FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
ESCALADE, INCORPORATED, an Indiana corporation (the "Company"), and
BANK ONE, INDIANAPOLIS, National Association, a national banking
association (the "Bank") being parties to that certain Amended and Restated
Credit Agreement dated as of May 31, 1996 (the "Agreement"), hereby agree
to amend the Agreement by this First Amendment to Amended and Restated
Credit Agreement (the "First Amendment"), on the terms and subject to the
conditions set forth as follows:
1. DEFINITIONS
a. Terms used in this First Amendment with their initial letter
capitalized which are not defined herein shall have the meanings ascribed
to them in the Agreement.
b. The definition of "Applicable Rate" set forth in Section 1 of
the Agreement is hereby amended and restated in its entirety to read as
follows:
"Applicable Rate" means that number of percentage points to be taken
into account in determining the Applicable Spread which is used in
computing the rate at which interest accrues on the Loans, the
Applicable Unused Fee Rate which is used in calculating the Unused
Fee, the Applicable Commission Rate which is used in calculating the
amount of Commission which is payable with respect to Standby Letters
of Credit, and the Applicable Issuance Fee Rate which is used in
calculating the amount of Issuance Fees payable with respect to
Commercial Letters of Credit. Initially, from the date of this
Agreement and until receipt by the Bank of the Company's 1996 fiscal
year end financial statements furnished to the Bank pursuant to the
requirements of Section 5.b(i), the Applicable Rate shall be
determined by reference to the following table:
Applicable Rate
-------------------------------------------------------------------------
Applicable Spread*
----------------------- Applicable Applicable Applicable
Prime-based LIBOR-based Unused Fee Commission Issuance
Rate Rate Rate Rate Fee Rate
------- -------- ----------- ---------- ---------
.25% RL 2.00% RL
.25% TL 2.25% TL .375% 1.50% .50%
* Where "RL" means Revolving Loan and "TL" means Term Loan.
On the first day of the month which follows receipt by the Bank of
the Company's 1996 fiscal year end financial statements furnished to
the Bank pursuant to the requirements of Section 5.b(i), the
Applicable Rate shall be determined by reference to the Company's
Leverage Ratio in accordance with the following table:
Applicable Rate
Applicable Spread*
---------------------------- Applicable Applicable Applicable
Prime-based LIBOR-based Unused Fee Commission Issuance
Leverage Ratio Rate Rate Rate Rate Fee Rate
-------------- ----------- ----------- ---------- ---------- ----------
greater than
or equal to
3.00:1.0 0.25% RL 2.00% RL .375% 1.50% .50%
0.25% TL 2.25% TL
less than or
equal to
2.99:1.00,
but
greater than
or
equal to 0.00% RL 1.75% RL .375% 1.375% .4375%
2.50:1.00 0.25% TL 2.00% TL
less than or
equal to
2.49:1.00,
but
greater than
or
equal to 0.00% RL 1.50% RL .25% 1.25% .375%
2.00:1.00 0.00% TL 1.75% TL
less than or
equal to
1.99:1.00,
but
greater than
or
equal to 0.00% RL 1.25% RL .25% 1.125% .3125%
1.50:1.00 0.00% TL 1.50% TL
less than 0.00% RL 1.00% RL .25% 1.00% .25%
1.50:1.00 0.00% TL 1.25% RL
* Where "RL" means Revolving Loan and "TL" means Term Loan.
Such determination will be effective as of January 1, 1997 and the
Interest and Unused Fees paid will be adjusted retroactively to such
date. Any overpayment shall be promptly refunded by the Bank and any
deficiency shall then be due and payable by the Company.
Thereafter, the Applicable Rate shall be determined on the basis of
the financial statements of the Company for each fiscal year
furnished to the Bank pursuant to the requirements of Section 5.b(i),
and shall be effective as of January 1 of each fiscal year. Interest
and Unused Fees paid will be adjusted retroactively to such date with
any overpayment of fees being promptly refunded by the Bank and any
deficiency being immediately due and payable by the Company.
Commissions and Issuance Fees with respect to Letters of Credit shall
be determined from the Applicable Rate in effect when the related
Letter of Credit is issued or renewed, and will thereafter adjust
annually after receipt of the financial statements and determination
of the Applicable Rate. It is noted that the above table provides an
Applicable Rate for a Leverage Ratio greater than that which will be
permissible under the terms of Section 5.g(ii). For the avoidance of
doubt, it is agreed that it is the intent of the parties that the
Bank shall be free to exercise all remedies otherwise provided for in
this Agreement in the event of the violation by the Company of the
covenant stated in Section 5.g(ii), notwithstanding the accrual of
interest upon the Loan at a rate determined in accordance with this
definition.
2. TERM LOAN. Section 2.c. of the Agreement is hereby amended and
restated in its entirety, to read as follows:
c. The Term Loan. The Bank will make a term loan (the "Term
Loan") to the Company contemporaneously with the execution of this
Agreement on the following terms and subject to the following
conditions:
(i) Amount. The principal amount of the Term Loan shall be
Thirteen Million Nine Hundred Thousand and No/100 Dollars
($13,900,000). The proceeds of the Term Loan may be disbursed in two
separate disbursements, at the option of the Company.
(ii) The Term Note. The obligation of the Company to repay
the Term Loan shall be evidenced by a promissory note (the "Term
Note") in the form of Exhibit A. The principal of the Term Loan
shall be repayable in equal quarterly installments of $500,000 each,
due and payable on the last day of each September, December, March
and June, commencing September 30, 1996. On September 30, 2001, the
entire remaining principal amount of the Term Loan shall be due and
payable, together with all accrued and unpaid interest. Subject to
the contemporaneous payment of any Prepayment Premium which would
become due on account of any proposed prepayment, the principal of
the Term Loan may be prepaid at any time in whole or in part,
provided that any partial prepayment shall be in an amount which is
an integral multiple of $250,000.00 and provided, further, that any
partial prepayment shall be applied to the principal installments
payable on the Term Loan in the inverse order of their maturities.
(iii) Excess Cash Flow Recapture Payment. Annually, while the
Term Loan is outstanding, within ten (10) days of the Bank's receipt
of the Company's financial statements required to be provided under
Section 5.b.(i) of the Agreement, the Company shall make an excess
cash flow recapture payment equal to fifty percent (50%) of the sum
of the Company's consolidated net income before taxes plus interest
expense plus depreciation and amortization expense plus any non-recurring
or extraordinary charges minus the sum of scheduled Term
Loan principal payments plus interest expense plus cash income taxes
plus capital expenditures not financed with term debt. Such excess
cash flow recapture payment shall be applied against the latest
maturing installment of principal.
(iv) Interest on the Term Loan. The unpaid principal balance
from time to time of the Term Loan shall bear interest from the date
the Loan is made prior to the maturity of the Term Note at a rate per
annum equal to the Prime Rate plus the Applicable Spread, except that
at the option of the Company exercised from time to time as provided
in Section 2.d(i) of the Agreement, interest may accrue prior to
maturity on the entire outstanding balance of the Term Loan or on any
portion thereof which is in excess of $1,000,000.00 and as to which
no Optional Rate previously selected remains in effect at a LIBOR-based
Rate for a period of 30, 90 or 180 days; provided that no
Optional Rate may be elected for a period extending beyond the
scheduled final maturity of the Term Loan. Those elections of a
"LIBOR-based Rate" which have been made under the "Term Loan" (as
that term was defined in the Prior Agreement) and which remain in
effect on the date of this Agreement, shall continue, under this
Agreement, to be in effect through the end of the interest period for
which elected. After maturity, whether scheduled maturity or
maturity by virtue of acceleration on account of the occurrence of an
Event of Default, interest will accrue on the Term Loan at a rate per
annum equal to the Prime Rate plus the Applicable Spread, except that
as to any portion of the Loan for which the Company may have elected
an Optional Rate for a period of time that has not expired at
maturity, such portion shall, during the remainder of such period,
bear interest at the greater of the Prime Rate plus the Applicable
Spread per annum or the Optional Rate then in effect plus two percent
(2%) per annum. Prior to maturity, interest shall be due and payable
on the last Banking Day of each month in addition to any installment
of principal which may be due and payable on such date. After
maturity, interest shall be payable as accrued and without demand.
(v) Use of Proceeds of the Term Loan; Prepayment from Unusued
Proceeds. The proceeds of the Term Loan shall be used to finance the
repurchase of stock by the Company from existing shareholders in a
tender offer filed with and in compliance with the applicable
regulations of the Securities and Exchange Commission or through
open-market purchases in an aggregate amount not to exceed Ten
Million Dollars ($10,000,000) on or prior to December 31, 1996; to
refinance an Industrial Revenue Bond held by the Citizens National
Bank of Evansville, Indiana in the amount of [$648,000]; and to
refinance the Company's existing Term Loan in the amount of Three
Million Two Hundred Fifty Thousand Dollars ($3,250,000). On or
before December 31, 1996, the Company shall deliver to the Bank a
Certificate of an Authorized Officer certifying that the Company has
used $10,000,000 of the Term Loan proceeds, or such lesser amount as
actually used, to repurchase the common stock of the Company through
the tender offer or open-market purchases. In the event that the
Company has not fully utilized the $10,000,000 for such purpose by
December 31, 1996, the remaining unused proceeds of the Term Loan
shall be immediately repaid by the Company as a prepayment of the
Term Loan and shall be applied against the latest maturing
installment of principal.
3. COLLATERAL FOR THE OBLIGATIONS. Section 4 of the Agreement is hereby
amended and restated in its entirety to read as follows:
SECTION 4. Collateral for the Obligations. All of the Obligations
will be supported and secured as hereinafter set forth:
a. Limited Guaranties. The Obligations are and will
continue to be supported by the unconditional limited guaranties of
prompt payment of Harvard Sports, Inc., Indian Industries, Inc.,
Xxxxxx Yale Industries, Inc. and Escalade International, Limited,
each of whom executed a Guaranty Agreement effective as of May 31,
1996. Each such entity shall execute and deliver on the date hereof
a Reaffirmation of Guaranty in the form attached as Exhibit "B". Any
other Subsidiary hereinafter formed or otherwise acquired by the
Company shall also guaranty the Obligations which guaranty shall be
evidenced by a Guaranty Agreement in the form of Exhibit "C".
b. Company Security Agreement. The Company shall grant to
the Bank a first and prior lien on and security interest in all of
the personal property of the Company, including but not limited to,
all accounts and accounts receivable, inventory, equipment and
general intangibles, whether now owned or hereafter acquired and
wherever located. Such lien and security interest will be evidenced
by a Security Agreement in the form of Exhibit "D" and by the filing
of Uniform Commercial Code ("UCC") Financing Statements in all
offices deemed appropriate by the Bank.
c. Subsidiary Security Agreements. The obligations shall be
further secured by the grant of a first and prior lien on and
security interest in all of the personal property of Indian
Industries, Inc., Xxxxxx Yale Industries, Inc., Harvard Sports, Inc.,
and Escalade International, Limited and any other Subsidiary
hereafter formed or acquired by the Company. Such lien and security
interest shall be evidenced by a Subsidiary Security Agreement in the
form of Exhibit "E" and by the filing of UCC Financing Statements in
all offices deemed appropriate by the Bank.
d. Pledge Agreement. The Obligations will be further
secured by the pledge by the Company to the Bank of its ownership
interests in the common stock of Indian Industries, Inc., Xxxxxx Yale
Industries, Inc., Harvard Sports, Inc. and Escalade International,
Limited. Such pledge shall be evidenced by a Pledge Agreement in the
form of Exhibit "F". The Company shall deliver the stock
certificates of each such Subsidiary and any other Subsidiary formed
or acquired by the Company hereafter, together with Stock Powers
executed in blank.
4. AFFIRMATIVE COVENANTS. Section 5.(g) of the Agreement is hereby
amended and restated in its entirety to read as follows:
g. Financial Covenants. The Company shall observe the
following financial covenants:
(i) Tangible Net Worth. The Company shall maintain its
Tangible Net Worth, determined on a consolidated basis, of not
less than $500,000 below the Company's consolidated Tangible
Net Worth as of the date of funding of the tender offer (after
giving effect to the tender offer and its related transactional
expenses) until December 28, 1996, provided that no default of
this covenant will occur if the Tangible Net Worth is decreased
by more than $500,000 directly and solely as a result of the
Company's open market purchases of stock with proceeds of the
Term Loan. At December 28, 1996 and at the last day of each
fiscal year thereafter, the Tangible Net Worth to be maintained
by the Company on that date and at all times thereafter until
the last day of the next year shall be increased by an amount
equal to fifty percent (50%) of the Company's consolidated net
income, exclusive of losses, for the fiscal year then ended.
(ii) Leverage Ratio. For each period of four consecutive
fiscal quarters of the Company, ending during the periods
indicated in the table below, the Company shall maintain a
Leverage Ratio, at levels not greater than those shown in the
following table:
Period Ratio
from the date of this Amendment and until
December 27, 1997 3.50 to 1.0
at December 27, 1997 and until
December 26, 1998 3.25 to 1.0
at December 26, 1998 and until
December 25, 1999 3.00 to 1.0
at December 25, 1999 and until
December 30, 2000 2.75 to 1.0
at December 30, 2000 and
at all times thereafter 2.50 to 1.0
(iii) Debt Service Coverage. For each period of four
consecutive fiscal quarters ending during the periods indicated
in the table below, the Company shall maintain a debt service
coverage ratio (hereinafter defined), determined on a
consolidated basis, of not less than that indicated in the
table below.
Period Ratio
from the date of this Amendment and until
December 26, 1998 1.10 to 1.0
at December 26, 1998 and until
December 25, 1999 1.15 to 1.0
at December 25, 1999 and at all
times thereafter 1.20 to 1.0
For purposes of this covenant, the phrase "debt service
coverage ratio" means the ratio of (A) the sum of consolidated
net income before taxes plus interest expense plus depreciation
and amortization expense plus non-recurring and extraordinary
charges, all for the period for which the ratio is being
determined, over (B) the sum of scheduled Term Loan and other
term debt payments (excluding excess cash flow recapture
payments under Section 2.c(iii) hereof) plus interest expense
plus cash income taxes plus capital expenditures which were not
financed, all for the period for which such ratio is being
determined.
5. NEGATIVE COVENANTS. Sections 6.a. and i. of the Agreement are hereby
amended and restated in their entirety to read as follows:
a. Restricted Payments. The Company shall not purchase or redeem
any shares of the capital stock of the Company or declare or pay any
dividends thereon except for dividends payable entirely in capital
stock; provided, however, that notwithstanding anything to the
contrary contained herein, the Company may purchase and redeem shares
of its capital stock through a tender offer or open-market purchases
for an aggregate purchase or redemption price not to exceed Ten
Million Dollars ($10,000,000) with the proceeds of the Term Loan.
The Company shall not make any other distributions to shareholders as
shareholders, or set aside any funds for any such purpose, or prepay,
purchase or redeem any subordinated indebtedness of the Company.
i. Capital Expenditures Limitation. The Company shall not make
consolidated capital expenditures in the aggregate in any fiscal year
in excess of the amount of the Company's consolidated depreciation
expenses for the prior fiscal year. For purposes of testing
compliance with this covenant, any expenditure or obligation which is
not required, under generally accepted accounting principles, to be
recorded in full as an expense in the fiscal period when made or
incurred shall be considered a capital expenditure and capital
expenditures shall include, without limitation, the present value of
all capital lease obligations incurred by the Company determined as
of the date such obligations are incurred.
6. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this First Amendment, the Company represents and warrants to the Bank
that:
a. The execution and delivery of this First Amendment, the
execution and delivery of all of the other documents executed in
connection herewith, and the performance by the Company of its
obligations under this First Amendment and all of the documents
executed in connection herewith are within the corporate power of the
Company, have been duly authorized by all necessary corporate action,
have received any required governmental or regulatory agency
approvals and do not and will not contravene or conflict with any
provision of law or of the Articles of Incorporation or Bylaws of the
Company or of any agreement binding upon the Company or any of its
property.
b. This First Amendment and all of the documents executed by the
Company in connection herewith are the legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws enacted for the relief of
debtors generally and other similar laws affecting the enforcement of
creditors' rights generally or by equitable principles which may
affect the availability of specific performance and other equitable
remedies.
c. The representations and warranties contained in Section 3 of
the Agreement are true and correct as of the date hereof except that
the representations contained in Section 3.d. of the Agreement shall
be deemed to refer to the latest financial statements furnished by
the Company to the Bank.
d. No Event of Default or Unmatured Event of Default has occurred
and is continuing as of the date of this First Amendment.
7. CONDITIONS PRECEDENT. This First Amendment shall become effective
upon the Bank's receipt of the following, contemporaneously with the
execution of this First Amendment, each duly executed, dated and in form
and substance satisfactory to the Bank:
a. This First Amendment;
b. The Replacement Term Loan Note;
c. The Company's Security Agreement, together with appropriate UCC
financing statements;
d. The Company's Pledge Agreement, together with executed Stock
Powers and the original stock certificates of Indian
Industries, Inc., Xxxxxx Yale Industries, Inc., Harvard Sports,
Inc. and Escalade International, Limited;
e. A Reaffirmation of Guaranty from each of Indian Industries,
Inc., Xxxxxx Yale Industries, Inc., Harvard Sports, Inc. and
Escalade International, Limited;
f. Subsidiary Security Agreement from each of Indian Industries,
Inc., Xxxxxx Yale Industries, Inc., Harvard Sports, Inc. and
Escalade International, Limited, together with appropriate UCC
financing statements;
g. The Ninth Amendment to the Xxxxxx Yale Industries, Inc. Credit
Agreement;
h. Certified copies of Resolutions of the Boards of Directors of
the Company and each of the Subsidiaries authorizing the
execution, delivery and performance, respectively of this First
Amendment and the Term Loan Note, the Security Agreement, the
Pledge Agreement, the Reaffirmations of Guaranty, the
Subsidiary Security Agreements, and the other Loan Documents to
which each such entity is a party;
i. Certificates of the Secretaries of each of the Company and the
Subsidiaries certifying the name of the officer or officers
authorized to sign each document to which the Company or any
Subsidiary is a party, together with a sample of the true
signature of each such officer;
j. Copies of the Articles of Incorporation and Bylaws of each of
the Company and the Subsidiaries, certified by the Secretary of
each such entity or a Certificate of No Change to such
documents if previously delivered to the Bank;
k. An opinion of counsel for the Company and the Subsidiaries, in
form and substance acceptable to the Bank and its counsel; and
l. Such other documents as the Bank may reasonably request.
8. PRIOR AGREEMENTS. The Agreement, as amended by this First Amendment,
supersedes all previous agreements and commitments made or issued by the
Bank, related to all of the subjects of the Agreement, as amended by this
First Amendment, and any oral or written proposals or commitments made or
issued by the Bank.
9. AFFIRMATION. Except as expressly amended by this First Amendment,
all of the terms and conditions of the Agreement and each of the Loan
Documents remains in full force and effect.
Executed on September 19, 1996.
ESCALADE, INCORPORATED
By________________________________________
________________________________________
Printed Name and Title
BANK ONE, INDIANAPOLIS, NATIONAL
ASSOCIATION
By
-------------------------------------
D. Xxxxx Xxxxxxxx, Vice President and
Senior Relationship Manager
SS-81652-3
