-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VT+aEMg5Yv/znyLhsAhHEiMYHGABS7mqx/nKc/6N6PLEaj71+RH8uSCtFQHJdP6t WEeJM4wkz4QpS5CK4a6Pkw== 0000927025-00-000113.txt : 20000921 0000927025-00-000113.hdr.sgml : 20000921 ACCESSION NUMBER: 0000927025-00-000113 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000531 FILED AS OF DATE: 20000717 DATE AS OF CHANGE: 20000721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RAWLINGS SPORTING GOODS CO INC CENTRAL INDEX KEY: 0000921915 STANDARD INDUSTRIAL CLASSIFICATION: 3949 IRS NUMBER: 431674348 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24450 FILM NUMBER: 674552 BUSINESS ADDRESS: STREET 1: 1859 INTERTECH DR CITY: FENTON STATE: MO ZIP: 63026 BUSINESS PHONE: 3143493500 MAIL ADDRESS: STREET 1: 1859 INTERTECH DR CITY: FENTON STATE: MO ZIP: 63026 10-Q 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended May 31, 2000 Commission file number 0-24450 RAWLINGS SPORTING GOODS COMPANY, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 43-1674348 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Identification No.) Organization) 1859 Intertech Drive, Fenton, Missouri 63026 (Address of Principal Executive Offices) (Zip Code) (636) 349-3500 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares outstanding of the issuer's Common Stock, par value $0.01 per share, as of June 30, 2000: 7,939,120 shares. Part I. FINANCIAL INFORMATION Item 1. Financial Statements Rawlings Sporting Goods Company, Inc. and Subsidiaries Consolidated Statements of Income (Amounts in thousands, except per share data) (Unaudited) Quarter Ended Nine Months Ended May 31, May 31, 2000 1999 2000 1999 Net revenues $45,978 $44,740 $143,680 $133,092 Cost of goods sold 30,174 30,715 96,420 89,707 Aluminum bat recall - 1,600 - 1,600 Gross profit 15,804 12,425 47,260 41,785 Selling, general 12,031 11,635 33,617 33,081 and administrative expenses Unusual charges - - 1,497 - Operating income 3,773 790 12,146 8,704 Interest expense, 1,439 1,344 4,666 3,577 net Other expense, net 70 50 221 118 Income (loss) from continuing operations before income 2,264 (604) 7,259 5,009 taxes Provision (benefit) 794 (224) 2,642 1,853 for income taxes Net income (loss) from continuing operations before 1,470 (380) 4,617 3,156 extraordinary item Loss from operations of discontinued segment, net of (1,458) (297) (2,314) (1,013) tax Loss on disposal of discontinued segment including provision of $1,500 for operating losses during phaseout period, (11,326) - (11,326) - net of tax Net income (loss) (11,314) (677) (9,023) 2,143 before extraordinary item Extraordinary item, - - (646) - net of tax Net income (loss) $(11,314) $(677) $(9,669) $2,143 Net income (loss) per common share: Basic Continuing $0.18 $(0.05) $0.58 $0.40 operations Discontinued (1.61) (0.04) (1.72) (0.13) segment Extraordinary - - (0.08) - item Net income $(1.42) $(0.09) $(1.22) $0.27 (loss) Diluted Continuing $ 0.18 $(0.05) $ 0.58 $0.40 operations Discontinued (1.61) (0.04) (1.72) (0.13) segment Extraordinary - - (0.08) - item Net income $(1.42) ($0.09) $(1.22) $0.27 (loss) Shares used in computing per share amounts: Basic 7,956 7,870 7,937 7,839 Assumed exercise - 16 2 28 of stock options Diluted 7,956 7,886 7,939 7,867 The accompanying notes are an integral part of these consolidated statements. Rawlings Sporting Goods Company, Inc. and Subsidiaries Consolidated Balance Sheets (Amounts in thousands, except share data) (Unaudited) May 31, August 31, 2000 1999 ASSETS Current Assets: Cash and cash equivalents $ 2,728 $ 904 Accounts receivable, net of allowance of $2,934 and $2,243 respectively 36,781 26,919 Inventories 39,774 35,220 Deferred income taxes 3,983 3,983 Prepaid expenses 794 851 Net assets of discontinued 1,436 9,287 segment Total current assets 85,496 77,164 Property, plant and equipment, net 9,324 10,687 Deferred income taxes 20,929 20,920 Other assets 1,097 643 Net noncurrent assets of 504 11,261 discontinued segment Total assets $117,350 $120,675 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 45,064 $ 51,015 Accounts payable 14,127 7,969 Accrued liabilities 14,230 10,626 Total current liabilities 73,421 69,610 Long-term debt, less current 2,182 133 maturities Other long-term liabilities 9,291 8,855 Total liabilities 84,894 78,598 Stockholders' equity: Preferred stock, none issued - - Common stock, 7,931,603 and 7,897,708 shares issued and outstanding, respectively 79 79 Additional paid-in capital 30,707 30,482 Stock subscription receivable (1,421) (1,421) Cumulative other comprehensive loss (1,576) (1,399) Retained earnings 4,667 14,336 Stockholders' equity 32,456 42,077 Total liabilities and $117,350 $120,675 stockholders' equity The accompanying notes are an integral part of these consolidated balance sheets. Rawlings Sporting Goods Company, Inc. and Subsidiaries Consolidated Statements of Cash Flow (Amounts in thousands) (Unaudited) Nine Months Ended May 31, 2000 1999 Cash flows from operating activities: Net income (loss) $(9,669) $ 2,143 Add net loss from discontinued segment 13,640 1,013 Add extraordinary item 646 - Net income from continuing operations 4,617 3,156 Adjustments to reconcile net income from continuing operations to net cash provided by (used in) continuing operations: Depreciation and amortization 2,228 1,622 Deferred income taxes 2,633 2,181 Changes in operating assets and liabilities: Accounts receivable, net (9,862) (6,500) Inventories (4,554) (3,462) Prepaid expenses 57 (34) Other assets (1,381) (149) Accounts payable 6,158 2,415 Accrued liabilities and other 3,936 (793) Net cash provided by (used in) continuing 3,832 (1,564) operations Net cash provided by discontinued segment 2,396 1,865 Net cash provided by operating activities 6,228 301 Cash flows from investing activities: Capital expenditures of continuing (657) (1,552) operations Capital expenditures of discontinued (70) (177) segment Net cash used in investing activities (727) (1,729) Cash flows from financing activities: Net decrease in short-term borrowings (6,353) - Borrowings of long-term debt 2,500 41,750 Repayments of long-term debt (49) (40,096) Issuance of common stock 225 758 Net cash (used in) provided by financing (3,677) 2,412 activities Net increase in cash and cash equivalents 1,824 984 Cash and cash equivalents, beginning of 904 724 period Cash and cash equivalents, end of period $ 2,728 $1,708 The accompanying notes are an integral part of these consolidated statements. Rawlings Sporting Goods Company, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: Summary of Significant Accounting Policies. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission pertaining to interim financial information and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Form 8-K filed on January 3, 2000. In the opinion of management, all adjustments consisting only of normal recurring adjustments considered necessary for a fair presentation of financial position and results of operations have been included therein. The results for the nine months ended May 31, 2000 are not necessarily indicative of the results that may be expected for a full fiscal year. Note 2: Discontinued Segment On June 26, 2000 the Company made a strategic decision to seek a buyer for its Vic hockey business. Vic provides an extensive line of equipment for hockey including hockey sticks, hockey protective equipment and goalie protective equipment. The sale of the Vic hockey business is expected to be completed during fiscal 2001. Vic hockey is accounted for as a discontinued segment, and accordingly, operating results and net assets are segregated in the Company's financial statements. The net current assets of this discontinued segment are primarily accounts receivable, inventory, accounts payable and accrued expenses. Net noncurrent assets are primarily property, plant and equipment and goodwill. Operating results for the hockey business are included in the Consolidated Statements of Income as net income from discontinued segment for all periods presented. Results for the discontinued segment are as follows (in thousands): Quarter Ended Nine Months Ended May 31, May 31, 2000 1999 2000 1999 Net revenues $ 1,426 $1,874 $ 5,070 $ 5,053 Loss from operations $ (1,385) $(471) $(2,744) $(1,608) of discontinued segment before income taxes Provision (benefit)for 73 (174) (430) (595) income taxes Net loss from $ (1,458) $(297) $(2,314) $(1,013) operations of discontinued segment Loss on disposal of $(13,000) $ - $(13,000) $ - discontinued segment before income taxes Benefit for income (1,674) - (1,674) - taxes Net loss on disposal $(11,326) $ - $(11,326) $ - of discontinued segment The loss on disposal includes the writedown of assets of the hockey business ($10,750,000) to estimated net realizable value, the provision for operating losses during the phaseout period of $1,500,000 and the estimated costs to dispose of this business of $750,000. Note 3: Credit Facility On December 28, 1999, the Company refinanced its credit facility by entering into a $75,000,000 five-year term credit agreement with a new lender. Actual availability is based on the Company's outstanding receivables and inventories. The facility also allows for a $15,000,000 seasonal advance from November through April. Borrowings under the agreement are based on an interest rate of LIBOR plus 2.25 percent. A commitment fee of 0.50 percent is charged on any unused portion of the facility. On May 15, 2000 the Company and its lenders amended the credit agreement to convert $2,500,000 of the seasonal advance portion of the facility to a term loan. The amount of seasonal advance available to the Company was reduced by the amount of the term loan. The term loan provides for monthly installment payments and the aggregate outstanding principal balance of the term loan becomes due and payable in full on the termination date of the credit facility. The term loan bears interest at LIBOR plus 2.50 percent. The credit facility includes various restrictions, including requirements that the Company achieve certain EBITDA levels as defined in the agreement, maintain a fixed charge ratio of 1 to 1 and limit capital expenditures and the payment of dividends. Certain restrictions contained in the credit facility require, based on current accounting literature, that debt under the facility, with the exception of the term loan component, be classified as current. Note 4: Inventories Inventories consisted of the following (in thousands): May 31, August 31, 2000 1999 Raw materials $ 7,943 $7,885 Work in process 2,370 1,253 Finished goods 29,461 26,082 $39,774 $35,220 Note 5: Comprehensive Income For the three months ended May 31, 2000 comprehensive loss was $11,666,000 compared with a comprehensive loss of $518,000 for the comparable prior year period. For the nine months ended May 31, 2000 comprehensive loss was $9,846,000 compared with comprehensive income of $2,491,000 for the nine months ended May 31, 1999. Note 6: Operating Segments In 1999, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of a Business Enterprise and Related Information," which establishes standards for reporting information about reportable operating segments. Operating segments, as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company has identified operating segments based on internal management reports. This Statement allows aggregation of similar operating segments into a single reportable operating segment if the businesses are considered similar under the criteria of this Statement. The Company has four operating segments based on its product categories, which in applying the aggregation criteria of this Statement have been aggregated into two reportable segments: Sports Equipment and Licensing. The sports equipment segment manufactures and distributes sports equipment and uniforms for team sports including baseball, basketball and football. The licensing segment licenses the Rawlings brand name on products sold by other companies, including products such as golf equipment, footwear, and activewear. There are no determinable operating expenses for the licensing segment. The accounting policies of the segments are the same as those for the Company. The revenues generated and long- lived assets located outside the United States are not significant and therefore, separate presentation is not required. Quarter Ended Nine Months Ended May 31, May 31, 2000 1999 2000 1999 Net revenues Sports equipment $44,269 $42,889 $139,428 $128,712 Licensing 1,709 1,851 4,252 4,380 Consolidated net $45,978 $44,740 $143,680 $133,092 revenues Operating income (loss) Sports equipment $ 2,064 $(1,061) $ 7,894 $ 4,324 Licensing 1,709 1,851 4,252 4,380 Consolidated $ 3,773 $ 790 $ 12,146 $ 8,704 operating income May 31, August 31, 2000 1999 Total assets Sports equipment $113,476 $ 98,898 Licensing 1,934 1,229 Net assets of 1,940 20,548 discontinued segment Consolidated total assets $117,350 $120,675 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Statements made in this report that are not historical in nature, or that state the Company's or management's intentions, hopes, beliefs, expectations, or predictions of the future, for example, the intent of the Company to restructure operations, redesign certain processes and potentially sell underperforming assets are "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, and involve risks and uncertainties. The words "should", "will be", "intended", "continue", "believe", "may", "expect", "hope", "anticipate", "goal", "forecast" and similar expressions are intended to identify such forward-looking statements. It is important to note that any such forward-looking statements are not guarantees of future performance, and the Company's actual results, financial condition or business could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below under the caption "Cautionary Factors That May Affect Future Results or the Financial Condition of the Business", as well as those discussed elsewhere in the Company's reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results over time. Discontinued Segment On June 26, 2000, the Company made a strategic decision to seek a buyer for its Vic hockey business. Vic provides an extensive line of equipment for hockey including hockey sticks, hockey protective equipment and goalie protective equipment. The sale of the Vic hockey business is expected to be completed during fiscal 2001. Vic hockey is accounted for as a discontinued segment, and accordingly, operating results and net assets are segregated in the Company's financial statements. RESULTS OF OPERATIONS Quarter Ended May 31, 2000 Compared with Quarter Ended May 31, 1999 Net revenues from continuing operations for the quarter ended May 31, 2000 were $45,978,000 or 2.8 percent higher than net revenues from continuing operations of $44,740,000 for the same quarter last year. The increase in net revenues from continuing operations was primarily the result of strong demand across all categories of baseball equipment (up $2,208,000) with the exception of radar speed-sensing baseballs, partially offset by a decrease in basketball net revenues (down $636,000). Basketball net revenues were down from the comparable prior year quarter partially as a result of the NBA players' strike which delayed shipments into the May 31, 1999 quarter. The Company's gross profit from continuing operations was $15,804,000 or 27.2 percent higher than the gross profit from continuing operations of $12,425,000 for the comparable prior year period. The gross profit margin from continuing operations for the quarter was 34.4 percent, 6.6 margin points higher than the comparable prior year quarter. Cost of sales for the quarter ended May 31, 1999 included a $1,600,000 provision for a voluntary slow-pitch softball aluminum bat recall for safety reasons. Excluding that provision, the gross profit margin from continuing operations for the May 31, 1999 quarter was 31.3 percent, 3.1 margin points lower than the comparable current year quarter. The higher gross profit margin was primarily related to improved margins for baseball equipment (with the notable exception of radar speed-sensing baseballs and wood bats), improved margins for footballs (specifically due to outsourcing) and improved margins across the apparel business. Gross profit margin for radar speed-sensing baseballs was lower as a result of markdowns taken to dispose of excess inventory, while the margin for wood bats was lower by comparison because of unusually strong sales of high margin Mark McGwire memorabilia baseball bats in the comparable prior year period. Selling, general and administrative (SG&A) expenses from continuing operations of $12,031,000 were 3.4 percent above SG&A expenses of $11,635,000 for the comparable prior year quarter. The increase in SG&A expenses was primarily related to increases in freight, salaries and wages and depreciation, partially offset by decreases in professional fees and advertising and promotion. SG&A expenses were 26.2 percent of net revenues from continuing operations or 0.2 points higher than the comparable prior year quarter. Interest expense for the quarter ended May 31, 2000 was $1,439,000 or 7.1 percent higher than the interest expense of $1,344,000 for the comparable prior year quarter. Lower average borrowings by $14,068,000 were more than offset by an increase in average interest rates of 2.8 points. Net revenues from the discontinued segment for the quarter ended May 31, 2000 were $1,426,000 or 23.9 percent lower than net revenues from the discontinued segment of $1,874,000 for the same quarter last year. The decrease in net revenues was primarily the result of lower sales of hockey sticks and goalie equipment. Loss from operations for the discontinued segment for the quarter ended May 31, 2000 was $1,385,000 or $914,000 higher than the loss from operations of $471,000 for the same quarter last year. The increased loss from operations was primarily the result of lower sales volume, an increased percentage of low margin sales of discontinued product and increased provisions for inventory obsolescence and reserve for bad debts. Nine Months Ended May 31, 2000 Compared with the Nine Months Ended May 31, 1999 Net revenues from continuing operations for the nine months ended May 31, 2000 were $143,680,000 or 8.0 percent higher than the net revenues from continuing operations of $133,092,000 for the comparable nine month period last year. The increase in net revenues from continuing operations was primarily the result of strong demand across all categories of baseball equipment (up $11,205,000) with the exception of radar speed-sensing baseballs and wood bats. Radar speed-sensing baseball net revenues were off significantly after an initial introduction of the product in late 1998. Sales of wood bats were lower by comparison because of unusually strong sales of Mark McGwire memorabilia baseball bats in the comparable prior year period. Additionally, net revenues from apparel were up $1,329,000 primarily as a result of additional demand for stock baseball apparel. Net revenues from footballs were down $1,606,000 due to the decision not to renew the NCAA football contract. The Company's gross profit from continuing operations for the nine months ended May 31, 2000 was $47,260,000 or 13.1 percent higher than the gross profit from continuing operations of $41,785,000 for the comparable prior year period. The gross profit margin from continuing operations for the nine months ended May 31, 2000 was 32.9 percent, 1.5 margin points higher than the comparable prior year period. Cost of sales for the nine months ended May 31, 1999 included a $1,600,000 provision for a voluntary slow-pitch softball aluminum bat recall for safety reasons. Excluding that provision the gross profit margin from continuing operations for the nine month period ended May 31, 1999 was 32.6 percent, 0.3 margin points lower than the comparable current year period. Profit margin for the nine months ended May 31, 2000 was negatively impacted (approximately 1.6 margin points) by a higher volume of low margin sales of discontinued products because of a concerted effort by management to reduce the levels of such inventories, and lower sales of high margin memorabilia wood baseball bats and radar speed-sensing baseballs. The Company is continuing to look for further production efficiencies in apparel and significant cost reductions in other areas including the potential sale of underperforming assets, consolidation of certain production and distribution facilities, various process redesigns in customer service and distribution, and a 15 percent reduction in headquarters' staff. The headquarters' staff reduction was completed during the first quarter through an early retirement program which resulted in a first quarter charge of $759,000. Additional charges may result from these or other actions. SG&A expenses from continuing operations for the nine months ended May 31, 2000 were $33,617,000, 1.6 percent above SG&A expenses of $33,081,000 for the comparable prior year period. The increase in SG&A expenses was primarily related to increases in freight, salaries and wages and depreciation, partially offset by decreases in advertising and promotion and professional fees. SG&A expenses were 23.4 percent of net revenues from continuing operations or 1.5 points lower than the comparable prior year period. Unusual charges included a charge of $759,000 for the previously discussed early retirement program and $738,000 of costs associated with the Company's recently completed review of strategic alternatives. Interest expense for the nine months ended May 31, 2000 was $4,666,000 or 30.4 percent higher than the interest expense of $3,577,000 for the comparable prior year period. Lower average borrowings by $10,220,000 were more than offset by an increase in average interest rates of 3.7 points. On December 28, 1999, the Company refinanced its credit facility by entering into a $75,000,000 five-year term credit agreement with a new lender. Borrowings under the new agreement are based on an interest rate of LIBOR plus 2.25 percent. On May 15, 2000 the Company and its lenders amended the credit agreement to convert $2,500,000 of the seasonal advance portion of the facility to a term loan. The term loan component of the credit facility bears interest at the rate of LIBOR plus 2.50 percent. See Note 3 to the Consolidated Financial Statements. The extraordinary item of $646,000 was due to the write-off of deferred financing costs associated with the early extinguishment of the previous credit facility. Net revenues from the discontinued segment for the nine months ended May 31, 2000 were $5,070,000, essentially flat with net revenues from the discontinued segment of $5,053,000 for the comparable prior year period. Loss from operations for the discontinued segment for the nine month period ended May 31, 2000 was $2,744,000 or $1,136,000 higher than the loss from operations of $1,608,000 for the comparable prior year period. The increased loss from operations was primarily the result of higher sales of low margin discontinued product and increased provisions for inventory obsolescence and reserve for bad debts. Seasonality Net revenues of baseball equipment and team uniforms are highly seasonal. Customers generally place orders with the Company for baseball-related products beginning in August for shipment beginning in November (pre-season orders). These pre- season orders from customers generally represent approximately 50 percent to 65 percent of the customers' anticipated needs for the entire baseball season. The amount of these pre-season orders generally determines the Company's net revenues and profitability between November 1 and March 31. The Company then receives additional orders (fill-in orders) which depend upon customers' actual sales of products during the baseball season (sell- through). Fill-in orders are typically received by the Company between February and May. These orders generally represent approximately 35 percent to 50 percent of the Company's sales of baseball-related products during a particular season. Pre-season orders for certain baseball-related products from certain customers are not required to be paid until early spring. These extended terms increase the risk of collectibility of accounts receivable. An increasing number of customers are on automatic replenishment systems; therefore, more orders are received on a ship-at-once basis. This change has resulted in shipments to the customer closer to the time the products are actually sold. This trend has and may continue to have the effect of shifting the seasonality and quarterly results of the Company with higher inventory and debt levels required to meet orders for immediate delivery. The sell-through of baseball-related products also affects the amount of inventory held by customers at the end of the season which is carried over by the customer for sale in the next baseball season. Customers typically adjust their pre- season orders for the next baseball season to account for the level of inventory carried over from the preceding baseball season. Football equipment and team uniforms are both shipped by the Company and sold by retailers primarily in the period between March 1 and September 30. Basketballs and team uniforms generally are shipped and sold throughout the year. Because the Company's sales of baseball-related products exceed those of its other products, Rawlings' business is seasonal, with its highest net revenues and profitability recognized between November 1 and April 30. Liquidity and Capital Resources Working capital increased by $4,521,000 during the nine months ended May 31, 2000 primarily as a result of a seasonal increase in accounts receivable and inventories, partially offset by an increase in accounts payable due to the conversion of foreign vendors from payment by letter of credit to open account payment terms. Cash flows provided by operating activities for the nine months ended May 31, 2000 were $6,228,000 or $5,927,000 higher than the $301,000 provided in the comparable prior year period. The improvement is primarily the result of converting foreign vendors from payment by letter of credit to open account payment terms and tighter cash controls, partially offset by volume driven increases in accounts receivable and inventory. Capital expenditures were $727,000 for the nine months ended May 31, 2000 compared to $1,729,000 for the comparable prior year period. The Company intends to continue to carefully review all proposed capital investments and expects total fiscal 2000 capital expenditures to be substantially below the $1,932,000 expended in fiscal 1999. During the nine months ended May 31, 2000, the Company repaid $3,902,000 of its outstanding debt. This resulted in total debt of $47,246,000 as of May 31, 2000 or 7.6 percent lower than total debt of $51,148,000 as of August 31, 1999. Compared to debt as of May 31, 1999 of $58,763,000, debt as of May 31, 2000 was down $11,517,000 or 19.6 percent. The decrease in total debt was primarily the result of more efficient working capital management. Management believes that the Company's current credit facility is sufficient to adequately finance its existing and future operators. Cautionary Factors That May Affect Future Results, Financial Condition or Business Statements made in this report, other reports and proxy statements filed with the Securities and Exchange Commission, communications to stockholders, press releases and oral statements made by representatives of the Company that are not historical in nature, or that state the Company's or management's intentions, hopes, beliefs, expectations, or predictions of the future, are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and involve risks and uncertainties. The words "should," "will be," "intended," "continue," "believe," "may," "expect," "hope," "anticipate," "goal," "forecast" and similar expressions are intended to identify such forward-looking statements. It is important to note that any such performance, and actual results, financial condition or business could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this document as well as those discussed elsewhere in other reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time. Item 3. Quantitative and Qualitative Disclosure about Market Risk The Company has no material sensitivity to changes in foreign currency exchange rates on its net exposed derivative financial instrument position. Part II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities and Use of Proceeds None. Item 3. Defaults on Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders The annual Stockholders' Meeting was held on April 13, 2000. At the meeting the following nominees were elected pursuant to the following votes: Number of Number of Nominee Votes For Votes Withheld Charles L. Jarvie 6,778,129 751,276 Michael McDonnell 6,761,117 768,288 Michael J. Roarty retired as a director at the meeting. The following directors' term of office continued after the meeting: Andrew N. Baur Linda L. Griggs Stephen M. O'Hara Robert S. Prather, Jr. William C. Robinson The approval of the Board of Directors' selection of Arthur Andersen LLP as independent public accountants was approved pursuant to the following vote: For Against Abstain 7,447,954 59,331 22,120 The shareholder proposal to revoke the Rights Agreement, dated July 1, 1994 was ratified pursuant to the following vote: For Against Abstain Non-Vote 3,402,524 1,236,620 57,407 2,832,854 Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Amendment No. 2 to the Credit Agreement among Rawlings Sporting Goods Company, Inc., General Electric Capital Corporation and LaSalle Bank National Association dated May 15, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RAWLINGS SPORTING GOODS COMPANY, INC. Date: /s/ STEPHEN M. O'HARA Stephen M. O'Hara Chairman of the Board and Chief Executive Officer Date: /s/ MICHAEL L. LUETKEMEYER Michael L. Luetkemeyer Chief Financial Officer (Principal Accounting Officer) EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS AUG-31-2000 MAY-31-2000 2,728 0 39,715 2,934 39,774 85,496 26,773 17,449 117,350 73,421 11,473 0 0 79 32,377 117,350 143,680 143,680 96,420 96,420 35,114 0 4,666 7,259 2,642 4,617 (13,640) (646) 0 (9,669) (1.22) (1.22)
EX-10 3 0003.txt AMENDMENT NO. 2 TO CREDIT AGREEMENT AMENDMENT NO. 2 TO CREDIT AGREEMENT This AMENDMENT NO. 2 TO CREDIT AGREEMENT (this "AMENDMENT") dated as of May 15, 2000 (the "Effective Date") is made among RAWLINGS SPORTING GOODS COMPANY, INC., a Delaware corporation ("BORROWER"); the other Credit Parties signatory to the hereinafter defined Credit Agreement; GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (in its individual capacity, "GE Capital"), for itself, as Lender, and as Agent for Lenders ("Agent"), and the other Lenders signatory to the hereinafter defined Credit Agreement. RECITALS A. Agent, Lenders and Credit Parties are party to that certain Credit Agreement dated as of December 28, 1999 (as amended, restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). B. On and subject to the terms and conditions hereof, Agent, Lenders and Credit Parties wish to amend certain provisions of the Credit Agreement. C. This Amendment shall constitute a Loan Document and these Recitals shall be construed as part of this Amendment; capitalized terms used herein without definition are so used as defined in Annex A to the Credit Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree as follows: 1. AMENDMENT. Subject to the conditions precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended as follows: (a) Section 1.1 of the Credit Agreement is amended by adding the following new Section 1.1(d): "(d) TERM LOAN. (i) Subject to the terms and conditions hereof, each Lender agrees to make a term loan on May _, 2000 to Borrower (the "TERM LOAN") in the original principal amount of its Term Loan Commitment. The obligations of each Lender hereunder shall be several and not joint. The Term Loan shall be evidenced by promissory notes substantially in the form of EXHIBIT 1.1(d) (each a "TERM NOTE" and collectively the "TERM NOTES"), and Borrower shall execute and deliver a Term Note to each Lender. Each Term Note shall represent the obligation of Borrower to pay the amount of the applicable Lender's Term Loan Commitment, together with interest thereon as prescribed in Section 1.5. (ii) Borrower shall pay the principal amount of the Term Loan in seventy five (75) consecutive monthly installments of $33,333.33 on the first day of each calendar month, commencing June 1, 2000. Notwithstanding the foregoing, the aggregate outstanding principal balance of the Term Loan shall be due and payable in full in immediately available funds on the Commitment Termination Date, if not sooner paid in full. Each payment of principal with respect to the Term Loan shall be paid to Agent for the ratable benefit of each Term Lender, ratably in proportion to each such Term Lender's respective Term Loan Commitment." (b) Section 1.3(a) of the Credit Agreement is amended by inserting the following sentence at the beginning of such Section: "Borrower may at any time on at least five (5) days' prior written notice to Agent voluntarily prepay all of the Term Loan." (c) Section 1.3(c) of the Credit Agreement is amended by deleting the Section in its entirety and replacing such Section with the following new Section 1.3(c): "(c) APPLICATION OF CERTAIN MANDATORY PREPAYMENTS. Any prepayments made by Borrower pursuant to CLAUSES (b)(ii) or (b)(iii) above shall be applied as follows: FIRST, to Fees and reimbursable expenses of Agent then due and payable pursuant to any of the Loan Documents; SECOND, to interest then due and payable on the Term Loan; THIRD, to prepay the scheduled installments of the Term Loan in inverse order of maturity, until such Loan shall have been prepaid in full; FOURTH, to interest then due and payable on the Swing Line Loan; FIFTH, to the principal balance of the Swing Line Loan until the same shall have been repaid in full; SIXTH, to interest then due and payable on the Revolving Credit Advances; SEVENTH, to the outstanding principal balance of Revolving Credit Advances until the same shall have been paid in full; and EIGHTH, to any Letter of Credit Obligations, to provide cash collateral therefor in the manner set forth in ANNEX B, until all such Letter of Credit Obligations have been fully cash collateralized in the manner set forth in ANNEX B. Neither the Revolving Loan Commitment nor the Swing Line Commitment shall be permanently reduced by the amount of any such prepayments." (d) Section 1.3(d) of the Credit Agreement is amended by deleting such Section in its entirety and replacing it with the following: "(d) APPLICATION OF PREPAYMENTS FROM INSURANCE PROCEEDS. Prepayments from insurance proceeds in accordance with SECTION 5.4(c) shall be applied as follows: insurance proceeds from casualties or losses to cash or Inventory shall be applied first, to the Swing Line Loans and, second, to the Revolving Credit Advances; insurance proceeds from casualties or losses to Equipment, Fixtures and Real Estate shall be applied to scheduled installments of the Term Loan in inverse order of maturity. Neither the Revolving Loan Commitment nor the Swing Line Loan Commitment shall be permanently reduced by the amount of any such prepayments. If the precise amount of insurance proceeds allocable to Inventory as compared to Equipment, Fixtures and Real Estate are not otherwise determined, the allocation and application of those proceeds shall be determined by Agent, subject to the approval of Requisite Lenders." (e) Section 1.5(a) of the Credit Agreement is amended by deleting the word "and" immediately before clause (ii) of such Section and inserting the following language at the end of such clause (ii): "and (iii) with respect to the Term Loan, the Index Rate plus the Applicable Term Loan Index Margin per annum or, at the election of the Borrower, the applicable LIBOR Rate plus the Applicable Term Loan LIBOR Margin per annum." (f) Section 1.5(a) of the Credit Agreement is further amended by inserting the following sentence immediately after the first sentence of the second paragraph thereof: "The Applicable Term Loan Index Margin and the Applicable Term Loan LIBOR Margin will be 1.00% and 2.50% per annum, respectively, as of the date of the Second Amendment to the Agreement." (g) Section 1.5(a) of the Credit Agreement is further amended by deleting the second grid set forth in such Section and replacing it with the following grid: "APPLICABLE MARGINS LEVEL I LEVEL II Applicable Index Margin 0.75% 0.50% Applicable LIBOR Margin 2.25% 2.00% Applicable Term Loan Index Margin 1.00% 0.75% Applicable Term Loan LIBOR Margin 2.50% 2.25% Applicable L/C Margin 2.25% 2.00% Applicable Unused Line Fee Margin 0.50% 0.50%" (h) Section 1.9(c) of the Credit Agreement is amended by inserting the words "prepays the Term Loan or" immediately after the first reference to "Borrower" in the first sentence of such Section and inserting the words "(i) the principal amount of the Term Loan prepaid and (ii)" immediately before the words "the amount of the Revolving Loan Commitment" in the first sentence of such Section. (i) Section 1.11(a) of the Credit Agreement is amended by deleting the words "Revolving Loan" in clause (4) of such Section and replacing such words with the words "other Loans, ratably in proportion to the interest accrued as to each Loan" and by deleting the words "Revolving Loan" in clause (5) of such Section and replacing such words with the words "other Loans." (j) Section 1.12 of the Credit Agreement is amended by inserting the words "and the Term Loan" immediately after the word "Advances" in the first sentence of such Section. (k) Section 1.16(d) of the Credit Agreement is amended by deleting the words "Loan and Revolving Loan Commitment" in such Section and replacing such words with the words "Loans and Commitments." (l) Section 9.1 of the Credit Agreement is amended by deleting each reference to "Revolving Loan Commitment" contained in such Section and replacing such reference with a reference to "Commitments" and by inserting the following sentence immediately after the first sentence of Section 9.1(a): "Each assignment shall be of a constant, and not a varying, ratable percentage of all of the assigning Lender's rights and obligations under this Agreement." (m) Sections 9.1, 9.4, 9.9(b), 11.2 and 11.8 of the Credit Agreement and the definitions of "Interest Payment Date" and "Pro Rata Share" contained in Annex A to the Credit Agreement are amended by deleting each reference to "Revolving Loan Commitment" or "Revolving Loan Commitments" in such Sections and replacing each such reference with a reference to "Commitments." (n) The following new definitions are inserted into Annex A to the Credit Agreement in appropriate alphabetical order: "APPLICABLE TERM LOAN INDEX MARGIN" shall mean the per annum interest rate from time to time in effect and payable in addition to the Index Rate applicable to the Term Loan, as determined by reference to Section 1.5(a) of the Agreement. ""APPLICABLE TERM LOAN LIBOR MARGIN" shall mean the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate applicable to the Term Loan, as determined by reference to SECTION 1.5(a) of the Agreement. "COMMITMENTS" shall mean (a) as to any Lender, the aggregate of such Lender's Revolving Loan Commitment (including without duplication the Swing Line Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment) and Term Loan Commitment as set forth on ANNEX J to the Agreement or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate of all Lenders' Revolving Loan Commitments (including without duplication the Swing Line Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment) and Term Loan Commitments, which aggregate commitment shall be Seventy Five Million Dollars ($75,000,000) on the Closing Date, as to each of clauses (a) and (b), as such Commitments may be reduced, amortized or adjusted from time to time in accordance with the Agreement. "TERM LOAN" shall have the meaning assigned to it in SECTION 1.1(d)(i). "TERM LOAN COMMITMENT" shall mean (a) as to any Lender, the commitment of such Lender to make its Pro Rata Share of the Term Loan as set forth on ANNEX J to the Agreement or in the most recent Assignment Agreement executed by such Lender, and (b) as to all Lenders, the aggregate commitment of all Lenders to make the Term Loan, which aggregate commitment shall be Two Million Five Hundred Thousand Dollars ($2,500,000) on the date of the Second Amendment to the Agreement, as to each of clauses (a) and (b), as such Term Loan Commitments may be reduced, amortized or adjusted from time to time in accordance with the Agreement. "TERM NOTE" shall have the meaning assigned to it in SECTION 1.1(d)(i)." (o) The following definitions contained in Annex A to the Credit Agreement are deleted and replaced in their entirety with the following definitions: ""APPLICABLE MARGINS" means collectively the Applicable L/C Margin, the Applicable Unused Line Fee Margin, the Applicable Index Margin, the Applicable Term Loan Index Margin, the Applicable LIBOR Margin and the Applicable Term Loan LIBOR Margin. "LOANS" shall mean the Revolving Loan, the Swing Line Loan and the Term Loan. "NOTES" shall mean the Revolving Notes, the Swing Line Note and the Term Notes, collectively." (p) The definition of "Borrowing Base" contained in Annex A to the Credit Agreement is amended by deleting clause (c) thereof in its entirety and replacing such clause (c) with the following: (c) during an Overadvance Period, the amount set forth below opposite such Overadvance Period: "OVERADVANCE PERIOD COMMENCING AMOUNT November 1, 2000 $11,500,000 November 1, 2001 $10,500,000 November 1, 2002 $ 9,500,000 November 1, 2003 $ 8,500,000 November 1, 2004 $ 7,500,000" (q) The definition of "Requisite Lenders" contained in Annex A to the Credit Agreement is amended by deleting each reference to "Revolving Loan Commitments" and "Revolving Loans" in such Sections and replacing such references with references to "Commitments" and "Loans," respectively. (r) Annex J to the Credit Agreement is deleted in its entirety and replaced by Annex J attached hereto. (s) Exhibit 1.1(d) is added to the Credit Agreement in the form of Exhibit 1.1(d) hereto. 2. REPRESENTATIONS AND WARRANTIES. As of the date hereof, Credit Parties hereby jointly and severally represent and warrant to Agent and Lenders as follows: (a) After giving effect to this Amendment and the transactions contemplated hereby (i) no Default or Event of Default shall have occurred or be continuing and (ii) the representations and warranties of Credit Parties contained in the Loan Documents shall be true, accurate and complete in all respects on and as of the date hereof to the same extent as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date. (b) The execution, delivery and performance, as the case may be, by each Credit Party of this Amendment and the other documents and transactions contemplated hereby are within each Credit Party's corporate powers, have been duly authorized by all necessary corporate action (including, without limitation, all necessary shareholder approval) of each Credit Party, have received all necessary governmental approvals, and do not and will not contravene or conflict with any provision of law applicable to any Credit Party, the certificate or articles of incorporation or bylaws of any Credit Party, or any order, judgment or decree of any court or other agency of government or any contractual obligation binding upon any Credit Party. (c) This Amendment, the Credit Agreement and each other Loan Document is the legal, valid and binding obligation of each Credit Party enforceable against each Credit Party in accordance with its respective terms, except to the extent enforceability is limited by bankruptcy, insolvency or similar laws affecting the rights of creditors generally or by application of general principles of equity. 3. CONDITIONS. This Amendment shall become effective as of the Effective Date, PROVIDED that as of the Effective Date (except as otherwise noted) each of the following items shall have been received by Agent or satisfied, as the case may be, all in form and substance satisfactory to Agent: (a) AMENDMENT. This Amendment, duly executed by each Credit Party, Agent and each Lender. (b) FEES, COSTS AND EXPENSES. Agent shall have received (at Agent's option, by payment or as a charge against the Revolving Loan) reimbursement of the amounts payable by Agent to its legal counsel for the reasonable legal fees of such counsel, and the costs and expenses incurred by such counsel, in respect of the preparation and negotiation of this Amendment and the other documents executed in connection herewith. (c) TERM NOTES. Duly executed originals of the Term Notes for each Lender, dated as of the Effective Date. (d) REVOLVING NOTES. Duly executed originals of the Revolving Notes, reflecting the revised Revolving Loan Commitment for each Lender, dated as of the Effective Date. 4. EFFECT ON LOAN DOCUMENTS. This Amendment is limited to the specific purpose for which it is granted and, except as specifically set forth above (a) shall not be construed as a consent, waiver, amendment or other modification with respect to any term, condition or other provision of any Loan Document and (b) each of the Loan Documents shall remain in full force and effect and are each hereby ratified and confirmed. 5. SUCCESSORS AND ASSIGNS. This Amendment shall be binding on and shall inure to the benefit of Credit Parties, Agent, Lenders and their respective successors and assigns; PROVIDED that no Credit Party may assign its rights, obligations, duties or other interests hereunder without the prior written consent of Agent and Lenders. The terms and provisions of this Amendment are for the purpose of defining the relative rights and obligations of Credit Parties, Agent and Lenders with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Amendment. 6. ENTIRE AGREEMENT. This Amendment, including all documents attached hereto, incorporated by reference herein or delivered in connection herewith, constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all other understandings, oral or written, with respect to the subject matter hereof. 7. INCORPORATION OF CREDIT AGREEMENT. The provisions contained in Sections 11.9 and 11.13 of the Credit Agreement are incorporated herein by reference to the same extent as if reproduced herein in their entirety with respect to this Amendment. 8. ACKNOWLEDGMENT. Each Credit Party hereby represents and warrants that there are no liabilities, claims, suits, debts, liens, losses, causes of action, demands, rights, damages or costs, or expenses of any kind, character or nature whatsoever, known or unknown, fixed or contingent (collectively, the "CLAIMS"), which any Credit Party may have or claim to have against Agent or any Lender, or any of their respective affiliates, agents, employees, officers, directors, representatives, attorneys, successors and assigns (collectively, the "LENDER RELEASED PARTIES"), which might arise out of or be connected with any act of commission or omission of the Lender Released Parties existing or occurring on or prior to the date of this Amendment, including, without limitation, any Claims arising with respect to the Obligations or any Loan Documents. In furtherance of the foregoing, each Credit Party hereby releases, acquits and forever discharges the Lender Released Parties from any and all Claims that any Credit Party may have or claim to have, relating to or arising out of or in connection with the Obligations or any Loan Documents or any other agreement or transaction contemplated thereby or any action taken in connection therewith from the beginning of time up to and including the date of the execution and delivery of this Amendment. Each Credit Party further agrees forever to refrain from commencing, instituting or prosecuting any lawsuit, action or other proceeding against any Lender Released Parties with respect to any and all Claims which might arise out of or be connected with any act of commission or omission of the Lender Released Parties existing or occurring on or prior to the date of this Amendment, including, without limitation, any Claims arising with respect to the Obligations or any Loan Documents. 9. CAPTIONS. Section captions used in this Amendment are for convenience only, and shall not affect the construction of this Amendment. 10. SEVERABILITY. Whenever possible each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment. 11. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment. [signature page follows] IN WITNESS WHEREOF, this Amendment No. 2. to Credit Agreement has been duly executed and delivered as of the day and year first above written. above. RAWLINGS SPORTING GOODS COMPANY, INC. By: /s/ Michael Luetkemeyer Title: CFO RAWLINGS CANADA, INCORPORATED By: /s/ Michael Luetkemeyer Title: V.P. and Secretary RAWLINGS de COSTA RICA, S.A. By: /s/ Howard Keene Title: Secretary GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender By: /s/ Geoffrey K. Hall Title: Duly Authorized Signatory LASALLE BANK NATIONAL ASSOCIATION, as Lender By: /s/ Andrew K. Dawson Title: Vice President Exhibit A to Amendment No. 2 to Credit Agreement ANNEX J (FROM ANNEX A -DEFINITIONS OF REVOLVING LOAN COMMITMENT AND SWING LINE COMMITMENT) TO CREDIT AGREEMENT Revolving Loan Term Loan Total Lender Commitment Commitment Commitment General Electric $48,333,333.33 $1,666,666.67 $50,000,000.00 Capital Corporation LaSalle Bank National $24,166,666.67 $ 833,333.33 $25,000,000.00 Association Total $72,500,00.000 $2,500,000.00 $75,000,00.00 Exhibit B to Amendment No. 2 to Credit Agreement EXHIBIT 1.1(d) TO CREDIT AGREEMENT FORM OF TERM NOTE $___________________ Chicago, Illinois May 15, 2000 FOR VALUE RECEIVED, the undersigned, RAWLINGS SPORTING GOODS COMPANY, INC., a Delaware corporation ("BORROWER"), HEREBY PROMISES TO PAY to the order of ___________________ ("LENDER") at the offices of GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as Agent for Lenders ("AGENT"), at its address at 10 South LaSalle Street, Suite 2700, Chicago, IL 60603, or at such other place as Agent may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the amount of _____________________ DOLLARS AND _____ CENTS ($___,___,___). All capitalized terms used but not otherwise defined herein have the meanings given to them in the "Credit Agreement" (as hereinafter defined) or in Annex A thereto. This Term Note is one of the Term Notes issued pursuant to that certain Credit Agreement dated as of December 28, 1999 by and among Borrower, the other Persons named therein as Credit Parties, Agent, Lender and the other Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto and as from time to time amended, restated, supplemented or otherwise modified, the "CREDIT AGREEMENT"), and is entitled to the benefit and security of the Credit Agreement, the Security Agreement and all of the other Loan Documents referred to therein. Reference is hereby made to the Credit Agreement for a statement of all of the terms and conditions under which the Loans evidenced hereby are made and are to be repaid. The principal balance of the Term Loan, the rates of interest applicable thereto and the date and amount of each payment made on account of the principal thereof, shall be recorded by Agent on its books; provided that the failure of Agent to make any such recordation shall not affect the obligations of Borrower to make a payment when due of any amount owing under the Credit Agreement or this Term Note. The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Credit Agreement. Interest thereon shall be paid until such principal amount is paid in full at such interest rates and at such times, and pursuant to such calculations, as are specified in the Credit Agreement. The terms of the Credit Agreement are hereby incorporated herein by reference. If any payment on this Term Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of any Event of Default, this Term Note may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable. Time is of the essence of this Term Note. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. Except as provided in the Credit Agreement, this Term Note may not be assigned by Lender to any Person. THIS TERM NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE. RAWLINGS SPORTING GOODS COMPANY, INC. 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