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EXHIBIT (b)
Commitment Letter dated as of October 15, 1997
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Between Bank One, Indianapolis, N.A. and the Company
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[BANK ONE LETTERHEAD]
October 15, 1997
Xx. Xxxx X. Xxxxxx
Chief Financial Officer and Secretary
Escalade, Incorporated
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Dear Xxxx:
Bank One, Indiana, N.A. has approved an increase, extension and
restructuring of the Term Loan provided to Escalade, Incorporated (the
"Borrower"), on the terms and conditions of the Amended and Restated Credit
Agreement dated as of May 31, 1996, as amended from time to time (the "Credit
Agreement"), and subject to the terms and conditions set forth herein. All
capitalized terms used herein which are not otherwise defined are used as
defined in the Credit Agreement.
BORROWER: Escalade, Incorporated
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GUARANTORS: Indian Industries, Inc., Xxxxxx Yale Industries, Inc.,
----------- Escalade International, Ltd., Harvard Sports, Inc., and
Master Products Manufacturing Company, Inc.
AMOUNT: Twenty Six Million Five Hundred Thousand Dollars
($26,500,000.00)
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PURPOSE: To finance the repurchase of stock by the Borrower in
-------- a tender offer filed in compliance with regulations
of the Securities and Exchange Commission (Dutch
Auction) and to repurchase Escalade, Inc. warrants in
an aggregate amount not to exceed Fifteen Million
Dollars ($15,000,000) and to refinance the Borrower's
existing Term Loan in the amount of Eleven Million
Five Hundred Thousand Dollars ($11,500,000).
TERM: Seven years
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INTEREST RATE: Interest will accrue at the Borrower's option,
-------- at the Bank's Prime Rate plus the Applicable Spread
or at the London Interbank Offered Rate (LIBOR) plus
the Applicable Spread based upon the Borrower's
consolidated Funded Debt to EBITDA ratio as follows:
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Funded Debt to
EBITDA Ratio LIBOR Spread Prime Spread
------------ ------------ ------------
greater than 3 to 1 225 b.p. 25 b.p.
2.50-2.99 to 1 200 b.p. 25 b.p.
2.00-2.49 to 1 175 b.p. 0 b.p.
1.50-1.99 to 1 150 b.p. 0 b.p.
less than 1.50 to 1 125 b.p. 0 b.p.
The interest rate will initially be set at the 2.50-2.99
Funded Debt to EBITDA Ratio and will thereafter adjust
annually upon receipt of the Borrower's audited fiscal year
end financial statement beginning with receipt of the
Borrower's 1997 fiscal year-end statement, and shall be
effective for the first interest period following receipt of
such statement.
Pricing for the Borrower's Revolving Loan and for the Xxxxxx
Yale Industries, Inc. letter of credit will adjust to the
2.50-2.99 Funded Debt to EBITDA Ratio as of the date of
funding of the Term Loan.
LIBOR-based borrowings are for period of 30, 60, 90 or 180
days, with a minimum advance of One Million Dollars
($1,000,000) and certain prepayment penalties will apply to
prepayments of any LIBOR-based rate borrowing.
Interest shall be based on a 360 day year applied to the
actual number of days elapsed and shall be payable monthly.
COMMITMENT
FEE: One percent (1%) of the net increased amount of the Term Loan.
--- The commitment fee shall be payable in installments, with the
first $30,000 due upon acceptance of this Commitment Letter,
which installment shall be deemed earned upon receipt and will
be non-refundable. At closing, 50% of the fee shall be
payable, less the $30,000 paid, upon acceptance of the
commitment. The remaining one-half of the commitment
fee shall be payable in two equal installments on June 1, 1998
and on December 1, 1998 provided, however, that any unpaid
commitment fee installments shall be waived if the sale of the
"Sporting Goods Division" occurs prior to any such installment
being due.
REPAYMENT: Principal shall be repaid in equal quarterly payments of
---------- $948,428 (adjusted proportionately should less than the
$26,500,000 be advanced at closing), commencing December 31,
1997 with the balance, if any, due September 30, 2004.
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An excess cash flow recapture payment equal to 50% of excess
cash flow, as is currently defined, shall be payable annually
upon receipt of the Borrower's audited fiscal year end
financial statements. Such payments shall be applied against
the latest maturing installments of principal.
COLLATERAL: No change in existing collateral
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GENERAL TERMS
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AND CONDITIONS: 1. There will have been no material adverse
--------------- change in the financial condition of the
Borrower or its Subsidiaries from that
reflected in the Borrower's September 6,
1997 financial statement.
2. The Term Loan will be subject to the terms
and conditions of Borrower's Amended and
Restated Credit Agreement, as amended (the
"Credit Agreement"), and as further amended
to incorporate the following:
- The Minimum Debt Service Coverage
Ratio covenant will be amended to
1.10 to 1 at fiscal year end 1998
and at fiscal year end 1999,
increasing to 1.20 to 1 at fiscal
year end 2000 and thereafter.
- The Funded Debt to EBITDA ratio
covenant shall remain the same (3.0
to 1 through December 30, 1998
reducing to 2.5 to 1 on December 31,
1998 and at all times thereafter).
- Maintain a minimum Net Worth
covenant of not less than $500,000
below the Borrower's consolidated
Net Worth as of the date of funding
the tender offer through fiscal year
end 1998 and thereafter increasing
annually at each fiscal year end by
50% of net income, exclusive of
losses.
- Amend negative covenant to provide
for the purchase of shares of common
stock and warrants through the
tender offer in an aggregate amount
not to exceed $15,000,000.
3. The Bank will employ outside legal counsel
at Borrower's expense to prepare all bank
related documents, not to exceed $2,000 plus
all out of pocket costs and expenses of Bank
and its counsel.
4. The Bank is to be provided copies of all
Securities and Exchange Commission filings
relating to the tender offer.
5. The Borrower shall have engaged the services
of Xxxxxxxxxxx & Co., Inc. in connection
with the possible sale of the "Sporting
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Goods Division," and the terms of that
engagement shall be satisfactory to the
Bank.
6. The Xxxxxx Yale Industries, Inc.
manufacturing facility in Wabash, Indiana
will be appraised to determine its fair
market value in accordance with FIRREA
appraisal requirements. The cost of the
appraisal will be paid by the Bank.
7. The Borrower and the Guarantors will be
required to execute and deliver resolutions,
officers' certificates and other documents
and to provide for and deliver counsel
opinions, all as the Bank and its counsel
deem necessary or appropriate and in form
and substance acceptable to the Bank and its
counsel.
This commitment shall expire on October 31, 1997, unless extended in
writing by the Bank. Please evidence your acceptance of this commitment by
signing where indicated and returning the original of this letter to me,
together with your check in the amount of $30,000 in payment of the first
installment of the commitment fee.
Very truly yours,
/s/ D. Xxxxx Xxxxxxxx
D. Xxxxx Xxxxxxxx, Vice President and Senior
Relationship Manager
Accepted this 28th day of October, 1997
ESCALADE, INCORPORATED
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, Chief Financial Officer
cc: Xxxxxx X. Xxxxxxx, Chairman
W.C. (Xxxx) Xxxx
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