or part of the Collateral, including for amounts owing for wages,
employee deductions, goods and services taxes, sales taxes,
income taxes, employer health taxes, municipal taxes, workers'
compensations, pension fund obligations and overdue rents.
"Prior Lender Obligations" shall mean the obligations
under the Prior Loan Agreement.
"Prior Lenders" shall mean the Lenders pursuant to the
Prior Loan Agreement.
"Prior Loan Agreement" shall mean that certain Amended
and Restated Credit Agreement dated as of September 12, 1997 (as
amended or otherwise modified as of the Closing Date) by and
among the Borrowers, the lenders named therein and Bank One, NA
(f/k/a The First National Bank of Chicago), as Agent.
"Proceeds" shall mean "proceeds," as such term is
defined in the Code and, in any event, shall include (a) any and
all proceeds of any insurance, indemnity, warranty or guaranty
payable to any Credit Party from time to time with respect to any
of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to any Credit Party from time
to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting
under color of governmental authority), (c) any claim of any
Credit Party against third parties (i) for past, present or
future infringement of any Patent or Patent License, or (ii) for
past, present or future infringement or dilution of any
Copyright, Copyright License, Trademark or Trademark License, or
for injury to the goodwill associated with any Trademark or
Trademark License, (d) any recoveries by any Credit Party against
third parties with respect to any litigation or dispute
concerning any of the Collateral, and (e) any and all other
amounts from time to time paid or payable under or in connection
with any of the Collateral, upon disposition or otherwise.
"Pro Forma" means the unaudited consolidated and
consolidating balance sheet of Borrower and its Subsidiaries as
of October 31, 1999 after giving PRO FORMA effect to the Related
Transactions.
"Projections" means Borrower's forecasted consolidated
and consolidating: (a) balance sheets; (b) profit and loss
statements; (c) cash flow statements; and (d) capitalization
statements, all prepared on a Subsidiary by Subsidiary or
division by division basis, if applicable, and otherwise
consistent with the historical Financial Statements of Borrower,
together with appropriate supporting details and a statement of
underlying assumptions.
<PAGE>
"Pro Rata Share" shall mean with respect to all matters
relating to any Lender, the percentage obtained by dividing (i)
the Revolving Loan Commitment (including the Swing Line
Commitment as a subset of the Swing Line Lender's Revolving Loan
Commitment), by (ii) the aggregate Revolving Loan Commitments.
"Qualified Plan" shall mean a Plan which is intended to
be tax-qualified under Section 401(a) of the IRC.
"Rawlings Canada" means Rawlings Canada, Incorporated,
a Canadian corporation.
"Real Estate" shall have the meaning assigned to it in
SECTION 3.6.
"Refinancing" shall mean the repayment in full by
Borrower of the Prior Lender Obligations on the Closing Date.
"Refunded Swing Line Loan" shall have the meaning
assigned to it in SECTION 1.1(c)(iii).
"Related Transactions" means each borrowing under the
Revolving Loan on the Closing Date, the Refinancing, the payment
of all fees, costs and expenses associated with all of the
foregoing and the execution and delivery of all of the Loan
Documents.
"Release" shall mean any release, threatened release,
spill, emission, leaking, pumping, pouring, emitting, emptying,
escape, injection, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Material in the
indoor or outdoor environment, including the movement of
Hazardous Material through or in the air, soil, surface water,
ground water or property.
"Requisite Lenders" shall mean (a) Lenders having more
than sixty-six and two-thirds percent (66 2/3%) of the
Commitments of all Lenders, or (b) if the Commitments have been
terminated, more than sixty-six and two-thirds percent (66 2/3%)
of the aggregate outstanding amount of the Loans.
"Reserves" shall mean, with respect to the Borrowing
Base (a) reserves established by Agent from time to time against
Eligible Inventory pursuant to SECTION 5.9, (b) reserves
established pursuant to SECTION 5.4(c), and (c) such other
reserves against Eligible Accounts, Eligible Inventory or
Borrowing Availability of Borrower which Agent may, in its
reasonable credit judgment, establish from time to time. Without
limiting the generality of the foregoing, Reserves established to
ensure the payment of accrued Interest Expenses or Indebtedness
or Prior Claims shall be deemed to be a reasonable exercise of
Agent's credit judgment.
"Restricted Payment" shall mean (a) the declaration or
payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other<PAGE>
property or assets in respect of a Person's Stock, (b) any
payment on account of the purchase, redemption, defeasance,
sinking fund or other retirement of a Person's Stock or any other
payment or distribution made in respect thereof, either directly
or indirectly, (c) any payment or prepayment of principal of,
premium, if any, or interest, fees or other charges on or with
respect to, and any redemption, purchase, retirement, defeasance,
sinking fund or similar payment and any claim for rescission with
respect to, any Subordinated Debt; (d) any payment made to
redeem, purchase, repurchase or retire, or to obtain the
surrender of, any outstanding warrants, options or other rights
to acquire Stock of such Person now or hereafter outstanding; (e)
any payment of a claim for the rescission of the purchase or sale
of, or for material damages arising from the purchase or sale of,
any shares of such Person's Stock or of a claim for
reimbursement, indemnification or contribution arising out of or
related to any such claim for damages or rescission; (f) any
payment, loan, contribution, or other transfer of funds or other
property to any Stockholder of such Person other than payment of
compensation in the ordinary course to stockholders who are
employees of such Person; and (g) any payment of management fees
(or other fees of a similar nature) by such Person to any
Stockholder of such Person or their Affiliates.
"Restructuring Charges" shall mean, collectively but
without duplication, all (a) costs and charges associated with
early retirement programs identified in Borrower's public
filings, (b) deferred financing costs associated with the
Indebtedness incurred pursuant to the Prior Loan Agreement, (c)
costs and charges associated with the support of due diligence
and other activities related to Borrower's analysis of its
business and financial alternatives, (d) costs and charges
associated with the potential disposition of the "hockey
business" of Borrower and its Subsidiaries, including treatment
of such business as a discontinued operation, and (e) costs and
charges associated with the restructuring and consolidation
proposed in Borrower's "three year plan".
"Retiree Welfare Plan" shall mean, at any time, a Plan
that is a "welfare plan" as defined in Section 3(2) of ERISA,
that provides for continuing coverage or benefits for any
participant or any beneficiary of a participant after such
participant's termination of employment, other than continuation
coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the
participant.
"Revolving Credit Advance" shall have the meaning
assigned to it in SECTION 1.1(a)(i).
"Revolving Loan" shall mean, at any time, the sum of
(i) the aggregate amount of Revolving Credit Advances outstanding
to Borrower PLUS (ii) the aggregate Letter of Credit Obligations
incurred on behalf of Borrower. Unless the context otherwise
requires, references to the outstanding principal balance of the
Revolving Loan shall include the outstanding balance of Letter of
Credit Obligations.
"Revolving Loan Commitment" shall mean (a) as to any
Lender, the aggregate commitment of such Lender to make Revolving
Credit Advances (including without duplication<PAGE> Swing Line
Advances as a subset of the Swing Line Lender's Revolving Loan
Commitment) and/or incur Letter of Credit Obligations as set
forth on ANNEX J to the Agreement or in the most recent
Assignment Agreement executed by such Lender and (b) as to all
Lenders, the aggregate commitment of all Lenders to make
Revolving Credit Advances (including without duplication Swing
Line Advances as a subset of the Swing Line Lender's Revolving
Loan Commitment) and/or incur Letter of Credit Obligations, which
aggregate commitment shall be Seventy Five Million Dollars
($75,000,000) on the Closing Date, as such amount may be
adjusted, if at all, from time to time in accordance with the
Agreement.
"Revolving Note" shall have the meaning assigned to it
in SECTION 1.1(a)(ii).
"Seasonal Accounts" shall mean each Account which
according to its terms is due more than ninety (90) days
following its original invoice date.
"Security Agreements" shall mean the Security
Agreements of even date herewith entered into among Agent, on
behalf of itself and Lenders, and each Credit Party that is a
signatory thereto.
"Solvent" shall mean (1) with respect to any Person on
a particular date that is subject to the insolvency laws of the
United States of America, that on such date (a) the fair value of
the property of such Person is greater than the total amount of
liabilities, including contingent liabilities, of such Person;
(b) the present fair salable value of the assets of such Person
is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become
absolute and matured; (c) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay as such debts and liabilities
mature; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or
transaction, for which such Person's property would constitute an
unreasonably small capital and (2) with respect to any Person on
a particular date that is subject to Insolvency Laws of Canada,
that on such date (a) the property of such Person is sufficient,
if disposed of at a fairly conducted sale under legal process, to
enable payment of all its obligations, due and accruing due,
(b) the property of such Person is, at a fair valuation, greater
than the total amount of liabilities, including contingent
liabilities, of such Person; and (c) such Person has not ceased
paying its current obligations in the ordinary course of business
as they generally become due. The amount of contingent
liabilities (such as litigation, guarantees and pension plan
liabilities) at any time shall be computed as the amount which,
in light of all the facts and circumstances existing at the time,
represents the amount which can be reasonably be expected to
become an actual or matured liability.
"Stock" shall mean all shares, options, warrants,
general or limited partnership interests or other equivalents
(regardless of how designated) of or in a corporation,
partnership or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as
amended).
<PAGE>
"Subordinated Debt" shall mean the Indebtedness of any
Credit Party subordinated to the Obligations in a manner and form
satisfactory to Agent and Lenders in their sole discretion, as to
right and time of payment and as to any other rights and remedies
thereunder.
"Subsidiary" shall mean, with respect to any Person,
(a) any corporation of which an aggregate of more than fifty
percent (50%) of the outstanding Stock having ordinary voting
power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, Stock of any
other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency)
is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of
such Person, or with respect to which any such Person has the
right to vote or designate the vote of fifty percent (50%) or
more of such Stock whether by proxy, agreement, operation of law
or otherwise, and (b) any partnership or limited liability
company in which such Person and/or one or more Subsidiaries of
such Person shall have an interest (whether in the form of voting
or participation in profits or capital contribution) of more than
fifty percent (50%) or of which any such Person is a general
partner or may exercise the powers of a general partner.
"Subsidiary Guaranty" shall mean the Subsidiary
Guaranty of even date herewith executed by each Subsidiary of
Borrower in favor of Agent, on behalf of itself and Lenders.
"Supermajority Lenders" shall mean (a) Lenders having
eighty percent (80%) or more of the Revolving Loan Commitments of
all Lenders, or (b) if the Revolving Loan Commitments have been
terminated, eighty percent (80%) or more of the aggregate
outstanding amount of the Revolving Loan (with the Swing Line
Loan being attributed to the Lender making such Loan) and Letter
of Credit Obligations.
"Swing Line Advance" has the meaning assigned to it in
SECTION 1.1(b)(i).
"Swing Line Availability" has the meaning assigned to
it in Section 1.1(b)(i).
"Swing Line Commitment" shall mean, as to the Swing
Line Lender, the commitment of the Swing Line Lender to make
Swing Line Loans as set forth on ANNEX J to the Agreement, which
commitment constitutes a subfacility of the Revolving Loan
Commitment of the Swing Line Lender.
"Swing Line Lender" shall mean GE Capital.
"Swing Line Loan" shall mean at any time, the aggregate
amount of Swing Line Advances outstanding to Borrower.
"Swing Line Note" has the meaning assigned to it in
SECTION 1.1(c)(ii).
"Tax Sharing Agreement" shall mean that certain Tax
Sharing and Separation Agreement, dated as of July 8, 1994,
between Borrower and Figgie International Inc.
<PAGE>
"Taxes" shall mean taxes, levies, imposts, deductions,
Charges or withholdings, and all liabilities with respect
thereto, excluding taxes imposed on or measured by the net income
of Agent or a Lender by the jurisdictions under the laws of which
Agent and Lenders are organized or any political subdivision
thereof.
"Termination Date" shall mean the date on which the
Loans have been indefeasibly repaid in full and all other
Obligations under the Agreement and the other Loan Documents have
been completely discharged and Letter of Credit Obligations have
been cash collateralized, cancelled or backed by stand-by letters
of credit in accordance with ANNEX B, and Borrower shall not have
any further right to borrow any monies under the Agreement.
"Third Party Interactives" shall mean all Persons with
whom any Credit Party exchanges data electronically in the
ordinary course of business, including, without limitation,
customers, suppliers, third-party vendors, subcontractors,
processors-converters, shippers and warehousemen.
"Title IV Plan" shall mean an employee pension benefit
plan, as defined in Section 3 (2) of ERISA (other than a
Multiemployer Plan), which is covered by Title IV of ERISA, and
which any Credit Party or ERISA Affiliate maintains, contributes
to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Trademark Security Agreements" shall mean the
Trademark Security Agreements made in favor of Agent, on behalf
of Lenders, by each applicable Credit Party.
"Trademark License" shall mean rights under any written
agreement now owned or hereafter acquired by any Credit Party
granting any right to use any Trademark.
"Trademarks" shall mean all of the following now owned
or hereafter acquired by any Credit Party: (a) all trademarks,
trade names, corporate names, business names, trade styles,
service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature (whether
registered or unregistered), now owned or existing or hereafter
adopted or acquired, all registrations and recordings thereof,
and all applications in connection therewith, including
registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of
the United States, any state or territory thereof, or any other
country or any political subdivision thereof; (b) all reissues,
extensions or renewals thereof; and (c) all goodwill associated
with or symbolized by any of the foregoing.
"Unfunded Pension Liability" shall mean, at any time,
the aggregate amount, if any, of the sum of (a) the amount by
which the present value of all accrued benefits under each Title
IV Plan exceeds the fair market value of all assets of such Title
IV Plan allocable to such benefits in accordance with Title IV of
ERISA, all determined as of the most recent valuation date for
each such Title IV Plan using the actuarial assumptions for
funding purposes in effect under such Title IV Plan, and (b) for
a period of five (5) years following a transaction which<PAGE>
might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be
avoided by any Credit Party or any ERISA Affiliate as a result of
such transaction.
"Year 2000 Date-Sensitive System/Component" shall mean,
as to any Person, any system software, network software,
applications software, data base, computer file, embedded
microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs
calendar-related data accurately; such systems and components
shall include, without limitation, mainframe computers, file
server/client systems, computer workstations, routers, hubs,
other network-related hardware, and other computer-related
software, firmware or hardware and information processing and
delivery systems of any kind and telecommunications systems and
other communications processors, security systems, alarms,
elevators and HVAC systems.
"Year 2000 Problems" shall mean, with respect to each
Credit Party, limitations on the capacity or readiness of any
such Credit Party's Year 2000 Date-Sensitive Systems/Components
to accurately accept, create, manipulate, sort, sequence,
calculate, compare or output calendar date information with
respect to calendar year 1999 or any subsequent calendar year
beginning on or after January 1, 2000 (including leap year
computations), including, without limitation, exchanges of
information among Year 2000 Date-Sensitive Systems/Components of
the Credit Parties and exchanges of information among the Credit
Parties and Year 2000 Date-Sensitive Systems/Components of Third
Party Interactives and functionality of peripheral interfaces,
firmware and embedded microchips.
All other undefined terms contained in any of the Loan
Documents shall, unless the context indicates otherwise, have the
meanings provided for by the Code as in effect in the State of
Illinois to the extent the same are used or defined therein.
Unless otherwise specified, references in the Agreement or any of
the Appendices to a Section, subsection or clause refer to such
Section, subsection or clause as contained in the Agreement. The
words "herein," "hereof" and "hereunder" and other words of
similar import refer to the Agreement as a whole, including all
Annexes, Exhibits and Schedules, as the same may from time to
time be amended, restated, modified or supplemented, and not to
any particular section, subsection or clause contained in the
Agreement or any such Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the
singular and the plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, feminine
and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without
limitation"; references to Persons include their respective
successors and assigns (to the extent and only to the extent
permitted by the Loan Documents) or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations
shall include any amendments of the same and any successor
statutes and regulations. Whenever any provision in any Loan
Document refers to the knowledge (or an analogous phrase) of any
Credit Party, such words are intended to signify that<PAGE> such
Credit Party has actual knowledge or awareness of a particular
fact or circumstance or that such Credit Party, if it had
exercised reasonable diligence, would have known or been aware of
such fact or circumstance.
<PAGE>
ANNEX B (SECTION 1.2)
to
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) ISSUANCE. Subject to the terms and conditions of
the Agreement, Agent and Lenders agree to incur, from time to
time prior to the Commitment Termination Date, upon the request
of Borrower and for Borrower's account, Letter of Credit
Obligations by causing Letters of Credit to be issued (by a bank
or other legally authorized Person selected by or acceptable to
Agent in its sole discretion (each, an "L/C Issuer")) for
Borrower's account and guaranteed by Agent; provided, however,
that if the L/C Issuer is a Lender, then such Letters of Credit
shall not be guaranteed by Agent but rather each Lender shall,
subject to the terms and conditions hereinafter set forth,
purchase (or be deemed to have purchased) risk participations in
all such Letters of Credit issued with the written consent of
Agent, as more fully described in paragraph (b)(ii) below. The
aggregate amount of all such Letter of Credit Obligations shall
not at any time exceed the least of (i) Two Million Five Hundred
Thousand Dollars ($2,500,000) (the "L/C Sublimit"), and (ii) the
Maximum Amount LESS the aggregate outstanding principal balance
of the Revolving Credit Advances and the Swing Line Loan, and
(iii) the Borrowing Base LESS the aggregate outstanding principal
balance of the Revolving Credit Advances and the Swing Line Loan.
No such Letter of Credit shall have an expiry date which is more
than one year following the date of issuance thereof, and neither
Agent nor Lenders shall be under any obligation to incur Letter
of Credit Obligations in respect of, or purchase risk
participations in, any Letter of Credit having an expiry date
which is later than the Commitment Termination Date.
(b)(i) ADVANCES AUTOMATIC; PARTICIPATIONS. In the
event that Agent or any Lender shall make any payment on or
pursuant to any Letter of Credit Obligation, such payment shall
then be deemed automatically to constitute a Revolving Credit
Advance under SECTION 1.1(a) of the Agreement regardless of
whether a Default or Event of Default shall have occurred and be
continuing and notwithstanding Borrower's failure to satisfy the
conditions precedent set forth in SECTION 2, and each Lender
shall be obligated to pay its Pro Rata Share thereof in
accordance with the Agreement. The failure of any Lender to make
available to Agent for Agent's own account its Pro Rata Share of
any such Revolving Credit Advance or payment by Agent under or in
respect of a Letter of Credit shall not relieve any other Lender
of its obligation hereunder to make available to Agent its Pro
Rata Share thereof, but no Lender shall be responsible for the
failure of any other Lender to make available such other Lender's
Pro Rata Share of any such payment.
(ii) If it shall be illegal or unlawful for Borrower
to incur Revolving Credit Advances as contemplated by paragraph
(b)(i) above because of an Event of Default described in SECTION
8.1(h) or (i) or otherwise or if it shall be illegal or unlawful
for any Lender to be deemed to have assumed a ratable share of
the reimbursement obligations owed to an L/C Issuer, or if the
L/C Issuer is a Lender, then (i) immediately and without further
action whatsoever, each Lender shall be deemed to have
irrevocably and unconditionally purchased from Agent (or such
L/C<PAGE> Issuer, as the case may be) an undivided interest and
participation equal to such Lender's Pro Rata Share (based on the
Revolving Loan Commitments) of the Letter of Credit Obligations
in respect of all Letters of Credit then outstanding and (ii)
thereafter, immediately upon issuance of any Letter of Credit,
each Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the
case may be) an undivided interest and participation in such
Lender's Pro Rata Share (based on the Revolving Loan Commitments)
of the Letter of Credit Obligations with respect to such Letter
of Credit on the date of such issuance. Each Lender shall fund
its participation in all payments or disbursements made under the
Letters of Credit in the same manner as provided in the Agreement
with respect to Revolving Credit Advances.
(c) CASH COLLATERAL. If Borrower is required to
provide cash collateral for any Letter of Credit Obligations
pursuant to the Agreement prior to the Commitment Termination
Date, Borrower will pay to Agent for the benefit of Lenders cash
or cash equivalents acceptable to Agent ("Cash Equivalents") in
an amount equal to 105% of the maximum amount then available to
be drawn under each applicable Letter of Credit outstanding.
Such funds or Cash Equivalents shall be held by Agent in a cash
collateral account (the "Cash Collateral Account") maintained at
a bank or financial institution acceptable to Agent. The Cash
Collateral Account shall be in the name of Borrower and shall be
pledged to, and subject to the control of, Agent, for the benefit
of Agent and Lenders, in a manner satisfactory to Agent.
Borrower hereby pledges and grants to Agent, on behalf of
Lenders, a security interest in all such funds and Cash
Equivalents held in the Cash Collateral Account from time to time
and all proceeds thereof, as security for the payment of all
amounts due in respect of the Letter of Credit Obligations and
other Obligations, whether or not then due. The Agreement,
including this ANNEX B, shall constitute a security agreement
under applicable law.
If any Letter of Credit Obligations, whether or not
then due and payable, shall for any reason be outstanding on the
Commitment Termination Date, Borrower shall either (i) provide
cash collateral therefor in the manner described above, or (ii)
cause all such Letters of Credit and guaranties thereof to be
canceled and returned, or (iii) deliver a stand-by letter (or
letters) of credit in guarantee of such Letter of Credit
Obligations, which stand-by letter (or letters) of credit shall
be of like tenor and duration (plus thirty (30) additional days)
as, and in an amount equal to 105% of the aggregate maximum
amount then available to be drawn under, the Letters of Credit to
which such outstanding Letter of Credit Obligations relate and
shall be issued by a Person, and shall be subject to such terms
and conditions, as are be satisfactory to Agent in its sole
discretion.
From time to time after funds are deposited in the Cash
Collateral Account by Borrower, whether before or after the
Commitment Termination Date, Agent may apply such funds or Cash
Equivalents then held in the Cash Collateral Account to the
payment of any amounts, in such order as Agent may elect, as
shall be or shall become due and payable by Borrower to Lenders
with respect to such Letter of Credit Obligations of Borrower
and, upon the satisfaction in full of all Letter of Credit
Obligations of Borrower, to any other Obligations then due and
payable.
<PAGE>
Neither Borrower nor any Person claiming on behalf of
or through Borrower shall have any right to withdraw any of the
funds or Cash Equivalents held in the Cash Collateral Account,
except that upon the termination of all Letter of Credit
Obligations and the payment of all amounts payable by Borrower to
Lenders in respect thereof, any funds remaining in the Cash
Collateral Account shall be applied to other Obligations when due
and owing and upon payment in full of such Obligations, any
remaining amount shall be paid to Borrower or as otherwise
required by law.
(d) FEES AND EXPENSES. Borrower agrees to pay to
Agent for the benefit of Lenders, as compensation to such Lenders
for Letter of Credit Obligations incurred hereunder, (x) all
costs and expenses incurred by Agent or any Lender on account of
such Letter of Credit Obligations, and (y) for each month during
which any Letter of Credit Obligation shall remain outstanding, a
fee (the "Letter of Credit Fee") in an amount equal to the
Applicable L/C Margin from time to time in effect multiplied by
the maximum amount available from time to time to be drawn under
the applicable Letter of Credit. Such fee shall be paid to Agent
for the benefit of the Lenders in arrears, on the first day of
each month. In addition, Borrower shall pay to any L/C Issuer,
on demand, such fees (including all per annum fees), charges and
expenses of such L/C Issuer in respect of the issuance,
negotiation, acceptance, amendment, transfer and payment of such
Letter of Credit or otherwise payable pursuant to the application
and related documentation under which such Letter of Credit is
issued.
(e) REQUEST FOR INCURRENCE OF LETTER OF CREDIT
OBLIGATIONS. Borrower shall give Agent at least two (2) Business
Days prior written notice requesting the incurrence of any Letter
of Credit Obligation, specifying the date such Letter of Credit
Obligation is to be incurred, identifying the beneficiary to
which such Letter of Credit Obligation relates and describing the
nature of the transactions proposed to be supported thereby. The
notice shall be accompanied by the form of the Letter of Credit
(which shall be acceptable to the L/C Issuer) to be guarantied
and, to the extent not previously delivered to Agent, copies of
all agreements between Borrower and the L/C Issuer pertaining to
the issuance of Letters of Credit. Notwithstanding anything
contained herein to the contrary, Letter of Credit applications
by Borrower and approvals by Agent and the L/C Issuer may be made
and transmitted pursuant to electronic codes and security
measures mutually agreed upon and established by and among
Borrower, Agent and the L/C Issuer.
(f) OBLIGATION ABSOLUTE. The obligation of Borrower
to reimburse Agent and Lenders for payments made with respect to
any Letter of Credit Obligation shall be absolute, unconditional
and irrevocable, without necessity of presentment, demand,
protest or other formalities, and the obligations of each Lender
to make payments to Agent with respect to Letters of Credit shall
be unconditional and irrevocable. Such obligations of Borrower
and Lenders shall be paid strictly in accordance with the terms
hereof under all circumstances including the following
circumstances:
(i) any lack of validity or enforceability of any
Letter of Credit or the Agreement or the other Loan Documents or
any other agreement;
<PAGE>
(ii) the existence of any claim, set-off, defense or
other right which Borrower or any of its Affiliates or any Lender
may at any time have against a beneficiary or any transferee of
any Letter of Credit (or any Persons or entities for whom any
such transferee may be acting), Agent, any Lender, or any other
Person, whether in connection with the Agreement, the Letter of
Credit, the transactions contemplated herein or therein or any
unrelated transaction (including any underlying transaction
between Borrower or any of its Affiliates and the beneficiary for
which the Letter of Credit was procured);
(iii) any draft, demand, certificate or any other
document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) payment by Agent (except as otherwise expressly
provided in paragraph (g)(ii)(C) below) or any L/C Issuer under
any Letter of Credit or guaranty thereof against presentation of
a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit or such guaranty;
(v) any other circumstance or happening whatsoever,
which is similar to any of the foregoing; or
(vi) the fact that a Default or an Event of Default
shall have occurred and be continuing.
(g) INDEMNIFICATION; NATURE OF LENDERS' DUTIES. (i)
In addition to amounts payable as elsewhere provided in the
Agreement, Borrower hereby agrees to pay and to protect,
indemnify, and save harmless Agent and each Lender from and
against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including attorneys' fees
and allocated costs of internal counsel) which Agent or any
Lender may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any Letter of Credit or guaranty
thereof, or (B) the failure of Agent or any Lender seeking
indemnification or of any L/C Issuer to honor a demand for
payment under any Letter of Credit or guaranty thereof as a
result of any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto government or
Governmental Authority, in each case other than to the extent
solely as a result of the gross negligence or willful misconduct
of Agent or such Lender (as finally determined by a court of
competent jurisdiction).
(ii) As between Agent and any Lender and Borrower,
Borrower assumes all risks of the acts and omissions of, or
misuse of any Letter of Credit by beneficiaries of any Letter of
Credit. In furtherance and not in limitation of the foregoing,
to the fullest extent permitted by law neither Agent nor any
Lender shall be responsible: (A) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any
document issued by any party in connection with the application
for and issuance of any Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (B) for the validity or
sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any<PAGE> Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in whole
or in part, which may prove to be invalid or ineffective for any
reason; (C) for failure of the beneficiary of any Letter of
Credit to comply fully with conditions required in order to
demand payment under such Letter of Credit; provided that, in the
case of any payment by Agent under any Letter of Credit or
guaranty thereof, Agent shall be liable to the extent such
payment was made solely as a result of its gross negligence or
willful misconduct (as finally determined by a court of competent
jurisdiction) in determining that the demand for payment under
such Letter of Credit or guaranty thereof complies on its face
with any applicable requirements for a demand for payment under
such Letter of Credit or guaranty thereof; (D) for errors,
omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (E) for errors in
interpretation of technical terms; (F) for any loss or delay in
the transmission or otherwise of any document required in order
to make a payment under any Letter of Credit or guaranty thereof
or of the proceeds thereof; (G) for the credit of the proceeds of
any drawing under any Letter of Credit or guaranty thereof; and
(H) for any consequences arising from causes beyond the control
of Agent or any Lender. None of the above shall affect, impair,
or prevent the vesting of any of Agent's or any Lender's rights
or powers hereunder or under the Agreement.
(iii) Nothing contained herein shall be deemed to limit
or to expand any waivers, covenants or indemnities made by
Borrower in favor of any L/C Issuer in any letter of credit
application, reimbursement agreement or similar document,
instrument or agreement between Borrower and such L/C Issuer.
<PAGE>
ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEMS
Borrower shall, and shall cause its Subsidiaries to,
establish and maintain the Cash Management Systems described
below:
(a) On or before the Closing Date and until the
Termination Date, Borrower and each of its Subsidiaries shall (i)
establish lock boxes ("Lock Boxes") at one or more of the banks
set forth on DISCLOSURE SCHEDULE (3.19), and shall request in
writing and otherwise take such reasonable steps to ensure that
all Account Debtors forward payment directly to such Lock Boxes,
and (ii) deposit and cause its Subsidiaries to deposit or cause
to be deposited promptly, and in any event no later than the
first Business Day after the date of receipt thereof, all cash,
checks, drafts or other similar items of payment relating to or
constituting payments made in respect of any and all Collateral
(whether or not otherwise delivered to a Lock Box) into bank
accounts in Borrower's name or any such Subsidiary's name
(collectively, the "Borrower Accounts") at banks set forth on
DISCLOSURE SCHEDULE (3.19) (each, a "Relationship Bank"). On or
before the Closing Date, Borrower shall have established a
concentration account in its name (the "Concentration Account")
at the bank which shall be designated as the Concentration
Account bank for Borrower on Part A of DISCLOSURE SCHEDULE (3.19)
(the "Concentration Account Bank") which bank shall be
satisfactory to Agent.
(b) On or before the Closing Date, the Concentration
Account Bank, each bank where a Disbursement Account is located
and all other Relationship Banks, shall have entered into
tri-party blocked account agreements with Agent, for the benefit
of itself and Lenders, and Borrower and Subsidiaries thereof, as
applicable, in form and substance acceptable to Agent, which
shall become operative on or prior to the Closing Date. Each
such blocked account agreement shall provide, among other things,
that (i) all items of payment deposited in such account and
proceeds thereof deposited in the Concentration Account are held
by such bank as agent or bailee-in-possession for Agent, on
behalf of Lenders, (ii) the bank executing such agreement has no
rights of setoff or recoupment or any other claim against such
account, as the case may be, other than for payment of its
service fees and other charges directly related to the
administration of such account and for returned checks or other
items of payment, for any required adjustment due to clerical or
calculation errors relating to such account and, in accordance
therewith, any court order, notice of garnishment or other
applicable law binding upon such bank, and (iii) from and after
the Closing Date (A) with respect to banks at which a Borrower
Account is located, such bank agrees to forward immediately all
amounts in each Borrower Account to the Concentration Account
Bank and to commence the process of daily sweeps from such
Borrower Account into the Concentration Account and (B) with
respect to the Concentration Account Bank, such bank agrees to
immediately forward all amounts received in the Concentration
Account to the Collection Account through daily sweeps from
such<PAGE> Concentration Account into the Collection Account.
Borrower shall not, and shall not cause or permit any Subsidiary
thereof to, accumulate or maintain cash in disbursement or
payroll accounts as of any date of determination in excess of
checks outstanding against such accounts as of that date and
amounts necessary to meet minimum balance requirements.
(c) So long as no Default or Event of Default has
occurred and is continuing, Borrower may amend DISCLOSURE
SCHEDULE (3.19) to add or replace a Relationship Bank, Lock Box
or Borrower Account or to replace any Concentration Account or
any Disbursement Account; provided, however, that (i) Agent shall
have consented in writing in advance to the opening of such
account or Lock Box with the relevant bank and (ii) prior to the
time of the opening of such account or Lock Box, Borrower and/or
the Subsidiaries thereof, as applicable, and such bank shall have
executed and delivered to Agent a tri-party blocked account
agreement, in form and substance satisfactory to Agent. Borrower
shall close any of its accounts (and establish replacement
accounts in accordance with the foregoing sentence) promptly and
in any event within thirty (30) days of notice from Agent that
the creditworthiness of any bank holding an account is no longer
acceptable in Agent's reasonable judgment, or as promptly as
practicable and in any event within sixty (60) days of notice
from Agent that the operating performance, funds transfer and/or
availability procedures or performance with respect to accounts
or lockboxes of the bank holding such accounts or Agent's
liability under any tri-party blocked account agreement with such
bank is no longer acceptable in Agent's reasonable judgment.
(d) The Lock Boxes, Borrower Accounts, Disbursement
Accounts and the Concentration Account shall be cash collateral
accounts, with all cash, checks and other similar items of
payment in such accounts securing payment of the Loans and all
other Obligations, and in which Borrower and each Subsidiary
thereof shall have granted a Lien to Agent, on behalf of itself
and Lenders, pursuant to the Security Agreements.
(e) All amounts deposited in the Collection Account
shall be deemed received by Agent in accordance with SECTION 1.10
of the Agreement and shall be applied (and allocated) by Agent in
accordance with SECTION 1.11 of the Agreement. In no event shall
any amount be so applied unless and until such amount shall have
been credited in immediately available funds to the Collection
Account.
(f) Borrower may maintain, in its name, an account
(each a "Disbursement Account" and collectively, the
"Disbursement Accounts") at a bank acceptable to Agent into which
Agent shall, from time to time, deposit proceeds of Revolving
Credit Advances and Swing Line Advances made to Borrower pursuant
to SECTION 1.1 for use by Borrower solely in accordance with the
provisions of SECTION 1.4. The Disbursement Account and the bank
at which the Disbursement Account is maintained shall be
designated as such on Part A of DISCLOSURE SCHEDULE (3.19).
(g) Borrower shall and shall cause its Affiliates,
officers, employees, agents, directors or other Persons acting
for or in concert with Borrower (each a "Related Person") to (i)
hold in trust for Agent, for the benefit of itself and Lenders,
all checks, cash and other items of<PAGE> payment received by
Borrower or any such Related Person, and (ii) within one (1)
Business Day after receipt by Borrower or any such Related Person
of any checks, cash or other items or payment, deposit the same
into a Borrower Account. Borrower and each Related Person
thereof acknowledges and agrees that all cash, checks or items of
payment constituting proceeds of Collateral are the property of
Agent and Lenders. All proceeds of the sale or other disposition
of any Collateral, shall be deposited directly into Borrower
Accounts.
(h) Notwithstanding the foregoing and so long as no
Default or Event of Default has occurred and is continuing, as to
each account identified on Part B of DISCLOSURE SCHEDULE (3.19):
(i) within sixty (60) days after the Closing Date, such account
shall be terminated or maintained as a Lock Box or Borrower
Account, as applicable, (ii) until the foregoing clause (i) has
been satisfied with respect to such account, the Credit Parties
shall forward all funds held in such account by wire transfer to
the Collection Account on each Tuesday and Friday of each week,
(iii) upon each such transfer of funds, the Credit Parties shall
deliver to Agent evidence satisfactory to Agent that such
transfer included all funds held in such account at the time of
such transfer and (iv) until the foregoing clause (i) has been
satisfied with respect to such account, the Credit Parties shall
deliver to Agent copies of a monthly bank statement and activity
report for such account.
(i) Notwithstanding the foregoing and so long as no
Default or Event of Default has occurred and is continuing, as to
each account identified on Part C of DISCLOSURE SCHEDULE (3.19):
(i) within sixty (60) days after the Closing Date, such account
shall be terminated or subject to a tri-party pledged account
agreement in the form and substance set forth in paragraph (b)
above, except that funds will be swept from such account upon
Agent's notice, (ii) until the foregoing clause (i) has been
satisfied with respect to such account, the Credit Parties shall
deliver to Agent copies of a monthly bank statement and activity
report for such account, (iii) except as set forth in clause (iv)
below, the aggregate amount of funds maintained at any one time
in any such account shall not exceed $15,000 and the maximum
amount of funds maintained at any one time in all such accounts
shall not exceed $25,000 and (iv) the aggregate amount of funds
maintained at any one time in such account held with Banc Credito
Agricola de Cartago shall not exceed $150,000 and no funds
transferred to such account shall be maintained in such account
for more than two (2) Business Days.
<PAGE>
ANNEX D (SECTION 2.1(a))
TO
CREDIT AGREEMENT
SCHEDULE OF ADDITIONAL CLOSING DOCUMENTS
In addition to, and not in limitation of, the
conditions described in SECTION 2.1 of the Agreement, pursuant to
SECTION 2.1(a), the following items must be received by Agent in
form and substance satisfactory to Agent on or prior to the
Closing Date (each capitalized term used but not otherwise
defined herein shall have the meaning ascribed thereto in ANNEX A
to the Agreement):
A. APPENDICES. All Appendices to the Agreement, in
form and substance satisfactory to Agent.
B. REVOLVING NOTES AND SWING LINE NOTE. Duly
executed originals of the Revolving Notes and Swing Line Note for
each applicable Lender, dated the Closing Date.
C. SECURITY AGREEMENTS. Duly executed originals of
the Security Agreements, dated the Closing Date, and all
instruments, documents and agreements executed pursuant thereto.
D. INSURANCE. Satisfactory evidence that the
insurance policies required by SECTION 5.4 are in full force and
effect, together with appropriate evidence showing loss payable
and/or additional insured clauses or endorsements, as requested
by Agent, in favor of Agent, on behalf of Lenders.
E. SECURITY INTERESTS AND CODE FILINGS. (a) Evidence
satisfactory to Agent that Agent (for the benefit of itself and
Lenders) has a valid and perfected first priority security
interest in, and validly registered first ranking hypothec on,
the Collateral, including (i) such documents duly executed by
each Credit Party (including financing statements under the Code
and other applicable documents under the laws of any jurisdiction
with respect to the perfection of Liens) as Agent may request in
order to perfect its security interests in, and hypothecs on, the
Collateral and (ii) copies of Code search reports and other
similar reports listing all effective financing statements (or
other applicable equivalent) that name any Credit Party as
debtor, together with copies of such financing statements (or
other applicable equivalent), none of which shall cover the
Collateral, except for those relating to the Prior Lender
Obligations (all of which shall be terminated on the Closing
Date).
(b) Evidence satisfactory to Agent, including copies,
of all UCC-1 and other financing statements filed in favor of any
Credit Party with respect to each location, if any, at which
Inventory may be consigned.
<PAGE>
(c) Control Letters from (i) all issuers of
uncertificated securities and financial assets held by Borrower,
(ii) all securities intermediaries with respect to all securities
accounts and securities entitlements of Borrower, and (iii) all
futures commission agents and clearing houses with respect to all
commodities contracts and commodities accounts held by Borrower.
F. PAYOFF LETTER; TERMINATION STATEMENTS. Copies of
a duly executed payoff letter, in form and substance satisfactory
to Agent, by and between all parties to the Prior Loan Agreement
evidencing repayment in full of all Prior Lender Obligations,
together with (a) UCC-3 or other appropriate termination
statements, in form and substance satisfactory to Agent, manually
signed by the Prior Lenders releasing all liens of Prior Lenders
upon any of the personal property of each Credit Party, (b)
mortgage releases (or other applicable equivalent) releasing all
liens of Prior Lenders upon any of the Real Property of each
Credit Party and (c) termination of all blocked account
agreements, bank agency agreements or other similar agreements or
arrangements or arrangements in favor of Prior Lenders or
relating to the Prior Lender Obligations.
G. INTELLECTUAL PROPERTY SECURITY AGREEMENTS. Duly
executed originals of Trademark Security Agreements, Copyright
Security Agreements and Patent Security Agreements, each dated
the Closing Date and signed by each Credit Party which owns
Trademarks, Copyrights and/or Patents, as applicable, all in form
and substance satisfactory to Agent, together with all
instruments, documents and agreements executed pursuant thereto.
H. SUBSIDIARY GUARANTIES. Guaranties executed by and
each direct and indirect Subsidiary of Borrower in favor of
Agent, for the benefit of Agent and Lenders.
I. INITIAL BORROWING BASE CERTIFICATE. Duly executed
originals of an initial Borrowing Base Certificate from Borrower,
dated the Closing Date, reflecting information concerning
Eligible Accounts and Eligible Inventory of Borrower as of a date
not more than seven (7) days prior to the Closing Date.
J. INITIAL NOTICE OF REVOLVING CREDIT ADVANCE. Duly
executed originals of a Notice of Revolving Credit Advance, dated
the Closing Date, with respect to the initial Revolving Credit
Advance to be requested by Borrower on the Closing Date.
K. LETTER OF DIRECTION. Duly executed originals of a
letter of direction from Borrower addressed to Agent, on behalf
of itself and Lenders, with respect to the disbursement on the
Closing Date of the proceeds of the initial Revolving Credit
Advance.
L. CASH MANAGEMENT SYSTEM; BLOCKED ACCOUNT
AGREEMENTS. Evidence satisfactory to Agent that, as of the
Closing Date, Cash Management Systems complying with ANNEX C to
the Agreement have been established and are currently being
maintained in the manner set forth in such ANNEX C, together with
copies of duly executed tri-party blocked account and lock box
agreements, satisfactory to Agent, with the banks as required by
ANNEX C.
<PAGE>
M. CHARTER AND GOOD STANDING. For each Credit Party,
such Person's (a) charter and all amendments thereto, (b) good
standing certificates (including verification of tax status or
other applicable equivalent) in its state or province of
incorporation and (c) good standing certificates (including
verification of tax status) and certificates of qualification (or
other applicable equivalent) to conduct business in each
jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification, each dated a
recent date prior to the Closing Date and certified by the
applicable Secretary of State or other authorized Governmental
Authority.
N. BYLAWS AND RESOLUTIONS. For each Credit Party,
(a) such Person's bylaws, together with all amendments thereto
and (b) resolutions of such Person's Board of Directors,
approving and authorizing the execution, delivery and performance
of the Loan Documents to which such Person is a party and the
transactions to be consummated in connection therewith, each
certified as of the Closing Date by such Person's corporate
secretary or an assistant secretary as being in full force and
effect without any modification or amendment.
O. INCUMBENCY CERTIFICATES. For each Credit Party,
signature and incumbency certificates of the officers of each
such Person executing any of the Loan Documents, certified as of
the Closing Date by such Person's corporate secretary or an
assistant secretary as being true, accurate, correct and
complete.
P. OPINIONS OF COUNSEL. Duly executed originals of
opinions of Stinson, Mag & Fizzell, counsel for the Credit
Parties, together with opinions of local counsel (including, the
jurisdiction of each Credit Party's principal place of business
and each location of Mortgaged Property), each in form and
substance satisfactory to Agent and its counsel, dated the
Closing Date, and each accompanied by a letter addressed to such
counsel from the Credit Parties, authorizing and directing such
counsel to address its opinion to Agent, on behalf of Lenders,
and to include in such opinion an express statement to the effect
that Agent and Lenders are authorized to rely on such opinion.
Q. PLEDGE AGREEMENTS. Duly executed originals of
each of the Pledge Agreements accompanied by (as applicable) (a)
share certificates representing all of the outstanding Stock
being pledged pursuant to such Pledge Agreement, (b) stock powers
for such share certificates executed in blank (except for such
share certificates which are registered in Agent's name, which
shall be accompanied by a copy of the share register for the
shares evidenced thereby, certified as being true, accurate,
correct and complete) and (c) the original Intercompany Notes and
other instruments evidencing Indebtedness being pledged pursuant
to such Pledge Agreement, duly endorsed in blank.
R. ACCOUNTANTS' LETTERS. A letter from the Credit
Parties to their independent auditors authorizing the independent
certified public accountants of the Credit Parties to communicate
with Agent and Lenders in accordance with SECTION 4.2, and a
letter from such auditors acknowledging Lenders' reliance on the
auditor's certification of past and future Financial Statements.
<PAGE>
S. APPOINTMENT OF AGENT FOR SERVICE. An appointment
of CT Corporation as each Credit Party's agent for service of
process.
T. FEE LETTER. Duly executed originals of the GE
Capital Fee Letter.
U. OFFICER'S CERTIFICATE. Agent shall have received
duly executed originals of a certificate of the Chief Executive
Officer and Chief Financial Officer of Borrower, dated the
Closing Date, stating that, since August 31, 1999 (a) no event or
condition has occurred or is existing which could reasonably be
expected to have a Material Adverse Effect; (b) there has been no
material adverse change in the industry in which Borrower
operates; (c) no Litigation has been commenced which, if
successful, would have a Material Adverse Effect or could
challenge any of the transactions contemplated by the Agreement
and the other Loan Documents; (d) there have been no Restricted
Payments made by any Credit Party; and (e) there has been no
material increase in liabilities, liquidated or contingent, and
no material decrease in assets of Borrower or any of its
Subsidiaries.
V. WAIVERS. Agent, on behalf of Lenders, shall have
received landlord waivers and consents, bailee letters and
mortgagee agreements in form and substance satisfactory to Agent,
in each case as required pursuant to SECTION 5.9.
W. MORTGAGES. Mortgages covering all of the Real
Estate (the "Mortgaged Properties") together with: (a) title
insurance policies, current as-built surveys, zoning letters,
certificates of location and certificates of occupancy, in each
case satisfactory in form and substance to Agent, in its sole
discretion; and (b) evidence that counterparts of the Mortgages
have been recorded in all places to the extent necessary or
desirable, in the judgment of Agent, to create a valid and
enforceable first priority lien (subject to Permitted
Encumbrances) on each Mortgaged Property in favor of Agent for
the benefit of itself and Lenders (or in favor of such other
trustee as may be required or desired under local law).
X. SUBORDINATION AND INTERCREDITOR AGREEMENTS. Agent
and Lenders shall have received any and all subordination and/or
intercreditor agreements, all in form and substance reasonably
satisfactory to Agent, in its sole discretion, as Agent shall
have deemed necessary or appropriate with respect to any
Indebtedness of any Credit Party.
Y. ENVIRONMENTAL REPORTS. Agent shall have received
Phase I Environmental Site Assessment Reports, consistent with
American Society of Testing and Materials (ASTM) Standard E
1527-94, and applicable state requirements, on all of the Real
Estate, dated no more than 6 months prior to the Closing Date,
prepared by environmental engineers satisfactory to Agent, all in
form and substance satisfactory to Agent, in its sole discretion;
and Agent shall have further received such environmental review
and audit reports, including Phase II reports, with respect to
the Real Estate of any Credit Party as Agent shall have
requested, and Agent shall be satisfied, in its sole discretion,
with the contents of all such environmental reports. Agent shall
have received letters executed by the environmental firms
preparing such environmental<PAGE> reports, in form and substance
satisfactory to Agent, authorizing Agent and Lenders to rely on
such reports.
Z. APPRAISALS. Agent shall have received appraisals
requested by Agent as to all Equipment and as to each parcel of
Real Estate owned by each Credit Party each of which shall be in
form and substance satisfactory to Agent.
AA. AUDITED FINANCIALS; FINANCIAL CONDITION. Agent
shall have received each Credit Party's final Financial
Statements for its Fiscal Year ended August 31, 1999, audited by
Arthur Andersen LLP. Each Credit Party shall have provided Agent
with its current operating statements, a consolidated and
consolidating balance sheet and statement of cash flows, the Pro
Forma, Projections, and a Borrowing Base Certificate with respect
to Borrower certified by its Chief Financial Officer, in each
case in form and substance satisfactory to Agent, and Agent shall
be satisfied, in its sole discretion, with all of the foregoing.
Agent shall have further received a certificate of the Chief
Executive Officer and/or the Chief Financial Officer of Borrower,
based on such Pro Forma and Projections, to the effect that (a)
Borrower will be Solvent upon the consummation of the
transactions contemplated herein; (b) the Pro Forma fairly
presents the financial condition of Borrower as of the date
thereof after giving effect to the transactions contemplated by
the Loan Documents; (c) the Projections are based upon estimates
and assumptions stated therein, all of which Borrower believes to
be reasonable and fair in light of current conditions and current
facts known to Borrower and, as of the Closing Date, reflect
Borrower's good faith and reasonable estimates of its future
financial performance and of the other information projected
therein for the period set forth therein; and (d) containing such
other statements with respect to the solvency of Borrower and
matters related thereto as Agent shall request.
BB. TAX SHARING AGREEMENT. Copies of the Tax Sharing
Agreement, certified as of the Closing Date by Borrower's
corporate secretary or an assistant secretary as being true,
accurate, correct and complete. A statement, in form and
substance satisfactory to Agent, of the amount and timing of each
payment made under the Tax Sharing Agreement as of the Closing
Date and the projected amount and timing of each payment
remaining thereunder, certified as of the Closing Date by
Borrower's Chief Financial Officer as being based upon the
estimates and assumptions stated therein, all of which Borrower
believes to be reasonable and fair in light of current conditions
and current facts known to Borrower and, as of the Closing Date,
reflect Borrower's good faith and reasonable estimates of its
future business plans and financial performance and of the other
information projected therein.
CC. LICENSE AGREEMENTS. Each License Agreement,
together with a schedule in form and substance satisfactory to
Agent setting forth the amount and timing of each payment to be
made (or projected to be made, as the case may be) under each
License Agreement as of the Closing Date, certified as of the
Closing Date by Borrower's Chief Financial Officer as being true,
accurate, correct and complete.
<PAGE>
DD. MATERIAL PLAYER CONTRACTS. A list of each Material
Player Contract, together with a schedule in form and substance
satisfactory to Agent setting forth the collective amount of
annual payments to be made (or projected to be made, as the case
may be) under all such Material Player Contracts in the
aggregate, certified as of the Closing Date by Borrower's Chief
Financial Officer as being true, accurate, correct and complete.
EE. OTHER DOCUMENTS. Such other certificates,
documents and agreements respecting any Credit Party as Agent
may, in its sole discretion, request.
<PAGE>
ANNEX E (SECTION 4.1(a))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS - REPORTING
Borrower shall deliver or cause to be delivered to
Agent or to Agent and Lenders, as indicated, the following:
(a) MONTHLY FINANCIALS. To Agent and Lenders,
promptly upon their becoming publicly available, but not later
than forty-five (45) days after the end of each Fiscal Month of
Fiscal Year 2000 and thirty (30) days after the end of each
Fiscal Month thereafter, financial information regarding Borrower
and its Subsidiaries, certified by the Chief Financial Officer of
Borrower, consisting of consolidated and consolidating (i)
unaudited balance sheets as of the close of such Fiscal Month and
the related statements of income and cash flow for that portion
of the Fiscal Year ending as of the close of such Fiscal Month;
(ii) unaudited statements of income and cash flows for such
Fiscal Month, setting forth in comparative form the figures for
the corresponding period in the prior year and the figures
contained in the Projections for such Fiscal Year, all prepared
in accordance with GAAP (subject to normal year-end adjustments);
and (iii) a summary of the outstanding balance of all
Intercompany Notes as of the last day of that Fiscal Month. Such
financial information shall be accompanied by the certification
of the Chief Financial Officer of Borrower that (i) such
financial information presents fairly in accordance with GAAP
(subject to normal year-end adjustments) the financial position
and results of operations of Borrower and its Subsidiaries, on a
consolidated and consolidating basis, in each case as at the end
of such month and for the period then ended and (ii) any other
information presented is true, correct and complete in all
material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of
Default shall have occurred and be continuing, describing the
nature thereof and all efforts undertaken to cure such Default or
Event of Default;
(b) QUARTERLY FINANCIALS. To Agent and Lenders,
promptly upon their becoming publicly available, but not later
than fifty (50) days after the end of each Fiscal Quarter of
Fiscal Year 2000 and forty-five (45) days after the end of each
Fiscal Quarter thereafter, consolidated and consolidating
financial information regarding Borrower and its Subsidiaries,
certified by the Chief Financial Officer of Borrower, including
(i) unaudited balance sheets as of the close of such Fiscal
Quarter and the related statements of income and cash flow for
that portion of the Fiscal Year ending as of the close of such
Fiscal Quarter and (ii) unaudited statements of income and cash
flows for such Fiscal Quarter, in each case setting forth in
comparative form the figures for the corresponding period in the
prior year and the figures contained in the Projections for such
Fiscal Year, all prepared in accordance with GAAP (subject to
normal year-end adjustments). Such financial information shall
be accompanied by (A) a statement in reasonable detail (each, a
"Compliance Certificate") showing the calculations used in
determining compliance with each of the financial covenants set
forth on ANNEX G and (B) the certification of the Chief Financial
Officer of Borrower that (i) such financial information<PAGE>
presents fairly in accordance with GAAP (subject to normal
year-end adjustments) the financial position, results of
operations and statements of cash flows of Borrower and its
Subsidiaries, on both a consolidated and consolidating basis, as
at the end of such Fiscal Quarter and for the period then ended,
(ii) any other information presented is true, correct and
complete in all material respects and that there was no Default
or Event of Default in existence as of such time or, if a Default
or Event of Default shall have occurred and be continuing,
describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default. In addition, Borrower shall
deliver to Agent and Lenders, not later than fifty (50) days
after the end of each Fiscal Quarter of Fiscal Year 2000 and
forty-five (45) days after the end of each Fiscal Quarter
thereafter, a management discussion and analysis which includes a
comparison to budget for that Fiscal Quarter and a comparison of
performance for that Fiscal Quarter to the corresponding period
in the prior year;
(c) OPERATING PLAN. To Agent and Lenders, as soon as
available, but not later than forty-five (45) days after the end
of Fiscal Year 2000 and thirty (30) days after the end of each
Fiscal Year thereafter, an annual operating plan for Borrower,
approved by the Board of Directors of Borrower, for the following
year, which will include a statement of all of the material
assumptions on which such plan is based, will include monthly
balance sheets and a monthly budget for the following year and
will integrate sales, gross profits, operating expenses,
operating profit, cash flow projections and Borrowing
Availability projections all prepared on the same basis and in
similar detail as that on which operating results are reported
(and in the case of cash flow projections, representing
management's good faith estimates of future financial performance
based on historical performance), and including plans for
personnel, Capital Expenditures and facilities;
(d) ANNUAL AUDITED FINANCIALS. To Agent and Lenders,
promptly upon their becoming publicly available, but not later
than one-hundred five (105) days after the end of Fiscal Year
2000 and ninety (90) days after the end of each Fiscal Year
thereafter, audited Financial Statements for Borrower and its
Subsidiaries on a consolidated and (unaudited) consolidating
basis, consisting of balance sheets and statements of income and
retained earnings and cash flows, setting forth in comparative
form in each case the figures for the previous Fiscal Year, which
Financial Statements shall be prepared in accordance with GAAP,
certified without qualification, by an independent certified
public accounting firm of national standing or otherwise
acceptable to Agent. Such Financial Statements shall be
accompanied by (i) a statement prepared in reasonable detail
showing the calculations used in determining compliance with each
of the financial covenants set forth on ANNEX G, (ii) a report
from such accounting firm to the effect that, in connection with
their audit examination, nothing has come to their attention to
cause them to believe that a Default or Event of Default has
occurred (or specifying those Defaults and Events of Default that
they became aware of), it being understood that such audit
examination extended only to accounting matters and that no
special investigation was made with respect to the existence of
Defaults or Events of Default, (iii) a letter addressed to Agent,
on behalf of itself and Lenders, in form and substance reasonably
satisfactory to Agent and subject to standard qualifications
taken by nationally recognized accounting firms, signed by such
accounting firm acknowledging that Agent and Lenders are entitled
to rely upon such<PAGE> accounting firm's certification of such
audited Financial Statements, (iv) the annual letters to such
accountants in connection with their audit examination detailing
contingent liabilities and material litigation matters, and (v)
the certification of the Chief Executive Officer or Chief
Financial Officer of Borrower that all such Financial Statements
present fairly in accordance with GAAP the financial position,
results of operations and statements of cash flows of Borrower
and its Subsidiaries on a consolidated and consolidating basis,
as at the end of such year and for the period then ended, and
that there was no Default or Event of Default in existence as of
such time or, if a Default or Event of Default shall have
occurred and be continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default;
(e) MANAGEMENT LETTERS. To Agent and Lenders, within
ten (10) Business Days after receipt thereof by any Credit Party,
copies of all management letters, exception reports or similar
letters or reports received by such Credit Party from its
independent certified public accountants;
(f) DEFAULT NOTICES. To Agent and Lenders, as soon as
practicable, and in any event within five (5) Business Days after
an executive officer of Borrower has actual knowledge of the
existence of any Default, Event of Default or other event which
has had a Material Adverse Effect, telephonic or telecopied
notice specifying the nature of such Default or Event of Default
or other event, including the anticipated effect thereof, which
notice, if given telephonically, shall be promptly confirmed in
writing on the next Business Day;
(g) SEC FILINGS AND PRESS RELEASES. To Agent and
Lenders, promptly upon their becoming available, copies of: (i)
all Financial Statements, reports, notices and proxy statements
made publicly available by any Credit Party to its security
holders; (ii) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by any
Credit Party with any securities exchange or with the Securities
and Exchange Commission or any governmental or private regulatory
authority; and (iii) all press releases and other statements made
available by any Credit Party to the public concerning material
changes or developments in the business of any such Person;
(h) SUBORDINATED DEBT AND EQUITY NOTICES. To Agent,
as soon as practicable, copies of all material written notices
given or received by any Credit Party with respect to any
Subordinated Debt or Stock of such Person, and, within five (5)
Business Days after any Credit Party obtains knowledge of any
matured or unmatured event of default with respect to any
Subordinated Debt, notice of such event of default;
(i) SUPPLEMENTAL SCHEDULES. To Agent, supplemental
disclosures, if any, required by SECTION 5.6 of the Agreement;
(j) LITIGATION. To Agent in writing, promptly upon
learning thereof, notice of any Litigation commenced or
threatened against any Credit Party that (i) seeks damages in
excess of $250,000, (ii) seeks injunctive relief, (iii) is
asserted or instituted against any Plan, its fiduciaries or its
assets or against any Credit Party or ERISA Affiliate in
connection with any<PAGE> Plan, (iv) alleges criminal misconduct
by any Credit Party, (v) alleges the violation of any law
regarding, or seeks remedies in connection with, any
Environmental Liabilities; or (vi) involves any product recall;
(k) INSURANCE NOTICES. To Agent, disclosure of losses
or casualties required by SECTION 5.4 of the Agreement;
(l) LEASE DEFAULT NOTICES. To Agent, copies of (i)
any and all default notices received under or with respect to any
leased location or public warehouse where Collateral is located,
and (ii) such other notices or documents as Agent may request in
its reasonable discretion; and
(m) LEASE AMENDMENTS. To Agent, copies of all
material amendments to real estate leases.
(n) TAX SHARING AGREEMENT. To Agent, copies of all
amendments to the Tax Sharing Agreement, certified by Borrower's
secretary or assistant secretary as being true, accurate, correct
and complete.
(o) LICENSE AGREEMENTS. To Agent, copies of all
License Agreements entered into after the Closing Date and all
amendments to any License Agreement, together with a schedule in
form and substance satisfactory to Agent setting forth the amount
and timing of each payment to be made (or projected to be made,
as the case may be) under each such License Agreement or, to the
extent affected thereby, each such amendment, certified by
Borrower's secretary or assistant secretary (or Chief Financial
Officer in the case of any such schedule) as being true,
accurate, correct and complete.
(p) MATERIAL PLAYER CONTRACTS. To Agent, a list of
all Material Player Contracts entered into after the Closing
Date, together with a schedule in form and substance satisfactory
to Agent setting forth the collective amount of annual payments
to be made (or projected to be made, as the case may be) under
all then existing Material Player Contracts in the aggregate,
certified by Borrower's secretary or assistant secretary (or
Chief Financial Officer in the case of any such schedule) as
being true, accurate, correct and complete.
(q) OTHER DOCUMENTS. To Agent and Lenders, such other
financial and other information respecting any Credit Party's
business or financial condition as Agent or any Lender shall,
from time to time, request.
<PAGE>
ANNEX F (SECTION 4.1(b))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrower shall deliver or cause to be delivered the
following:
(a) To Agent, upon its request, and in no event less
frequently than ten (10) Business Days after the end of each
Fiscal Month (together with a copy of all or any part of such
delivery requested by any Lender in writing after the Closing
Date), each of the following:
(i) with respect to Borrower and Rawlings Canada, a
Borrowing Base Certificate (with all Accounts payable in Canadian
Dollars converted to Dollars at the Current Dollar Equivalent as
of the date of such Borrowing Base Certificate), accompanied by
such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion;
(ii) with respect to Borrower and Rawlings Canada, a
summary of Inventory by location and type with a supporting
perpetual Inventory report (with the amount of all Inventory
valued in Canadian Dollars converted to Dollars at the Current
Dollar Equivalent as of the date of such summary), in each case
accompanied by such supporting detail and documentation as shall
be requested by Agent in its reasonable discretion; and
(iii) with respect to Borrower and Rawlings Canada, a
monthly trial balance showing Accounts outstanding aged from
invoice due date as follows (with all Accounts payable in
Canadian Dollars converted to Dollars at the Current Dollar
Equivalent as of the date of such trial balance): 1 to 30 days,
31 to 60 days, 61 to 90 days and 91 days or more, and
distinguishing Seasonal Accounts from all other Accounts, all
accompanied by such supporting detail and documentation as shall
be requested by Agent in its reasonable discretion.
(b) To Agent, on a weekly basis or at such more
frequent intervals as Agent may request from time to time
(together with a copy of all or any part of such delivery
requested by any Lender in writing after the Closing Date),
collateral reports with respect to Borrower and Rawlings Canada,
including all additions and reductions (cash and non-cash) with
respect to Accounts of Borrower and Rawlings Canada (with all
Accounts payable in Canadian Dollars converted to Dollars at the
Current Dollar Equivalent as of the date of each such report), in
each case accompanied by such supporting detail and documentation
as shall be requested by Agent in its reasonable discretion;
(c) To Agent, at the time of delivery of each of the
monthly Financial Statements delivered pursuant to ANNEX E, a
reconciliation of the Accounts trial balance and month-end
Inventory reports of Borrower and Rawlings Canada to Borrower's
and Rawlings Canada's (as applicable) general ledger and monthly
Financial Statements delivered pursuant to such ANNEX E, in each
case accompanied by such supporting detail and documentation as
shall be requested by Agent in its reasonable discretion;
<PAGE>
(d) Borrower, at its own expense, shall deliver to
Agent the results of each physical verification, if any, which
Borrower or any of its Subsidiaries may in their discretion have
made, or caused any other Person to have made on their behalf, of
all or any portion of their Inventory (with the amount of all
Inventory valued in Canadian Dollars converted to Dollars at the
Current Dollar Equivalent as of the date of such delivery) and,
if a Default or an Event of Default shall have occurred and be
continuing, Borrower shall, upon the request of Agent, conduct,
and deliver the results of, such physical verifications as Agent
may require;
(e) Borrower, at its own expense, shall deliver to
Agent such appraisals of its or its Subsidiaries assets as Agent
may request at any time after the occurrence and during the
continuance of a Default or an Event of Default, such appraisals
to be conducted by an appraiser, and in form and substance,
satisfactory to Agent; and
(f) Such other reports, statements, reconciliations or
conversions from Canadian Dollars to Dollars with respect to the
Borrowing Base or Collateral of any or all Credit Parties as
Agent shall from time to time request in its reasonable
discretion.
(g) For the purpose of valuing the Collateral of
Rawlings Canada that is denominated in Canadian Dollars, such
Collateral shall be converted into the Current Dollar Equivalent,
in each case, as determined as of the last day of each Fiscal
Month unless (a) Agent has notified Borrower that, in light of
recent or expected currency fluctuations, the conversion shall be
made on a more current basis and then such conversion shall be
made on such more current basis satisfactory to Agent or (b)
otherwise required pursuant to this Agreement to be determined as
of another day.
<PAGE>
ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrower shall not breach or fail to comply with any of
the following financial covenants, each of which shall be
calculated in accordance with GAAP consistently applied:
(a) MAXIMUM CAPITAL EXPENDITURES. Borrower and its
Subsidiaries on a consolidated basis shall not make Capital
Expenditures during the following periods that exceed in the
aggregate the amounts set forth opposite each of such periods:
PERIOD MAXIMUM CAPITAL EXPENDITURES
Fiscal Year 2000 $2,100,000
Fiscal Year 2001 $2,500,000
Fiscal Year 2002 $2,500,000
Fiscal Year 2003 $2,500,000
Fiscal Year 2004 and each $2,500,000
Fiscal Year thereafter
(b) MINIMUM FIXED CHARGE COVERAGE RATIO. Borrower and
its Subsidiaries shall have on a consolidated basis at the end of
each Fiscal Quarter set forth below, a Fixed Charge Coverage
Ratio for the 12-month period then ended (or with respect to the
Fiscal Quarters ending on or before November 30, 2000, the period
commencing on December 1, 1999 and ending on the last day of such
Fiscal Quarter) of not less than the following:
FIXED CHANGE
FISCAL QUARTER COVERAGE RATIO
Second Fiscal Quarter of Fiscal Year 2000 1.00 to 1.00
Third Fiscal Quarter of Fiscal Year 2000 1.00 to 1.00
Fourth Fiscal Quarter of Fiscal Year 2000 1.00 to 1.00
First Fiscal Quarter of Fiscal Year 2001 1.00 to 1.00
Second Fiscal Quarter of Fiscal Year 2001 1.00 to 1.00
Third Fiscal Quarter of Fiscal Year 2001 1.00 to 1.00
Fourth Fiscal Quarter of Fiscal Year 2001 1.00 to 1.00
First Fiscal Quarter of Fiscal Year 2002 1.00 to 1.00
Second Fiscal Quarter of Fiscal Year 2002 1.00 to 1.00
Third Fiscal Quarter of Fiscal Year 2002 1.00 to 1.00
Fourth Fiscal Quarter of Fiscal Year 2002 1.00 to 1.00
First Fiscal Quarter of Fiscal Year 2003 1.00 to 1.00
Second Fiscal Quarter of Fiscal Year 2003 1.00 to 1.00
Third Fiscal Quarter of Fiscal Year 2003 1.00 to 1.00
<PAGE>
Fourth Fiscal Quarter of Fiscal Year 2003 1.00 to 1.00
First Fiscal Quarter of Fiscal Year 2004 1.00 to 1.00
Second Fiscal Quarter of Fiscal Year 2004 1.00 to 1.00
Third Fiscal Quarter of Fiscal Year 2004 1.00 to 1.00
Fourth Fiscal Quarter of Fiscal Year 2004 1.00 to 1.00
and each Fiscal Quarter thereafter
c) MINIMUM EBITDA. Borrower and its Subsidiaries
on a consolidated basis shall have, at the end of each Fiscal
Quarter set forth below, EBITDA for the 12-month period then
ended (or with respect to the Fiscal Quarters ending on or before
November 30, 2000, the period commencing on December 1, 1999 and
ending on the last day of such Fiscal Quarter) of not less than
the following:
FISCAL QUARTER EBITDA
Second Fiscal Quarter of Fiscal Year 2000 $ 6,400,000
Third Fiscal Quarter of Fiscal Year 2000 $ 7,600,000
Fourth Fiscal Quarter of Fiscal Year 2000 $ 9,200,000
First Fiscal Quarter of Fiscal Year 2001 $10,000,000
Second Fiscal Quarter of Fiscal Year 2001 $11,700,000
Third Fiscal Quarter of Fiscal Year 2001 $12,700,000
Fourth Fiscal Quarter of Fiscal Year 2001 $12,500,000
First Fiscal Quarter of Fiscal Year 2002 $12,700,000
Second Fiscal Quarter of Fiscal Year 2002 $14,900,000
Third Fiscal Quarter of Fiscal Year 2002 $16,200,000
Fourth Fiscal Quarter of Fiscal Year 2002 $15,900,000
First Fiscal Quarter of Fiscal Year 2003 $15,900,000
Second Fiscal Quarter of Fiscal Year 2003 $15,900,000
Third Fiscal Quarter of Fiscal Year 2003 $15,900,000
Fourth Fiscal Quarter of Fiscal Year 2003 $15,900,000
First Fiscal Quarter of Fiscal Year 2004 $15,900,000
Second Fiscal Quarter of Fiscal Year 2004 $15,900,000
Third Fiscal Quarter of Fiscal Year 2004 $15,900,000
Fourth Fiscal Quarter of Fiscal Year 2004 $15,900,000
and each Fiscal Quarter thereafter
For purposes of calculating compliance with the
financial covenants set forth in this ANNEX G for any fiscal
period, there shall be excluded in the determination of EBITDA
for such period all Restructuring Charges for such period, but
only to the extent (i) included in the calculation of
consolidated net income of Borrower for such period in accordance
with GAAP and (ii) set forth in the Financial Statements and
Projections attached as DISCLOSURE SCHEDULES (3.4(A)) and (3.4(C))
as of the Closing Date (except, in the case of Restructuring
Charges constituting costs and charges associated with the
treatment of the "hockey business" of Borrower and its
Subsidiaries as a discontinued operation, the Financial
Statements in which <PAGE> such Restructuring Charges are
required to be set forth),and not in excess of the lesser of the
amount set forth therein and the amount otherwise permitted by
SECTION 6.5 of the Agreement.
Unless otherwise specifically provided herein, any
accounting term used in the Agreement shall have the meaning
customarily given such term in accordance with GAAP, and all
financial computations hereunder shall be computed in accordance
with GAAP consistently applied. That certain items or
computations are explicitly modified by the phrase "in accordance
with GAAP" shall in no way be construed to limit the foregoing.
If any "Accounting Changes" (as defined below) occur and such
changes result in a change in the calculation of the financial
covenants, standards or terms used in the Agreement or any other
Loan Document, then Borrower, Agent and Lenders agree to enter
into negotiations in order to amend such provisions of the
Agreement so as to equitably reflect such Accounting Changes with
the desired result that the criteria for evaluating Borrower's
and its Subsidiaries' financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not
been made; provided, however, that the agreement of Requisite
Lenders to any required amendments of such provisions shall be
sufficient to bind all Lenders. "Accounting Changes" means (a)
changes in accounting principles required by the promulgation of
any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified
Public Accountants (or successor thereto or any agency with
similar functions), (b) changes in accounting principles
concurred in by Borrower's certified public accountants; (c)
purchase accounting adjustments unde A.P.B. 16 and/or 17 and EITF
88-16, and the application of the accounting principles set forth
in FASB 109,including the establishment of reserves pursuant
thereto and any subsequent reserval (in whole or in part) of such
reserves; and (d) the reversal of any reserves established as a
result of purchase accounting adjustments. All such adjustments
resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of
pre-Closing Date liabilities) shall be treated as expenses in the
period the expenditures are made and deducted as part of the
calculation of EBITDA in such period. If Agent, Borrower and
Requisite Lenders agree upon the required amendments, then after
appropriate amendments have been executed and the underlying
Accounting Change with respect thereto has been implemented, any
reference to GAAP contained in the Agreement or in any other Loan
Document shall, only to the extent of such Accounting Change,
refer to GAAP, consistently applied after giving effect to the
implementation of such Accounting Change. If Agent, Borrower
and Requisite Lenders cannot agree upon the required amendments
within thirty (30) days following the date of implementation
of any Accounting Change, then all Financial Statements
delivered and all calculations of financial covenants
and other standards and terms in accordance with the Agreement
and the other Loan Documents shall be prepared, delivered and
made without regard to the underlying Accounting Change.
<PAGE>
ANNEX H (SECTION 1.1(d)
TO
CREDIT AGREEMENT
LENDERS' WIRE TRANSFER INFORMATION
GENERAL ELECTRIC CAPITAL CORPIRATION:
Bankers Trust Company
New York, New York
Account No.: 502-328-54
Account Name: GE Capital
<PAGE>
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at:
General Electric Capital Corporation
10 South LaSalle Street, Suite 2800
Chicago, Illinois 60603
Attention: Rawlings Sporting Goods Company, Inc.,
Account Manager
Telecopier No.: (312) 419-5992
Telephone No.: (312) 419-0985
with copies to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Ronald H. Jacobson
Telecopier No.: (312) 558-5700
Telephone No.: (312) 558-5600
and
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Corporate Counsel-Commercial Finance
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7552
(B) If to Borrower, at:
Rawlings Sporting Goods Company, Inc.
1859 Intertech Drive
Fenton, Missouri 63026
Attention: Michael Luetkemeyer
Telecopier No.: (314) 349-3958
Telephone No.: (314) 349-3500
with copies to:
<PAGE>
Stinson, Mag & Fizzell
1201 Walnut Street
Suite 2800
Kansas City, Missouri 64141-6251
Attention: Craig Evans
Telcopier No.: (816) 842-8600
Telephone No.: (816) 691-3310
<PAGE>
ANNEX J
(FROM ANNEX A - DEFINITIONS OF REVOLVING LOAN
COMMITMENT AND SWING LINE COMMITMENT)
TO
CREDIT AGREEMENT
Lender(s):
General Electric Capital Corporation
Revolving Loan Commitment
(including a Swing Line Commitment
of $5,000,000): $75,000,000
<PAGE>
SCHEDULE 1.1 (SECTION 1.1(a))
TO
CREDIT AGREEMENT
RESPONSIBLE INDIVIDUAL
General Electric Capital Corporation
10 South LaSalle Street, Suite 2800
Chicago, Illinois 60603
Attention: Rawlings Sporting Goods Company, Inc.,
Account Manager
Telecopier No.: (312) 419-5992
Telephone No.: (312) 419-0985
<PAGE>
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation by reference of our report included in this Form
10-K, into the Company's previously filed Registration Statement
File No. 33-83958 and Registration Statement No. 33-86354.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
St. Louis, Missouri,
December 28, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> AUG-31-1999
<CASH> 1,438
<SECURITIES> 0
<RECEIVABLES> 34,586
<ALLOWANCES> 2,538
<INVENTORY> 39,749
<CURRENT-ASSETS> 78,146
<PP&E> 28,459
<DEPRECIATION> 15,889
<TOTAL-ASSETS> 121,657
<CURRENT-LIABILITIES> 70,592
<BONDS> 8,988
0
0
<COMMON> 79
<OTHER-SE> 41,998
<TOTAL-LIABILITY-AND-EQUITY> 121,657
<SALES> 165,391
<TOTAL-REVENUES> 165,391
<CGS> 117,720
<TOTAL-COSTS> 117,720
<OTHER-EXPENSES> 46,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,699
<INCOME-PRETAX> (4,150)
<INCOME-TAX> (789)
<INCOME-CONTINUING> (3,361)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,361)
<EPS-BASIC> (.43)
<EPS-DILUTED> (.43)
</TABLE>
EXHIBIT 99
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS OF RAWLINGS SPORTING GOODS COMPANY, INC.:
We have audited the accompanying consolidated balance sheets of
Rawlings Sporting Goods Company, Inc. (a Delaware corporation)
and subsidiaries (the Company) as of August 31, 1999 and 1998 and
the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period
ended August 31, 1999. These financial statements are the
responsibility of Rawlings' management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Rawlings Sporting Goods Company, Inc. and subsidiaries as of
August 31, 1999 and 1998, and the results of their operations and
their cash flows for each of the three years in the period ended
August 31, 1999, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri
December 14, 1999
(except with respect to the matter discussed in Note 2,
as to which the date is December 28, 1999)
<PAGE>
RAWLINGS SPORTING GOODS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended August 31,
1999 1998 1997
<S> <C> <C> <C>
Net revenues $165,391 $170,604 $147,600
Cost of goods sold 117,720 119,151 102,111
Gross profit 47,671 51,453 45,489
Selling, general and
administrative expenses 46,890 39,989 33,609
Unusual charges (See Note 6) - 1,475 -
Operating income 781 9,989 11,880
Interest expense 4,699 4,218 3,115
Other expense, net 232 251 83
Income (loss) before
income taxes (4,150) 5,520 8,682
Provision (benefit) for
income taxes (789) 1,860 3,212
Net income (loss) $(3,361) $3,660 $5,470
Net income (loss) per common share:
Basic ($0.43) $0.47 $0.71
Diluted ($0.43) $0.47 $0.71
Shares used in computing per share amounts:
Basic 7,853 7,777 7,712
Assumed exercise of
stock options 21 41 6
Diluted 7,874 7,818 7,718
</TABLE>
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 and per share data)
August 31,
1999 1998
Assets
Current assets:
Cash and cash equivalents $1,438 $862
Accounts receivable,
net of allowance of
$2,538 and $2,043,
respectively 32,048 40,352
Inventories 39,749 43,573
Prepaid expenses 928 673
Deferred income taxes 3,983 2,927
Total current assets 78,146 88,387
Property, plant and equipment, net 12,570 12,911
Deferred income taxes 21,460 22,340
Goodwill, net 8,112 8,326
Other assets 1,369 568
Total assets $121,657 $132,532
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $51,015 $61
Accounts payable 8,518 9,047
Accrued liabilities 11,059 12,547
Total current liabilities 70,592 21,655
Long-term debt, less current maturities 133 57,048
Other long-term liabilities 8,855 9,577
Total liabilities 79,580 88,280
Stockholders' equity:
Preferred stock, $.01 par
value per share, 10,000,000
shares authorized,
no shares issued and
outstanding - -
Common stock, $.01 par
value per share,
50,000,000 shares
authorized,
7,897,708 and
7,794,483 shares
issued and outstanding,
respectively 79 78
Additional paid-in capital 30,482 29,479
Stock subscription receivable (1,421) (1,421)
Cumulative other comprehensive income (1,399) (1,581)
Retained earnings 14,336 17,697
Stockholders' equity 42,077 44,252
Total liabilities and
stockholders' equity $121,657 $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 STOCKHOLDERS' EQUITY
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Cumula-
Stock tive
Subscrip Other Total
Additional -tion Compre Stock Compre
Common Stock Paid-in Receiv -hensive Retained -holder's -hensive
Shares Amount Capital -able Income Earnings Equity Income
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
August 31,
1996 7,697,527 $77 $25,820 $ - $ - $ 8,567 $34,464
Net income - - - - - 5,470 5,470 $5,470
Issuance of
Common stock 28,287 - 263 - - - 263 -
Comprehensive
income $5,470
Balance,
August 31,
1997 7,725,814 77 26,083 - - 14,037 40,197
Net income - - - - - 3,660 3,660 $3,660
Issuance of
Common
stock 68,669 1 704 - - - 705 -
Issuance of
warrants - - 2,692 (1,421) - - 1,271 -
Translation
adjustments - - - - (1,581) - (1,581) (1,581)
Comprehensive
income $2,079
Balance,
August 31,
1998 7,794,483 78 29,479 (1,421) (1,581) 17,697 44,252
Net loss - - - - - (3,361) (3,361) $(3,361)
Issuance of
Common stock 103,225 1 1,003 - - - 1,004 -
Translation
adjustments - - - - 182 - 182 182
Comprehensive
income $(3,179)
Balance,
August 31,
1999 7,897,708 $79 $30,482 $(1,421) $(1,399) $14,336 $42,077
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
RAWLINGS SPORTING GOODS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Years Ended August 31,
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $(3,361) $3,660 $5,470
Adjustments to reconcile net
(loss) income to
net cash provided by
(used in) operating
activities :
Depreciation and amortization 2,576 1,781 1,220
Loss (gain) on disposal of
equipment - 101 (150)
Deferred income taxes (889) 1,019 2,642
Changes in operating assets and liabilities:
Accounts receivable, net 8,304 (3,742) (2,878)
Inventories 3,824 (10,608) 2,634
Prepaid expenses (255) 279 537
Other assets (926) 93 (242)
Accounts payable (529) 19 (1,263)
Accrued liabilities and other (1,279) (1,186) 581
Net cash provided by (used in)
operating activities 7,465 (8,584) 8,551
Cash flows from investing activities:
Capital expenditures (1,932) (3,600) (2,994)
Acquisition of a business - (14,098) -
Proceeds from sale of equipment - - 150
Net cash used in investing activities (1,932) (17,698) (2,844)
Cash flows from financing activities:
Borrowings of long-term debt 44,050 108,450 41,448
Repayments of long-term debt (50,011) (84,014) (47,475)
Issuance of common stock 1,004 705 263
Issuance of warrants - 1,271 -
Net cash (used in) provided by
financing activities (4,957) 26,412 (5,764)
Net increase (decrease) in cash and
cash equivalents 576 130 (57)
Cash and cash equivalents,
beginning of year 862 732 789
Cash and cash equivalents, end of year $1,438 $862 $732
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $4,564 $4,216 $3,159
Income taxes 300 631 383
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Rawlings Sporting Goods Company, Inc. and all of its subsidiaries
(Rawlings or the Company). All significant intercompany
transactions have been eliminated.
BUSINESS
Rawlings manufactures and distributes sports equipment and
uniforms to team sports such as baseball, basketball, football,
and hockey predominately in the United States.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid investments
with a maturity when purchased of three months or less.
INVENTORIES
Inventories are valued at the lower of cost or net realizable
value with cost principally determined on a first-in, first-out
method. Cost includes materials, labor and overhead.
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment is stated at cost and depreciation
is generally computed on a straight-line basis. The principal
rates of depreciation are as follows:
Buildings and improvements 20-30 years
Machinery and equipment 5-12 years
Other 4-10 years
INCOME TAXES
Deferred income taxes are recorded for temporary differences in
reporting income and expenses for tax and financial statement
purposes in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Incomes Taxes (SFAS No. 109).
<PAGE>
TRANSLATION AND HEDGING OF FOREIGN CURRENCIES
The assets and liabilities of foreign branches and subsidiaries
are translated into U.S. dollars at current exchange rates and
profit and loss accounts are translated at average annual
exchange rates. Resulting translation gains and losses are
included as cumulative other comprehensive income, a separate
component in Stockholders' Equity. Foreign exchange transaction
losses of $10, $0 and $25 were included in the results of
operations for the fiscal years ended August 31, 1999, 1998 and
1997, respectively.
The Company has utilized forward foreign currency contracts to
minimize the impact of currency movements on anticipated royalty
payments denominated in Japanese yen. In June and September 1998,
the Company entered into forward contracts to sell Yen 75 million
and Yen 150 million with fixed exchange rates and maturity dates
which aligned with the royalty payments received in February and
August 1999, respectively. The Company has no forward foreign
currency contracts outstanding as of August 31, 1999.
COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income." This statement
requires that all items recognized under accounting standards as
components of comprehensive income be reported in the financial
statements. The Company has included these disclosures in the
accompanying Consolidated Statements of Stockholders' Equity.
FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments
approximates their carrying amounts. Fair value for all financial
instruments other than long-term debt, for which no quoted market
prices exist, was based on appropriate estimates. The value of
the Company's long-term debt is estimated based on market prices
for similar issues or on the current rates offered to the Company
for debt of the same remaining maturities.
RECLASSIFICATION
Certain reclassifications have been made to the prior year
financial statements to conform with the current year
presentation.
USE OF ESTIMATES
These financial statements have been prepared on the accrual
basis of accounting, which require the use of certain estimates
by management, in determining the Company's assets, liabilities,
revenues and expenses. Resolution of certain matters could differ
significantly from the resolution that is currently expected.
<PAGE>
NOTE 2. DEBT REFINANCING
On December 28, 1999, the Company refinanced its long-term credit
facility by entering into a $75,000,000 credit agreement with a
new lender. Borrowings under the new credit facility will bear
interest, at the option of the borrower, at either LIBOR plus
applicable margin or the Index Rate (as defined therein) plus
applicable margin. The credit facility requires the Company to
meet certain financial covenants including a minimum fixed charge
coverage, minimum level of earnings before interest, taxes,
depreciation and amortization, and restricts the Company's
ability to make capital expenditures and to pay cash dividends.
The credit facility matures in five years, is asset based and is
supported by the Company's receivables, inventory and property,
plant and equipment. Additionally, the facility provides for an
incremental seasonal advance. The proceeds from this new
facility were used to pay-off the existing credit facility.
NOTE 3. ACQUISITION
On September 12, 1997 the Company acquired the net assets of the
Victoriaville hockey business. The acquisition was accounted for
under the purchase method and accordingly, the results of
operations were included in the Company's consolidated statements
of income from the date of acquisition. The purchase price, paid
in cash, has been allocated to the assets and liabilities and the
excess of cost over the fair value of net assets acquired is
being amortized over a forty year period on a straight-line basis
with accumulated amortization as of August 31, 1999 and 1998 of
$418 and $204, respectively. The purchase price allocation was as
follows:
Net assets $ 5,568
Goodwill 8,530
Total purchase price $14,098
NOTE 4. INVENTORIES
Inventories consist of the following:
August 31,
1999 1998
Raw materials $8,447 $9,552
Work in process 1,977 2,497
Finished goods 29,325 31,524
Total inventories $39,749 $43,573
<PAGE>
NOTE 5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consists of the following:
August 31,
1999 1998
Buildings and improvements $6,198 $6,143
Machinery and equipment 19,111 17,598
Other 3,150 2,926
Total property, plant and
equipment 28,459 26,667
Less - Accumulated depreciation (15,889) (13,756)
Property, plant and equipment,
net $12,570 $12,911
NOTE 6. UNUSUAL CHARGES
ENVIRONMENTAL
The Company has been conducting environmental investigation and
remediation activities at its Dolgeville, New York facility (the
"Site") with respect to the release of wood pitch into
surrounding soil and surface water. In November 1997, the Company
entered into a Voluntary Agreement with the New York State
Department of Environmental Conservation (the "NYSDEC") to
conduct certain environmental remediation activities related to
the presence of wood pitch in the soils at the Site. The wood
pitch was generated as a result of the operation, before
Rawlings' ownership of the Site, of a retort facility by a third
party unrelated to Rawlings. In December 1997, an environmental
consulting firm retained by Rawlings initiated remediation
activities under the oversight of the NYSDEC. In conducting the
remediation activities under the Voluntary Agreement, it was
discovered that the actual volume of wood pitch substantially
exceeded the amount originally estimated by the environmental
consulting firm. Some of the unanticipated, additional wood pitch
has been remediated in accordance with the requirements of the
Voluntary Agreement. The Company believes that a portion of the
unanticipated, additional volume of wood pitch remaining at the
Site may be outside the scope of the current Voluntary Agreement.
Nevertheless, the Company expects to be required to address such
additional wood pitch through an amendment to the Voluntary
Agreement. In May 1998, the Company's environmental consultants
completed an investigation of the amount of the additional wood
pitch at the Site. Based upon the report received from the
environmental consultants and the Company's historical experience
with environmental matters at this Site, the Company recorded a
$975 charge to remediate the additional unanticipated wood pitch,
which is reflected in unusual charges in the accompanying
consolidated statement of income for 1998. In the year ended
December 31, 1993, the Company recorded a charge of $1,559 which
included the estimated clean up costs at this Site. The Company's
reserve for remediation costs as of August 31, 1999 was $987. In
management's estimation, this amount is adequate to cover the
expected remediation activities at the wood pitch Site.
In June 1998, the Company filed an action in the Northern
District of New York against Trident Rowan Group, Inc. (Trident
Rowan), which the Company believes is the successor to the
entity<PAGE> which owned the wood pitch Site during the period in
which the wood pitch contamination occurred. The Company believes
that the case against Trident Rowan is strong and all or a
portion of the clean up costs associated with the wood pitch at
the Site may be recoverable. However, due to the uncertainty
associated with this matter, no receivable associated with a
potential recovery has been recorded at this time and there can
be no assurance that any amount will be recovered.
CHANGE IN CHIEF EXECUTIVE OFFICER
In October 1997, the Company recorded a $500 charge for severance
and related benefits, legal costs and other costs associated with
changes in the Chief Executive Officer's position. This charge
has been included in unusual charges in the accompanying
consolidated statement of income. In November 1998, Stephen M.
O'Hara was named Chairman and Chief Executive Officer of
Rawlings.
NOTE 7. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
August 31,
1999 1998
Salary, benefits and other taxes $ 4,489 $ 4,670
Royalties 990 1,975
Environmental 987 1,082
Payable to former parent - 1,346
Other 4,593 3,474
Accrued liabilities $11,059 $12,547
<PAGE>
NOTE 8. INCOME TAXES
The income tax provision (benefit) is as follows:
1999 1998 1997
Current:
Federal $(200) $ 724 $ 472
State and other 300 117 98
Total current 100 841 570
Deferred:
Federal (1,389) 1,184 2,464
Foreign (250) (281) -
State and other (496) 116 178
Total deferred (2,135) 1,019 2,642
Valuation allowance 1,246 - -
Total income tax
(benefit)
provision $(789) $1,860 $3,212
A reconciliation between the provision for income taxes computed
at the Federal statutory rate and the rate used for financial
reporting purposes is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Expected provision
(benefit) at the
statutory rate $(1,453) (35.0) $1,932 35.0 $3,039 35.0
State & other taxes,
net of federal tax benefit (117) (2.8) 232 4.2 365 4.2
Lower tax rates on
foreign income (576) (13.9) (265) (4.8) (118) (1.4)
Valuation allowance 1,246 30.0 - - - -
Other 111 2.7 (39) (0.7) (74) (0.8)
Total income
tax provision (benefit) $(789) (19.0) $1,860 33.7 $3,212 37.0
</TABLE>
The significant components of deferred taxes which are included
in the accompanying balance sheets are as follows:
<TABLE>
<CAPTION>
1999 1998
Deferred Deferred Tax Deferred Deferred Tax
Tax Assets Liabilities Tax Assets Liabilities
<S> <C> <C> <C> <C>
Intangible assets $19,720 $ - $22,440 $ -
Operating loss carryforward 2,976 - 316 -
Foreign tax credits 1,458 - 851 -
Receivable reserve 512 - 157 -
Environmental reserve 363 - 410 -
Inventory 1,773 - 718 -
Other accruals 1,135 - 1,442 -
Other 390 1,638 433 1,500
Valuation allowance (1,246) - - -
Total $27,081 $1,638 $26,767 $1,500
</TABLE>
<PAGE>
In 1999 the Company recorded a valuation allowance of $1,246
against certain foreign tax credits set to expire in 2000 to
2003. The Company's net operating loss carryforward expires in
2019 and the foreign tax credits expire in 2000 to 2004.
Income taxes have not been provided on the undistributed income
(approximately $3,820) of a foreign subsidiary, which the Company
does not intend to be remitted to the U.S.
NOTE 9. DEBT AND CAPITAL LEASES
Debt consists of the following:
August 31,
1999 1998
Credit agreement with banks due
April 2000, average interest
rate of 9.50% and 6.65%,
respectively $50,950 $56,850
Obligation under capital
lease, interest rate of 4.90% 198 259
Total debt 51,148 57,109
Less current maturities (51,015) (61)
Total long-term debt $ 133 $57,048
In 1997, the Company maintained a $72,000 variable rate unsecured
credit agreement with a bank group. In September 1997, the
Company amended and restated the unsecured credit agreement with
a bank group which, among other matters, increased the facility
to $90,000 and extended the maturity date to September 1, 2002.
The amended and restated credit agreement, among other matters,
required the Company to meet certain financial covenants
including a minimum fixed charge coverage, a required ratio of
maximum total debt to total capitalization, a minimum net worth
and restricted the Company's ability to pay cash dividends. In
June 1998, the Company amended the credit agreement to, among
other matters, exclude the unusual charges from the minimum fixed
charge coverage covenant. In March 1999, the Company renegotiated
debt covenants by amending the existing credit agreement with an
increase in interest rates. In July 1999, the credit agreement
was amended to become an asset based borrowing vehicle. Available
credit under the amended agreement is based on a percentage of
net receivables, inventory and property, plant and equipment. In
September 1999, the agreement was amended to increase the
allowable borrowing base by $4,000 with an additional increase in
interest rates. In October 1999, the credit agreement was amended
increasing the allowable borrowing base to a percentage of assets
plus $10,000 with a maximum availability of $70,000. This last
amendment changed the maturity date of the agreement to April
2000, and as a result, the debt evidenced by such agreement has
been reclassified as current on the Company's balance sheet.
Additionally, the Company is currently not in compliance with
certain debt covenants under its amended and restated credit
agreement with its current bank group. The Company has obtained
a temporary waiver of these covenants through December 31, 1999.
Upon expiration of the waiver on December 31, 1999, the defaults
could be reinstated and the lenders would have all the rights and
remedies provided for in the amended and restated credit
agreement. In addition, the Company, in consideration for
waiving the defaults under the amended and restated credit
agreement,<PAGE> agreed to pay a supplemental commitment fee of
twenty-five basis points, payable on a gross percentage basis and
not a per annum basis, on the last day of each month, commencing
on December 31, 1999, on the full amount of the aggregate
revolving credit commitment then in effect. Based on the
aggregate revolving credit commitment in effect on the date
hereto, the supplemental commitment fee would be $175,000.
The Company is pursuing the refinancing of its debt to more
favorable terms and believes it can successfully conclude a
long-term debt refinancing. The Company has classified this debt
as current in the consolidated balance sheet. See Note 2 for a
discussion of the Company's debt refinancing.
As of August 31, 1999 the Company had outstanding letters of
credit of $816 under the credit agreement with banks.
In October 1995 the Company entered into a two-year interest rate
swap agreement with a commercial bank under which the Company
received a floating rate based on three month LIBOR through
September 1997 on $25,000 and paid a fixed rate of 6.50 percent.
In October 1997, the Company entered into a two-year interest
rate swap agreement with a commercial bank under which the
Company received a floating rate based on three month LIBOR
through October 1999 on $30,000 and paid a fixed rate of 7.00
percent. These transactions effectively converted a portion of
the Company's debt from a floating rate to a fixed rate.
The Company uses interest rate swaps, with the objective of
reducing exposure to increases in short-term interest rates, by
fixing the interest rate on a portion of its debt for a period of
time. The interest differential, to be paid or received on an
interest rate swap, is recognized as an adjustment to interest
expense as the differential occurs.
NOTE 10. OTHER LONG-TERM LIABILITIES
In July 1994, Figgie International, Inc. (the former parent)
transferred the net assets of the Rawlings business to the
Company. The assets and liabilities transferred to Rawlings were
recorded at the predecessor's cost for financial reporting
purposes. For tax purposes, the transaction resulted in a step-up
of the basis of the assets transferred determined by the fair
value paid by the Company for the Rawlings business. Under the
terms of a tax sharing and separation agreement between the
Company and the former parent, the Company is required to pay the
former parent 43 percent of the tax benefits resulting from the
step-up in the tax basis of the assets as the benefit of the
step-up is realized. The amount of the obligation to pay the
former parent that is not expected to be paid in the next year is
recorded as other long-term liabilities.
NOTE 11. EMPLOYEE BENEFITS
COMPANY-SPONSORED DEFINED CONTRIBUTION PLANS
Substantially all U.S. salaried employees and certain U.S. hourly
employees are covered by a defined contribution (Section 401(k))
plan that provides funding based on a percentage of compensation.
The Company's contributions to the plan were $323, $327 and $242
in 1999, 1998 and 1997, respectively.
<PAGE>
MULTI-EMPLOYER PENSION PLANS
Certain union employees participate in multi-employer defined
benefit pension plans. Contributions to the plans were $171, $194
and $201 in 1999, 1998 and 1997, respectively.
NOTE 12. STOCK OPTIONS
The 1994 Rawlings Long-Term Incentive Plan, as amended (the 1994
Incentive Plan), provides for the issuance of up to 1,125,000
shares of Rawlings common stock upon the exercise of stock
options and stock appreciation rights, and as restricted stock,
deferred stock, stock granted as a bonus or in lieu of other
awards and other equity-based awards. The 1994 Non-Employee
Directors Stock Plan (1994 Directors Stock Plan) provides for the
issuance of up to 50,000 shares of Rawlings common stock to
non-employee directors upon the exercise of stock options or in
lieu of director's fees.
Stock options granted under the 1994 Incentive Plan and the 1994
Directors Stock Plan have exercise prices equal to the market
price on the date of grant, vest over three to four years from
the date of grant and, once vested, are generally exercisable
over ten years following the date of grant.
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation." Accordingly, no compensation cost
has been recognized for the stock option plans. Had compensation
cost for the Company's stock option plans been determined based
on the fair value at the grant date for awards in 1999, 1998 and
1997 consistent with the provisions of this statement, the
Company's net income and net income per share would have been as
follows (in thousands, except net income per share):
1999 1998 1997
Net (loss) income $(4,542) $2,956 $4,910
Net (loss) income
per share $(0.58) $0.38 $0.64
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1999,
1998 and 1997: dividend yield of 0 percent, expected volatility
of 43.0 percent, 40.0 percent and 54.0 percent in 1999, 1998 and
1997, respectively, risk-free interest rate of 4.8 percent, 5.4
percent and 6.4 percent in 1999, 1998 and 1997, respectively and
expected life of six years. The weighted average grant date fair
value of options was $4.77, $6.59 and $5.82 for 1999, 1998 and
1997, respectively.
<PAGE>
OPTION ACTIVITY IS AS FOLLOWS:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Outstanding at beginning
of year 610,810 631,137 483,185
Granted 412,850 178,000 160,378
Exercised (70,376) (44,548) (1,000)
Cancelled (86,156) (153,779) (11,426)
Outstanding at end of year 867,128 610,810 631,137
Shares exercisable 392,337 313,899 327,541
Price of stock options:
Granted $8.88 - $14.00 $11.88 - $13.63 $8.31 - $12.13
Exercised $9.00 - $ 9.75 $ 9.00 - $ 9.75 $8.00
Cancelled $8.31 - $13.88 $ 9.00 - $13.63 $9.00 - $ 9.75
Outstanding $7.88 - $14.00 $ 7.88 - $13.88 $7.88 - $13.88
Exercisable $7.88 - $13.88 $ 7.88 - $13.88 $7.88 - $13.88
</TABLE>
At August 31, 1999, 191,948 shares of Rawlings common stock were
available for future awards under the plans. As of August 31,
1999 the weighted average remaining contractual life on
outstanding options was 6.4 years.
NOTE 13. WARRANTS
In November 1997, the Company issued warrants to purchase 925,804
shares of common stock at $12.00 per share to Bull Run
Corporation for $3.07 per warrant. The warrants expire in
November 2001 and are exercisable only if the Company's common
stock closes above $16.50 for twenty consecutive trading days.
One half of the purchase price of the warrants was paid in cash
with the other half payable with interest at 7 percent at the
time of exercise or expiration of the warrants. The receivable
for the unpaid portion of the warrants is classified as a stock
subscription receivable in the accompanying balance sheet. These
warrants are not considered common stock equivalents until the
point in time that the warrants become exercisable.
NOTE 14. RELATED PARTY TRANSACTIONS
In 1999 the Company sold approximately $285 of product to a
professional baseball club in which one of the Company's board of
directors is the secretary and treasurer. The Company believes
that the terms and prices for the sale of these products are no
less favorable than those obtained from unaffiliated parties.
During the fiscal year ended August 31, 1999, the Company
purchased approximately $442 of catalogs and promotional items
from a company in which one of the Company's board of directors
is the president.
<PAGE>
NOTE 15. COMMITMENTS AND CONTINGENCIES
The Company operates certain facilities and equipment under
operating lease agreements. The lease expense was $1,951,
$2,184, and $2,300 for years 1999, 1998 and 1997, respectively.
Future minimum payments under noncancelable leases, royalty and
licensing agreements as of August 31, 1999 are as follows:
Royalty and
Operating Licensing
Leases Agreements
Fiscal 2000 $1,398 $ 4,103
Fiscal 2001 481 3,428
Fiscal 2002 137 2,919
Fiscal 2003 - 545
Fiscal 2004 - 507
Thereafter - 225
Total minimum lease payments $2,016 $11,727
In the normal course of doing business, Rawlings is subject to
various federal, state and local environmental laws. Rawlings
currently is working with the New York State Department of
Environmental Conservation in addressing contamination relating
to wood pitch located at its facility in Dolgeville, New York.
(See Note 6 Unusual Charges for additional discussion of the
Dolgeville environmental matter.)
Rawlings is periodically subjected to product liability claims
and proceedings involving its patents and other legal
proceedings; such proceedings have not had a material adverse
effect on Rawlings.
Additionally, the Company is currently not in compliance with
certain debt covenants contained in its amended and restated
credit agreement with its current bank group. The Company has
obtained a waiver of these covenants through December 31, 1999.
The Company is pursuing the refinancing of its debt to more
favorable terms and believes it can successfully conclude a
long-term debt refinancing.
In December 1999, the Company received a commitment to refinance
its long-term credit facility. The credit facility will be
asset-based and supported by the Company's receivables, inventory
and property, plant and equipment. Additionally, the facility
provides for an incremental seasonal advance. The facility is
scheduled to close and be funded prior to December 31, 1999. The
proceeds from this new facility will be used to pay-off the
existing credit facility. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition --
Liquidity and Capital Resources."
<PAGE>
In the opinion of management, ultimate liabilities resulting from
pending environmental matters and other legal proceedings will
not have a material adverse effect on the financial condition or
results of operations of Rawlings.
NOTE 16. OPERATING SEGMENTS
In 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of a Business
Enterprise and Related Information," which establishes standards
for reporting information about reportable operating segments.
Operating segments, as defined, are components of an enterprise
about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
The Company has identified operating segments based on internal
management reports. This Statement allows aggregation of similar
operating segments into a single reportable operating segment if
the businesses are considered similar under the criteria of this
statement. The Company has five operating segments based on its
product categories, which in applying the aggregation criteria of
this Statement have been aggregated into two reportable segments:
Sports Equipment and Licensing.
The sports equipment segment manufactures and distributes sports
equipment and uniforms for team sports including baseball,
basketball, football, and hockey. The licensing segment licenses
the Rawlings brand name on products sold by other companies and
include products such as golf equipment, footwear, and
activewear. There are no determinable operating expenses for the
licensing segment. The accounting policies of the segments are
the same as those described in Note 1 for the Company. The
revenues generated and long-lived assets located outside the
United States are not significant for separate presentation. One
customer's purchases of products sold by Rawlings were 13
percent, 12 percent and 12 percent of net revenues of Rawlings
for 1999, 1998 and 1997, respectively.
1999 1998 1997
Net revenues
Sports equipment $159,422 $164,734 $141,069
Licensing 5,969 5,870 6,531
Consolidated net revenues $165,391 $170,604 $147,600
Operating income (loss)
Sports equipment $(5,188) $4,119 $5,349
Licensing 5,969 5,870 6,531
Consolidated operating income $781 $9,989 $11,880
Total assets
Sports equipment $120,428 $131,453 $100,414
Licensing 1,229 1,079 850
Consolidated total assets $121,657 $132,532 $101,264
<PAGE>
NOTE 17. ALLOWANCE FOR DOUBTFUL ACCOUNTS
1999 1998 1997
Balance at beginning of year $2,043 $1,627 $1,498
Provision 1,110 827 760
Acquisition of Victoriaville
hockey business - 838 -
Charge-offs, net of recoveries (615) (1,249) (631)
Balance at end of year $2,538 $2,043 $1,627
<PAGE>
