SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________ to __________
Commission File Number: 0-24556
MARKER INTERNATIONAL
(Exact name of registrant as specified in its charter)
Utah 87-0372759
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1070 West 2300 South
Salt Lake City, Utah 84119
(Address of principal executive offices)
(801) 972-2100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filings
requirements for the past 90 days.
Yes X No ________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Common Stock Outstanding at August 18, 1998
Common Stock, $0.01 par value 11,130,577
<PAGE>
MARKER INTERNATIONAL
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets
As of June 30, 1998 and March 31, 1998 3
Condensed Consolidated Statements of Operations
For the Three Months Ended June 30, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended June 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
<PAGE>
PART I - FINANCIAL INFORMATION
MARKER INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
--------- -----------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 2,580 $ 4,241
Accounts receivable, net of allowance for doubtful
accounts of $1,462 and $1,697, respectively 25,911 31,710
Inventories 53,606 37,223
Prepaid and other current assets 4,976 4,440
---------- ----------
Total current assets 87,073 77,614
---------- ----------
PROPERTY, PLANT AND EQUIPMENT:
Land 1,050 1,050
Building and improvements 8,250 7,581
Machinery and equipment 22,334 21,222
Furniture, fixtures and office equipment 5,392 4,582
---------- ----------
37,026 34,435
Less accumulated depreciation and amortization (18,174) (16,733)
---------- ----------
Net property, plant and equipment 18,852 17,702
---------- ----------
INTANGIBLE ASSETS, net of accumulated amortization 8,244 8,322
---------- ----------
OTHER ASSETS 1,418 1,482
------------ ----------
$ 115,587 $ 105,120
============ ==========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in Thousands)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
--------- ----------
CURRENT LIABILITIES:
<S> <C> <C>
Notes payable to banks $ 64,676 $ 48,645
Current maturities of long-term debt 3,833 3,512
Current maturities of Series A Bonds, issued to a related party 4,500 4,500
Accounts payable 6,542 6,381
Other current liabilities 8,095 7,830
---------- ----------
Total current liabilities 87,646 70,868
---------- ----------
LONG-TERM DEBT, net of current maturities 14,810 14,898
---------- ----------
SERIES A BONDS, net of current maturities, issued to a related party 5,500 5,500
---------- ----------
MINORITY INTEREST 1,399 1,447
---------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 5,000,000 shares
authorized and none issued - -
Common stock, $0.01 par value, 25,000,000
shares authorized; 11,130,577 issued and
outstanding 111 111
Additional paid-in capital 36,299 36,299
Accumulated deficit (22,826) (16,471)
Cumulative foreign currency translation adjustments (7,352) (7,532)
------------ -----------
Total shareholders' equity 6,232 12,407
------------ -----------
$ 115,587 $ 105,120
============ ===========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1998 1997
----- ----
<S> <C> <C>
NET SALES $ 3,010 $ 2,271
COST OF SALES 1,364 2,088
-------- --------
GROSS PROFIT 1,646 183
-------- --------
OPERATING EXPENSES:
Selling 2,767 2,859
General and administrative 2,754 3,059
Research and development 911 992
Warehousing and shipping 503 439
Amortization of goodwill and intangibles 111 227
--------- -------
7,046 7,576
--------- -------
OPERATING LOSS (5,400) (7,393)
OTHER INCOME (EXPENSE): --------- --------
Interest expense (1,495) (1,114)
Other, net 489 384
--------- --------
(1,006) (730)
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (6,406) (8,123)
BENEFIT FOR INCOME TAXES - 2,844
MINORITY INTEREST 52 224
---------- --------
NET LOSS $ (6,354) $ (5,055)
=========== =========
NET LOSS PER COMMON SHARE (BOTH BASIC AND DILUTED) $(0.57) $(0.45)
=========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING (BOTH BASIC AND DILUTED) 11,130,577 11,129,127
============ ===========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1998 1997
--------- -----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (6,354) $ (5,055)
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interest in loss (52) (224)
Gain on sale of property, plant and equipment - (88)
Depreciation and amortization 1,273 1,286
Change in assets and liabilities:
Decrease in accounts receivable, net 5,851 2,917
Increase in inventories (16,205) (13,921)
Increase in prepaid and other assets (251) (2,546)
Increase in accounts payable 1,686 1,156
Decrease in other current liabilities (1,395) (2,930)
---------- ---------
NET CASH USED IN OPERATING ACTIVITIES (15,447) (19,405)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,951) (2,404)
Proceeds from disposition of equipment - 3,571
--------- ---------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
(1,951) 1,167
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on notes payable to banks 15,771 11,675
Proceeds from issuance of long-term debt 360 -
Principal payments on long-term debt (490) (685)
---------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 15,641 10,990
---------- ---------
Effect of foreign exchange rate changes on cash 96 (724)
--------- ---------
Net decrease in cash and cash equivalents (1,661) (7,972)
Cash and cash equivalents at beginning of period 4,241 13,532
--------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,580 $ 5,560
========= ===========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements include
the accounts of Marker International and its subsidiaries (the "Company"). The
condensed consolidated financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission (the "SEC").
Certain information and footnote disclosures normally required in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations. The financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management, are necessary to fairly
present the financial position, results of operations and cash flows for the
periods presented.
The Company's financial statements for the year ended March 31, 1998
and unaudited financial statements for the quarter ended June 30, 1998 have been
prepared on a going concern basis, which contemplates the realization of assets
and settlement of liabilities and commitments in the normal course of business.
The Company has continued to experience financial difficulties through the first
quarter of fiscal 1999 and thereafter.
The results of operations for the three months ended June 30, 1998 are
not necessarily indicative of the results for the full fiscal year. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's latest Annual Report on Form 10-K as filed with the SEC.
NOTE 2. RECENT EVENTS
On June 23, 1998, the Board of Directors authorized the disposal of
the Company's snowboard manufacturing operations if such disposal was
subsequently determined by senior management to be in the best interests of the
Company. Production of snowboards and operating activities within the
manufacturing plant ceased on July 30, 1998. The Company expects to dispose of
the manufacturing facility and related assets by the end of fiscal year 1999. At
the present time, the gain or loss from the sale of such assets is uncertain.
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
At June 30, 1998, the Company was not in compliance with certain
financial covenants under a $25.0 million line of credit agreement with a U.S.
Bank. The Company continues not to be in compliance with such covenants as of
August 18, 1998. As a result of such non-compliance, the U.S. Bank has the right
to declare all obligations of the Company under the line of credit to be
immediately due and payable. At June 30, 1998, the aggregate outstanding
borrowings under such line was $23.5 million. In August 1998, the Company
requested that such bank increase the $25.0 million credit line (the "U.S.
Credit Line") by approximately $4.1 million for which the Company would provide
additional collateral to the U.S. Bank. The Company is continuing to negotiate
with the U.S. Bank.
On August 1, 1998, the Company's DM 80.0 million (US $45.0 million)
line of credit agreement with a group of German Banks expired (the "German
Credit Line"). As a result of such expiration, the German Banks have the right
to declare all obligations of the Company under the German Credit Line to be
immediately due and payable. Further, on August 6, 1998, the German Banks
notified the Company that it had canceled the German Credit Line and would not
extend any further borrowings under such line.
While the Company and its banks are continuing to discuss alternatives
to mitigate the Company's financial difficulties and the possible reinstatement
or renewal of the credit lines, there can be no assurance that satisfactory
agreements will be reached between the Company and current or prospective
lenders. In the event that the banks do not extend the terms of the Company's
U.S. Credit Line and German Credit Line to provide the Company with necessary
working capital, or if the banks exercise their rights to demand payment of all
amounts and/or foreclose on the Company's assets which are pledged as collateral
under the credit line agreements, there is a substantial risk that the Company
will not be able to continue as a going concern.
Although the Company is seeking alternatives which, among other
things, include restructuring the Company, obtaining additional equity and/or
debt financing or entering into a new business alliance, there can be no
assurance that the Company will be successful in such endeavors. Accordingly,
there is a substantial risk that the Company will not be able to continue as a
going concern and, among other things, could be forced to seek protection from
its creditors.
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include investments in certificates of
deposit with original maturities of less than 30 days and restricted cash. The
Company has granted a security interest in a $2.0 million time deposit held in
the Company's name at a United States branch of a German bank. This deposit is
restricted for use as collateral on borrowings from such bank.
NOTE 4. INVENTORIES
Inventories include direct materials, direct labor and manufacturing
overhead costs and are recorded at the lower of cost (using the first-in,
first-out method) or market. The major classes of inventories are as follows (in
thousands):
June 30, 1998 March 31, 1998
--------------- -----------------
Raw materials $ 1,651 $ 1,411
Work in process 2,929 2,306
Finished goods 49,026 33,506
---------- ----------
$ 53,606 $ 37,223
========== ==========
NOTE 5. INTANGIBLE ASSETS
Intangible assets consist of goodwill, trade names and licenses
resulting from the Company's acquisition of DNR Sportsystem Ltd. Intangible
assets are amortized using the straight-line method over lives ranging from 5 to
30 years. At June 30, 1998 and March 31, 1998 accumulated amortization of
goodwill and intangible assets totaled approximately $1.3 million and $1.2
million, respectively.
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6. RECENT ACCOUNTING PRONOUNCEMENTS
COMPREHENSIVE INCOME
As of April 1, 1998, the Company adopted SFAS No. 130 "Reporting
Comprehensive Income." The following table displays components of the Company's
comprehensive income for the three month periods ended June 30, 1998 and 1997:
For the Three Months Ended June 30,
1998 1997
----------- ---------
Net Loss $ (6,354) $ (5,055)
OTHER COMPREHENSIVE INCOME ITEMS:
Foreign Currency Translation
Adjustments 180 (694)
---------- -----------
Comprehensive Loss $ (6,174) $ (5,749)
=========== ===========
SEGMENT REPORTING
The Company adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 establishes new standards for
public companies to report information about their operating segments, products
and services, geographic areas and major customers. SFAS 131, though effective
for the Company in fiscal 1999, is not applied to interim financial statements
in the initial year of its application. The adoption of SFAS 131 will have no
effect on the Company's consolidated results of operations, financial positions
or cash flows.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that derivative
instruments be recorded in the balance sheet as either an asset or liability
measured at its fair market value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. SFAS No. 133 is effective for fiscal years beginning after
June 15, 1999.
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Therefore, SFAS 133 is not effective for the Company until fiscal year 2001. The
effect of SFAS No. 133 on the Company's consolidated financial statements is
uncertain.
Derivative financial instruments held by the Company are generally
used to manage well-defined foreign exchange and interest rate risks which
occur in the normal course of business. From time to time the Company has
entered into transactions involving derivative instruments that require
speculative accounting treatment. Forward foreign exchange contracts are used by
the Company to reduce the potential impact of unfavorable fluctuations in
foreign exchange rates. The Company has off balance sheet commitments to buy and
sell foreign currencies relating to foreign exchange contracts in order to hedge
against future currency fluctuations.
Gains and losses on foreign currency contracts not intended to be used
to hedge operating requirements are reported currently in other income. Gains
and losses on foreign currency contracts intended to meet firm commitments are
deferred and recognized as part of the cost of the underlying transaction being
hedged. At June 30, 1998, the Company holds foreign currency contracts that are
not being used to hedge operating requirements. As a result, the Company has
recorded a loss in order to adjust these contracts to market value at June 30,
1998.
Counterparties to the foreign exchange contracts are typically major
international financial institutions. The Company's theoretical risk in these
transactions is the cost of replacing, at current market rates, these contracts
in the event of default by the counterparty. Management believes the risk of
incurring such losses is remote.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report.
GENERAL
Marker International is a designer, developer, manufacturer and
marketer of alpine ski bindings in the United States, Europe and Asia. Marker
International ("Marker" or the "Company") is a holding company which operates
through its subsidiaries, Marker Deutschland GmbH ("Marker Germany"), Marker
USA, Marker Japan Co., Ltd. ("Marker Japan"), Marker Austria GmbH ("Marker
Austria") and Marker Canada, Ltd. ("Marker Canada"). Substantially all of the
Company's ski bindings are manufactured by Marker Germany, which also
distributes bindings in Germany, to subsidiaries of the Company, and to
independent distributors in countries where the Company does not have a
distribution subsidiary. Marker Ltd., also a subsidiary of the Company, designs,
distributes and sells to retailers the Company's clothing, gloves and luggage
products for skiing and other recreational activities. The principal markets for
the Company's clothing, gloves and luggage products are North America, Europe
and Asia.
In addition, the Company is a designer, developer and marketer of
snowboards, Interface Step-in Systems(TM), traditional snowboard bindings and
snowboard boots. The Company operates its snowboard business through its 80%
owned subsidiary, DNR Sportsystem Ltd. ("DNR"), and its wholly-owned
subsidiaries, DNR USA, Inc., DNR North America, Inc. ("DNR North America") and
DNR Japan Co., Ltd. ("DNR Japan"). DNR designs, develops and distributes
snowboards and related products. DNR North America and DNR Japan, through their
own sales force market snowboards, Interface Step-in SystemsTM, snowboard
bindings and boots directly to retailers in the United States and Japan,
respectively. The Board of Directors has authorized the disposition of the
Company's snowboard manufacturing assets. Production of snowboards and operating
activities within the manufacturing plant ceased on July 30, 1998. See
"--Liquidity and Capital Resources."
The Company has experienced financial difficulties through the first
quarter of fiscal 1999 and thereafter. As a result of such difficulties, there
is a substantial risk that the Company will not be able to continue as a going
concern. See "--Liquidity and Capital Resources."
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Marker Germany receives payment primarily in German marks ("Marks")
for ski bindings sold. For subsidiaries of the Company (principally Marker USA
and Marker Japan), Marker Germany may allow payment for ski bindings sold to be
made in the functional currency of the subsidiary. Marker Germany or the
distribution subsidiary, as applicable, routinely enters into forward foreign
exchange contracts with financial institutions in order to fix the cost of
converting the functional currency to Marks. Sales prices for the ski bindings
offered to the subsidiaries and ultimately the price the subsidiaries offer for
the sale of the ski bindings to their customers is based upon, among other
things, the rate afforded by the forward foreign exchange contracts and market
conditions. Accordingly, the relationship of the exchange rate between the
functional currency of the subsidiary and the Mark has a direct impact on the
cost of the products sold by the distribution subsidiary.
Each of the Company's distribution subsidiaries operates and maintains
its accounting records in the functional currency of the country in which it
operates. In accordance with United States generally accepted accounting
principles, upon consolidation of the Company's consolidated financial
statements, the assets, liabilities, revenues and expenses of each of the
Company's foreign subsidiaries are translated at the appropriate exchange rate
prevailing during the period. Therefore, the Company's assets, liabilities and
results of operations are subject to fluctuations in forward foreign exchange
contract rates and translation effects which can vary as a result of
fluctuations in the exchange rates between the functional currencies of such
foreign subsidiaries and the United States dollar ("Dollar").
For the three months ended June 30, 1998, average exchange rates
between the Dollar and the Mark, the Dollar and the Japanese yen ("Yen") and the
Dollar and the Swiss franc ("Franc") resulted in an effective decrease in the
value of the Mark against the Dollar, the Yen against the Dollar and the Franc
against the Dollar of approximately 5%, 13% and 3%, respectively, compared to
the corresponding period of the prior year. Such currency exchange activity
resulted in corresponding fluctuations in the value of the revenues and expenses
of Marker Germany, Marker Japan and Marker AG, as well as DNR Sportsystem and
DNR Japan, when converted to Dollars, compared to the corresponding period of
the prior fiscal year.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
The Company's business is seasonal in nature. Consistent with this
seasonal nature and the ski and snowboard industries in general, the Company
historically records a relatively small percentage of its annual net sales
during its first fiscal quarter. The Company historically records a majority of
its sales during its second and third fiscal quarters and to a lesser extent
during its fourth fiscal quarter.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1998 WITH THE THREE MONTHS ENDED
JUNE 30, 1997
Consistent with the seasonal nature of the Company's business and the
ski industry in general, the Company has historically recorded a small
percentage of its annual net sales during its first fiscal quarter. These sales
amounts have historically represented less than 2% of the Company's annual net
sales and are primarily attributable to close-out products sold late in the ski
season. As such, sales results and gross profit margins are not necessarily
indicative of the results to be expected for the full fiscal year.
Gross profit for the three months ended June 30, 1998 increased to
$1.6 million compared to $0.2 million for the corresponding period of the prior
fiscal year. The increase in gross profit was a result of increased sales.
Operating expenses for the three months ended June 30, 1998 decreased
to $7.0 million, compared to $7.6 million for the same period of the prior
fiscal year. Approximately $0.4 million of the decrease relates to legal fees
for arbitration proceedings incurred during the first quarter of fiscal 1998,
which were not incurred in the first quarter of fiscal 1999 due to the fact that
the arbitration was settled in March 1998. As a result of adjustments made to
the Company's goodwill and intangible assets at March 31, 1998, the associated
amortization expense decreased to $0.1 million in the first quarter of fiscal
1999 from $0.2 million for the corresponding period of the prior fiscal year. In
addition, the overall decrease in operating expenses of the Company is partly
the result of decreases in the operating expenses of the Company's foreign
subsidiaries, which resulted from fluctuations in exchange rates used to
translate the subsidiaries functional currencies to Dollars, when compared to
the same period of the prior fiscal year.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Interest expense for the three months ended June 30, 1998 increased to $1.5
million, compared to $1.1 million for the corresponding period of the prior
fiscal year. The increase in interest expense is the result of higher average
outstanding balances on the Company's existing line of credit arrangements and
higher weighted average interest rates on the credit lines for the first quarter
of fiscal 1999 as compared to the corresponding period of the prior fiscal year.
The income tax benefit recognized for the three months ended June 30,
1998 and 1997 was calculated using the estimated consolidated annual effective
tax rate which considers the effective tax rates of domestic and foreign tax
jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for raw materials
inventory for production, finished goods inventory, funding of accounts
receivable, capital expenditures and strategic business acquisitions.
Historically, the Company's primary sources of cash for its business activities
have been cash flows from operations and borrowings under its lines of credit
and term loans.
On June 23, 1998, the Board of Directors authorized the disposal of
the Company's snowboard manufacturing assets. Production of snowboards and
operating activities within the manufacturing plant ceased on July 30, 1998. The
Company expects to dispose of the manufacturing facility and related assets by
the end of fiscal year 1999. At the present time, the gain or loss from the sale
of such assets is uncertain.
At June 30, 1998, the Company had a working capital deficit of ($0.6)
million, compared to working capital of $6.7 million at March 31, 1998.
As of June 30, 1998, the Company had approximately $64.7 million of
outstanding borrowings under its short-term credit facilities. Substantially all
of such borrowings are secured by inventory and receivables. The Company has
experienced serious liquidity problems in recent periods. See "Note 2 - Recent
Events."
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
At June 30, 1998, the Company was not in compliance with certain
financial covenants under a $25.0 million line of credit agreement with a U.S.
Bank. The Company continues not to be in compliance with such covenants as of
August 18, 1998. As a result of such non-compliance, the U.S. Bank has the
right to declare all obligations of the Company under the line of credit to be
immediately due and payable. At June 30, 1998, the aggregate outstanding
borrowings under such line was $23.5 million. In August 1998, the Company
requested that such bank increase the $25.0 million credit line (the "U.S.
Credit Line") by approximately $4.1 million for which the Company would provide
additional collateral to the U.S. Bank. The Company is continuing to negotiate
with the U.S. Bank.
On August 1, 1998, the Company's DM 80.0 million (US $45.0 million)
line of credit agreement with a group of German Banks expired (the "German
Credit Line"). As a result of such expiration, the German Banks have the right
to declare all obligations of the Company under the German Credit Line to be
immediately due and payable. Further, on August 6, 1998, the German Banks
notified the Company that it had canceled the German Credit Line and would not
extend any further borrowings under such line.
While the Company and its banks are continuing to discuss alternatives
to mitigate the Company's financial difficulties and the possible reinstatement
or renewal of the credit lines, there can be no assurance that satisfactory
agreements will be reached between the Company and current or prospective
lenders. In the event that the banks do not extend the terms of the Company's
U.S. Credit Line and German Credit Line to provide the Company with necessary
working capital, or if the banks exercise their rights to demand payment of all
amounts and/or foreclose on the Company's assets which are pledged as collateral
under the credit line agreements, there is a substantial risk that the Company
will not be able to continue as a going concern.
Although the Company is seeking alternatives which, among other
things, include restructuring the Company, obtaining additional equity and/or
debt financing or entering into a new business alliance, there can be no
assurance that the Company will be successful in such endeavors. Accordingly,
there is a substantial risk that the Company will not be able to continue as a
going concern and, among other things, could be forced to seek protection from
its creditors.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
YEAR 2000 COMPUTER ISSUE
Many currently installed computer systems and software are coded to
accept only two digit entries in the date code field. Beginning the year 2000,
these date code fields will need to accept four digit entries to distinguish
twenty-first century dates from twentieth century dates. As a result, within the
next eighteen months, computer systems and/or software used by many companies
may need to be upgraded to comply with such "Year 2000" requirements.
The Company has developed plans to modify its computer information
systems enabling proper processing of data relating to the year 2000 and beyond.
The Company is now in the process of executing its plan and expects all systems
to be compliant by the end of fiscal 1999. This will allow time for the testing
for compliance. The total cost of the project is estimated to be approximately
$150,000. While there can be no assurance that Year 2000 matters will be
satisfactorily identified and resolved, the Company currently believes that Year
2000 issues will not have a material adverse effect on the Company.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
With the exception of historical information (information relating to
the Company's financial condition and results of operations at historical dates
or for historical periods), the matters discussed in this Management's
Discussion and Analysis of Financial Condition and Results of Operations are
forward-looking statements that necessarily are based on certain assumptions and
are subject to certain risks and uncertainties. These forward-looking statements
are based on management's expectations as of the date hereof, and the Company
does not undertake any responsibility to update any of these statements in the
future. Actual future performance and results could differ from that contained
in or suggested by these forward-looking statements as a result of the factors
set forth in this Management's Discussion and Analysis of Financial Condition
and Results of Operations, the Business Risks described in the Company's Report
on Form 10-K for the year ended March 31, 1998 and elsewhere in the Company's
filings with the Securities and Exchange Commission.
<PAGE>
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities.
At June 30, 1998, the Company was not in compliance with certain
financial covenants under a $25.0 million line of credit agreement with a U.S.
Bank. The Company continues not to be in compliance with such covenants as of
August 18, 1998. As a result of such non-compliance, the U.S. Bank has the
right to declare all obligations of the Company under the line of credit to be
immediately due and payable. At June 30, 1998, the aggregate outstanding
borrowings under such line was $23.5 million. In August 1998, the Company
requested that such bank increase the $25.0 million credit line by approximately
$4.1 million for which the Company would provide additional collateral to the
U.S. Bank. The Company is continuing to negotiate with the U.S. Bank.
On August 1, 1998, the Company's DM 80.0 million (US $45.0 million)
line of credit agreement with a group of German Banks expired (the "German
Credit Line"). As a result of such expiration, the German Banks have the right
to declare all obligations of the Company under the German Credit Line to be
immediately due and payable. Further, on August 6, 1998, the German Banks
notified the Company that it had canceled the German Credit Line and would not
extend any further borrowings under such line. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
Item 6. Exhibits and Reports on Form 8-K.
a) EXHIBITS:
10.26 Second Amended and Restated Conditional Pledge Agreement
and Assignment dated April 15, 1998, between Marker
International and Bayerische Hypotheken-und Wechsel-Bank
Aktiengesellschaft.*
10.27 Third Restated and Amended Promissory Note dated as of
April 15, 1998 executed by the Company and payable to
Bayerische Hypotheken-und Wechsel-Bank
Aktiengesellschaft.*
27 Financial Data Schedule.*
b) No reports were filed on Form 8-K.
- ----------------------
* Filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARKER INTERNATIONAL
Registrant
Dated: August 19, 1998 /S/ JOHN G. MCMILLIAN
----------------------
John G. McMillian
Chief Executive Officer
and Chairman of the Board
Executive Officer
Dated: August 19, 1998 /S/ KEVIN HARDY
----------------
Kevin Hardy
Chief Financial Officer
Exhibit 10.26
SECOND AMENDED AND RESTATED CONDITIONAL
PLEDGE AGREEMENT AND ASSIGNMENT
MARKER INTERNATIONAL ("Pledgor"), whose address is 1070 West South, Salt Lake
City, Utah 84126, as an inducement to BAYERISCHE HYPOTHEKEN- UND WECHSEL-BANK
AKTIENGESELLSCHAFT, a banking corporation organized under the laws of the
Federal Republic of Germany, or any of its branches ("Bank"), including any
successor bank or branches thereof, to continue to extend credit to Pledgor,
hereby as follows:
WHEREAS, Pledgor entered a Pledge Agreement and Conditional Assignment
effective June 26, 1995, and an Amended and Restated Conditional Pledge
Agreement and Assignment dated as of December 18, 1996 (together, as amended
hereby, the "Agreement"), in order to grant to Bank a security interest in a
time deposit (the "Collateral") currently in the amount of U.S. $2,000,000, as
an inducement to the Bank to continue (the "Term Loan"): and
WHEREAS, Pledgor has requested Bank, and Bank has agreed, to reduce
the Term Loan to DEM 6,397,919.38 as of April 15, 1998, in accordance with the
Third Restated and Amended Promissory Note as of the same date, and to continue
to hold as security for the reduced Term Loan the remaining Collateral in the
amount of $2,000,000.
NOW, THEREFORE, Pledgor agrees, subject to the bank's consent, to
amend and restate the Agreement, as follows:
1. Paragraph 1 shall read in its entirety as follows:
"CONDITIONAL ASSIGNMENT AND SECURITY INTEREST. As security for
the payment when and as due of the Term Loan in the amount of
Six Million Three Hundred Ninety Seven Thousand Nine Hundred
Nineteen Deutsche Marks and Thirty Eight Pfennigs (DEM
6,397,919.38) referenced in the Bank's Third Restated and
Amended Promissory Note dated as of April 15, 1998 and all
interest and other sums due in connection therewith, and the
performance of all present and future obligations of Pledgor
for payment, reimbursement or other performance hereunder (the
loan, sum due and obligation being referred to herein as the
"Obligation"), Pledgor hereby conditionally assigns to Bank,
and hereby grants Bank a security interest in the time deposit
held in Pledgor's name Bayerische Hypotheken- und Wechsel-Bank
Aktiengesellchaft, including any successor bank, acting
through its New York Branch, in the current amount of Two
Million United States Dollars (US$ 2,000,000.00) as well as
such time deposits into which it may be rolled over, (all the
foregoing property and any part thereof being hereinafter
called ("Collateral"). The assignment made hereby, and the
security interest granted hereby, shall be continuing until
payment of the Obligation hereunder in full."
2. All other terms of the Agreement, to the extent not inconsistent
herewith, are incorporated herein by reference, in their entirety.
This Amendment shall be governed by the laws of the State of New York, as
applied to contracts to be performed wholly in that State.
Dated: as of April 15, 1998
MARKER INTERNATIONAL, PLEDGOR
By: /S/ BRAD STEWART
Title: EXECUTIVE VICE PRESIDENT
Accepted and Agreed:
Bayerische Hypotheken -und Wechsel - Bank
Aktiengesellschaft, New York Branch
By: /S/ Y. DANKNER
Title: SENIOR VICE PRESIDENT
By: /S/ UVE RODDER
Title: VICE PRESIDENT
Exhibit 10.27
THIRD RESTATED AND AMENDED PROMISSORY NOTE (THE "NOTE")
Dated as of April 15, 1998
For value received, MARKER INTERNATIONAL, a corporation organized under the laws
of the State of Utah, with its principal place of business located at 1070 West
2300 South, Salt Lake City, Utah 84126 ("Borrower"), hereby unconditionally
promises to pay to the order of BAYERISCHE HYPOTHEKEN-UND WECHSEL-BANK
AKTIENGESELLSCHAFT, acting through its New York Branch ("Lender"), at its office
at 32 Old Slip, Financial Square, 32nd Floor, New York, New York 10005, or any
other branch of office of Lender which it shall designate, the principal sum of
Six Million Three Hundred Ninety Seven Thousand Nine Hundred Nineteen Deutsche
Marks and Thirty Eight Pfennigs (DEM 6,397,919.38) ("Principal") in an
installment of Nine Hundred Thousand Deutsche Marks (DEM 900,000.00) on April
15, 1999 (the "Installment Date") and the balance of Five Million Four Hundred
Ninety Seven Thousand Nine Hundred Nineteen Deutsche Marks and Thirty Eight
Pfennigs (DEM 5,497,919.38) on April 15, 2000 ("Maturity Date") and to pay
interest thereon, to the extent permitted by applicable law in accordance with
the following.
1. INTEREST.
(a) Interest shall accrue (i) for the period from the
Effective Date, through July 15, 1998 at 5.12891% per annum; and (ii) for the
period thereafter at Borrower's option of (x) a rate to be mutually agreed upon
between Borrower and Lender, or (y) at a rate per annum equal to one point five
percent (1.5%) above LIBOR (as defined below) for interest periods of 1, 2, 3
and 6 months (each period set forth herein shall be an "Interest Period").
(b) "LIBOR" shall mean that rate of interest, as determined
by Lender in its sole judgment, at which, for a Interest Period commencing on
the date of each borrowing ("Borrowing") and, if applicable, each successive
Interest Period, U.S. dollar deposits in an amount equal to the outstanding
Principal shall be offered to Lender in the London Interbank market at
approximately 11 a.m. London time two Business Days (as defined below) prior to
the first day of such Interest Period, whether or not Borrower shall have notice
thereof; provided that LIBOR is available, and provided further, that each such
period shall commence on the day on which the immediately preceding period
expires. If LIBOR shall be deemed unavailable, interest shall accrue at a per
annum rate to be mutually agreed to by Lender and Borrower. LIBOR shall be
deemed unavailable if no deposit in the amount of the outstanding Principal
hereunder based on the Interest Period selected in readily obtainable by Lender
in the London Interbank market, as determined by Lender in its sole judgment.
(c) As used herein, "Business Day" shall mean any day on
which commercial banks in Frankfurt, Federal Republic of Germany, London,
England and New York, New York are open for general business.
(d) Except as otherwise provided herein, interest shall
accrue on the outstanding Principal from the date hereof (the "Effective Date")
until its payment to Lender in full, computed on the basis of a 360-day year and
the actual number of days elapsed. Accrued interest shall be paid to Lender, (i)
on the Installment Date and Maturity Date, (ii) on the last day of each Interest
Period, (iii) when the Interest Period is longer than three months, every three
months after the Initial Day, (as defined below) and (iv) whenever else a
payment of Principal shall be made or shall become payable.
(e) Notwithstanding any provision to the contrary contained
herein, (i) if the last day of an Interest Period falls on a day other than a
Business Day, then the last day of the Interest Period shall be extended to fall
on the next succeeding Business Day, unless such extension would cause the last
day of the Interest Period to occur in the next following calendar month, in
which case, the Interest Period shall end on the immediately preceding Business
Day; (ii) if any Interest Period begins on the Business Day of a calendar month
(or a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period), then it shall end on a day which is
the last Business Day of the applicable calendar month; and (iii) no Interest
Period may be selected that would end later than the Maturity Date.
2. PREPAYMENTS.
The Principal may be paid before the Installment Date or, with respect
to the balance due thereafter, before the Maturity Date, only if Lender shall
have given its prior written consent. With such a prepayment, Borrower shall
also pay accrued interest and any other amounts owed to Lender in respect of the
Borrowing and shall reimburse Lender for any fee, cost, expense or loss which
Lender shall incur or suffer, in an amount to be determined by Lender in its
sole discretion, because of early payment of Principal including, but not
limited to, any fee, cost, expense or loss which Lender shall incur in the
redeployment of its funds.
3. PAYMENTS.
(a) Each payment due under this Note shall be made in
immediately available funds at the office of Lender or to such account as Lender
may designate to Borrower without any setoff, withholding or deduction of any
kind. Whenever any payment to be made hereunder would without this provision be
due and payable on a day which is not a Business Day, it shall be due on the
next succeeding Business Day.
(b) Lender shall apply payments received from or for the
account of Borrower first to accrued, unpaid interest due Lender and next to
sums due Lender other than Principal, notwithstanding any direction by Borrower
to the contrary.
(c) All payments of Principal, interest and any other sums
due hereunder shall be made in the amounts required hereby without any reduction
or setoff (unless based on a final judgment on which execution may be had),
notwithstanding the assertion of any right of recoupment or setoff or any
counterclaim, and without any withholding on account of taxes, levies or duties
or any other deduction whatsoever. In the event that Borrower is required by law
to withhold or to deduct any sum from payments required hereby, Borrower shall,
to the extent permitted by applicable law, increase the amount paid by it to
Lender by such withholding or deductions as may be necessary so that Lender
shall receive an amount which after payment of any sum withheld or deducted
shall be equal to the amount that Lender would have received had such sum not
been withheld or deducted.
(d) In the event that Borrower does not cause a payment to
be made when and as due to Lender, Lender may charge the amount due to any
account of Borrower with Lender or any other branch or any subsidiary of Lender
and apply funds from such account to the payment due, unless Lender shall have
agreed expressly with Borrower not to do so.
4. INTEREST SELECTION NOTICE
(a) To request an Interest Period, Borrower shall in
communication to Lender (the "Notice") refer to this Note and specify the
duration of such Interest Period and the Business Day on which such Interest
Period is to commence ("Initial Day"). To be effective, a Notice must be
received by Lender at least two full business days prior to the Initial Day. A
Notice not in writing shall be deemed to have been complete and in accordance
with the record Lender makes of the Borrowing.
(b) By requesting an Interest Period, Borrower shall be
deemed to represent that, as of the date of the request, the Representations and
Warranties of Section 5 hereof remain accurate and that no Event of Default (as
defined below) or an event which, with the giving of notice or the passage of
time, or both, would become an Event of Default, will result or have resulted.
No Interest Period shall commence unless all such Representations and Warranties
shall then be true and correct, and Lender shall have received in form and
substance satisfactory to Lender and its counsel, certificates of corporate
officers of Borrower or other evidence, reasonably requested by Lender, as to
its corporate existence, its authority to act and to perform as contemplated
hereby, the identify of its officers acting on its behalf in connection with
this Agreement and their authority to act on its behalf.
5. REPRESENTATIONS AND WARRANTIES.
By executing and delivering this Note, Borrower represents
and warrants that
(a) Borrower is a corporation duly organized, validly
existing and in good standing and qualified to do business in the jurisdiction
of its incorporation and states in which it is operating;
(b) Borrower has full power and authority, not restricted by
any law or governmental regulation, to execute and deliver this Note and to
perform its obligations as contemplated hereby;
(c) execution and delivery of this Note has been duly
authorized and it is being duly executed and delivered to Lender; upon delivery
it will evidence a valid and legally binding obligation of Borrower, enforceable
in accordance with its terms;
(d) Borrower is not in default in the performance,
observance or fulfillment of any obligation, covenant or condition contained in
any agreement or instrument to which Borrower is a party, in which the
aggregated defaulted amounts equal or exceed Two Hundred Thousand United States
Dollars (US$ 200,000.00);
(e) execution and delivery of this Note is not in violation
of, nor is it an event of default, or an event which with the passage of time or
service of notice may become an event of default, under any agreement or
instrument to which Borrower is a party;
(f) execution and delivery of, and performance under, this
Note will not result in the creation or imposition of any security interest in,
or lien or encumbrance upon, any asset of Borrower except in favor of Lender;
(g) Borrower has filed all tax returns and any other reports
to government agencies which it is required by law to file; and
(h) Borrower's financial statements, including any schedules
and notes pertaining thereto, are, and have been, prepared in accordance with
generally accepted accounting principles consistently applied except as noted in
them, and fully and fairly present, at the dates thereof, the financial
condition of Borrower and, if prepared on a consolidated basis, subsidiaries of
Borrower (such subsidiaries hereinafter "Consolidated Subsidiaries"), and the
results of operations for the period covered thereby; there has been no
material, adverse change in the financial condition or business of Borrower or
any Consolidated Subsidiary since the date as of which the statements last
received by Lender were prepared (which, as of the date hereof, is December 31,
1997).
6. EVENTS OF DEFAULT.
Any person, corporation or other entity that (i) directly or
indirectly through one or more intermediaries is controlled by Borrower or (ii)
has given, or is to give, a guaranty, pledge, security agreement, mortgage,
conditional assignment, comfort letter or other commitment to secure or support
Borrower's obligations to Lender shall hereafter be referred to as an
"Affiliate". If any of the following events ("Events of Default") shall occur,
namely
(a) any representation or warranty set forth in this Note,
in any document given in connection with it or otherwise made in connection with
any extension of credit by Lender to Borrower shall prove to have been false or
misleading in any material respect when made or deemed to have been made; or
(b) Borrower shall fail to pay to Lender any Principal when
and as due hereunder, or for five days Borrower shall fail either to pay to
Lender any other sum when and as due hereunder or to comply with any other
obligation of Borrower under this Note; or any document given in connection with
it or to fulfill any condition to the Borrowing which shall not have been
expressly waived in a writing signed by two officers of Lender, or Borrower or
any Affiliate shall fail to pay when and as due and payable or within any
applicable grace period any indebtedness of an amount material in respect of his
or its financial condition or business, or shall default with respect to any
evidence of indebtedness or any obligation for borrowed money in such an amount,
or with respect to the performance of any other obligation incurred in
connection with any such indebtedness or obligation; or
(c) Borrower shall not, within ten days after Lender's
request and Lender's agreement to any reasonable requirement for confidential
treatment of information received, provide to Lender information Borrower has
pertaining to its business or finances, or to the business or finances of an
Affiliate or allow the inspection during business hours of his or its books and
records; or
(d) a final judgment shall be entered against Borrower or an
Affiliate for the payment of money in an amount material in respect of his or
its financial condition or business, or it shall have, or may reasonably be
expected to have, a material, adverse effect on his or its financial condition
or business, and the same shall remain unsatisfied for a 30-day period during
which it might be executed upon; or any writ or warrant of attachment or
execution or similar process shall be issued or levied against Borrower's or
Affiliate's property having a book value in an amount material in respect of his
or its financial condition or business, and the same shall not be discharged,
released, vacated or bonded within 30 days after its issue or levy; or a
judgment creditor shall by any means, including levy, distraint, replevin or
self-help, obtain actual or constructive possession of Borrower's or an
Affiliate's property having a book value in an amount material in respect of his
or its financial condition or business, or such possession shall have a material
adverse effect on his or its financial condition or business; or
(e) (i) Borrower generally shall not pay its debts as they
become due, or as it becomes insolvent or suspends its usual business; (ii)
borrower shall enter into an agreement with its creditors to reduce its
obligations to them or to defer their fulfillment, make a general assignment for
the benefit of its creditors, commence any proceeding relating to it under any
Chapter of Title 11 of the United States Code or seek any other form of relief
from its creditors or from a court or governmental agency pursuant to any law,
statute or procedure of any jurisdiction (federal, state or foreign) for the
relief of financially distressed debtors (each of the foregoing a "Debtor Relief
Procedure"); (iii) a Debtor Relief Procedure shall be commenced against Borrower
and shall not be dismissed or otherwise terminated within 30 days; or (iv)
Borrower shall take any action to effect any event described in clauses (i),
(ii) or (iii) of this subsection; the term "Borrower" used in this subsection
shall also include any Affiliate; or
(f) there shall have been any other material, adverse change
in the financial condition, business or operations of borrower or any Affiliate
or the condition or affairs of Borrower or any Affiliate shall change in such a
manner that, in the opinion of Lender, its credit risk is increased or Lender
shall deem itself insecure, and Lender shall have given Borrower notice of such
change or insecurity and Borrower shall not have eliminated such risk within 30
days of such notice; or
(g) this Note, or any guaranty of Borrower's or an
Affiliate's obligations to Lender or any agreement or commitment securing or
supporting any such obligation shall be declared by a court of competent
jurisdiction to be not in full force and effect or shall for any other reason
cease to be fully enforceable in courts within the United States having
jurisdiction over Borrower, or the validity or enforceability of any of the
foregoing shall be challenged, denied or contested by Borrower, any Affiliate,
or person acting by or through either Borrower or any Affiliate, or any person
having possession, custody or any control over any property of Borrower or any
Affiliate, or any governmental office or agency; or
(h) Borrower shall, without Lender's written consent signed
by two of its officers, transfer, or grant or allow to attach a security
interest in, Borrower's interest in (i) any asset without receiving fair
consideration for it or (ii) except in the ordinary course of its business, any
asset having a value material to Borrower's financial condition or that is
material to the successful operation of Borrower's business; or
(i) there shall occur any seizure, vesting or intervention
by or under authority of any government by which the management of Borrower or
any Affiliate shall be displaced, or its authority in the conduct of its
business shall be curtailed or impaired;
thereupon, by Lender giving notice thereof to Borrower, (i) every liability of
Borrower to Lender of whatever kind, whether absolute or contingent shall
forthwith become payable, both as to Principal and interest; and (ii) interest
shall accrue on the outstanding Principal until the date of its payment in full
at the lesser of a rate two percent above the Base Rate in effect from time to
time, or the maximum rate, allowed by applicable law. "Base Rate" shall mean
those rates of interest fixed from time to time by the management of the Lender
as its "Base Rate" for the use of its loan officers in setting interest rates
for borrowing, whether or not Borrower shall have notice thereof.
7. GOVERNING LAW; RESOLUTION OF DISPUTES.
This Note, any amendment to it or any note given as a replacement or in
substitution for it shall be construed in accordance with and governed by the
laws of the State of New York applicable to agreements made and to be performed
wholly in that State. IN CONNECTION WITH ANY DISPUTE WHICH MAY ARISE UNDER THIS
NOTE OR ANY AMENDMENT OF IT, OR ANY NOTE GIVEN AS A REPLACEMENT OR IN
SUBSTITUTION FOR IT, BORROWER HEREBY IRREVOCABLY SUBMITS TO, CONSENTS TO, AND
WAIVES ANY OBJECTION TO, THE JURISDICTION OF THE COURTS OF THE UNITED STATES AND
OF THE STATE OF NEW YORK LOCATED IN THE COUNTY OF NEW YORK WAIVES ANY OBJECTION
TO THE LAYING OF VENUE IN SUCH A COURT; AND WAIVES ANY RIGHT TO TRIAL BY JURY.
8. CHANGE OF CIRCUMSTANCES.
(a) If after the date hereof there shall become effective
any change in any law or regulation, or in the application or interpretation
thereof by a governmental authority, or there shall be issued or changed any
guideline (whether or not having the force of law) by an entity charged with
responsibility therefor, including without limitation any issuance or change in
respect of reserve, capital adequacy, asset ratio, tax or similar requirements,
or if any such authority or entity shall request or direct that Lender comply
with any law, regulation or guideline or if the Lender shall commence compliance
with any law, regulation, or guideline, either in effect or expected to become
effective, and if as a result of such change, request, direction or compliance
the cost to the Lender of maintaining, or obtaining funds to satisfy, its
commitment or its other obligations regarding the transaction represented hereby
shall increase, the net income after taxes received or receivable by the Lender
in connection with this transaction shall be reduced or the return it would
receive on its capital or performance of this transaction shall be diminished,
Borrower shall compensate the Lender in the manner requested by the Lender so
that the Lender shall receive the sums or return on its capital it could not
receive because of such change, request, direction or compliance. The Lender's
request for such compensation shall be accompanied by a certificate setting
forth the basis of its entitlement thereto and shall be conclusive, absent
manifest error. The Lender shall not be entitled to compensation pursuant to
this provision because of increase in tax rates applicable to its general
income. (b) If there shall be a change in an applicable law or regulation or in
the interpretation thereof, or a material change in the New York and/or London
Interbank Eurodollar market, including any changes set forth in the foregoing
paragraph (a), as may have occurred, so that in Lender's judgment it shall
become unlawful for Lender to continue such Borrowing in accordance with this
Note, or if by doing so Lender, in its sole discretion, determines that it would
be subject to material adverse operational burdens or restrictions, then Lender
shall give notice of such fact to Borrower and outstanding Principal and accrued
interest, and all other sums owed to Lender, shall forthwith become payable and
Borrower shall pay to Lender such sums as would be payable under this Note if a
prepayment were made on the date of such notice in an amount equal to the
outstanding Principal of the Borrowing and reimburse Lender for any fee, cost,
expense or loss Lender shall incur or suffer because of such change, in an
amount to be determined by Lender in its sole discretion.
9. OTHER PROVISIONS.
(a) Borrower waives demand, presentment, protest, notice of
dishonor and any other form of notice, not expressly required of Lender by this
Note, that may be required to hold Borrower liable on this Note.
(b) Any notice or advice given to Borrower at the above
address or any other specified by it in writing shall be presumed received by
Borrower immediately if given by telex or facsimile transmission, within one day
if given by telegram, Express Mail or a recognized courier service, or within
three days if deposited, first class postage prepaid, in an official depository
of the United States Postal Service for mail to be delivered.
(c) Borrower shall reimburse Lender upon request for any
out-of-pocket expenses, including reasonable fees and disbursements of legal
counsel, incurred in connection with the enforcement of this Note or amendment
of it, or any note given as a replacement or in substitution for it, or
maintenance of its rights thereunder. Each sum due to Lender under this Note,
other than Principal and interest, shall bear interest from the date of demand
until the date of payment in full at per annum rates equal to the lesser of two
per cent above the Base Rate or the maximum extent allowed by applicable law.
(d) In the event Lender extends credit to Borrower after the
date hereof and such extension of credit shall not be pursuant to a written
agreement signed by two officers of Lender or evidenced by a note accepted by
Lender, it shall be governed by and subject to all the provisions of this Note
except that the term and interest rate shall be as otherwise agreed.
(e) Neither Lender nor its directors, officers, attorneys,
agents or employees shall be liable to Borrower or any Affiliate for any loss or
damage caused by any act or omission on the part of any of them unless such loss
or damage shall have been caused by the gross negligence or willful misconduct
of such person, unless such loss or damage shall have been the direct, immediate
and necessary result of such act or omission and unless such result was intended
by such person or such person knew that such loss or damage was the probable
result of his act or omission.
(f) This Note constitutes the entire agreement with respect
to the subject matter hereof; Borrower has not relied upon any representation of
Lender in making the Borrowing or giving this Note. This Note supersedes all
prior agreements, understanding and arrangements, whether oral or written,
regarding the obligations of Borrower which it evidences, including specifically
the Promissory Note dated June 26, 1995, the Restated and Amended Promissory
Note dated January 15, 1996 as well as the Second Restated and Amended
Promissory Note dated December 18, 1996.
(g) This Note may not be modified or amended except by an
instrument or instruments in writing signed by the person or entity against whom
enforcement of any such modification or amendment is sought, with two officers
of Lender signing if it must sign; the waiver by Lender of any condition of, or
any breach of any term of provision of, this Note shall be limited to such
instance and shall not be construed as a waiver of the conditions generally or
of any subsequent breach.
(h) In the event any one or more of the provisions contained
in this Note, any amendment of it or any note taken as a replacement or in
substitution for it, should be invalid, illegal or unenforceable in any respect,
the remaining provisions shall not for that reason be affected or impaired in
any way.
(i) Unless the context otherwise requires, words of any
gender shall include each other gender where appropriate.
(j) This Note shall inure to the benefit of, and shall be
binding upon, Lender and Borrower, their respective successors and Lender's
assigns.
MARKER INTERNATIONAL, BORROWER
By: /S/ BRAD STEWART
Title: EXECUTIVE VICE PRESIDENT
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF MARKER INTERNATIONAL FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 94
<SECURITIES> 2,486
<RECEIVABLES> 27,373
<ALLOWANCES> (1,462)
<INVENTORY> 53,606
<CURRENT-ASSETS> 87,073
<PP&E> 37,026
<DEPRECIATION> (18,174)
<TOTAL-ASSETS> 115,587
<CURRENT-LIABILITIES> 87,646
<BONDS> 10,000
0
0
<COMMON> 111
<OTHER-SE> 6,121
<TOTAL-LIABILITY-AND-EQUITY> 115,587
<SALES> 3,010
<TOTAL-REVENUES> 3,010
<CGS> 1,364
<TOTAL-COSTS> 7,046
<OTHER-EXPENSES> (489)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,495
<INCOME-PRETAX> (6,406)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,354)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,354)
<EPS-PRIMARY> (0.57)
<EPS-DILUTED> (0.57)
</TABLE>
