EXHIBIT 10.26
AMENDED AND RESTATED FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS AGENT AND AS LENDER),
THE LENDERS
AND
BIG 5 CORP.
(AS BORROWER)
DATED: MARCH 20, 2003
TABLE OF CONTENTS
Page
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SECTION 1. Definitions................................................. 1
SECTION 2. Conditions Precedent........................................ 13
SECTION 3. Revolving Loans............................................. 16
SECTION 4. Letters of Credit........................................... 19
SECTION 5. Collateral.................................................. 21
SECTION 6. Representations, Warranties and Covenants................... 24
SECTION 7. Interest, Fees and Expenses................................. 31
SECTION 8. Powers...................................................... 34
SECTION 9. Events of Default and Remedies.............................. 35
SECTION 10. Termination................................................. 38
SECTION 11. Agreement between the Lenders............................... 39
SECTION 12. Agency...................................................... 42
SECTION 13. Miscellaneous............................................... 46
EXHIBIT A - Assignment and Transfer Agreement
SCHEDULE I - Store Locations
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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation (hereinafter
"CITBC") with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
FLEET CAPITAL CORPORATION, PNC BANK, NATIONAL ASSOCIATION, BANK OF AMERICA,
N.A., AND TRANSAMERICA BUSINESS CAPITAL CORPORATION (collectively, "Prior
Lenders"), and CITBC as agent for the Prior Lenders, and BIG 5 CORP., a Delaware
corporation (hereinafter referred to as the "Company"), having a principal place
of business at ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, have
previously entered into that certain Financing Agreement, dated as of March 8,
1996 (as amended and modified, from time to time, the "Prior Financing
Agreement").
CITBC, in its capacity as a lender, Prior Lenders, and such other lenders
that may, subsequent to the date hereof, purchase from CITBC or from a Prior
Lender a portion of CITBC's or such Prior Lender's rights and obligations under
this Amended and Restated Financing Agreement (CITBC, the Prior Lenders and such
other lenders each individually sometimes referred to as a "Lender" and
collectively as the "Lenders"), and CITBC in its capacity as agent for Lenders
(in its capacity as agent, the "Agent"), on the one hand, and the Company, on
the other hand, wish to amend and restate certain terms of the Prior Financing
Agreement.
In light of the forgoing, the Agent and Lenders are pleased to confirm the
terms and conditions under which the Lenders acting through the Agent shall make
revolving loans, advances and other financial accommodations to the Company
under this Amended and Restated Financing Agreement (hereinafter, the "Financing
Agreement").
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of the Company's now existing and future: (A) accounts
(as defined in the UCC), and any and all other receivables (whether or not
specifically listed on schedules furnished to the Agent), including, without
limitation, all accounts created by, or arising from, all of the Company's
sales, leases, rentals of goods or renditions of services to its customers,
including but not limited to, those accounts arising under any of the Company's
trade names or styles, or through any of the Company's divisions; (B) any and
all instruments, documents, chattel paper (including electronic chattel paper)
(all as defined in the UCC); (C) unpaid seller's or lessor's rights (including
rescission, replevin, reclamation, repossession and stoppage in transit)
relating to the foregoing or arising therefrom; (d) rights to any goods
represented by any of the foregoing, including rights to returned, reclaimed or
repossessed goods; (E) reserves and credit balances arising in connection with
or pursuant hereto; (f) guarantees, supporting obligations, payment intangibles
and letter of credit rights (all as defined in the UCC); (G) insurance policies
or rights relating to any of the foregoing; (H) general intangibles pertaining
to any and all of the foregoing (including all rights to payment, including
those arising in connection with bank and non-bank credit cards), and including
books and records and any electronic media and software thereto; (I) notes,
deposits or property of account debtors securing the obligations of any such
account debtors to the Company; and (J) cash and non-cash proceeds (as defined
in the UCC) of any and all of the foregoing.
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AFFILIATE shall mean, as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person and the term "control" shall have
the meaning set forth in respect thereof in Rule 105 promulgated under the
Securities Act of 1933, as amended.
ANNIVERSARY DATE shall mean the date occurring one (1) year from the date of
[MARCH __, 2003] and the same date in every year thereafter, provided, however,
that if the Company gives notice, in accordance with Section 10 of this
Financing Agreement, to terminate on an Anniversary Date and such date is not a
Business Day, then the Anniversary Date shall be the next succeeding Business
Day.
ASSIGNMENT AND TRANSFER AGREEMENT shall mean the Assignment and Transfer
Agreement in the form of Exhibit A hereto.
AVAILABILITY shall mean at any time of determination the lesser of a) the Line
of Credit or b) the Borrowing Base, in each case, less the sum of x) the
outstanding aggregate amount of all Obligations (excluding all obligations in
respect of the outstanding amounts of any Letters of Credit) and y) the
Availability Reserve.
AVAILABILITY RESERVE shall mean at any time of determination an amount equal to
the sum of a) the then undrawn amount of all outstanding Letters of Credit, b)
the amount of all unpaid sales taxes due any state and which sales taxes have
been collected by the Company, and c) an amount equal to three times the monthly
rent for leased facilities in lieu of landlord waivers which have not been
obtained in favor of the Agent for leased locations at which Inventory is
located, provided, however, that such reserve required under this clause (c)
shall cease upon receipt of landlord's waivers for the distribution centers and
not less than eighty-five (85) retail outlets.
BLOCKED ACCOUNT shall mean any Concentration Account owned by the Company which
is governed by a blocked account or similar agreement in form substantially
similar to Exhibit B attached hereto and which account is subject to written
instructions only from the Company unless and until the Agent shall give the
institution holding such Concentration Account written instructions to the
contrary in accordance with the terms of Section 3.4 of this Financing
Agreement.
BORROWING BASE shall mean the amount determined by multiplying the then sum of
Eligible Inventory by the percentage provided for in Section 3.1 of this
Financing Agreement.
BUSINESS DAY shall mean any date on which both the Agent and ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Bank are open for business.
CAPITAL EXPENDITURES for any period shall mean the aggregate of all expenditures
of the Company during such period that in conformity with GAAP are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the balance sheet of the Company, reduced, to the
extent otherwise included therein, by the aggregate principal amount of all
Indebtedness (including obligations under capitalized lease obligations, but not
under this Financing Agreement) assumed or incurred after the
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date of this Financing Agreement in connection with the acquisition of any
capital asset after the date of this Financing Agreement, other than the
aggregate amount of principal payments (including the principal component of
payments under capitalized lease obligations) made during such period on such
Indebtedness, provided, however, that the following shall in any event be
excluded from the definition of Capital Expenditures: (i) any such expenditures
for Designated Sale-Leaseback Properties, provided that to the extent any such
Designated Sale-Leaseback Property shall not have been financed pursuant to a
sale-leaseback or mortgage financing permitted hereunder within eighteen (18)
months after the Company has designated the subject capital asset as a
Designated Sale-Leaseback Property, such expenditures shall be deemed to be
Capital Expenditures incurred on and as of the date of the expiration of such
eighteen (18)-month period, and (ii) any such expenditures made with (or, to the
extent of the receipt during the same fiscal year, expenditures in the amount
of) the proceeds of sales of Real Estate, or Equipment or similar fixed assets
or the proceeds of insurance, condemnation awards (or payments in lieu thereof)
or indemnity payments received from third parties for purposes of replacing or
repairing the assets in respect of which such proceeds, awards or payments were
received, so long as such expenditures are made within eighteen (18) months of
receipt by the Company of such proceeds, awards or payments.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheet of the Company.
CHASE BANK RATE shall mean the rate of interest per annum announced by ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ Bank, or its successor in interest, from time to time as its prime rate in
effect at its principal office in the County, City and State of New York. (The
prime rate is not intended to be the lowest rate of interest charged by ▇▇
▇▇▇▇▇▇ Chase Bank to its borrowers).
CLOSING DATE shall mean March 20, 2003.
COLLATERAL shall mean all present and future Accounts, Equipment, Inventory,
Documents of Title, General Intangibles, Real Estate, and Other Collateral.
COMPANY LIQUIDITY shall mean, at any date of determination, an amount equal to
the Company's (a) Availability plus (b) unrestricted cash, determined on a basis
consistent with past practices (and as cash is determined in accordance with
GAAP).
CONCENTRATION ACCOUNT shall mean any account owned by the Company which receives
funds from i) the Depository Accounts and ii) the credit card companies.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for the
Company and its Subsidiaries, if any, eliminating all inter-company transactions
and prepared, in the case of any such quarterly or annual balance sheet, in
accordance with GAAP consistently applied.
COPYRIGHTS shall mean all present and hereafter acquired copyrights, copyright
registrations, recordings, applications, designs, styles, licenses, marks,
prints and labels bearing any of the foregoing, goodwill, any and all general
intangibles, intellectual property and rights pertaining thereto, and all cash
and non-cash proceeds thereof.
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CURRENT ASSETS shall mean, whenever used throughout this Financing Agreement,
those assets of the Company and its Subsidiaries, on a consolidated basis, which
in accordance with GAAP, consistently applied, are classified as "current".
CURRENT LIABILITIES shall mean, wherever used throughout this Financing
Agreement, those liabilities of the Company and its Subsidiaries, on a
consolidated basis, which in accordance with GAAP, consistently applied, are
classified as "current", provided, however, that notwithstanding GAAP, i) the
Revolving Loans and ii) the current portion of long term Permitted Indebtedness
are not to be considered "current liabilities."
CUSTOMARILY PERMITTED LIENS shall mean
(a) liens of local or state authorities for franchise or other like taxes
provided the aggregate amounts of such liens shall not exceed $1,000,000.00 in
the aggregate at any one time;
(b) statutory liens of landlords and liens of carriers, work-men,
repairmen, warehousemen, mechanics, materialmen, vendors (other than Inventory
vendors or suppliers) and other like liens imposed by law, created in the
ordinary course of business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary course of
business including, without limitation, security deposits for leases, surety
bonds and appeal bonds, deposits in connection with utilities, workers'
compensation, unemployment insurance and other types of social security benefits
or to secure the performance of tenders, bids, contracts (other than for the
repayment or guarantee of borrowed money or purchase money obligations),
statutory obligations and other similar obligations; and
(d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), licenses, leases, restrictions, covenants,
rights of way, encroachments, minor defects or irregularities in title,
variation and other restrictions, liens, mortgages, charges or other
encumbrances (whether or not recorded) affecting the Company's Real Estate which
do not prohibit the use of the Real Estate for the retail sale of Inventory at
the Company's retail locations or the storage of Inventory at the Inventory
distribution centers.
DEFAULT shall mean any event specified in Section 9.1 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal to the
sum of: i) two percent (2%) and ii) the then applicable rate of interest, which
Default Rate of Interest Rate the Agent, on behalf of the Lenders, shall be
entitled to charge the Company on all Obligations due the Lenders by the Company
to the extent provided in Section 9.2(ii) of this Financing Agreement.
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DEPOSITORY ACCOUNTS shall mean those accounts (other than Concentration
Accounts) owned by the Company and designated for the deposit of proceeds of
Collateral.
DESIGNATED SALE-LEASEBACK PROPERTY means a capital asset developed or to be
developed by the Company after the date of this Financing Agreement and as to
which the Company has notified the Agent in writing that such capital asset is,
at such time, a Designated Sale-Leaseback Property and as to which the Company
intends to enter into construction, sale-leaseback or mortgage financing,
provided that such Designated Sale-Leaseback Property shall cease to be a
Designated Sale-Leaseback Property upon the earlier to occur of eighteen (18)
months after the date of such notice and the date on which such Designated
Sale-Leaseback Property is financed pursuant to a sale-leaseback or mortgage
financing permitted hereunder.
DOCUMENTATION FEE shall mean the Agent's standard and reasonable fees relating
to any and all modifications, waivers, releases, amendments or additional
collateral with respect to this Financing Agreement, the Collateral and/or the
Obligations.
DOCUMENTS OF TITLE shall mean all of the Company's present and future documents
(as defined in the UCC), and any and all warehouse receipts, bills of lading,
shipping documents, chattel paper, instruments and similar documents, all
whether negotiable or not, and all goods and Inventory relating thereto and all
cash and non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Company terminates this
Financing Agreement or the Line of Credit which date is prior to the third (3rd)
Anniversary Date.
EARLY TERMINATION FEE shall: i) mean the fee the Agent for the account of the
Lenders is entitled to charge the Company in the event the Company terminates
the Line of Credit or this Financing Agreement on a date prior to the third
(3rd) Anniversary Date; and ii) be determined by calculating the sum of (a) the
average daily balance of the Revolving Loans for the period from the date of
this Financing Agreement to the Early Termination Date and (b) the average daily
undrawn face amount of the Letters of Credit outstanding for the period from the
date of this Financing Agreement to the Early Termination Date and multiplying
that sum by (x) three quarters of one percent (0.75%) if the Early Termination
Date occurs on or before the first (1st) Anniversary Date, (y) one half of one
percent (0.50%) if the Early Termination Date occurs after the first (1st)
Anniversary Date but on or before the second (2nd) Anniversary Date, and (z) one
quarter of one percent (0.25%) if the Early Termination Date occurs after the
second (2nd) Anniversary Date.
EBITDA shall mean, in any period, the net income (or net loss) of the Company
and its Subsidiaries, on a consolidated basis plus all amounts deducted in
determining net income in respect of Interest Expense, income tax obligations
(paid or accrued), depreciation expense and amortization expenses, non-cash
straight line rent expense and all other non-cash items, each determined in
accordance with GAAP consistently applied.
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ELIGIBLE INVENTORY shall mean the gross cost of the Company's finished goods
Inventory that conforms to the warranties herein less any i) supplies, ii)
Inventory not present in the United States of America, iii) Inventory returned
or rejected by the Company's customers other than Inventory that is undamaged
and resalable in the normal course of business, iv) Inventory to be returned to
the Company's suppliers, v) Inventory in transit to or from third parties, vi)
shrinkage, and vii) reserves required by the Agent in accordance with the
standard set forth below and without duplication but only for the following: (a)
Inventory specially ordered for specific customers which Inventory is uniquely
different in size, shape, quality or color and which uniquely different
Inventory is not customarily sold by the Company; (b) market value declines, to
the extent the Inventory's value is below its cost; (c) ▇▇▇▇ and hold (deferred
shipment or consignment sales); (d) markdowns, to the extent the Inventory's
value is below its cost; (e) Inventory which is not located at the Company's
retail store locations or warehouses (other than Inventory in transit between
the Company's facilities); (f) demonstration items, to the extent the
Inventory's value is below its cost; (g) damaged or defective Inventory; (h)
obsolete Inventory (but not including undamaged Inventory which is solely
out-of-season); (i) Inventory at outlet locations not owned or operated by the
Company; (j) Inventory held for lease, but only to the extent such Inventory
held for lease exceeds twenty-five percent (25%) of the then aggregate gross
cost of Inventory; and (k) Inventory imported under letters of credit issued
without the assistance of the Letter of Credit Guaranty and then only until the
bank issuing such letters of credit has been reimbursed by the Company for any
drafts under such letters of credit. The amount of such reserves shall be
determined solely by the Agent in its Reasonable Discretion.
EQUIPMENT shall mean all of the Company's present and hereafter acquired
equipment (as defined in the UCC), including, without limitation, all machinery,
equipment, furnishings and fixtures, and all additions, substitutions and
replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all proceeds thereof of whatever sort.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time, as applicable.
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 9.1 of this
Financing Agreement.
FEE LETTER shall mean that certain letter agreement, between the Agent and the
Company, dated as of the date hereof.
FIXED CHARGE COVERAGE RATIO shall mean a ratio determined as of the relevant
calculation date by dividing EBITDA by the sum of i) Capital Expenditures and
ii) Interest Expense, for the relevant period.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply. Except as otherwise provided in this
Financing Agreement, all computations and determinations as to accounting or
financial matters and all quarterly and annual
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consolidated financial statements to be delivered pursuant to this Financing
Agreement shall be made and prepared in accordance with GAAP (including
principles of consolidation where appropriate), and all accounting or financial
terms shall have the meanings ascribed to such terms by GAAP. If any change in
accounting principles from those effective December 31, 1995 and used in
preparation of the financial statements required hereunder occurs or are
hereafter occasioned by promulgation of rules, regulations, pronouncements or
opinions by or are otherwise required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions), and any such changes results in a
change of the method of calculation of, or affect the results of such
calculation of, any financial covenant, standard or term found herein, then the
parties shall amend such financial covenants, financial standards or terms so as
to equitably reflect such changes, with the desired result that the criteria for
evaluating the financial condition and results of operations of the Company
shall be the same after such changes as if such changes had not been made.
GENERAL INTANGIBLES shall mean all of the Company's present and hereafter
acquired general intangibles (as defined in the UCC), and shall include, without
limitation, all present and future right, title and interest in and to: (a) all
Trademarks, trade names, corporate names, business names, logos and any other
designs or sources of business identities, (b) Patents, together with any
improvements on said Patents, utility models, industrial models, and designs,
(c) Copyrights, (d) trade secrets, (e) licenses, permits and franchises, (f) all
applications with respect to the foregoing, (g) all right, title and interest in
and to any and all extensions and renewals, (h) goodwill with respect to any of
the foregoing, (i) any other forms of similar intellectual property, (j) all
customer lists, distribution agreements, supply agreements, blueprints,
indemnification rights and tax refunds, together with all monies and claims for
monies now or hereafter due and payable in connection with any of the foregoing
or otherwise, and all cash and non-cash proceeds thereof, including, without
limitation, the proceeds or royalties of any licensing agreements between the
Company and any licensee of any of the Company's General Intangibles.
GUARANTOR shall mean Parent.
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, and (b) lease obligations which, in accordance
with GAAP, have been, or which should be capitalized.
INTEREST EXPENSE shall mean i) total cash interest obligations (paid or accrued)
of the Company and its Subsidiaries determined in accordance with GAAP on a
basis consistent with the latest audited statements of the Company, excluding
amortization of financing fees related hereto and to other Indebtedness of the
Company and its Subsidiaries, prepayment penalties, fees or premiums related to
the payment, in whole or in part, of Indebtedness of the Company and its
Subsidiaries and original issue discounts, if any, minus ii) interest income, if
any.
INVENTORY shall mean all of the Company's present and hereafter acquired
inventory (as defined in the UCC), including, without limitation, all
merchandise, inventory, and goods
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held for sale or lease and all additions, substitutions and replacements
thereof, wherever located, together with all goods and materials used or usable
in manufacturing, processing, packaging or shipping same in all stages of
production from raw materials through work-in-process to finished goods - and
all proceeds thereof of whatever sort.
INVESTMENT PROPERTY shall mean all of the Company's now owned and hereafter
acquired investment property (as defined in the UCC) and all proceeds thereof.
ISSUING BANK shall mean any bank issuing Letters of Credit for the Company.
LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
the Lenders acting through the Agent by the Issuing Bank for or on behalf of the
Company.
LETTER OF CREDIT GUARANTY shall mean any guaranty delivered by the Agent on
behalf of Lenders to the Issuing Bank of the Company's reimbursement obligations
under the Issuing Bank's reimbursement agreement, application for Letters of
Credit or other like documents.
LETTER OF CREDIT GUARANTY FEE shall mean the fee the Agent may charge on behalf
of Lenders under Section 7.2 of this Financing Agreement for: i) issuing the
Letter of Credit Guaranty or ii) otherwise aiding the Company in obtaining
Letters of Credit pursuant to Section 4.
LIBOR shall mean, at any time of determination, and subject to availability, the
London Interbank Offered Rate paid in London by ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank on one
month, two month, three month, six month, or nine month dollar deposits and if
such rates are not otherwise available, then those rates as published, under
"Money Rates", in the New York City edition of the Wall Street Journal or if
there is no such publication or statement therein as to Libor, then in any
publication used in the New York City financial community.
LIBOR LOAN shall mean the loans for which the Company has elected to use Libor
for interest rate computations.
LIBOR PERIOD shall mean the Libor for one month, two month, three month, six
month or nine month dollar deposits, as selected by the Company.
LIBOR PROCESSING FEE shall mean the sum of $500.00 which the Agent, for its own
account, shall be entitled to charge the Company in accordance with, but subject
to, the provisions of Section 7 of this Financing Agreement upon the election of
a Libor Loan.
LINE OF CREDIT shall mean the commitment of the Lenders acting through the Agent
to make loans and advances and issue Letter of Credit Guaranties, all pursuant
to and in accordance with, but subject to, Sections 3 and 4 of this Financing
Agreement, in the aggregate amount of $140,000,000.00 or such lesser amount as
the Company may elect in accordance with Section 7 of this Financing Agreement.
LINE OF CREDIT FEE shall: i) mean the fee due the Agent at the end of each month
for the Line of Credit, and ii) be determined by multiplying x) the difference
between the Line of Credit less the sum of a) the average daily Revolving Loans
outstanding during such month
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and b) the average daily undrawn face amount of all outstanding Letters of
Credit, for said month by y) three hundred twenty-five hundredths of one percent
(.325%) per annum for the number of days in said month during which this
Financing Agreement was in effect.
LOAN FACILITY FEE shall mean the fee payable to the Agent for the account of the
Lenders in accordance with, and pursuant to, the provisions of Section 7 of this
Financing Agreement.
MARGIN SECURITIES shall have the meaning assigned to such term in Regulation G
of the Board of Governors of the Federal Reserve System (12 C.F.R. 207, as
amended).
NET WORTH shall mean Total Assets of the Company and its Subsidiaries, on a
consolidated basis, in excess of Total Liabilities, and determined in accordance
with GAAP, on a consistent basis with the latest audited statements of the
Company and its Subsidiaries.
OBLIGATIONS shall mean all obligations of the Company to pay, as and when due
and payable, all amounts from time to time owing by and in respect of this
Financing Agreement or any of loan documents related to this Financing
Agreement, including, without limitation, all loans and advances made or to be
made by the Lenders or the Agent on behalf of the Lenders to the Company, or to
others for the Company's account under this Financing Agreement or any loan
document related to this Financing Agreement; any and all indebtedness and
obligations which may at any time be owing by the Company under this Financing
Agreement or any other loan document related to this Financing Agreement,
whether now in existence or incurred by the Company from time to time hereafter;
whether secured by pledge, lien upon or security interest in the Company's
assets or property or the assets or property of any other person, firm, entity
or corporation; whether such indebtedness is absolute or contingent, matured or
unmatured, direct or indirect and whether the Company is liable for such
indebtedness as principal, surety, endorser, guarantor or otherwise. Obligations
shall also include, without duplication of the foregoing, all indebtedness owing
by the Company under this Financing Agreement or under any other agreement or
arrangement hereafter entered into between the Company and the Agent on behalf
of the Lenders, including, but not limited to, obligations to the Lenders or the
Agent on behalf of the Lenders in respect of Letters of Credit issued with the
assistance of the Letter of Credit Guaranty, indebtedness or obligations
incurred by, or imposed on, the Agent or the Lenders as a result of
environmental claims arising out of the Company's operations, premises or waste
disposal practices or sites, the Company's liability to the Agent on behalf of
the Lenders under any instrument of guaranty or indemnity, or arising under any
guaranty, endorsement or undertaking which the Agent on behalf of the Lenders
may make or issue to others for the Company's accounts, but in no event shall
Obligations include any obligations due any affiliate of a Lender.
OTHER COLLATERAL shall mean all of the Company's now owned and hereafter
acquired lockbox, blocked account and any other deposit accounts maintained with
any bank or financial institutions into which the proceeds of Collateral are or
may be deposited; all other deposit accounts; all Investment Property; all cash
and other monies and property in the possession or control of the Agent and/or
any of the Lenders; all books, records, ledger cards, disks and related data
processing software at any time evidencing or containing information relating to
any of the Collateral described herein or otherwise necessary or
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helpful in the collection thereof or realization thereon; and all cash and
non-cash proceeds of the foregoing.
OUT-OF-POCKET EXPENSES shall mean all of the Agent's reasonable and documented
out of pocket expenses (including reasonable attorneys' fees) incurred relative
to the closing of this Financing Agreement and any amendment, modification or
waiver thereof, whether incurred heretofore or hereafter, and, in any case, with
appropriate documentation delivered to the Company upon the Company's request,
which expenses shall include, without being limited to, the cost of record
searches, all costs and expenses incurred by the Agent in opening bank accounts,
depositing checks, receiving and transferring funds, and any charges imposed on
the Agent due to "insufficient funds" of deposited checks the Agent's standard
fee relating thereto, any amounts paid by the Agent on behalf of the Lenders to
an Issuing Bank or incurred by or charged to the Agent on behalf of the Lenders
by the Issuing Bank under the Letter of Credit Guaranty or the Company's
reimbursement agreement, application for letter of credit or other like document
which pertain either directly or indirectly to such Letters of Credit, and the
Agent's standard and reasonable fees relating to the Letters of Credit and any
drafts thereunder, reasonable and documented local counsel fees, if any, fees
and taxes relative to the filing of financing statements, and all expenses,
costs and fees set forth in Section 9.3 of this Financing Agreement.
PARENT shall mean Big 5 Sporting Goods Corporation, a Delaware corporation.
PATENTS shall mean all of the Company's present and hereafter acquired patents,
patent applications, registrations, any reissues or renewals thereof, licenses,
any inventions and improvements claimed thereunder, and all general intangible,
intellectual property and patent rights with respect thereto of the Company, and
all income, royalties, cash and non-cash proceeds thereof.
PERMITTED ENCUMBRANCES shall mean: I) liens expressly permitted, or consented
to, by the Agent on behalf of the Lenders in accordance with Section 12.10; II)
Customarily Permitted Liens; III) liens granted the Agent on behalf of the
Lenders by the Company; IV) liens of judgment creditors, provided such liens do
not exceed, in the aggregate, at any time, $1,500,000.00 (other than liens
stayed, satisfied, bonded or insured to the reasonable satisfaction of the Agent
within a) fifteen (15) calendar days of the date the Company acquired actual
knowledge of such judgment lien or b) fifteen (15) calendar days of the date
such lien attached by levy, whichever first occurs); V) liens for taxes, levies
or assessments not yet due and payable or which are being diligently contested
in good faith by the Company by appropriate proceedings, and which liens are not
a) senior to the lien of the Agent on behalf of the Lenders; or b) for taxes due
the United States of America; VI) liens, if any, given to an Issuing Bank in
connection with a Letter of Credit obtained with the assistance of the Letter of
Credit Guaranty; VII) liens securing Purchase Money Obligations; VIII) liens and
other encumbrances in existence at the date hereof; IX) liens given to issuers
of letters of credit issued without the assistance of the Letter of Credit
Guaranty provided such liens a) do not secure Indebtedness in excess of
$1,500,000.00 in the aggregate at any one time and b) attach only to the
Inventory and/or Equipment acquired with the assistance of such letter of
credit, provided, however, that any Inventory subject to the lien permitted by
this clause ix) shall not be considered Eligible Inventory until such lien is
terminated;
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X) liens on assets, other than the Collateral, of the Company, to secure the
Indebtedness referenced in clause x of the definition of Permitted Indebtedness;
xi) liens on the Margin Securities; and XII) any extension, renewal or
replacement of any of the foregoing, provided that any extension, renewal or
replacement lien shall be limited to the property or assets covered by the lien
extended, renewed or replaced and the obligation secured by such extension,
renewal or replacement lien shall be in an amount not greater than the
obligations secured by the lien extended, renewed or replaced plus the amount of
all expenses, fees, premiums and penalties paid in connection with such
extension, renewals or replacement.
PERMITTED INDEBTEDNESS shall mean: I) Indebtedness incurred in the ordinary
course of business for Inventory, services, taxes or labor; II) Indebtedness
arising in connection with Letters of Credit, this Financing Agreement and the
loan documents related to this Financing Agreement; III) deferred taxes and
other expenses incurred in the ordinary course of business; IV) other
Indebtedness existing on the date of execution of this Financing Agreement and
listed in the most recent financial statement delivered to the Agent or
otherwise disclosed to the Agent in writing prior to the date hereof; V)
Indebtedness arising in connection with or secured by, the Permitted
Encumbrances; VI) Indebtedness under any letters of credit issued without the
assistance of the Letter of Credit Guaranty provided such Indebtedness does not
exceed $1,500,000 in the aggregate at any one time; VII) Indebtedness of the
Company to the Parent or the Company's Subsidiaries in an amount not to exceed
$10,000,000 in the aggregate at any one time; VIII) the Senior Notes; IX)
Indebtedness incurred in the form of surety, customs and appeal bonds and other
obligations of a similar nature; X) other Indebtedness of the Company in an
amount not to exceed $10,000,000.00 in the aggregate at any time outstanding,
provided, such Indebtedness is a) not secured by the Collateral and b) not due
the Parent or any Subsidiaries of the Company or the Parent; XI) Indebtedness in
an aggregate amount not to exceed $15,000,000 at any time which is subordinated
to the Obligations on terms and conditions reasonably acceptable to Required
Lenders ("New Subordinated Debt"); and XII) any extension, renewal or
replacement of any of the foregoing, provided that any extension, renewal or
replacement shall be in an amount not greater than the Indebtedness so extended,
renewed or replaced (plus the amount of expenses, fees and any premium or
penalty paid in connection with such extension, renewal or replacement).
PERMITTED INVESTMENTS shall mean (i) commercial paper and municipal bonds, in
each case issued or guaranteed by a Person rated P-1 or better by ▇▇▇▇▇'▇
Investors Service, Inc. ("Moody's") or A-1 or MIG-1 or better by Standard &
Poor's Corporation ("S & P"), (ii) certificates of deposit, time deposits,
Eurodollar deposits or bankers' acceptances maturing not more than one year
after the date of issue, issued by any commercial banking institution, which is
a member of the Federal Reserve System and has a combined capital and surplus
and undivided profits of not less than $100,000,000, (iii) repurchase agreements
having maturities of not more than one year and which are secured by readily
marketable direct obligations of the Government of the United States of America
or any agency thereof, (iv) readily marketable obligations of the Government of
the United States of America or any agency thereof; (v) readily marketable
obligations issued by any state of the United States or any political
subdivision thereof having a rating by Moody's or S & P of "A" or its equivalent
or better; (vi) Margin Securities and (vii) mutual funds regularly traded in the
-▇▇-
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ whose investments are limited to those described in
clauses (i) through (v) above.
PERSON shall mean an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, governmental
authority or other entity of whatever nature.
PURCHASE MONEY OBLIGATIONS shall mean the Indebtedness (a) incurred to
construct, purchase or lease Equipment and/or Real Estate and secured solely by
a lien on the Equipment and/or Real Estate, including construction, sale
leaseback and mortgage financing incurred in connection with Designated
Sale-Leaseback Property; (b) of a Person existing at the time such Person is
acquired by, merged into or consolidated with the Company in accordance with
this Financing Agreement provided such Indebtedness is not secured by
Collateral; or c) secured by property (other than Collateral) acquired by the
Company existing at the time such property is or was acquired by the Company.
REAL ESTATE shall mean the Company's leasehold and fee interests in real
property.
REASONABLE DISCRETION means the Agent's reasonable discretion in the exercise of
its reasonable business judgement using standards customarily applied by the
Agent to transactions involving retail clients and taking into account the
nature of the Company's business, consistently applied by Agent. When used with
respect to determination of reserves, in addition to the foregoing, such
standard shall take into consideration amounts representing, historically, the
Company's reserves, discounts, returns, claims, credits and allowances.
REPORTING DATE shall mean any date on which the Company is to deliver to the
Agent any Collateral report pursuant to Section 3.2 of this Financing Agreement,
any financial statement or any other information requested of the Company
pursuant to the terms of this Financing Agreement.
REQUIRED LENDERS shall mean Lenders holding more than fifty percent (50%) of the
outstanding loans, advances, extensions of credit and letter of credit
participation interests of the Company hereunder.
RETAINED CASH shall mean an amount of cash sufficient to provide the Company
with cash in an amount necessary to stock the Company's cash registers at its
retail locations and consistent with the business practices of the Company.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Company by the Lenders acting through the Agent pursuant
to Section 3 of this Financing Agreement.
SENIOR NOTES shall mean the Company issued 10 7/8% Senior Notes due 2007 in the
original amount of $131,000,000.00.
SETTLEMENT DATE shall mean the date, weekly, and more frequently, at the
discretion of the Agent, upon the occurrence of an Event of Default or a
continuing decline or increase of the
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Revolving Loans that the Agent and the Lenders shall settle amongst themselves
so that x) the Agent shall not have, as Agent, any money at risk and y) on such
Settlement Date the Lenders shall have a pro rata amount of all outstanding
Revolving Loans and Letters of Credit, provided that each Settlement Date for a
Lender shall be a Business Day on which such Lender and its bank are open for
business.
SUBSIDIARY shall mean as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interest having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Financing Agreement shall refer to a Subsidiary or
Subsidiaries of the Company or the Parent.
TOTAL ASSETS shall mean total assets of the Company and its Subsidiaries, on a
consolidated basis, determined in accordance with GAAP, on a basis consistent
with the latest audited statements of the Company and its Subsidiaries.
TOTAL LIABILITIES shall mean total liabilities of the Company and its
Subsidiaries, on a consolidated basis, determined in accordance with GAAP, on a
basis consistent with the latest audited statements of the Company and its
Subsidiaries.
TRADE ACCOUNTS PAYABLE shall mean, at any time of determination, the amounts due
any supplier for Inventory sold to the Company.
TRADE ACCOUNTS RECEIVABLE shall mean, at any time of determination, the amounts
due the Company by any i) credit card issuer and ii) any customer obligated on
an invoice, in each instance due as a result of a sale of Inventory or the
rendition of services by the Company.
TRADEMARKS shall mean all present and hereafter acquired trademarks, trademark
registrations, recordings, applications, trade names, trade styles, service
marks, prints and labels (on which any of the foregoing may appear), licenses,
reissues, renewals, and any other intellectual property and trademark rights
pertaining to any of the foregoing, together with the goodwill associated
therewith, and all cash and non-cash proceeds thereof.
UCC shall mean the Uniform Commercial Code of the State of California, and any
successor statute.
WORKING CAPITAL shall mean Current Assets in excess of Current Liabilities.
SECTION 2. CONDITIONS PRECEDENT
2.1 CONDITIONS TO THE INITIAL EXTENSION OF CREDIT. The obligation of the
Lenders acting through the Agent to make loans hereunder is subject to the
satisfaction of, or waiver of, immediately prior to or concurrently with the
making of such loans, the following conditions precedent:
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(a) AMENDMENT OF UCC FILINGS. Amendments to all existing UCC
financing statements to amend the collateral descriptions thereunder to match
the Collateral description set forth herein. The Agent shall have received
acknowledgement copies of all such filings (or, in lieu thereof, Agent shall
have received other evidence satisfactory to the Agent that all such filings
have been made); and the Agent shall have received evidence that all necessary
filing fees and all taxes or other expenses related to such filings have been
paid in full.
(b) OPINIONS. Counsel for the Company shall have delivered to the
Agent on behalf of the Lenders opinions satisfactory to the Agent opining, inter
alia, that, subject to the i) filing, priority and remedies provisions of the
Uniform Commercial Code, ii) the provisions of the Bankruptcy Code, insolvency
statutes or other like laws, iii) the equity powers of a court of law and iv)
such other matters as may be agreed upon with the Lenders, the Financing
Agreement of the Company and the Guaranty of the Guarantor x) are valid, binding
and enforceable according to their terms, y) are duly authorized and z) do not
violate any terms, provisions, representations or covenants in the charter or
by-laws of the Company or the Guarantor, or, to the knowledge of such counsel,
after reasonable inquiry, of any loan agreement, mortgage, deed of trust, note,
security or pledge agreement or indenture, identified by the Company and the
Guarantor to such counsel as material, to which the Company and/or the Guarantor
is a signatory or by which the Company or the Guarantor or its assets are bound.
(c) ADDITIONAL DOCUMENTS. The Company shall execute and deliver to
the Agent for the benefit of the Lenders all loan documents necessary to
consummate the lending arrangement contemplated between the Company and the
Lenders.
(d) BOARD RESOLUTION. The Agent for the benefit of the Lenders shall
have received a copy of the resolutions of the Board of Directors of the
Company, authorizing the execution, delivery and performance of (i) this
Financing Agreement, and (ii) any related agreements, certified by the Secretary
or Assistant Secretary of the Company, as of the date hereof, together with a
certificate of the Secretary or Assistant Secretary of the Company as to the
incumbency and signature of the officers of the Company executing this Financing
Agreement and any certificate or other documents to be delivered by it pursuant
hereto, together with evidence of the incumbency of such Secretary or Assistant
Secretary.
(e) CORPORATE ORGANIZATION. The Agent for the benefit of the Lenders
shall have received (i) a copy of the Certificate of Incorporation of the
Company certified by the Secretary of State of its incorporation, and (ii) a
copy of the By-Laws (as amended through the date hereof) of the Company and
certified by the Secretary or Assistant Secretary of the Company.
(f) OFFICER'S CERTIFICATE. The Agent for the benefit of the Lenders
shall have received an executed Officer's Certificate of the Company,
satisfactory in form and substance to the Agent, certifying that: (i) the
representations and warranties contained herein are true and correct in all
material respects on and as of the date hereof; (ii) the
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Company is in compliance with all of the terms and provisions set forth herein;
and (iii) no Event of Default or Default has occurred.
(g) ABSENCE OF DEFAULT. No material adverse change in the financial
condition, business, prospects, profits (after giving affect to the seasonal
nature of the Company's business), operations or assets of the Company shall
have occurred since September 29, 2002. No Default or Event of Default shall
exist as of the date of this Financing Agreement.
(h) LEGAL RESTRAINTS/LITIGATION. At the date of execution of this
Financing Agreement, there shall be, to the actual knowledge of the management
of the Company or to the actual knowledge of any Lender, no x) litigation,
investigation or proceeding (judicial or administrative) pending or threatened
against the Company or its assets, by any agency, division or department of any
county, city, state, province or federal government arising out of this
Financing Agreement, or the financing arrangement contemplated under this
Financing Agreement, y) injunction, writ or restraining order restraining or
prohibiting the consummation of the financing arrangements contemplated under
this Financing Agreement or z) suit, action, investigation or proceeding
(judicial or administrative) pending or threatened against the Company, or its
assets, which, is reasonably likely to result in a material adverse effect on
the business, operation, assets or financial condition of the Company or the
Collateral.
(i) CONFIRMATION OF GUARANTY. The Guarantor shall have executed and
delivered to the Agent, for the benefit of the Lenders, a confirmation of the
continued effectiveness of its guaranty, in form and substance reasonably
acceptable to the Agent.
Upon the execution of this Financing Agreement and the initial
disbursement of loans hereunder, all of the above Conditions Precedent shall
have been deemed satisfied except as the Company and the Agent shall otherwise
agree herein or in a separate writing.
2.2 CONDITIONS TO EACH EXTENSION OF CREDIT.
(a) Subject to the terms of this Financing Agreement, including
without limitation the Agent's rights pursuant to Section 10.2 hereof, the
agreement of the Agent on behalf of the Lenders to make any extension of credit
requested to be made by it to the Company on any date (including, without
limitation, the initial extension of credit) is subject to the satisfaction of
the following conditions precedent:
(i) Representations and Warranties - Each of the
representations and warranties made by the Company in or pursuant to this
Financing Agreement shall be true and correct in all material respects on and as
of such date as if made on and as of such date.
(ii) No Default - No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the extension
of credit requested to be made on such date.
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(iii) Borrowing Base - Subject to the last sentence of Section
3.1 and after giving effect to the extension of credit requested to be made by
the Company on such date, the aggregate outstanding balance of the Revolving
Loans and outstanding Letters of Credit owing by the Company will not exceed the
amount calculated as (A) the lesser of (i) the Revolving Line of Credit or (ii)
the Borrowing Base, minus (B) the Availability Reserves.
(b) Each borrowing by the Company hereunder shall constitute a
representation and warranty by the Company as of the date of such loan or
advance that each of the representations, warranties and covenants contained in
the Financing Agreement have been satisfied and are true and correct, except as
the Company and the Agent and/or the Required Lenders shall otherwise agree
herein or in a separate writing.
SECTION 3. REVOLVING LOANS
3.1 The Lenders, acting through the Agent, agree, subject to the terms and
conditions of this Financing Agreement from time to time, and within x) the
Availability and y) the Line of Credit, but subject to the Agent's and the
Lenders' (acting through the Agent) rights to make "Overadvances", to make loans
and advances to the Company on a revolving basis, and subject to the limitations
set forth herein, the Company may borrow, repay and re-borrow Revolving Loans.
All Revolving Loans shall be made by the Lenders simultaneously and in
accordance with their pro rata shares. It is understood that (i) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Revolving Loans hereunder, nor shall any commitment of any Lender be
increased or decreased as a result of any failure by any other Lender to perform
its obligation to make any Revolving Loans hereunder, (ii) no failure by any
Lender to perform its obligation to make any Revolving Loans hereunder shall
excuse any other Lender from its obligation to make any Revolving Loans
hereunder, and (iii) the obligations of each Lender hereunder shall be several,
not joint and several. Prior to an updated appraisal performed by Agent, such
loans shall be in amounts up to seventy percent (70%) of Eligible Inventory
during the months of November, December, January and February of each year, and
sixty-five percent (65%) of Eligible Inventory during the months of March
through October of each year. Following an appraisal performed by Agent, such
loans and advances shall be in amounts up to the lesser of (i) seventy-five
percent (75%) of Eligible Inventory during the months of November, December,
January and February of each year, and seventy percent (70%) of Eligible
Inventory during the months of March through October of each year; or (ii)
eighty-five percent (85%) of the orderly liquidation value (net of all costs and
expenses) of the Eligible Inventory. The value of Eligible Inventory shall be
determined at cost, by the cost inventory method, using a valuation on a first
in, first out basis in accordance with GAAP excluding capitalized buying,
handling and distribution costs, as reflected on the Company's books and
records. The net orderly liquidation value of the Eligible Inventory shall be
determined from time to time in the Agent's Reasonable Discretion taking into
account the results of the latest appraisal. All requests for loans and advances
(other than LIBOR Loans) must be received by an officer of the Agent no later
than 2:00 p.m. New York time on the Business Day on which such loans and
advances are required. Should the Company request advances in excess of the
limitations set forth in the fourth sentence, or, following an appraisal, fifth
sentence, as the case may be, of this
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Section 3.1, such advances shall be considered "Overadvances" and, shall be made
by the Agent only with the consent of the Required Lenders and in the sole
discretion of the Required Lenders, subject to any additional terms the Required
Lenders deem necessary, and subject to the terms and provisions of clause (c) of
Section 12.10 hereof.
3.2 In furtherance of the continuing collateral assignment and security
interest in the Company's Accounts and Inventory, the Company shall deliver to
the Agent not later than: 1) thirty (30) days after the end of each month an
aging of the Company's Trade Accounts Receivable in such form and manner as the
Agent may reasonably require but consistent with the current practices of the
Company (provided, however, that such aging reports shall not be required in any
month when the amount of the Trade Accounts Receivable are less than
$3,500,000.00); 2) fourteen (14) days after the end of each month (other than
October, November and December), a monthly inventory confirmation statement
stating the aggregate amount of Eligible Inventory of the Company; and 3) five
(5) Business Days after each Sunday in the months of October, November and
December, a weekly Inventory confirmation statement stating the aggregate amount
of Eligible Inventory of the Company. With respect to all such reports, the
Company will provide to the Agent such additional information and material as
the Agent may reasonably request to effectively evaluate the Trade Accounts
Receivable and the collectability thereof and the mix of the Inventory and such
other information as the Agent may reasonably require to evaluate the Company's
Trade Accounts Receivable and Inventory, such as returns, claims, credits,
allowances and information identifying and describing the Trade Accounts
Receivable. Failure to provide the Agent with the foregoing information will in
no way effect, diminish, modify, or limit the security interest granted herein.
Such reports are to be executed by a responsible officer of the Company.
3.3 The Company hereby represents and warrants that: a) sales of Inventory
are, and shall be, based upon actual and bona fide sales and deliveries of
Inventory x) in the ordinary course of the Company's business, y) in connection
with the liquidation of an immaterial portion of the Inventory or z) after the
occurrence of a casualty loss, bulk sales of salvageable Inventory, and that, in
any instance, the Inventory being sold and the proceeds thereof are the
exclusive property of the Company and are not and shall not be subject to any
lien, charge, arrangement, encumbrance, security interest, or financing
statement whatsoever other than the Permitted Encumbrances, provided, however
that if there is then no Default or Event of Default, the Company may make
charitable transfers of Inventory in an amount not to exceed $1,000,000.00 in
any fiscal year; b) invoices representing Trade Accounts Receivable or credit
card receipts evidencing credit card sales are in the name of the Company and
except for disputes, offsets, defenses, counterclaims, contras, returns or
credits, all arising in the normal course of the Company's business or except as
may be promptly disclosed to the Agent, the purchasers of such Inventory owe and
are obligated to pay the amount stated in the invoices or credit card receipts;
and c) except for the Permitted Encumbrances, any and all taxes and fees
relating to its business are the Company's sole responsibility and that same
will be paid when due (except as otherwise provided in this Financing
Agreement), and that none of said taxes or fees represent a lien on or claim
against the proceeds of any sale of Inventory. The Company agrees to issue
credit memoranda promptly. The Company also warrants and represents that it is a
duly and validly existing corporation and is qualified to transact business in
all states where the
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failure to so qualify would have a material adverse effect on the business of
the Company or the ability of such Company to enforce collection of Trade
Accounts Receivable due from Persons residing in that state.
3.4 During the term of this Financing Agreement, the Company may and will,
at its expense, consistent with the Company's existing business practices,
enforce, collect and receive all amounts owing on the Accounts. Except for the
Retained Cash, all checks or cash from the sale of Inventory must be deposited
promptly to the Depository Accounts, and promptly thereafter and therefrom, to a
Blocked Account. The Company shall require that all amounts due under credit
card sales be remitted by the credit card companies to a Blocked Account. The
Company agrees that it will only direct the flow of funds from the Depository
Accounts and the credit card remitters to the Blocked Accounts. The institutions
holding such Blocked Accounts will be instructed that when it is satisfied that
such funds on deposit are "good funds", such institution will remit such "good
funds" to the Company's operating account. Notwithstanding anything herein
contained to the contrary, if x) there is then an Event of Default or y) the
Company has Availability of less than zero ($0) for three (3) consecutive
Business Days, then the Agent, acting on behalf of the Lenders, may advise the
banks holding the Blocked Accounts to remit all proceeds of Collateral to the
Agent for the account of the Lenders. The Agent will immediately rescind these
instructions a) upon the waiver of the Event of Default and b) when the Company
has Availability of zero ($0) or greater. All amounts received by the Agent for
the account of the Lenders will be credited to the Obligations upon the Agent's
receipt of "good funds" at its bank account in New York, New York on the
Business Day of receipt if received no later than 2 p.m. New York time or on the
next succeeding Business Day if received after 2 p.m. New York time. No checks,
drafts or other instruments received by the Agent will constitute final payment
unless and until such instruments have actually been collected. If the loan
account reflects a zero Revolving Loan balance and there is then no Event of
Default, then the Agent shall promptly remit to the operating account of the
Company any credit balances in the loan account.
3.5 The Agent shall maintain a separate account on its books in the
Company's name in which the Company will be charged with loans, advances and
payments under the Letter of Credit Guaranty, made to the Company or for its
account, and with any other Obligations, including any and all reasonable costs,
expenses and reasonable and documented attorney's fees which the Agent may incur
in connection with the exercise of any of the rights or powers herein conferred
or in the prosecution or defense of any action or proceeding to enforce or
protect any rights of the Agent or of any Lender in connection with this
Financing Agreement or the Collateral assigned hereunder, or any Obligations
owing by the Company. The Company will be credited with all amounts received by
the Agent from the Company or from others for the Company's account, including,
as above set forth, all amounts received by the Agent in payment of Accounts and
such amounts will be applied to payment of the Obligations. In no event shall
prior recourse to any Accounts or other security granted to or by the Company be
a prerequisite to the Agent's right to demand payment of any Obligation.
Further, it is understood that neither the Agent nor any Lender shall have any
obligation whatsoever to perform in any respect any of the Company's contracts
or obligations relating to the Accounts.
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3.6 After the end of each month, the Agent, on its own behalf and/or
acting on behalf of the Lenders, shall promptly send the Company a statement
showing the accounting for the charges, loans, advances, payments under the
Letter of Credit Guaranty, and other transactions occurring between the Agent,
on its own behalf, and/or acting on behalf of the Lenders and the Company during
that month. The monthly statement shall be deemed correct and binding upon the
Company and shall constitute an account stated between the Company, the Agent,
and the Lenders unless the Agent receives a written statement of the exceptions
within thirty (30) days of the date of the monthly statement.
3.7 In the event that (a) the sum of (i) the outstanding balance of
Revolving Loans plus (ii) the outstanding balance of Letters of Credit exceeds
(b) the amount calculated as (i) the lesser of (A) the Revolving Line of Credit
or (B) the Borrowing Base, minus (ii) the Availability Reserves, any such
nonconsensual Overadvance shall be due and payable to Agent immediately upon
Agent's demand therefor; provided, however, that any consensual Overadvance made
pursuant to Section 3.1 hereof shall be due as and when specified in the
requisite consent of Required Lenders.
SECTION 4. LETTERS OF CREDIT
In order to assist the Company in establishing or opening i) documentary
Letters of Credit with an Issuing Bank to cover the purchase and importation of
inventory and ii) standby Letters of Credit with an Issuing Bank to cover such
other matters as the Company may so decide, other than for the purchase of
Inventory or to secure present or future Trade Accounts Payable, the Company has
requested the Agent, acting on behalf of the Lenders, to join in the
applications for such Letters of Credit, and/or guarantee payment or performance
of such Letters of Credit and any drafts or acceptances thereunder through the
issuance of the Letters of Credit Guaranty, thereby lending the Lenders' credit
to the Company and the Lenders, acting through the Agent, have agreed to do so.
These arrangements shall be handled by the Agent, acting on behalf of the
Lenders, subject to the terms and conditions set forth below.
4.1 Within the Line of Credit and subject to Availability, the Lenders,
acting through the Agent, shall assist the Company in obtaining such Letters of
Credit in an amount not to exceed $15,000,000.00 in the aggregate outstanding at
any one time. The Agent's assistance with respect to Letters of Credit for
amounts in excess of the limitations set forth herein shall at all times and in
all respects be in the Agent's sole discretion. Notwithstanding anything herein
to the contrary, upon the occurrence of a Default and/or an Event of Default,
the Agent's assistance with respect to any Letters of Credit shall be in the
Agent's sole discretion unless such Event of Default is waived in writing, or
such Default is cured to the Agent's satisfaction in the exercise of its
reasonable business judgment during any applicable grace or cure period.
4.2 The Agent, acting on behalf of the Lenders, shall have the right,
without notice to the Company, to charge the loan account with the amount of any
and all indebtedness, liability or obligation of any kind paid or incurred under
the Letters of Credit Guaranty at the earlier of: a) payment by the Agent under
the Letters of Credit Guaranty, or b) termination of this Financing Agreement in
accordance with Section 10 of this Financing
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Agreement. Any amount so charged to the loan account shall be charged against
any credit balances then in the loan account, and if there are then insufficient
credit balances then to the extent of such insufficiency such amount shall be
deemed a Revolving Loan hereunder and shall incur interest at the rate provided
for in Section 7.1 of this Financing Agreement.
4.3 [Intentionally Left Blank].
4.4 In connection with any Letter of Credit, neither the Agent nor any
Lender shall be responsible for: the existence, character, quality, quantity,
condition, packing, value or delivery of the goods purporting to be represented
by any documents; any difference or variation in the character, quality,
quantity, condition, packing, value or delivery of the goods from that expressed
in the documents; the validity, sufficiency or genuineness of any documents or
of any endorsements thereon, even if such documents should in fact prove to be
in any or all respects invalid, insufficient, fraudulent or forged, other than
as a result of the gross negligence of the Agent and/or any Lender; the time,
place, manner or order in which shipment is made; partial or incomplete
shipment, or failure or omission to ship any or all of the goods referred to in
the Letters of Credit or documents; any deviation from instructions; delay,
default, or fraud by the shipper and/or anyone else in connection with any
Inventory which is the subject of any Letter of Credit or the shipping thereof;
or any breach of contract between the shipper or vendors and the Company.
Furthermore, without being limited by the foregoing, neither the Agent nor any
Lender shall be responsible for any act or omission with respect to or in
connection with any Inventory which is the subject of any Letter of Credit.
4.5 In connection with any Letter of Credit, the Company agrees that any
action taken by the Agent, if taken in good faith, or any action taken by any
Issuing Bank, under or in connection with the Letters of Credit, the guarantees,
the drafts or acceptances, or the Collateral, shall, as between the Company and
the Agent, be binding on the Company and shall not put the Agent or any Lender
in any resulting liability to the Company other than as a result of the gross
negligence or willful misconduct of the Agent or such Lender. After the
occurrence of an Event of Default which is not waived, the Agent shall have the
full right and authority to clear and resolve any questions of non-compliance of
documents; to give any instructions as to acceptance or rejection of any
documents or goods; to execute any and all steamship or airways guaranties (and
applications therefor), indemnities or delivery orders; to grant any extensions
of the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents; and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; all in the
Agent's sole name, and the Issuing Bank shall be entitled to comply with and
honor any and all such documents or instruments executed by or received solely
from the Agent, all without any notice to or any consent from the Company,
provided, however, that the Agent shall give the Company notice of the
acceptance or rejection of any goods.
4.6 In connection with any Letter of Credit, without the Agent's express
consent (which consent shall not be unreasonably withheld) and, where
applicable, endorsement in writing, the Company agrees: a) not to execute any
and all applications for steamship or airway guaranties, indemnities or delivery
orders; to grant any extensions of the maturity of,
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time of payment for, or time of presentation of, any drafts, acceptances or
documents; or to agree to any amendments, renewals, extensions, modifications or
changes of any of the terms or conditions of any of the Letters of Credit,
applications, drafts or acceptances; and b) after the occurrence of an Event of
Default which is not waived, not to i) clear and resolve any questions of
non-compliance of documents, or ii) give any instructions as to acceptance or
rejection of any documents or goods.
4.7 In connection with any Letter of Credit, the Company agrees that any
necessary import, export or other licenses or certificates for the import or
handling of the Inventory will have been promptly procured, and all foreign and
domestic governmental laws and regulations in regard to the shipment and
importation of the Inventory, or the financing thereof will have been promptly
and fully complied with, except to the extent that any such non-procurement or
non-compliance will not have a material adverse effect on such Inventory; and
any certificates in that regard that the Agent, on behalf of the Lenders, may at
any time reasonably request will be promptly furnished. In this connection, the
Company warrants and represents that, to its actual knowledge, all shipments
made under any of the Letters of Credit are in accordance with the laws and
regulations of the countries in which the shipments originate and terminate, and
are not prohibited by any such laws and regulations, except to the extent that
any failure to so comply will not have a material adverse effect on such
shipments. The Company assumes all risk, liability and responsibility for, and
agrees to pay and discharge, all present and future local, state, federal or
foreign taxes, duties, or levies in connection with any Inventory or goods
purchased, imported or acquired under the Letter of Credit. Any embargo,
restriction, laws, customs or regulations of any country, state, province, city,
or other political subdivision, where the Inventory is or may be located, or
wherein payments are to be made, or wherein drafts may be drawn, negotiated,
accepted, or paid, shall be solely the Company's risk, liability and
responsibility.
4.8 Upon any payments made to the Issuing Bank under the Letter of Credit
Guaranty, the Agent, for the benefit of the Lenders, shall acquire by
subrogation, any rights, remedies, duties or obligations granted or undertaken
by the Company to the Issuing Bank in any application for Letters of Credit, any
standing agreement relating to Letters of Credit or otherwise, all of which
shall be deemed to have been granted to the Agent for the benefit of the Lenders
and apply in all respects to the Agent and the Lenders and shall be in addition
to any rights, remedies, duties or obligations contained herein.
4.9 Nothing in this Financing Agreement is intended to relieve any Issuing
Bank from any liability to any Person.
SECTION 5. COLLATERAL
5.1 As security for the prompt payment in full of all loans and advances
made and to be made to the Company from time to time by the Agent on behalf of
the Lenders pursuant hereto, as well as to secure the payment in full of the
other Obligations, the Company hereby pledges and grants to the Agent for the
benefit of the Lenders a continuing general lien upon and security interest in
all of its:
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(a) Accounts;
(b) Documents of Title;
(c) Equipment;
(d) General Intangibles;
(e) Inventory; and
(f) Other Collateral.
5.2 The security interests granted hereunder shall extend and attach to:
(a) All Collateral which is presently in existence and which is
owned by the Company or in which the Company has any interest (but only to the
extent of such interest), whether held by the Company or others for its account;
(b) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Agent or the Company from any
of the Company's customers, as well as to all supplies, goods, incidentals,
packaging materials, labels and any other items which contribute to the finished
goods or products manufactured or processed by the Company, or to the sale,
promotion or shipment thereof.
5.3 The Company agrees to take reasonable steps, consistent with current
business practices, to safeguard, protect and hold all Inventory and make no
disposition thereof except in the manner or for the purpose described in Section
3.3 of this Financing Agreement. Inventory may be sold and shipped by the
Company to its customers in the ordinary course of the Company's business, and
the Company will collect all proceeds of such sales, consistent with reasonable
business practices in existence on the date of execution of this Financing
Agreement or consistent with the business practices of like companies in the
retail industry, provided, however, that all proceeds of all such sales
(including cash, checks and instruments for the payment of money), other than
the Retained Cash, are promptly deposited in accordance with Section 3.4 of this
Financing Agreement. Upon the sale, exchange, or other disposition of Inventory,
as herein provided, the security interest in the Inventory provided for herein
shall, without break in continuity and without further formality or act,
continue in, and attach to, the proceeds, including any instruments for the
payment of money, accounts receivable, contract rights, documents of title,
shipping documents, chattel paper and all other cash and non-cash proceeds of
such sale, exchange or disposition. As to any such sale, exchange or other
disposition, the Agent on behalf of the Lenders shall have a security interest
in all of the rights of the Company as an unpaid seller, including stoppage in
transit, replevin, rescission and reclamation. The Company hereby agrees to
immediately forward any and all proceeds of Collateral (other than Retained
Cash) to the Depository Account, and to hold any such proceeds (including any
notes and instruments), in trust for the Agent, on behalf of the Lenders,
pending delivery to the Agent. Irrespective of the Agent's perfection status in
any and all of the General Intangibles, including, without limitations, any
Patents, Trademarks, Copyrights or licenses with respect thereto, the Company
hereby irrevocably grants the Agent a royalty free license to sell, or
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otherwise dispose of or transfer, in accordance with Section 9.3 of this
Financing Agreement, and the applicable terms hereof, any of the Inventory upon
the occurrence of an Event of Default which has not been waived in writing by
the Agent.
5.4 The rights and security interests granted to the Agent for the benefit
of the Lenders hereunder are to continue in full force and effect,
notwithstanding the termination of this Financing Agreement or the fact that the
loan account on the books of the Agent may from time to time be temporarily in a
credit position, until the satisfaction in full of all Obligations and the
termination of this Financing Agreement. Any delay or omission by the Agent to
exercise any right hereunder, shall not be deemed a waiver thereof, or be deemed
a waiver of any other right, unless such waiver shall be in writing and signed
by the Agent. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion. Upon satisfaction in full
of all Obligations and the termination of this Financing Agreement, the Agent
will take, at the Company's request and expense, all actions and do all things
reasonably necessary to release the rights and security interests in the
Collateral, and upon any partial release of Collateral, the Agent will take, at
the Company's request and expense, all actions and do all things reasonably
necessary to release the rights and security interests in the Collateral that is
the subject of such partial release.
5.5 To the extent that the Obligations are now or hereafter secured by any
assets or property other than the Collateral or by the guarantee, endorsement,
assets or property of any other person, then the Agent shall have the right in
its sole discretion to determine which rights, security, liens, security
interests or remedies the Agent shall at any time pursue, foreclose upon,
relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of the Agent's or
any Lenders' rights hereunder.
5.6 Any reserves or credit balances in the loan account and any other
property or assets of the Company in the possession of the Agent may be held by
the Agent as security for any Obligations and applied in whole or partial
satisfaction of such Obligations when due. The liens and security interests
granted herein and any other lien or security interest the Agent may have in any
other assets of the Company, shall secure payment and performance of all now
existing and future Obligations. The Agent may, in its Reasonable Discretion,
charge any or all of the Obligations to the Revolving Loan Account when due.
5.7 The Company possesses all General Intangibles and rights thereto
necessary to conduct its business as conducted as of the Closing Date and the
Company shall maintain its rights in, and the value of, the foregoing in the
ordinary course of its business, including, without limitation, by making timely
payment with respect to any applicable licensed rights. The Company shall
deliver to the Agent, and/or shall cause the appropriate party to deliver to the
Agent, from time to time such pledge or security agreements with respect to
General Intangibles (now or hereafter acquired) of the Company and its
subsidiaries as the Agent shall reasonably require to obtain valid first liens
thereon (subject to the Permitted Encumbrances set forth in the definition
thereof in clauses (i) (if and to the extent consented to by Lenders as senior
liens), (ii), (vi), (vii), (ix), (x), (xi), and, with respect to such clauses
only, (xii)). In furtherance of the foregoing, the Company shall provide timely
notice to the
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Agent of any additional Patents, Trademarks, trade names, service marks,
Copyrights, brand names, trade names, logos and other trade designations
acquired or applied for subsequent to the Closing Date and the Company shall
execute such documentation as the Agent may reasonably require to obtain and
perfect its lien thereon. The Company hereby irrevocably grants to the Agent a
royalty-free, non-exclusive license in the General Intangibles, including trade
names, Trademarks, Copyrights, Patents, licenses, and any other proprietary and
intellectual property rights and any and all right, title and interest in any of
the foregoing, for the sole purpose, upon the occurrence and during the
continuance of an Event of Default, of having the right to advertise for sale
and sell or transfer any Inventory bearing any of the General Intangibles, and
apply the proceeds thereof to the Obligations hereunder, all as further set
forth in this Financing Agreement and irrespective of the Agent's lien and
perfection in any General Intangibles.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 The Company hereby warrants and represents that: i) the fair value of
its assets exceed the book value of its liabilities; ii) the Company is
generally able to pay its debts as they become due and payable; and iii) the
Company does not have unreasonably small capital to carry on its business as it
is currently conducted absent extraordinary and unforeseen circumstances. The
Company further warrants and represents that except for the Permitted
Encumbrances and liens of which the Agent is aware on the date hereof, each of
the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral. Further, that except for
the Permitted Encumbrances, the Company is or will be at the time additional
Collateral is acquired by it, the absolute owner of the Collateral with full
right to pledge, sell, consign, transfer and create a security interest therein,
free and clear of any and all claims, consignments, or liens in favor of others,
that the Company will, at its expense, defend the same from any and all claims
and demands (other than the Permitted Encumbrances) of any other person.
6.2 The Company agrees to maintain accurate books and records pertaining
to the Collateral. Prior to the occurrence of an Event of Default, the Agent,
accompanied by the Lenders or their respective agents may, from time to time
(but no more than twice per fiscal year of the Company) upon reasonable notice,
enter upon the Company's premises at any time during normal business hours, or
at such other times as the Agent and the Company may agree upon, for the purpose
of inspecting the Collateral and any and all records pertaining thereto, all at
the Agent's and the applicable Lender's expense. During the continuance of an
Event of Default, the Agent, accompanied by the Lenders or their respective
agents may, at the Company's expense, enter the Company's premises, upon
reasonable notice and during normal business hours, and as often as the Agent
deems reasonably necessary, to inspect the Collateral and the books and records
of the Company. The Company agrees to afford the Agent prior written notice of
any change in the location of any Collateral, other than to locations that are
known to the Agent and at which the Agent has otherwise fully perfected its
liens thereon. Set forth on Schedule I hereto is a list of all of the Company's
retail stores and the addresses of such stores. The Company is also to advise
the Agent promptly, in sufficient detail, of any material adverse change
relating to the type, quantity or quality of the Collateral or on the security
interests granted to the Agent therein.
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6.3 [Intentionally Left Blank].
6.4 The Company agrees to comply with the requirements of all state and
federal laws in order to grant to the Agent for the benefit of the Lenders valid
and perfected first security interests in the Collateral, subject only to the
Permitted Encumbrances. The Agent is hereby authorized by the Company, to the
extent permitted by applicable law, to file any financing statements covering
the Collateral whether or not the Company's signature appears thereon and the
Agent agrees to provide the Company with copies of such financing statements.
The Company hereby consents to and ratifies any and all execution and/or filing
of financing statements on or prior to the Closing Date by the Agent. The
Company agrees to do whatever the Agent may reasonably request, from time to
time, by way of: filing notices of liens, financing statements, amendments,
renewals and continuations thereof; cooperating with the Agent's employees and
agents; keeping Inventory stock records; transferring proceeds of Collateral to
the Agent's possession in accordance with the terms of this Financing Agreement;
and performing such further acts as the Agent on behalf of the Lenders may
reasonably require in order to effect the purposes of this Financing Agreement.
6.5 The Company agrees to i) maintain on Inventory, insurance under such
policies of insurance, with such insurance companies, in such reasonable amounts
and covering such insurable risks on as is reasonably acceptable to the Agent
and ii) maintain or caused to be maintained on Real Estate and Equipment,
insurance under such policies of insurance with such insurance companies
selected by the Company, on terms no less favorable than the insurance coverage
in place as of the date hereof (other than with respect to the deductible
amounts and limits of such coverage). All policies covering the Inventory are,
subject to the rights of any holders of Permitted Encumbrances holding claims
senior to the Agent, to be made payable to the Agent on behalf of the Lenders
under a standard non-contributory "mortgagee", "lender" or "secured party"
clause and are to contain such other provisions as the Agent may reasonably
require to fully protect by insurance the Agent's interest in the Inventory and
to any payments to be made under such policies with respect to the Inventory.
All original policies or true copies thereof or certificates thereof are to be
delivered to the Agent, with all premiums current with the loss payable
endorsement in the Agent's favor, and shall provide for not less than ten (10)
days prior written notice to the Agent of the exercise of any right of
cancellation. If the Company fails to maintain such insurance, the Agent may
arrange for such insurance, but at the Company's expense and without any
responsibility on the Agent's or any Lender's part for: obtaining the insurance,
the solvency of the insurance companies, the adequacy of the coverage, or the
collection of claims. Upon the occurrence of an Event of Default which is not
waived, the Agent shall, subject to the rights of any holders of Permitted
Encumbrances holding claims senior to the Agent, have the sole right, in the
name of the Agent or the Company, to file claims under any insurance policies
with respect to the Inventory, to receive, receipt and give acquittance for any
payments that may be payable thereunder with respect to the Inventory, and to
execute any and all endorsements, receipts, releases, assignments, reassignments
or other documents that may be necessary to effect the collection, compromise or
settlement of any claims with respect to the Inventory under any such insurance
policies. In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to Collateral shall be deposited in the Depository
Accounts in accordance with Section 3.4 of this Financing Agreement.
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6.6 The Company agrees to pay, when due, all local, domestic and foreign
(as applicable) taxes, assessments, and other charges (herein "taxes") lawfully
levied or assessed upon the Company or the Collateral, provided, however, that
such taxes need not be paid on or before the date fixed for payment thereof if:
i) such taxes are being diligently contested by the Company in good faith and by
appropriate proceedings; ii) the Company establishes such reserves as may be
required by GAAP; iii) such taxes are not secured by a filed lien which is
senior to the liens of the Agent on the Collateral and iv) such taxes secured by
a filed lien are not due the United States of America. To prevent the imminent
foreclosure of any tax liens (whether such liens are senior or junior to the
liens of the Agent) or in the event the Agent on behalf of the Lenders is
exercising its remedies as a secured creditor on Collateral, then the Agent may,
on the Company's behalf, pay any taxes then due and secured by a lien on the
Collateral and the amount thereof shall be an Obligation secured hereby.
6.7 Subject to the provisions of Section 6.6 above, the Company: (a)
agrees to comply with all acts, rules, regulations and orders of any
legislative, administrative or judicial body or official, including, but not
limited to, the Fair Labor Standards Act, as set forth in Section 201 through
Section 219 of Title 29 of the United States Code, which the failure to comply
with would have a materially adverse impact on the Collateral, or on the
operation of the business of the Company, provided that the Company may contest
any acts, rules, regulations, orders and directions of such bodies or officials
in any reasonable manner which will not materially adversely effect the Agent's
liens or priority in the Collateral; and (b) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the ownership and/or use
of its Real Estate and operation of its business, which the failure to comply
with would have a materially adverse impact on any material part of the
Collateral, or on the operation of the business of the Company. The Company
shall not be deemed to have breached any provision of this Section 6.7 if (i)
the failure to comply with the requirements of this Section 6.7 resulted from
good faith error or innocent omission, (ii) the Company promptly commences and
diligently pursues a cure of such breach and such cure is eventually, within a
reasonable time frame based upon the circumstances and the amount of work
required, completed and (iii) such failure has not resulted in a materially
adverse effect on any material portion of the Collateral or the business,
financial condition or operations of the Company.
6.8 Until termination of this Financing Agreement and satisfaction in full
of all Obligations due hereunder, the Company agrees that, unless the Agent
shall have otherwise consented in writing, the Company will furnish, or cause to
be furnished, to the Agent, not later than: (a) one hundred and twenty (120)
days after the end of each fiscal year of the Company, an audited Consolidated
Balance Sheet as at the close of such year and consolidated statements of
operations, cash flows, shareholders' equity and reconciliation of surplus of
the Parent, the Company and their Subsidiaries for such year, audited by
independent public accountants selected by the Company and satisfactory to the
Agent, (the Agent hereby agrees that KPMG Peat Marwick is satisfactory to the
Agent); (b) forty-five (45) days after the end of each month, other than a month
that constitutes a fiscal year end, a Consolidated Balance Sheet as at the end
of such period and consolidated statements of operations and cash flows of the
Parent, the Company and their Subsidiaries for such period,
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certified by an authorized financial or accounting officer of the Company; and
(c) a reasonable time after request, such further information regarding the
business affairs and financial condition of the Company as the Agent may
reasonably request, including, without limitation, annual cash flow projections
in form reasonably satisfactory to the Agent. Each financial statement required
to be submitted under clauses a and b above must be accompanied by an Officer's
Certificate, signed by the President, Senior Vice President, Vice President,
Controller, or Treasurer, of the Company pursuant to which such officer must
certify that: (i) the financial statement(s) fairly and accurately represent(s)
the financial condition of Parent, the Company and their Subsidiaries, at the
end of the particular accounting period, as well as the operating results of
Parent, the Company and their Subsidiaries, during such accounting period,
subject to year-end audit adjustments; (ii) during the particular accounting
period: (x) there has been no Default or Event of Default under this Financing
Agreement, provided, however, that if any such officer has knowledge that any
such Default or Event of Default has occurred during such period, the existence
of and a detailed description of same shall be set forth in such Officer's
Certificate; and (y) a senior officer of the Company has not received any notice
of cancellation with respect to its property insurance policies or certifying as
to replacement policies therefor; and (iii) the exhibits attached to such
monthly and annual financial statement(s) constitute detailed calculations
showing compliance with all financial covenants applicable for such period, if
any, contained in this Financing Agreement. Notwithstanding anything in this
Financing Agreement to the contrary, should the Parent purchase the assets of,
or capital stock of, a Person, or create or incorporate another Person of which
it owns a majority of such Person's capital stock, then the references to
Consolidated Balance Sheet shall mean the Consolidated Balance Sheet of the
Company and its Subsidiaries only and all references to Parent and its
Subsidiaries shall, without further action, be immediately deleted from this
Section 6.8.
6.9 The Company and its Subsidiaries shall have, as of the end of each
fiscal quarter, on a consolidated basis, a Net Worth, as defined herein, of not
less than ($50,000,000.00).
6.10 Until termination of this Financing Agreement and satisfaction of all
Obligations due hereunder, the Company agrees that, without the prior written
consent of the Agent, except as otherwise herein provided, the Company will not:
A. Incur, create, assume or permit any lien, charge, security interest,
encumbrance or judgment, (whether as a result of a purchase money or
title retention transaction, or other security interest, or
otherwise) to exist on i) the Collateral, except for the Permitted
Encumbrances and ii) any of its other assets whether real, personal
or mixed, whether now owned or hereafter acquired, except for the
Permitted Encumbrances;
B. Incur or create any Indebtedness other than the Permitted
Indebtedness;
C. Except for Permitted Indebtedness, borrow any money on the security
of the Collateral from sources other than the Agent acting on behalf
of the Lenders;
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D. Sell, lease, assign, transfer or otherwise dispose of i) Collateral,
except as otherwise specifically permitted by this Financing
Agreement, or ii) either all or substantially all of the other
assets of the Company;
E. Merge, consolidate or otherwise alter or modify its corporate name,
principal place of business, jurisdiction of incorporation,
structure or existence, or enter into or engage in any operation or
activity materially different from that presently being conducted by
the Company or otherwise related to the retail sporting goods
industry, provided, however, that on fifteen (15) days prior notice
to the Agent, the Company may, without obtaining the consent of the
Agent or any Lender i) merge its Subsidiaries or a Person into
itself provided x) the Company is the survivor of the mergers; y) no
liens on the assets of the Subsidiaries or the Person survive such
merger other than liens that constitute Permitted Encumbrances; z)
such Person was an entity with its principal place of business,
state of formation and assets in the United States of America; aa)
such Person was engaged in the retail sporting goods industry; and
bb) the Company, immediately after giving effect to such merger, is
in full compliance with all of the terms and provisions of this
Financing Agreement, provided, however, that such Person's or
Subsidiary's Inventory shall not be deemed Eligible Inventory until
such time as the Agent has completed to its reasonable satisfaction
an examination and review of such Inventory and such Person's or
Subsidiary's books and records; and ii) alter or modify its
corporate name or principal place of business;
F. Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, other than
i) by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business, ii) pursuant to obligations in effect on the date hereof,
iii) in connection with subleases pursuant to which the Company is
the sub-lessor, iv) home relocation loans to or on behalf of
employees or v) in the ordinary course of the Company's business or
for purposes deemed reasonable by the Company provided such
obligations under this clause v) shall not exceed $10,000,000.00 in
the aggregate at any one time;
G. Declare or pay any dividend of any kind on, or purchase, acquire,
redeem or retire, any of its capital stock or equity interest of any
class whatsoever, whether now or hereafter outstanding, except that
(i) the Company may declare and pay dividends on its capital stock:
(a) in cash (and not subject to any limitation based upon Company
Liquidity) in (1) amounts sufficient to enable the Parent to (y) pay
income or franchise taxes of the Company due as a result of the
filing of a consolidated, combined or unitary tax return in which
the operations of the Company are included, and (z) reimburse the
Parent for out-of-pocket expenses incurred by the Parent for the
joint or several benefit of the Parent and the Company, including
fees and expenses of its directors for attending the Board of
Directors' meeting, and (2) additional amounts not to exceed the sum
of $5,000,000 plus the net cash proceeds realized from sales by the
Company in such fiscal year of its capital stock in any fiscal year;
provided, however, that if the Company does not declare and pay
dividends in any fiscal year of up to the sum of $5,000,000 and the
net cash proceeds realized from sales by the Company in such fiscal
year of its capital
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stock, the difference may be added to the amount permitted in
subsequent fiscal years and provided, further, that such dividends
under this clause (a) may not be declared and paid if a Default or
Event of Default is then in existence or will be in existence after
giving effect to such dividends, (b) in kind (i.e. in the form of
capital stock only and not subject to any limitation based upon
Company Liquidity), and (c) in cash in any amount on or after May
15, 2003; provided, that such Company dividend or other distribution
under this clause (c) is used either to repurchase, acquire or
redeem capital stock of Parent or to pay a cash dividend thereon;
and further provided, that, such Company dividend or other
distribution under this clause (c) may not be declared or paid if a
Default or Event of Default is then in existence or will be in
existence after giving effect to the payment of such dividend, or
if, after giving effect to the making of such Company dividend or
other distribution under this clause (c), the Company shall have
less than $40,000,000 in Company Liquidity.
H. Repurchase, acquire, prepay, or redeem any Senior Notes, except that
the Company may repurchase, acquire, prepay, or redeem Senior Notes
so long as (i) no Default or Event of Default is then in existence
or will be in existence after giving effect to such repurchase,
acquisition, prepayment, or redemption, and (ii) after giving effect
to such repurchase, acquisition, prepayment, or redemption, the
Company shall have not less than $40,000,000 in Company Liquidity.
I. Make any advance or loan to, or any investment in, any Person,
except for i) advances, loans or investments in existence on the
date of execution of this Financing Agreement; ii) Permitted
Investments; iii) loans and advances to employees in the ordinary
course of business for travel, entertainment and home relocation;
iv) loans and advances to employees to enable employees to purchase
the capital stock of Parent provided such loans and advances do not
exceed $2,000,000.00 in the aggregate at any one time, provided,
however, that such $2,000,000.00 limitation shall not be applicable
if the cash proceeds of such stock purchases are immediately
reinvested by the Parent in the capital stock of the Company or are
immediately used to repay Indebtedness of Parent to the Company; v)
advances or loans to, or investments in, joint ventures or
Subsidiaries of the Company, provided, however, that if such loans
or advances are not being used to acquire, directly or indirectly,
assets for the benefit of the Company, such loans, advances or
investments may not exceed $2,500,000.00 in the aggregate at any one
time; and vi) other loans, advances and investments to, or with the
Parent, provided same do not exceed in the aggregate outstanding at
any one time $10,000,000.00.
6.11 Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Company and its
Subsidiaries shall not contract for,
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purchase, make expenditures for, lease pursuant to a Capital Lease or otherwise
incur obligations with respect to Capital Expenditures (whether subject to a
security interest or otherwise) in an aggregate amount, measured quarterly, in
excess of fifty percent (50%) of the Company's EBITDA for the immediately
preceding twelve (12) month period then ending.
6.12 Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Company and its
Subsidiaries, on a consolidated basis, shall maintain at the end of each Fiscal
Quarter, a Fixed Charge Coverage Ratio of not less than 1.50 to 1.0.
6.13 [Intentionally Left Blank].
6.14 The Company agrees to advise the Agent, promptly, in writing of: a)
all quantifiable expenditures (actual or anticipated) in excess of $1,500,000.00
pertaining to the Real Estate and operations in any fiscal year for i)
environmental clean-up, ii) environmental compliance or iii) environmental
testing and the impact of said expenses on Working Capital; and b) any notices
the Company receives from any local, state or federal authority advising the
Company of any environmental liability (real or potential) stemming from any of
the Company's operations, premises, its waste disposal practices, or waste
disposal sites used by the Company and to provide the Agent with copies of all
such notices if so required.
6.15 Without the prior written consent of the Agent, the Company agrees
that it will not: a) enter into any transaction, including, without limitation,
any purchase, sale, transfer, lease, loan or exchange of property with Parent or
any Subsidiary or Affiliate other than i) transactions in the ordinary course of
the Company's business and on terms no less favorable than the terms otherwise
attainable by the Company from a Person not an Affiliate; ii) as otherwise
permitted in this Financing Agreement, including, without limitation, Permitted
Indebtedness, to the extent applicable; iii) reimbursement of fees and expenses
to directors for the expenses incurred by such directors for attending the
Company's Board of Directors' meetings; and iv) all customary compensation
arrangements, including participation in employee benefit plans.
6.16 The Company shall conduct or cause to be conducted, not less than
once in any calendar year, an actual physical count of its Inventory at each
store. Such physical inventory count shall, in part, be conducted or reviewed by
an entity that is not an Affiliate of the Company and which entity shall be
experienced in conducting or reviewing such a physical inventory. The Company
shall, within forty-five (45) days after the end of each month, provide to the
Agent for each Lender a schedule prepared by the Company of the results of the
Inventory counts completed at the Company's stores during that month.
Concurrently therewith, the Company shall provide the Agent for each Lender with
the results of the internally prepared cycle counts completed at the Company's
distribution centers during that month. Such cycle counts shall be reviewed by
the Company's independent public accountants in their normal annual review
process. Upon the Agent's reasonable request, the Company will provide the Agent
with further details of Inventory count and review results, so long as the
Agent's request is for information readily available to the Company on existing
internally or externally prepared Inventory reports.
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6.17 The Company shall remit any and all sales taxes when due to the
appropriate sales tax authorities when any such remittances are due, provided,
however, that such remittances need not be made on or before such due date if:
i) such sales taxes are being diligently contested by the Company in good faith
and by appropriate proceedings; ii) the Company establishes such reserves as may
be required by GAAP; and iii) the failure to remit such sales taxes does not
create a lien in favor of such sales tax authorities or impose upon the Agent or
any Lender any obligation to segregate proceeds.
6.18 The Company hereby agrees to indemnify and hold harmless the Agent
and the Lenders and their respective officers, directors, employees, attorneys
and agents (each an "Indemnified Party") from, and holds each of them harmless
against, any and all losses, liabilities, obligations, claims, actions, damages,
out-of-pocket costs and out-of-pocket expenses (including reasonable and
documented attorney's fees) arising out of or incurred with respect to the Loan
Documents, including without limitation those which may arise from or relate to:
(a) the Depository Account, the Blocked Accounts, the lockbox and/or any other
depository account and/or the agreements executed in connection therewith; (b)
any transactions or occurrences relating to Letters of Credit established or
opened for the Company's account, the collateral relating thereto and any drafts
or acceptances thereunder, and all Obligations thereunder, including any such
loss or claim due to any errors or actions taken by, or any omissions,
negligence or misconduct of, any Issuing Banks; (c) any and all claims or
expenses asserted against the Agent or a Lender as a result of any environmental
pollution, hazardous material or environmental clean-up relating to the Real
Estate, or any claim or expense which results from the Company's operations
(including, but not limited to, the Company's off-site disposal practices) and
use of the Real Estate, which the Agent or a Lender may sustain or incur (other
than solely as a result of the physical actions of the Agent or the Lenders or
their respective employees or agents on the Company's premises which are
determined to constitute gross negligence or willful misconduct by a court of
competent jurisdiction), all whether through the alleged or actual negligence of
such person or otherwise, and (d) any sale or transfer of Collateral,
preserving, maintaining or securing the Collateral, defending its interests in
Collateral (including pursuant to any claims brought by the Company, the Company
as debtor-in-possession, any secured or unsecured creditors of the Company, any
trustee or receiver in bankruptcy, or otherwise); except and to the extent in
each case that the same results from the gross negligence or willful misconduct
of any Indemnified Party. The Company hereby agrees that this indemnity shall
survive termination of this Financing Agreement, as well as payments of
Obligations which may be due hereunder, but such survival shall be limited to
two (2) years with respect to the indemnity described in clause (c) hereof. The
Agent may, in its Reasonable Discretion, establish such Availability Reserves
with respect thereto as it may deem advisable under the circumstances and, upon
any termination hereof, hold such reserves as cash reserves for any such
contingent liabilities.
SECTION 7. INTEREST, FEES AND EXPENSES
7.1 Interest on the Revolving Loans (other than Libor Loans) shall be
payable monthly as of the end of each month and shall be at a rate equal to the
sum of the Chase Bank Rate and the applicable following percentage:
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(i) 0.75%, if the Company's EBITDA (as evidenced by the most recent
fiscal quarter's financial statement) for the four fiscal quarters then ended,
is less than or equal to $35,000,000;
(ii) 0.50%, if the Company's EBITDA (as evidenced by the most recent
fiscal quarter's financial statement) for the four fiscal quarters then ended,
is greater than $35,000,000 and less than or equal to $40,000,000;
(iii) 0.25%, if the Company's EBITDA (as evidenced by the most
recent fiscal quarter's financial statement) for the four fiscal quarters then
ended, is greater than $40,000,000 and less than or equal to $45,000,000;
(iv) 0.00%, if the Company's EBITDA (as evidenced by the most recent
fiscal quarter's financial statement) for the four fiscal quarters then ended,
is greater than $45,000,000;
in all instances the applicable percentage will become effective the month
following receipt of the financial statements evidencing that a change of rate
is appropriate. Interest on the Revolving Loans (other than Libor Loans) will be
computed on a per annum basis, on the average of the net balances (other than
Libor Loans) owing by the Company in the Company's account at the close of each
day during such month. Interest on the Revolving Loans which are Libor Loans
shall be payable monthly as of the end of each month and shall be at a rate
equal to the sum of the applicable Libor on each then outstanding Revolving Loan
which is a Libor Loan and the applicable following percentage:
(i) 2.50%, if the Company's EBITDA (as evidenced by the most recent
fiscal quarter's financial statement) for the four fiscal quarters then ended,
is less than or equal to $35,000,000;
(ii) 2.25%, if the Company's EBITDA (as evidenced by the most recent
fiscal quarter's financial statement) for the four fiscal quarters then ended,
is greater than $35,000,000 and less than or equal to $40,000,000;
(iii) 2.00%, if the Company's EBITDA (as evidenced by the most
recent fiscal quarter's financial statement) for the four fiscal quarters then
ended, is greater than $40,000,000 and less than or equal to $45,000,000;
(iv) 1.75%, if the Company's EBITDA (as evidenced by the most recent
fiscal quarter's financial statement) for the four fiscal quarters then ended,
is greater than $45,000,000 and less than or equal to $50,000,000;
(v) 1.50%, if the Company's EBITDA (as evidenced by the most recent
fiscal quarter's financial statement) for the four fiscal quarters then ended,
is greater than $50,000,000;
in all instances the applicable percentage will become effective the month
following receipt of the financial statements evidencing that a change of rate
is appropriate. Interest on Revolving Loans which are Libor Loans will be
computed on a per annum basis, on the
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average of the net balances owing by the Company on such Libor Loan at the close
of each day during such month. The Company may elect to use Libor as to any new
or then outstanding Revolving Loans provided x) there is then no unwaived
Default or Event of Default, and y) the Company has so advised the Agent of its
election to use Libor and the Libor Period selected no later than three (3)
Business Days prior to the proposed borrowing or, in the case of a Libor
election with respect to a then outstanding Revolving Loan, three (3) Business
Days prior to the conversion of any then outstanding Revolving Loans to Libor
Loans and z) the election and Libor shall be effective, provided, there is then
no unwaived Default or Event of Default, on the fourth Business Day following
said notice. The Libor elections must be for $100,000.00 or whole multiples
thereof. If no such election is timely made or can be made, then the Agent shall
use the Chase Bank Rate and the applicable percentage set forth above to compute
interest. In the event of any change in the Chase Bank Rate, the interest rate
hereunder shall change, as of the first day of the month following any change,
so as to reflect the changed Chase Bank Rate. The rates hereunder shall be
calculated based on a 365-day year. The Agent shall be entitled to charge the
Company's account at the rate provided for herein when due until all Obligation
have been paid in full.
7.2 In consideration of the Letter of Credit Guaranty, the Company shall
pay to the Agent, for the ratable benefit of Lenders, the Letter of Credit
Guaranty Fee which shall be an amount equal to one and one-quarter percent (1
1/4%) per annum, payable monthly, on the face amount of each outstanding Letter
of Credit less the amount of any and all amounts previously drawn under such
Letter of Credit.
7.3 Any charges, fees, commissions, costs and expenses charged to the
Agent for the Company's account by any Issuing Bank in connection with or
arising out of Letters of Credit issued pursuant to this Financing Agreement or
out of transactions relating thereto will be charged to the loan account in full
when charged to or paid by the Agent and when made by any such Issuing Bank
shall be conclusive on the Agent.
7.4 The Company shall reimburse or pay the Agent, as the case may be, for:
a) all Out-of-Pocket Expenses and b) any applicable Documentation Fees.
7.5 Upon the last Business Day of each month, commencing with February 28,
2003, the Company shall pay the Agent for the account of the Lenders the Line of
Credit Fee provided, however, the Company shall have no obligation to pay the
Line of Credit Fee on February 28, 2003, if the Company has paid Agent such fee
pursuant to the terms of the Prior Financing Agreement.
7.6 [Intentionally Left Blank].
7.7 [Intentionally Left Blank].
7.8 To induce the Lenders (including CITBC) to enter into this Financing
Agreement and to extend to the Company the Revolving Loans, the Company hereby
agrees to pay to the Agent for the account of the Lenders a Loan Facility Fee in
the amount of $350,000, payable upon execution of this Financing Agreement. Such
fee shall be fully
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earned when paid and shall not be refundable or rebateable by reason of
prepayment, acceleration upon an Event of Default or any other circumstances and
shall be retained notwithstanding any termination of this Agreement.
7.9 Immediately upon the advice to the Agent by the Company of the
Company's election of a Libor Loan, the Company shall pay to the Agent for the
Agent's account only the Libor Processing Fee which shall be non-refundable.
7.10 The Company shall pay to the Agent for the account of the Lenders
such amount or amounts as shall compensate the Agent, the Lenders or their
Participants (as defined below), if any, for any loss, costs or expenses
incurred by the Agent, the Lenders or their Participants if any, (as reasonably
determined by the Agent, the Lenders or their Participants if any) as a result
of: (i) any payment or prepayment on a date other than the last day of a Libor
Period for such Libor Loan, or (ii) any failure of the Company to borrow a Libor
Loan on the date for such borrowing specified in the relevant notice; such
compensation to include, without limitation, an amount equal to any loss or
expense suffered by the Agent, the Lenders or their Participants if any, during
the period from the date of receipt of such payment or prepayment or the date of
such failure to borrow to the last day of such Libor Period if the rate of
interest obtained by the Agent, the Lenders or their Participants if any, upon
the reemployment of an amount of funds equal to the amount of such payment,
prepayment or failure to borrow is less than the rate of interest applicable to
such Libor Loan for such Libor Period. The determination by the Agent, the
Lenders or their Participants, if any, of the amount of any such loss or
expense, when set forth in a written notice to the Company, containing the
calculations thereof in reasonable detail, shall constitute prima facie evidence
thereof.
7.11 The Company may at any time, on ten (10) Business Days prior written
notice to the Agent, reduce the Line of Credit provided that: i) any reduction
shall be permanent and irrevocable; ii) a reduction must be for at least
$5,000,000.00 or whole multiples thereof; and iii) the Company shall immediately
repay the Agent the amount by which the Obligations exceed the amount of the
Borrowing Base less the Availability Reserve.
7.12 The Company hereby confirms and authorizes the Agent, and the Agent
hereby agrees, to charge the loan account with the amount of all Obligations due
hereunder as such payment becomes due. In the unlikely event the Agent is unable
or unwilling to charge any such Obligation to the loan account, then the Agent
shall so notify the Company in writing and, without limiting any of the Agent's
and Lenders' rights and remedies hereunder, the amount so requested shall be due
and payable thirty (30) days after such demand.
SECTION 8. POWERS
Subject to the last paragraph in this Section 8, the Company hereby
constitutes the Agent on behalf the Lenders or any person or agent the Agent may
reasonably designate as its attorney-in-fact, at the Company's cost and expense,
to exercise all of the following
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powers, which being coupled with an interest, shall be irrevocable until all
Obligations to the Agent and the Lenders have been satisfied and this Financing
Agreement terminated:
(a) To receive, take, endorse, sign, assign and deliver, all in
the name of the Agent or the Company, any and all checks,
notes, drafts, and other documents or instruments relating to
the Collateral for i) deposit to a Blocked Account (consistent
with the terms of Section 3.4 of this Financing Agreement) or
ii) after the acceleration by the Agent of the Obligations for
application to satisfaction of the Obligations consistent with
the terms of Section 9.3 hereof;
(b) To request, not more frequently than two (2) times a fiscal
year, from customers indebted on Trade Accounts Receivable, in
the name of the Company or the Agent's designee, information
concerning the amounts owing on the Trade Accounts Receivable
provided, however, that such request made be made only if the
then aggregate balance of the Trade Accounts Receivable is in
excess of $3,500,000.00;
(c) To request from customers indebted on Trade Accounts
Receivable at any time, in the name of the Agent, information
concerning the amounts owing on the Trade Accounts Receivable;
(d) To transmit to customers indebted on Trade Accounts Receivable
notice of the Agent's interest therein and to notify customers
indebted on Trade Accounts Receivable to make payment directly
to the Agent for the Company's account; and
(e) To take or bring, in the name of CITBC or the Company, all
steps, actions, suits or proceedings reasonably deemed by
CITBC necessary or desirable to enforce or effect collection
of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the powers
set forth in (a), (c), (d) and (e) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES
9.1 Notwithstanding anything hereinabove to the contrary, the Agent acting
for the Lenders may terminate this Financing Agreement immediately upon the
occurrence of any of the following (herein "Events of Default"):
(a) cessation of business of the Company or the calling of a general
meeting of the creditors of the Company for purposes of compromising the debts
and obligations of the Company;
(b) the Company admits in writing its inability to generally pay its
debts as they mature;
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(c) the commencement by the Company of any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law;
(d) the commencement against the Company of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law provided, however, that such Default shall not be
deemed an Event of Default if the proceeding, petition, case or arrangement is
dismissed within sixty (60) days of the filing of, or the commencement of, such
petition, case, proceeding or arrangement;
(e) material breach by the Company of any warranty, representation
(representations and warranties referred to in this subparagraph e shall be
deemed made as of each i) Reporting Date, whether or not any report is in fact
given to the Agent or ii) request for a Revolving Loan or iii) request for the
Agent's assistance in obtaining a Letter of Credit or iv) the posting of any
Obligation to the loan account) or any covenant contained herein (other than
those otherwise referred to in this Section 9) or in any other agreement between
the Company and the Agent relating to this Financing Agreement, provided that
such Default by the Company of any of the warranties, representations or
covenants referred to in this clause (e) shall not be deemed to be an Event of
Default unless and until such Default shall remain unwaived or unremedied to the
Agent's reasonable satisfaction for a period of fifteen (15) days from the date
of the Agent's discovery of such breach (the Agent shall endeavor to notify the
Company of such breach but the failure to so notify shall not detract from the
Agent's rights or give the Company any claim, course of action or defense);
(f) breach by the Company of any warranty, representation or
covenant of: i) the first sentence of Section 3.3; or ii) Section 3.4; or iii)
Section 5.3; or iv) Section 6.5 (only as it relates to insurance on the
Inventory); or v) Section 6.6; or vii) Section 6.10 (other than sub-paragraphs A
(ii), B and F thereof); or Section 6.17;
(g) breach by the Company of sub-paragraphs A (ii), B or F of
Section 6.10, provided that such Default by the Company shall not be deemed to
be an Event of Default unless and until such Default shall remain unwaived or
unremedied for a period of fifteen (15) days from the date of such Default;
(h) except as otherwise provided in Section 7.12 of this Financing
Agreement, failure of the Company to pay any of the Obligations within ten (10)
days of the due date thereof;
(i) the Company shall i) engage in any "prohibited transaction" as
defined in ERISA, ii) have any "accumulated funding deficiency" as defined in
ERISA, iii) have any Reportable Event as defined in ERISA, iv) terminate any
Plan, as defined in ERISA or v) be engaged in any proceeding in which the
Pension Benefit Guaranty Corporation shall seek appointment, or is appointed, as
trustee or administrator of any Plan, as defined in ERISA, and with respect to
this sub-paragraph i) such event or condition x) remains uncured for a period of
ninety (90) days from date of occurrence and y) could reasonably be expected to
subject that Company to any tax, penalty or other liability
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materially adverse to the business, operations or financial condition of the
Company and its Subsidiaries taken as a whole;
(j) the Company shall default in the payment of, or other
performance under, any indenture or other instrument evidencing the Senior
Notes, or any other recourse Indebtedness of the Company in excess of
$3,000,000.00, if as a result of such default, the maturity of any Indebtedness
evidenced by any such indenture or instrument is accelerated prior to its stated
maturity; or
(k) without the prior written consent of the Required Lenders, the
Company shall amend or modify the Senior Notes.
9.2 Upon the occurrence of a Default and/or an Event of Default, at the
option of the Agent, all loans and advances provided for in Section 3.1 of this
Financing Agreement shall be made thereafter in the Agent's sole discretion and
the obligation of the Agent acting for the Lenders to make Revolving Loans
and/or assist the Company in obtaining Letters of Credit shall cease until such
time as the Default is timely cured to the Agent's reasonable satisfaction or
the Event of Default is waived. Further, at the option of the Agent, or at the
direction of the Required Lenders, upon the occurrence of an Event of Default
(unless waived): i) all Obligations shall upon notice (provided, however, that
no such notice is required if the Event of Default is the Event of Default
listed in Sections 9.1(c) or 9.1(d)) become immediately due and payable; ii) the
Agent may thereafter charge the Company the Default Rate of Interest on all then
outstanding or thereafter incurred Obligations in lieu of the interest provided
for in Section 7.1 of this Financing Agreement provided a) the Agent has given
the Company written notice of the Event of Default, provided, however, that no
notice is required if the Event of Default is the Event of Default listed in
Sections 9.1(c) or 9.1(d) and b) the Company has failed to cure the Event of
Default within fifteen (15) days after x) the Agent deposited such notice in the
United States mail or y) the occurrence of the Event of Default listed in
Sections 9.1(c) or 9.1(d); and iii) the Agent may, and shall at the direction of
the Required Lenders, immediately terminate this Financing Agreement upon notice
to the Company, provided, however, that no notice of termination is required if
the Event of Default is the Event of Default listed in Sections 9.1(c) or
9.1(d). Notwithstanding anything herein contained to the contrary, if the Agent
waives all Events of Default, then by written notice to the Company, the
acceleration of the Obligations will be rescinded and all remedies and actions
then being exercised by the Agent shall cease. The exercise of any option is not
exclusive of any other option which may be exercised at any time by the Agent.
9.3 Upon the occurrence of any Event of Default, the Agent may, to the
extent permitted by law: (a) remove from any premises where same may be located
copies of any and all documents, instruments, files and records, relating to the
Accounts, or the Agent may use such of the Company's personnel, supplies or
space at the Company's places of business or otherwise, as may be necessary to
properly administer and control the Accounts or the handling of collections and
realizations thereon; (b) bring suit, in the name of the Company or the Agent,
and generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part, any amounts owing on any
Accounts and issue credits in the name of the Company or the Agent; (c) sell,
assign and deliver the Collateral and any
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returned, reclaimed or repossessed merchandise, with or without advertisement,
at public or private sale, for cash, on credit or otherwise, at the Agent's sole
option and discretion, and, to the extent permitted by applicable law, the Agent
may bid or become a purchaser at any such sale, free from any right of
redemption, which right is hereby expressly waived by the Company; (d) foreclose
the security interests created herein by any available judicial procedure, or to
take possession of any or all of the Inventory without judicial process, and to
enter any premises where any Inventory may be located for the purpose of taking
possession of or removing the same; and (e) exercise any other rights and
remedies provided in law, in equity, by contract or otherwise. The Agent shall
have the right, without notice or advertisement, to sell, lease, or otherwise
dispose of all or any part of the Collateral whether in its then condition or
after further preparation or processing, in the name of the Company or the
Agent, or in the name of such other party as the Agent may designate, either at
public or private sale or at any broker's board, in lots or in bulk, for cash or
for credit, with or without warranties or representations, and upon such other
terms and conditions as the Agent in its sole discretion may deem advisable,
and, to the extent permitted by applicable law, the Agent shall have the right
to purchase at any such sale. If any Inventory shall require repairing,
maintenance or preparation, the Agent shall have the right, at its option, to do
such of the aforesaid as is necessary, for the purpose of putting the Inventory
in such saleable form as the Agent shall reasonably deem appropriate. The
Company agrees, at the request of the Agent, to assemble the Inventory and to
make it available to the Agent at premises of the Company or such other location
reasonably designated by the Agent for the purpose of the Agent's taking
possession of, removing or putting the Inventory in saleable form. However, if
notice of intended disposition of any Collateral is required by law, it is
agreed that ten (10) days notice shall constitute reasonable notification and
full compliance with the law. The net cash proceeds resulting from the Agent's
exercise of any of the foregoing rights, (after deducting all reasonable
charges, costs and expenses, including reasonable attorneys' fees) shall be
applied by the Agent to the payment of the Obligations, whether due or to become
due, and the Company shall remain liable to the Agent for any deficiencies, and
the Agent in turn agrees to remit to the Company or its successor or assign, any
surplus resulting therefrom. The enumeration of the foregoing rights is not
intended to be exhaustive and the exercise of any right shall not preclude the
exercise of any other rights, all of which shall be cumulative.
SECTION 10. TERMINATION
Except as otherwise permitted herein, the Agent may, and shall at the
direction of the Required Lenders, terminate this Financing Agreement and the
Line of Credit only as of the third or any subsequent Anniversary Date and then
only by giving the Company at least ninety (90) days prior written notice of
termination. Notwithstanding the foregoing, the Agent may terminate the
Financing Agreement immediately upon the occurrence of an Event of Default upon
notice to the Company, provided, however, that if the Event of Default is an
event listed in Sections 9.1(c) or 91(d) of this Financing Agreement, the Agent
may, and shall at the direction of the Required Lenders, regard the Financing
Agreement as terminated and notice to that effect is not required. This
Financing Agreement, unless terminated as herein provided, shall automatically
continue from Anniversary Date to Anniversary Date. The Company may, at any
time, terminate this Financing Agreement and the Line of Credit upon at least
thirty (30) days' prior written notice to the Agent, provided
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that the Company pay to the Agent for the account of the Lenders, concurrent
with payment of the Obligations, the Early Termination Fee, provided, however,
that the Agent for the account of the Lenders shall not be entitled to the Early
Termination Fee if the termination is on or after the Early Termination Date.
All Obligations shall become due and payable as of any termination hereunder or
under Section 9 hereof. All of the Agent's rights, liens and security interests
shall continue after any termination until all Obligations have been satisfied
in full. Pending payment in full of all Obligations, the Agent can withhold any
credit balances in the loan account (unless supplied with an indemnity
satisfactory to the Agent) to cover all of the Obligations, whether absolute or
contingent, provided, however, that if the remaining unpaid Obligations arise
solely out of the outstanding amounts of Letters of Credit, the Agent will, at
the Company's request, retain, solely as collateral, credit balances in an
amount equal to one hundred and five percent (105%) of the then outstanding
amounts of Letters of Credit unless the Company provides the Agent with
back-to-back letters of credit from a financial institution reasonably
acceptable to the Agent, on terms reasonably acceptable to the Agent, in an
amount equal to one hundred and five percent (105%) of the then outstanding
amounts of Letters of Credit. When all other Obligations have been paid in full
in cash and the outstanding amount of Letters of Credit have been so secured by
cash or by the back-to-back letters of credit, in either event in an amount
equal to one hundred and five percent (105%) of the then outstanding amounts of
Letters of Credit pursuant to a fully executed agreement between the Agent and
the Company and pursuant to which the Company agrees to reimburse the Agent for
any Letter of Credit claims that exceed the cash collateral or the back to back
letters of credit, then for all purposes of this Financing Agreement, this
Financing Agreement shall be treated by the parties hereto as terminated and all
other Collateral will be released.
SECTION 11. AGREEMENT BETWEEN THE LENDERS
11.1 (a) The Agent, for the account of the Lenders, shall disburse all
loans and advances to the Company and shall handle all collections of Collateral
and repayment of Obligations. It is understood that for purposes of advances to
the Company and for purposes of this Section 11 the Agent is using the funds of
the Agent.
(b) Unless the Agent shall have been notified in writing by any
Lender prior to any advance to the Company that such Lender will not make the
amount which would constitute its share of the borrowing on such date available
to the Agent, the Agent may assume that such Lender shall make such amount
available to the Agent on a Settlement Date, and the Agent may, in reliance upon
such assumption, make available to the Company a corresponding amount. A
certificate of the Agent submitted to any Lender with respect to any amount
owing under this subsection shall be conclusive, absent manifest error. If such
Lender's share of such borrowing is not in fact made available to the Agent by
such Lender on the Settlement Date, the Agent shall be entitled to recover such
amount with interest thereon at the rate per annum applicable to Revolving Loans
hereunder, on demand, from the Company without prejudice to any rights which the
Agent may have against such Lender hereunder. Nothing contained in this
subsection shall relieve any Lender which has failed to make available its
ratable portion of any borrowing hereunder from its obligation to do so in
accordance with the terms hereof. Nothing contained herein shall be deemed to
obligate Agent to make available to the Company the full amount of a requested
advance
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when the Agent has any notice (written or otherwise) that any of the Lenders
will not advance its ratable portion thereof.
11.2 On the Settlement Date, the Agent and the Lenders shall each remit to
the other, in immediately available funds, all amounts necessary so as to ensure
that, as of the Settlement Date, the Lenders shall have their proportionate
share of all outstanding Obligations.
11.3 The Agent shall forward to each Lender, at the end of each month, a
copy of the account statement rendered by the Agent to the Company.
11.4 The Agent shall, after receipt of any interest and fees earned under
this Financing Agreement, promptly remit to the Lenders their pro rata portion
of all fees, provided, however, that the Lenders (other than CITBC in its role
as Agent) shall not share in the fees set forth in the Fee Letter, Documentation
Fees or Libor Processing Fee.
11.5 (a) The Company acknowledges that the Lenders, with the consent of
the Agent, which consent shall not be unreasonably withheld, may sell
participations in the loans and extensions of credit made and to be made to the
Company hereunder (the "Participants"), provided, however, that a Participant
may not so purchase a participation in an amount less than $5,000,000 or the
then aggregate amount of such Lender's interest in the loans and advances and
extensions of credit hereunder. The Company further acknowledges that in doing
so, the Lenders may grant to such Participants certain rights which would
require the Participant's consent to certain waivers, amendments and other
actions with respect to the provisions of this Financing Agreement, provided
that the consent of any such Participant shall not be required except for
matters requiring the consent of all Lenders hereunder as set forth in Section
12.10 hereof.
(b) The Company authorizes each Lender to disclose to any
Participant or purchasing lender (each, a "Transferee") and any prospective
Transferee any and all financial information in such Lender's possession
concerning the Company and their affiliates which has been delivered to such
Lender by or on behalf of the Company pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Company in connection with
such Lender's credit evaluation of the Company and its affiliates prior to
entering into this Agreement, provided, however, that prior to such disclosure
to a then or potential Participant the Lender must first obtain from the then or
potential Participant a confidentiality agreement in form and substance similar
to the confidentiality paragraph of this Financing Agreement.
11.6 The Company has made and will, from time to time, make available to
the Agent and/or the Lenders certain financial and other business information
(the "Confidential Information") relating to its business. By their signatures
hereto or to the Assignment and Transfer Agreement, the Agent and each Lender
agree to maintain the confidentiality of all Confidential Information, and to
disclose such information only (a) to officers, directors or employees of such
Agent or Lender and their legal or financial advisors, in each case to the
extent necessary to carry out this Financing Agreement and in the case of CITBC,
to CIT Group Holdings, Inc., or CIT Group, Inc., and in the case of any other
Lender, to such other
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Lender's parent organization, but only, in the case of all of the foregoing
Persons referred to in this clause (a), after the Agent or the Lender, as the
case may be, has advised each such Person to maintain the confidentiality of the
Confidential Information, (b) to any other Person to the extent the disclosure
of such information to such Person is required in connection with the
examination of a Lender's records by appropriate authorities, pursuant to court
order, subpoena or other legal process or otherwise as required by law or
regulation, and (c) to Transferees or potential Transferees but only after such
Transferees or potential Transferees have executed a written confidentiality
agreement substantially in the form of this paragraph. The Lenders, the Agent,
Transferees and potential Transferees shall not be required to maintain the
confidentiality of any portion of the Confidential Information which (a) is
known by such Person or its agents, advisors or representatives prior to
disclosure or (b) becomes generally available to the public provided that the
disclosure of such Confidential information does not violate a confidentiality
agreement of which the Transferees, potential Transferees, the Agent or the
Lender, as the case may be, has actual knowledge.
11.7 The Company hereby agrees that each Lender is solely responsible for
its portion of the Line of Credit and that neither the Agent nor any Lender
shall be responsible for, nor assume any obligations for, the failure of any
Lender to make available its portion of the Line of Credit. Further, should any
Lender refuse to make available its portion of the Line of Credit, then another
Lender may, but without obligation to do so, increase, unilaterally, its portion
of the Line of Credit in which event the Company is so obligated to that other
Lender.
11.8 In the event that the Agent, the Lenders or any one of them is sued
or threatened with suit by the Company, or by any receiver, trustee, creditor or
any committee of creditors on account of any preference, voidable transfer or
lender liability issue, alleged to have occurred or been received as a result
of, or during the transactions contemplated under, this Financing Agreement,
then in such event any money paid in satisfaction or compromise of such suit,
action, claim or demand and any expenses, costs and attorneys' fees paid or
incurred in connection therewith, whether by the Agent, the Lenders or any one
of them, shall be shared proportionately by the Lenders. In addition, any costs,
expenses, fees or disbursements incurred by outside agencies or attorneys
retained by the Agent to effect collection or enforcement of any rights in the
Collateral, including enforcing, preserving or maintaining rights under this
Financing Agreement shall be shared proportionately between and among the
Lenders to the extent not reimbursed by the Company or from the proceeds of
Collateral. The provisions of this paragraph shall not apply to any (i) suits,
actions, proceedings or claims that are unrelated, directly or indirectly, to
this Financing Agreement, or (ii) costs, fees, expenses or disbursements
resulting solely from the gross negligence or willful misconduct of the Agent or
any Lender.
11.9 Each of the Lenders agrees with each other Lender that any money or
assets of the Company held or received by such Lender, no matter how or when
received, shall be applied to the reduction of the Obligations (to the extent
permitted hereunder) after x) the occurrence of an Event of Default and y) the
election by the Required Lenders to accelerate the Obligations. In addition, the
Company authorizes, and the Lenders shall have the right, without notice, upon
any amount becoming due and payable hereunder, to set-off and apply
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against any and all property held by, or in the possession of such Lender the
Obligations due such Lenders.
11.10 CITBC shall have the right at any time to assign to one or more
commercial banks, commercial finance lenders or other financial institutions all
or a portion of its rights and obligations under this Financing Agreement
(including, without limitation, under its obligations the Line of Credit, the
Revolving Loans and its rights and obligations with respect to Letters of
Credit). In any event, CITBC shall retain for its own account an amount at least
equal to a pro-rata share equal to the highest pro-rata share held by any
Participant, and in no event less than 20% of the amount of the Obligations
("CITBC Hold Position"); provided, however, that such CITBC Hold Position shall
cease while there is then an Event of Default and only until such Event of
Default is waived. Should CITBC during an Event of Default assign additional
interests, then the CITBC Hold Position shall be the remaining amount of CITBC's
position if and when such Event of Default is waived. Upon execution of an
Assignment and Transfer Agreement, (i) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such assignment, have the rights and obligations of
CITBC as the case may be hereunder and (ii) CITBC shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
assignment, relinquish its rights and be released from its obligations under
this Financing Agreement. The Company shall, if necessary, execute any documents
reasonably required to effectuate the assignments. No other Lender may assign
its interest, in whole or in part, in the loans and advances and extensions of
credit hereunder without i) the prior written consent of the Agent, which
consent shall not be unreasonably withheld; ii) the payment to the Agent (solely
for the Agent's account) by the current or prospective Lender of a $5,000.00 fee
for processing the assignment; and (iii) if the Transferee is a Foreign Lender
(as defined in Section 13.5 hereof), such Foreign Lender first complies with the
provisions of Section 13.5 hereof provided, however, that the immediately
preceding clauses (i) and (ii) hereof shall not apply in connection with any
assignment by a Lender to an affiliate of such Lender, or in connection with any
merger, consolidation, sale, transfer, or other disposition of all or any
substantial portion of the business or loan portfolio of a Lender. Additionally,
no other Lender shall assign such Lender's interest in the loans and advances
and extensions of credit hereunder (or any portion thereof) unless the interest
to be so assigned is either not less than $5,000,000 or all of such Lender's
entire interest in the loans and advances and extensions of credit hereunder.
Notwithstanding anything to the contrary herein contained, prior to any such
assignment and/or the disclosure of the Confidential Information, such
Transferee, actual or potential, shall execute a confidentiality agreement in
form and substance substantially similar to the confidentiality paragraph of
this Financing Agreement.
SECTION 12. AGENCY
12.1 Each Lender hereby irrevocably designates and appoints CITBC as the
Agent for the Lenders under this Financing Agreement and any ancillary loan
documents and irrevocably authorizes CITBC as Agent for such Lender, to take
such action on its behalf under the provisions of the Financing Agreement and
all ancillary documents and to exercise such powers and perform such duties as
are expressly delegated to the Agent by the terms of this Financing Agreement
and all ancillary documents together with such other powers as
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are reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Financing Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into
Financing Agreement and the ancillary documents or otherwise exist against the
Agent.
12.2 The Agent may execute any of its duties under this Financing
Agreement and all ancillary documents by or through agents or attorneys-in-fact
and shall be entitled to the advice of counsel concerning all matters pertaining
to such duties.
12.3 Neither the Agent nor any of its officers, directors, employees,
agents, or attorneys-in-fact shall be (i) liable to any Lender for any action
lawfully taken or omitted to be taken by it or such person under or in
connection with the Financing Agreement and all ancillary documents (except for
its or such person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Company or any officer thereof
contained in the Financing Agreement and all ancillary documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by, the Agent under or in connection with the Financing Agreement
and all ancillary documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Financing Agreement and all
ancillary documents or for any failure of the Company to perform its obligations
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, the Financing Agreement and all
ancillary documents or to inspect the properties, books or records of the
Company.
12.4 The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper person or
persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Company), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or refusing
to take any action under the Financing Agreement and all ancillary documents
unless it shall first receive such advice or concurrence from all of the
Lenders, or the Required Lenders, as the case may be, as it deems appropriate or
it shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under the Financing Agreement
and all ancillary documents in accordance with a request from all of the
Lenders, or the Required Lenders, as the case may be, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders.
12.5 The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or the Company describing such Default or Event of
Default. In the event that the Agent receives such a notice, the Agent shall
promptly give notice thereof to
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the Lenders. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
provided that unless and until the Agent shall have received such direction, the
Agent may in the interim (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable and in the best interests of the Lenders.
12.6 Each Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents or attorneys-in-fact has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Company, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender and based on such documents and information
as it has deemed appropriate, made its own appraisal of, and investigation into,
the business, operations, property, financial and other condition and
creditworthiness of the Company and made its own decision to enter into this
Financing Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under the Financing Agreement and to make such investigation as it deems
necessary to inform itself as to the business, operations, property, financial
and other condition or creditworthiness of the Company. The Agent, however,
shall provide the Lenders with copies of all inventory confirmation statements,
Collateral examinations and/or reviews, financial statements, projections and
business plans which come into the possession of the Agent or any of its
officers, employees, agents or attorneys-in-fact. Further, the Agent shall use
reasonable efforts to give the Lenders reasonable prior notice of the date of
the Agent's visit to the Company's premises for purposes of inspecting the
Collateral and books and records pertaining thereto.
12.7 The Lenders agree to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Company and without limiting the obligation of
the Company to do so), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever (including negligence on the part of the
agent) which may at any time be imposed on, incurred by or asserted against the
Agent in anyway relating to or arising out of this Financing Agreement on any
ancillary documents or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Agent's gross negligence or willful
misconduct. The agreements in this paragraph shall survive the payment of the
obligations.
12.8 The Agent may make loans to, and generally engage in any kind of
business with the Company as though the Agent were not the Agent hereunder. With
respect to its loans made or renewed by it or loan obligations hereunder as
Lender, the Agent shall have the same rights and powers, duties and liabilities
under the Financing Agreement as any
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Lender and may exercise the same as though they were not the Agent and the terms
"Lender" and "Lenders" shall include the Agent in its individual capacities.
12.9 The Agent may resign as Agent upon thirty (30) days' notice to the
Lenders and such resignation shall be effective upon the appointment of a
successor Agent. If the Agent shall resign as Agent, then the Lenders shall
appoint a successor agent for the Lenders whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent and the term "Agent" shall
mean such successor agent effective upon its appointment, and the former Agent's
rights, powers and duties as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent or any of the parties to
this Financing Agreement, provided, however, that the Lenders shall: a) notify
the Company of the successor Agent and b) request the consent of the Company to
such successor Agent, which consent shall not be unreasonably withheld. The
Company shall be deemed to have consented to the successor Agent if the Lenders
do not receive from the Company, within ten (10) days of the Lenders' notice to
the Company, a written statement of the Company's objection to the successor
Agent. Should the Company not consent and no acceptable successor Agent is
agreed upon within thirty (30) days of the date the Company advised the Lenders
of its objection to the successor Agent, then the Lenders may appoint (without
the Company's consent) another successor Agent. After any retiring Agent's
resignation hereunder as Agent the provisions of this Section 14 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent.
12.10 Notwithstanding anything contained in this Financing Agreement to
the contrary, the Agent will not, without the prior written consent of all
Lenders: a) amend the Financing Agreement to v) increase the rate of advance
against Eligible Inventory as set forth in Section 3.1 of this Financing
Agreement (provided, however, that the foregoing shall not prevent the making of
Overadvances pursuant to Section 3.1 hereof with the consent of and on the terms
agreed to by Required Lenders) or increase the Line of Credit; w) reduce the
interest rates; x) reduce or waive i) any fees in which the Lenders share
hereunder; or ii) the repayment of any Obligations due the Lenders; y) extend
the maturity of the Obligations; or z) alter or amend 1) this Section 12.10 or
2) the definitions of Eligible Inventory, Collateral or Required Lenders, or the
Agent's criteria for determining compliance with such definitions of
eligibility; b) release or permit or consent to liens on Collateral with an
aggregate value greater than $5,000,000.00 without a corresponding reduction in
the Obligations to the Lenders, or c) intentionally make any Revolving Loan or
assist in opening any Letter of Credit hereunder if after giving effect thereto
the total of Revolving Loans and Letters of Credit hereunder for the Company
would exceed one hundred and ten percent (110%) of the maximum amount available
under Sections 3 and 4 hereof. In all other respects and except as otherwise
specifically provided to the contrary in this Financing Agreement, the Agent is
authorized to take such actions or fail to take such actions if the Agent, in
its reasonable discretion, deems such to be advisable and in the best interest
of the Lenders, including, but not limited to, the termination of the Financing
Agreement upon the occurrence of an Event of Default, unless it is specifically
instructed to the contrary by the Required Lenders.
12.11 Each Lender agrees that notwithstanding the provisions of Section 10
of this Financing Agreement any Lender may terminate this Financing Agreement or
the Line of
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Credit only as of the third or any subsequent Anniversary Date and then only by
giving the Agent one hundred and twenty (120) days prior written notice thereof.
Within thirty (30) days after receipt of any such termination notice, the Agent
shall, at its option, either (i) give notice of termination to the Company
hereunder or (ii) purchase the Lender's share of the Obligations hereunder for
the full amount thereof plus accrued interest thereon. Unless so terminated this
Financing Agreement and the Line of Credit shall be automatically extended from
Anniversary Date to Anniversary Date.
SECTION 13. MISCELLANEOUS
13.1 Except as otherwise expressly provided, the Company hereby waives
diligence, demand, presentment and protest and any notices thereof as well as
notice of nonpayment, notice of dishonor, notice of intent to accelerate and
notice of acceleration. No delay or omission of the Agent or the Company to
exercise any right or remedy hereunder, whether before or after the happening of
any Event of Default, shall impair any such right or shall operate as a waiver
thereof or as a waiver of any such Event of Default. No single or partial
exercise by the Agent of any right or remedy precludes any other or further
exercise thereof, or precludes any other right or remedy.
13.2 Neither this Financing Agreement nor any provision hereof may be
waived, amended or modified except as pursuant to an agreement or agreements in
writing entered into by the Company, the Agent, the Lenders or the Required
Lenders, as the case may be.
13.3 THIS WRITTEN AGREEMENT AND THE OTHER DOCUMENTS REFERENCED HEREIN OR
CONTEMPLATED HEREBY REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES. THE COMPANY ACKNOWLEDGES AND AGREES THAT THE SECURITY INTEREST
GRANTED BY IT PURSUANT TO THE PRIOR FINANCING AGREEMENT (AND MAINTAINED PURSUANT
TO THIS FINANCING AGREEMENT) CONTINUES (WITHOUT INTERRUPTION) IN FULL FORCE AND
EFFECT IN FAVOR OF THE AGENT FOR THE BENEFIT OF LENDERS. UPON THE EFFECTIVENESS
OF THIS FINANCING AGREEMENT, THE TERMS AND CONDITIONS OF THE PRIOR FINANCING
AGREEMENT ARE HEREBY AMENDED AND RESTATED IN THEIR ENTIRETY BY THIS FINANCING
AGREEMENT.
13.4 It is the intent of the Company, the Agent and the Lenders to conform
strictly to all applicable state and federal usury laws. All agreements between
the Company and the Agent, acting on behalf of the Lenders, whether now existing
or hereafter arising and whether written or oral, are hereby expressly limited
so that in no contingency or event whatsoever, whether by reason of acceleration
of the maturity hereof or otherwise, shall the amount contracted for, charged or
received by the Agent, acting on behalf of the Lenders, for the use,
forbearance, or detention of the money loaned hereunder or otherwise, or for the
payment or performance of any covenant or obligation contained herein or in any
other document evidencing, securing or pertaining to the Obligations evidenced
hereby which
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may be legally deemed to be for the use, forbearance or detention of money,
exceed the maximum amount which the Agent, acting on behalf of the Lenders, is
legally entitled to contract for, charge or collect under applicable state or
federal law. If from any circumstance whatsoever fulfillment of any provisions
hereof or of such other documents, at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
law, then the obligations to be fulfilled shall be automatically reduced to the
limit of such validity, and if from any such circumstance the Agent, acting on
behalf of the Lenders, shall ever receive as interest or otherwise an amount in
excess of the maximum that can be legally collected, then such amount which
would be excessive interest shall be applied to the reduction of the principal
indebtedness hereof and any other amounts due with respect to the Obligations
evidenced hereby, but not to the payment of interest and if such amount which
would be excessive interest exceeds the Obligations and all other non-interest
indebtedness described above, then such additional amount shall be refunded to
the Company. In determining whether or not all sums paid or agreed to be paid by
the Company for the use, forbearance or detention of the Obligations of the
Company to the Agent, acting on behalf of the Lenders, under any specific
contingency, exceeds the maximum amount permitted by applicable law, the Company
and the Agent, acting on behalf of the Lenders, shall, to the maximum extent
permitted under applicable law, (a) characterize any non-principal payment as an
expense, fee or premium rather than as sums paid or agreed to be paid by the
Company for the use, forbearance or detention of the Obligations of the Company
to the Agent, acting on behalf of the Lenders, (b) exclude voluntary prepayments
and the effect thereof, and (c) to the extent not prohibited by applicable law,
amortize, prorate, allocate and spread in equal parts, the total amount of all
sums paid or agreed to be paid by the Company for the use, forbearance or
detention of the Obligations of the Company to the Agent, acting on behalf of
the Lenders, throughout the entire contemplated term of the Obligations so that
the interest rate is uniform throughout the entire term of the Obligations. The
terms and provisions of this paragraph shall control and supersede every other
provision hereof and all other agreements between the Company and the Agent,
acting on behalf of the Lenders.
13.5 Any Lender organized under the laws of a jurisdiction outside of the
United States (a "Foreign Lender") shall deliver to Agent and the Company (i)
two valid, duly completed copies of IRS Form 1001 or 4224 or successor
applicable form, as the case may be, and any other required form, certifying in
each case that such Foreign Lender is entitled to receive payments under this
Financing Agreement without deduction or withholding of any United States
federal income taxes, or (ii) if such Foreign Lender is not a "bank" within the
meaning of Section 881(c) (3) (A) of the Internal Revenue Code and cannot
deliver either IRS Form 1001 or 4224 pursuant to clause (i) above, (A) a duly
completed certificate of non-withholding acceptable to the Company and the Agent
in their reasonable discretion (any such certificate, a "Tax Certificate") and
(B) two valid, duly completed copies of IRS Form W-8 or successor applicable
form, as the case may be, to establish an exemption from United States backup
withholding tax. Each such Foreign Lender shall also deliver to Agent and the
Company two further copies of said Form 1001 or 4224 or Form W-8 and a Tax
Certificate, or successor applicable forms, or other manner of required
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or otherwise is required to be resubmitted as a
condition to obtaining an exemption from a required withholding of United States
of America federal income tax or after the occurrence
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of any event requiring a change in the most recent form previously delivered by
it to the Company and Agent, and such extensions or renewals thereof as may
reasonably be requested by the Company and Agent, certifying (x) in the case of
a Form 1001 or 4224 that such Foreign Lender is entitled to receive payments
under this Financing Agreement without deduction or withholding of any United
States federal income taxes, or (y) in the case of a Form W-8 and a Tax
Certificate, establishing an exemption from United States backup withholding
tax.
13.6 If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.
13.7 TO THE EXTENT PERMITTED BY LAW, THE COMPANY, THE LENDERS AND THE
AGENT HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
ARISING OUT OF THIS FINANCING AGREEMENT. THE COMPANY HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED. ANY JUDICIAL PROCEEDING BROUGHT BY OR
AGAINST THE COMPANY WITH RESPECT TO ANY OF THE OBLIGATIONS, THIS FINANCING
AGREEMENT OR ANY RELATED AGREEMENT MAY BE BROUGHT IN ANY COURT OF COMPETENT
JURISDICTION IN THE STATE OF CALIFORNIA, UNITED STATES OF AMERICA, AND, BY
EXECUTION AND DELIVERY OF THIS FINANCING AGREEMENT, THE COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE
BOUND BY ANY FINAL, NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH
THIS FINANCING AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE AGENT TO BRING
PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. THE
COMPANY WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OF
VENUE OR BASED UPON FORUM NON CONVENIENS.
13.8 Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing, and shall be deemed to
have been validly served, given or delivered when hand delivered, including
overnight delivery by a courier service or sent by facsimile, or five days after
deposit in the United States mails, with proper first class postage prepaid and
addressed to the party to be notified as follows:
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(A) if to CITBC or the Agent, at:
The CIT Group/Business Credit, Inc.
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Attn: Regional Manager
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Buchalter, Nemer, Fields & Younger
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
(B) if to the Company at:
Big 5 Corp.
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Big 5 Corp.
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a further copy to:
Irell & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
(C) if to any other Lender, at the address specified in the Assignment
and Transfer Agreements
or to such other address as any party may designate for itself by like notice.
13.9 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
-49-
13.10 This Financing Agreement may be executed in counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one agreement.
[the remainder of this page left blank intentionally; signatures to follow]
-50-
IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be executed and delivered in Los Angeles, California by their
proper and duly authorized officers as of the date set forth above.
BIG 5 CORP.,
A DELAWARE CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Title: Senior Vice President
and Chief Financial Officer
-------------------------------
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS AGENT AND LENDER)
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Title: Vice President
-------------------------------
Commitment: $41,000,000
FLEET CAPITAL CORPORATION (AS LENDER)
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Title: Senior Vice President
-------------------------------
Commitment: $28,000,000
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER)
By /s/ ▇▇▇▇ ▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇
--------------------------------
Title: Vice President
-------------------------------
Commitment: $10,000,000
S-1
Amended and Restated Financing Agreement
BANK OF AMERICA, N.A. (AS LENDER)
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------
Title: Vice President
-------------------------------
Commitment: $36,000,000
TRANSAMERICA BUSINESS CAPITAL
CORPORATION (AS LENDER)
By /s/ ▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇
--------------------------------
Title: Vice President
-------------------------------
Commitment: $25,000,000
S-2
Amended and Restated Financing Agreement
EXHIBIT A -- ASSIGNMENT AND TRANSFER AGREEMENT
Dated: _____________, 200_
Reference is made to the Amended and Restated Financing Agreement dated as of
____________, 2003 (as amended, modified, supplemented and in effect from time
to time, the "Financing Agreement"), among Big 5 Corp., a Delaware corporation
(the "Company"), the Lenders named therein, and The CIT Group/Business Credit,
Inc., as Agent (the "Agent"). Initially capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the
Financing Agreement. This Assignment and Transfer Agreement, between the
Assignor (as defined and set forth on Schedule 1 hereto and made a part hereof)
and the Assignee (as defined and set forth on Schedule 1 hereto and made a part
hereof) is dated as of the Effective Date (as set forth on Schedule 1 hereto and
made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date, an undivided interest (the "Assigned Interest") in and to all
the Assignor's rights and obligations under the Financing Agreement respecting
those, and only those, financing facilities contained in the Financing Agreement
as are set forth on Schedule 1 (collectively, the "Assigned Facilities" and
individually, an "Assigned Facility"), in a principal amount for each Assigned
Facility as set forth on Schedule 1.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Financing Agreement or any other instrument,
document or agreement executed in conjunction therewith (collectively the
"Ancillary Documents") or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Financing Agreement, any Collateral
thereunder or any of the Ancillary Documents furnished pursuant thereto, other
than that it is the legal and beneficial owner of the interest being assigned by
it hereunder and that such interest is free and clear of any adverse claim and
(ii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company or any guarantor or the
performance or observance by the Company or any guarantor of any of its
respective obligations under the Financing Agreement or any of the Ancillary
Documents furnished pursuant thereto.
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Transfer Agreement; (ii) confirms
that it has received a copy of the Financing Agreement, together with the copies
of the most recent financial statements of the Company, and such other documents
and information as it has deemed appropriate to make its own credit analysis;
(iii) agrees that it will, independently and without reliance upon the Agent,
the Assignor or any other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Financing Agreement; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Financing Agreement as are delegated to the Agent by the
terms thereof, together with such powers as
Exhibit A-1
are reasonably incidental thereto; (v) agrees that it will be bound by the
provisions of the Financing Agreement and will perform in accordance with its
terms all the obligations which by the terms of the Financing Agreement are
required to be performed by it as Lender; and (vi) if the Assignee is organized
under the laws of a jurisdiction outside the United States, attaches the forms
prescribed by the Internal Revenue Service of the United States certifying as to
the Assignee's exemption from United States withholding taxes with respect to
all payments to be made to the Assignee under the Financing Agreement or such
other documents as are necessary to indicate that all such payments are subject
to such tax at a rate reduced by an applicable tax treaty.
4. Following the execution of this Assignment and Transfer Agreement,
such agreement will be delivered to the Agent for acceptance by it and the
Company, effective as of the Effective Date.
5. Upon such acceptance, from and after the Effective Date, the Agent
shall make all payments in respect of the Assigned Interest (including payments
of principal, interest, fees and other amounts) to the Assignee, whether such
amounts have accrued prior to the Effective Date or accrue subsequent to the
Effective Date. The Assignor and Assignee shall make all appropriate adjustments
in payments for periods prior to the Effective Date made by the Agent or with
respect to the making of this assignment directly between themselves.
6. From and after the Effective Date, (i) the Assignee shall be a
party to the Financing Agreement and, to the extent provided in this Assignment
and Transfer Agreement, have the rights and obligations of a Lender thereunder,
and (ii) the Assignor shall, to the extent provided in this Assignment and
Transfer Agreement, relinquish its rights and be released from its obligations
under the Financing Agreement.
7. THIS ASSIGNMENT AND TRANSFER AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective duly authorized officers on
Schedule 1 hereto.
Exhibit A-2
SCHEDULE 1 TO ASSIGNMENT AND TRANSFER AGREEMENT
Name of Assignor:
------------------------
Name of Assignee:
------------------------
Effective Date of Assignment: _________________, 200__
Percentage Assigned of
Each Facility (Shown
as a percentage of
Principal aggregate original
Amount (or, principal amount
with respect to [OR, WITH RESPECT TO
Letters of Credit LETTERS OF CREDIT,
Assigned face amount) FACE AMOUNT]
Facilities Assigned of all Lenders)
---------------------- --------------------- --------------------
Revolving Loans $____________________ ____________________%
Letter of Credit
participation interest $____________________ ____________________%
Total $______________
Fees:
Rates:
Exhibit A-3
Agreed and Accepted by:
THE CIT GROUP/BUSINESS
CREDIT, INC., as Agent
------------------------,
as Assignor
By: By:
-------------------------------- ---------------------------------
Title: Title:
----------------------------- ------------------------------
BIG 5 CORP. ------------------------,
(the "Company") as Assignee
By: By:
-------------------------------- ---------------------------------
Title: Title:
----------------------------- ------------------------------
Exhibit A-4