Exhibit 99.2
AMENDED AND RESTATED
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FINANCING AGREEMENT
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by and among
THE LENDERS THAT ARE SIGNATORIES HERETO
GART BROS. SPORTING GOODS COMPANY,
SPORTMART, INC.,
▇▇▇▇▇▇'▇ SPORTING GOODS, INC.
and
SUBSIDIARIES OF ▇▇▇▇▇▇'▇ SPORTING GOODS INC. THAT ARE SIGNATORIES HERETO
(collectively, as co-borrowers)
and
THE CIT GROUP/BUSINESS CREDIT, INC.
(as the Agent and as a Lender)
Dated: June 7, 2001
Table of Contents
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Page
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SECTION 1. Definitions..................................................... 2
SECTION 2. Conditions Precedent............................................ 16
SECTION 3. Revolving Loans................................................. 20
SECTION 4. Letters of Credit............................................... 23
SECTION 5. Collateral...................................................... 26
SECTION 6. Representations, Warranties and Covenants....................... 28
SECTION 7. Interest, Fees and Expenses..................................... 36
SECTION 8. Powers.......................................................... 37
SECTION 9. Events of Default and Remedies.................................. 38
SECTION 10. Termination..................................................... 41
SECTION 11. Agreement among the Lenders..................................... 42
SECTION 12. Agency.......................................................... 46
SECTION 13. Miscellaneous................................................... 49
Exhibit A......................................Assignment and Transfer Agreement
Exhibit S-1.................................................Suretyship Agreement
Schedule R-1..............................................Real Estate Collateral
Schedule 4.7.......................................Outstanding Letters of Credit
AMENDED AND RESTATED FINANCING AGREEMENT
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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation
(hereinafter "CITBC") with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
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▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, the other lenders from time to time party hereto (CITBC and
such other lenders each individually sometimes referred to as a "Lender" and
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collectively as the "Lenders"), and CITBC as agent for the Lenders (hereinafter
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the "Agent") are pleased to confirm the terms and conditions under which the
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Lenders acting through the Agent shall make revolving loans, advances and other
financial accommodations to GART BROS. SPORTING GOODS COMPANY, a Colorado
corporation (hereinafter referred to as "Gart") having a principal place of
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business at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, to SPORTMART, INC., a
Delaware corporation (hereinafter referred to as "Sportmart") having a principal
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place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, to ▇▇▇▇▇▇'▇ SPORTING
GOODS, INC., a Delaware corporation formerly named GSC Acquisition Corp., a
Delaware corporation (hereinafter referred to as "▇▇▇▇▇▇'▇ Parent") having a
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principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and each
of the Subsidiaries of ▇▇▇▇▇▇'▇ Parent identified on the signatory pages hereof
(such Subsidiaries together with ▇▇▇▇▇▇'▇ Parent are referred to hereinafter
collectively as "▇▇▇▇▇▇'▇", and Gart, Sportmart and ▇▇▇▇▇▇'▇ collectively and
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individually, jointly and severally, as co-borrowers, are referred to
hereinafter as the "Company").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Gart and Sportmart (the "Original Borrowers") are
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parties to that certain Financing Agreement, dated January 9, 1998, with the
lenders parties thereto (the "Original Lenders"), and CITBC as agent (such
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Financing Agreement, as so amended or otherwise modified, the "Original Loan
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Agreement"), pursuant to which, among other things, the Original Lenders agreed
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to make revolving credit loans to the Original Borrowers from time to time in an
aggregate amount at any time outstanding of up to $175,000,000; and
WHEREAS, Parent, Merger Sub and ▇▇▇▇▇▇'▇ (as such terms and
other capitalized terms are used herein are defined in Section 1 below) are
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parties to the Merger Agreement, pursuant to which ▇▇▇▇▇▇'▇ will merge with and
into Merger Sub, with Merger Sub as the surviving corporation, pursuant to a
Certificate of Merger and upon the terms and conditions set forth in the Merger
Agreement, such transaction to be consummated substantially simultaneously with
the execution and delivery of this Financing Agreement and the funding of the
loans hereunder; and
WHEREAS, the Company desires to obtain additional financing
for the consummation of the transactions contemplated by the Merger Agreement,
to pay fees, costs and expenses in connection with the consummation of the
Merger Agreement and this
Financing Agreement, and to provide additional working capital for the mutual
and collective enterprise of the Company, and has requested that the Lenders and
the Agent agree to amend and restate the Original Loan Agreement as hereinafter
set forth; and
WHEREAS, in order to utilize the financial powers of Gart,
Sportmart and ▇▇▇▇▇▇'▇ in the most efficient and economical manner, and in order
to facilitate the financing of each of the working capital needs, the Lenders
will, at the request of the Company, extend financial accommodations to Gart,
Sportmart and ▇▇▇▇▇▇'▇ on a combined basis in accordance with the provisions set
forth in this Agreement; and
WHEREAS, the Company's business is a mutual and collective
enterprise and the Company believes that the consolidation of all loans and
other financial accommodations under this Financing Agreement will enhance the
aggregate borrowing powers of each of Gart, Sportmart and ▇▇▇▇▇▇'▇ and
facilitate the administration of their loan relationship with the Agent and the
Lenders, all to the mutual advantage of Gart, Sportmart and ▇▇▇▇▇▇'▇; and
WHEREAS, each of Gart, Sportmart and ▇▇▇▇▇▇'▇ acknowledges
that it will receive substantial direct and indirect benefits by reason of the
making of loans and other financial accommodations to the other parties hereto
as provided in this Financing Agreement, by virtue of the various
inter-relationships of Gart, Sportmart and ▇▇▇▇▇▇'▇ as joint guarantors or joint
obligors and the beneficiaries thereof, as lessors and lessees, as suppliers and
customers, and as joint venturers; and
WHEREAS, the Agent's and the Lenders' willingness to extend
financial accommodations to Gart, Sportmart and ▇▇▇▇▇▇'▇, and to administer each
of Gart, Sportmart and ▇▇▇▇▇▇'▇ collateral security therefor, on a combined
basis as more fully set forth in this Financing Agreement, is done solely as an
accommodation to Gart, Sportmart and ▇▇▇▇▇▇'▇ and at their request and in
furtherance of their mutual and collective enterprise.
NOW, THEREFORE, for and in consideration of the above premises
and the mutual covenants and agreements contained herein, Gart, Sportmart and
▇▇▇▇▇▇'▇, the Lenders and the Agent hereby agree as follows:
SECTION 1. Definitions
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Accounts shall mean all of the Company's now existing and
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future: (a) rights to payment of a monetary obligation, including any Trade
Accounts Receivable, whether or not earned by performance, including rights to
payment under bank or non-bank credit or charge cards or information contained
on or for use with the card (whether or not specifically listed on schedules
furnished to the Agent) and any and all instruments, documents, contract rights,
chattel paper, general intangibles, including, without limitation, all accounts
created by or arising from the Company's sale, lease, license, assignment or
other disposition of property including Inventory or rendition of services to
its customers, and all accounts arising from sales or rendition of services made
under any trade names or styles of the Company, or through any
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divisions of the Company; (b) unpaid seller's rights (including rescission,
replevin, reclamation and stoppage in transit) relating to the foregoing or
arising therefrom; (c) rights to any Inventory represented by any of the
foregoing, including rights to returned or repossessed Inventory; (d) credit
balances arising hereunder; (e) guarantees or collateral for any of the
foregoing; (f) credit or property insurance policies or rights relating to any
of the foregoing; and (g) cash and non-cash proceeds of any and all the
foregoing.
Acquisition-Related Transactions shall mean the merger of
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▇▇▇▇▇▇'▇ with and into Merger Sub with Merger Sub as the surviving corporation,
pursuant to the Merger Agreement, such that, at the conclusion of the
transaction contemplated by the Merger Agreement, Merger Sub, as
successor-in-interest by merger to ▇▇▇▇▇▇'▇, will be a wholly-owned subsidiary
of Parent, and will thereupon promptly change its name to ▇▇▇▇▇▇'▇.
Additional Documents shall mean the documents listed in
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Section 2(f) hereof.
Affiliate shall mean, as to any Person, any other Person
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(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 any of the date occurring one (1)
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year from the date of execution hereof and the corresponding date in every year
thereafter.
Applicable Percentage shall mean, as of any date of
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determination, the lesser of: (a) (i) except as otherwise provided in clause
(ii), 70%; and (ii) (A) for the two (2) consecutive 90 day periods commencing
August 20, 2001 and ending November 20, 2001, and commencing February 15, 2002
and ending April 15, 2002, respectively, occurring during the one (1) year
period from the date of execution hereof to the first Anniversary Date, and (B)
any one (1) consecutive period of up to 90 days in each subsequent year during
the term hereof as designated in writing by the Company in advance to the Agent,
75%, provided, further, that at least 60 days shall elapse following the
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conclusion of such a period during which the higher percentage is applicable
before another such designation by the Company may become effective; and (b) 85%
of the Net Liquidation Percentage.
Assignment and Transfer Agreement shall mean the Assignment
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and Transfer Agreement in the form of Exhibit A hereto.
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Availability shall mean at any time of determination the
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amount by which the lesser of (a) the Line of Credit or (b) the amount
determined by multiplying the then sum of Eligible Inventory by the then
Applicable Percentage provided for in Section 3.1 of this Financing Agreement
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exceeds 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
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an amount equal to the sum of (a) the then undrawn amount of all outstanding
Letters of Credit, (b) the amount of all sales taxes that have been collected by
the Company and not remitted to any state taxing authority when due, (c) an
amount equal to three (3) months gross rent for each warehouse or
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distribution facility of the Company located in a state where the landlord may
be entitled to a priority lien on Personal Property Collateral to secure unpaid
rent and with respect to each such property the landlord has not executed a form
of waiver and consent reasonably acceptable to Agent, and (d) an amount based
upon past due rent for any of the Company's leased locations, with the exception
of past due rent that is the subject of a Permitted Protest, as determined by
Agent in its reasonable discretion.
Blocked Account shall mean any Concentration Account owned by
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the Company which is governed by a blocked account or similar agreement 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.
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Borrower shall mean Gart, Sportmart, ▇▇▇▇▇▇'▇ and the
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Subsidiaries of ▇▇▇▇▇▇'▇ that are signatories hereto (but no other Subsidiaries
of Gart, Sportmart, or ▇▇▇▇▇▇'▇), and "Borrowers" shall mean each of them,
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individually and collectively, jointly and severally.
Business Day shall mean any date on which both the Agent and
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The Chase Manhattan Bank are open for business.
Chase Manhattan Bank Rate shall mean the rate of interest per
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annum announced by The Chase Manhattan Bank from time to time as its prime rate
in effect at its principal office in the City of New York or its successors or
such other bank as the Agent may choose in its discretion of similar size and
reputation. (The prime rate is not intended to be the lowest rate of interest
charged by The Chase Manhattan Bank to its borrowers).
Collateral shall mean all present and future Accounts,
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Inventory, Documents of Title, General Intangibles, chattel paper, electronic
chattel paper, commercial tort claims, deposit accounts, Equipment, instruments,
investment property, letter-of-credit rights and letters of credit of the
Company, Real Estate Collateral, all present and future books and records
relating to any of the foregoing Collateral (except that such books and records
shall not include any Equipment not owned by the Company or in which another
Person has a Permitted Encumbrance with priority over what would be that of the
Agent, the terms of which other Permitted Encumbrance would be violated by the
attachment of the Agent's security interest therein), and all present and future
proceeds of any of the foregoing Collateral, including insurance proceeds and
supporting obligations and proceeds of proceeds. The foregoing notwithstanding,
the "Collateral" shall not include any Equipment, acquired with Indebtedness
comprising Purchase Money Obligations, that is subject to a Permitted
Encumbrance, and the holder of such Permitted Encumbrance has prohibited the
Company from granting any other lien or security interest in such Equipment as a
condition or negative covenant to the Company obtaining or maintaining the
Indebtedness comprising Permitted Money Obligations, and the Company has not
otherwise obtained a waiver of such condition or negative covenant, until such
Purchase Money Obligations have been finally paid in full.
Collections shall mean all cash, checks, notes, instruments,
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and other items of payment (including insurance proceeds, proceeds of cash
sales, rental proceeds, and tax refunds) of the Company.
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Company has the meaning set forth in the introductory
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paragraph hereof. For purposes of financial and accounting calculations herein,
unless otherwise expressly provided, or unless the context otherwise requires,
the "Company" means Gart, Sportmart and ▇▇▇▇▇▇'▇, and their consolidated
Subsidiaries, on a consolidated basis.
Company Stock Pledge Agreement shall mean that certain Stock
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Pledge Agreement, dated as of even date herewith, among Gart, Sportmart and
▇▇▇▇▇▇'▇, on the one hand, and Agent, on the other hand, with respect to the
pledge by Gart, Sportmart and ▇▇▇▇▇▇'▇ of their ownership interest in the Stock
of certain of their respective Subsidiaries, in form and content reasonably
satisfactory to Agent.
Concentration Account shall mean any account owned by the
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Company which receives funds from (i) the Depository Accounts and ii) the credit
card companies.
Consolidated Balance Sheet shall mean a consolidated balance
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sheet for the Company and its Subsidiaries, eliminating all inter-company
transactions and prepared, in the case of any such quarterly or annual balance
sheet, in accordance with GAAP consistently applied.
Customarily Permitted Liens shall mean:
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(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 in the aggregate at any one time;
(b) statutory liens of landlords and liens of carriers,
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 to
the extent required by 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), 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 materially detract from the value or
materially adversely affect the intended use of the Real Estate.
Default shall mean any event specified in Section 9 hereof,
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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.
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Default Rate of Interest shall mean a rate of interest per
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annum equal to the sum of: (i) two and one-quarter percent (2-1/4%) and (ii) the
Chase Manhattan Bank Rate, which rate the Lenders and the Agent shall be
entitled to charge the Company on all Obligations due the Lenders or the Agent
by the Company to the extent provided in Section 9.2 of this Financing
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Agreement.
Depository Accounts shall mean those accounts (other than
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Concentration Accounts) owned by the Company and designated for the deposit of
proceeds of Collateral.
Designated Event of Default shall mean any Event of Default
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arising under subparagraphs (a), (b), (c), (d), or (h) of Section 9.1 hereof.
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Designated Sale-Leaseback Property shall mean a capital asset
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developed or to be developed by the Company 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 a 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 twelve (12) 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 fees
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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 present and future warehouse
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receipts, bills of lading, shipping documents, instruments and similar
documents, all whether negotiable or not, and all Inventory relating thereto and
all cash and non-cash proceeds of the foregoing.
EBITDA shall mean, in any period, the net income (or net loss)
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of the Company and its Subsidiaries, on a consolidated basis, excluding
integration costs not recognized in purchase accounting incurred by the Company
during the 12 month period following the date hereof in an aggregate amount not
to exceed the lesser of (i) the actual amount of integration costs or (ii)
$5,000,000, solely for the fiscal year ending January 31, 2002, plus all amounts
deducted in determining net income in respect of Interest Expense, income tax
obligations (paid or accrued), depreciation expense and amortization expense,
and all other non-cash items, including, but not limited to, the Company's LIFO
reserve, each determined in accordance with GAAP consistently applied.
Eligible Inventory shall mean the gross cost of the Company's
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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 third
parties, (vi) shrinkage, (vii) consigned goods, (viii) Inventory stored in any
public warehouse (other than Inventory in a public warehouse while such
Inventory is clearing customs) with respect to which the Agent for the benefit
of the Lenders has not received from such public warehouse an
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acknowledgement of the type contemplated by paragraph q of Section 2 hereof or
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Section 6.15 hereof, and ix) reserves required by the Agent in its reasonable
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judgment and without duplication but only for the following: (a) special order
Inventory; (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, warehouses, or
distribution centers, (f) demonstration items, to the extent the Inventory's
value is below its cost; (g) damaged or defective Inventory; (h) obsolete
Inventory; (i) Inventory at outlet locations not owned or operated by the
Company; (j) from and after the date that is 90 days after the making of the
initial loan hereunder, with respect to any and each distribution facility of
the Company as to which there is not in effect in favor of the Agent a landlord
waiver in form and content reasonably satisfactory to the Agent, but only with
respect to any period that such a landlord waiver is not in effect, a reserve
not to exceed three month's rent payable to such landlord with respect to such
distribution facility; (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; and (l) Inventory subject to a lien that
has priority over the lien of the Agent therein, but only to the extent of the
aggregate obligations or indebtedness secured by such priority lien. The amount
of such reserves shall be determined solely by the Agent in its reasonable
business judgment and in good faith using standards consistently applied by the
Agent. Such standards shall take into consideration amounts representing,
historically, the Company's reserves, discounts, returns, claims, credits and
allowances.
Equipment shall mean all present and hereafter acquired
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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 of whatever sort, including insurance proceeds and
supporting obligations of any and all of the foregoing.
ERISA shall mean the Employee Retirement Income Security Act
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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
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Section 9 of this Financing Agreement.
Family Member means, with respect to any individual, any other
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individual having a relationship by blood (to the second degree of
consanguinity), marriage, or adoption to such individual.
Family Trusts means, with respect to any individual, trusts or
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other estate planning vehicles established for the benefit of Family Members of
such individual and in respect of which such individual serves as trustee or in
a similar capacity.
Fee Letter shall mean that certain fee letter, dated as of the
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date hereof, between Agent and the Company, in form and substance satisfactory
to Agent.
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Financing Agreement shall mean this Amended and Restated
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Financing Agreement.
GAAP shall mean generally accepted accounting principles in
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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 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.
Gart has the meaning ascribed thereto in the introductory
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paragraph hereof.
General Intangibles shall have the meaning set forth in the
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UCC and shall include, without limitation, all present and future right, title
and interest in and to all tradenames, trademarks (together with the goodwill
associated therewith), patents, licenses, customer lists, distribution
agreements, supply agreements 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.
Guaranty shall mean that certain General Continuing Guaranty,
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dated of even date herewith, among Parent, certain indirect Subsidiaries of
Parent named therein, and Agent, in form and substance satisfactory to Agent.
Indebtedness shall mean, without duplication, all liabilities,
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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, but excluding
leases of property by the Company under the MLTC Documents.
Intangible Assets shall mean that portion of the book value of
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all of the Company's assets that would be treated as intangibles under GAAP.
Interest Expense shall mean (i) total cash interest
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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 and commitment fees related
hereto and original issue discounts, if any, minus (ii) interest income, if any.
Inventory shall mean all of the Company's present and
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hereafter acquired merchandise and inventory held for sale or lease and all
additions, substitutions and replacements thereof, wherever located, together
with all packaging or shipping materials and all proceeds thereof of whatever
sort, including insurance proceeds and supporting obligations of any and all of
the foregoing.
Investment Property shall mean "investment property" as that
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term is defined in the UCC.
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Issuing Bank shall mean any bank issuing Letters of Credit for
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the Company.
Lenders has the meaning ascribed thereto in the introductory
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paragraph hereof.
Letters of Credit shall mean all letters of credit issued with
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the assistance of the Lenders acting through the Agent by the Issuing Banks for
or on behalf of the Company.
Letter of Credit Guaranty shall mean any guaranty delivered by
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the Agent 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
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charge under Section 7.2 of this Financing Agreement for: (i) issuing the Letter
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of Credit Guaranty or (ii) otherwise aiding the Company in obtaining Letters of
Credit pursuant to Section 4.
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Libor shall mean, at any time of determination, and subject to
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availability, the London Interbank Offered Rate paid in London by The Chase
Manhattan 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
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elected to use Libor for interest rate computations.
Libor Period shall mean the Libor for one month, two month,
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three month, six month, or nine month dollar deposits, as selected by the
Company.
LIFO shall mean the last in-first out method of accounting for
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Inventory.
Line of Credit shall mean the commitment of the Lenders acting
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through the Agent to make loans and advances and issue Letter of Credit
Guaranties, all pursuant to and in accordance with Sections 3 and 4 of this
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Financing Agreement, in the aggregate amount of $300,000,000.
Line of Credit Fee shall: (i) mean the fee due the Agent for
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the account of the Lenders 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
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month and (b) the average daily undrawn face amount of all outstanding Letters
of Credit, for said month by (y) three eighths of one percent (0.375%) per annum
("Line of Credit Fee Rate") for the number of days in said month during which
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this Financing Agreement was in effect.
Loan Facility Fee shall mean the fee payable to the Agent in
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accordance with, and pursuant to, the provisions of Section 7.6 of this
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Financing Agreement.
Margin Stock shall have the meaning assigned to such term in
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Regulation U of the Board of Governors of the Federal Reserve System (12 C.F.R.
221.2, as amended).
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Merger Agreement shall mean that certain Agreement and Plan of
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Merger, dated as of February 21, 2001 (as amended, restated, supplemented, or
otherwise modified as of the date hereof), by and among Parent, Merger Sub and
▇▇▇▇▇▇'▇.
Merger Documents shall mean, individually and collectively,
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the Merger Agreement, and all agreements, documents and instruments executed or
delivered in connection therewith, as all of the foregoing now exist or may
hereunder be amended, modified, supplemented, extended, renewed, restated or
replaced.
Merger Sub shall mean GSC Acquisition Corp., a Delaware
----------
corporation.
MLTC Documents shall mean the Amended and Restated Master
--------------
Lease Agreement dated as of April 20, 1994 between MLTC Funding, Inc. and
Thrifty Corporation, the Amended and Restated Master Lease Agreement dated as of
April 20, 1994 between MLTC Funding, Inc. and Thrifty Realty Company, and all
other documents and instruments delivered or to be delivered pursuant thereto or
in connection therewith, in each case, as may be amended or otherwise modified
from time to time in accordance with its terms.
Mortgages shall mean, individually and collectively, one or
---------
more mortgages, deeds of trust, or deeds to secure debt, executed and delivered
by the Company in favor of Agent for the benefit of the Lenders, in form and
substance reasonably satisfactory to Agent, that encumber the Real Estate
Collateral and the related improvements thereto.
Net Liquidation Percentage shall mean the percentage of the
--------------------------
book value at the lower of cost or market of Company's Inventory that is
estimated to be recoverable in an orderly liquidation of such Inventory, such
percentage to be as determined from time to time at Agent's election, but no
more frequently than annually, on the basis of a physical appraisal to be
conducted upon reasonable prior notice to the Company, or more frequently, with
or without notice, after the occurrence and during the continuance of an Event
of Default as determined by Agent in its reasonable credit judgment, by an
appraisal firm reasonably acceptable to Agent.
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 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 to the Agent or any Lender under
the 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 to the Agent or any Lender
12
for such indebtedness as principal, surety, endorser, guarantor or otherwise.
Obligations shall also include, without duplication of the foregoing, all
indebtedness owing to the Agent or any Lender 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 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, all at the Company's request hereafter, but in no
event shall Obligations include any obligations due any affiliate of a Lender.
Original Revolving Loans shall have the meaning provided for
------------------------
in Section 3.7 of this Financing Agreement.
-----------
▇▇▇▇▇▇'▇ has the meaning ascribed thereto in the introductory
--------
paragraph hereof.
▇▇▇▇▇▇'▇ Credit Facility shall mean that certain Amended and
------------------------
Restated Financing Agreement, by and among CITBC and the Subsidiaries of
▇▇▇▇▇▇'▇ Parent, dated December 15, 1997, as amended.
▇▇▇▇▇▇'▇ Parent has the meaning ascribed thereto in the
---------------
introductory paragraph hereof.
Out-of-Pocket Expenses shall mean all of the Agent's
----------------------
reasonable expenses incurred relative to the commitment letter or the closing of
this Financing Agreement and any amendment, modification or waiver thereof,
whether incurred heretofore or hereafter, and, in any case, at the Company's
request, with appropriate documentation delivered to the Company, which expenses
shall include, without being limited to, the cost of record searches, the cost
of appraisals, the reasonable out-of-pocket costs of audits and other field
examinations to be conducted, prior to the occurrence and during the continuance
of an Event of Default, no more frequently than twice per any 12 month period,
and after the occurrence and during the continuance of an Event of Default, as
frequently as Agent may require, 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
and 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 fees relating to the Letters of Credit and
any drafts thereunder, reasonable legal fees and disbursements of outside
counsel for the Agent, 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.
13
Outstanding Letters of Credit shall have the meaning provided
-----------------------------
for in Section 4.10 of this Financing Agreement.
------------
Overadvance shall have the meaning provided for in Section 3
----------- ---------
of this Financing Agreement.
Parent shall mean Gart Sports Company, a Delaware corporation.
------
Parent Stock Pledge Agreement shall mean that certain Stock
-----------------------------
Pledge Agreement, dated of even date herewith, between Parent and Agent, with
respect to Parent's pledge of its ownership interest in the Stock of Gart and
▇▇▇▇▇▇'▇, in form and content satisfactory to Agent.
Permitted Encumbrances shall mean: (i) liens expressly
----------------------
permitted, or consented to, by the Agent on behalf of the Lenders; (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 (other than liens bonded
or insured to the reasonable satisfaction of the Agent); (v) filed liens for
taxes 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 on the date hereof; (ix) liens given to an
issuer of a sight letter of credit issued without the assistance of the Letter
of Credit Guaranty provided such liens do not secure Indebtedness in excess of
$4,000,000 in the aggregate at any one time; (x) liens in favor of consignors on
consigned goods to the extent the Agent determines, in the exercise of its
reasonable credit judgment, that any Inventory subject to liens in favor of
consignors can easily be identified by the Agent and verified as having been
excluded by the Company from any determination of Eligible Inventory; (xi) liens
on property or assets of the Company, including but not limited to the
Collateral, securing obligations or indebtedness of the Company in the aggregate
at any time not in excess of $1,000,000; (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, and (xiii) liens
and rights of set-off in favor of depository banks arising in the ordinary
course of business, unless waived pursuant to a blocked account or similar
agreements.
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, and any extension, renewal
or replacement of any of such indebtedness, provided that any such extension,
renewal or replacement indebtedness shall be in a principal
14
amount not greater than the amount of the indebtedness being extended, renewed
or replaced; (v) indebtedness arising in connection with or secured by, the
Permitted Encumbrances; (vi) indebtedness under any sight letters of credit
issued without the assistance of the Letter of Credit Guaranty provided such
Indebtedness does not exceed $4,000,000 in the aggregate at any one time; (vii)
Indebtedness owed by any one or more of Gart, Sportmart or ▇▇▇▇▇▇'▇ to any one
or more of Gart, Sportmart or ▇▇▇▇▇▇'▇; (viii) 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; (ix) Indebtedness in an aggregate amount not
to exceed $50,000,000 at any time which is subordinated to the Obligations,
provided the terms and conditions of such Indebtedness are reasonably
satisfactory to the Agent; (x) indebtedness incurred in the form of surety,
customs and appeal bonds and other obligations of a similar nature; and (xi)
other Indebtedness of the Company in an amount not to exceed $10,000,000 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.
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 $500,000,000, (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 Stock and (vii) mutual funds regularly traded in the
United States of America whose investments are limited to those described in
clauses (i) through (v) above.
Permitted Protest shall mean the right of the Company to
-----------------
protest any lien or security interest (other than any such lien or security
interest that secures the Obligations), taxes (other than payroll taxes or taxes
that are the subject of a United States federal tax lien), or rental payment,
provided that (a) a reserve with respect to such obligation is established on
the books and records in such amount to the extent required under GAAP, (b) any
such protest is instituted promptly and prosecuted diligently by the Company in
good faith, and (c) Agent is satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of any
of the Agent's liens and security interests in the Collateral.
Person shall mean an individual, partnership, corporation,
------
business trust, joint stock company, trust, limited liability company,
unincorporated association, joint venture, governmental authority or other
entity of whatever nature.
Personal Property Collateral means all Collateral other than
----------------------------
Real Estate Collateral.
15
Purchase Money Obligations shall mean the Indebtedness (i)
--------------------------
incurred to purchase or lease Equipment and Real Estate and ii) secured solely
by a lien on the Equipment and/or Real Estate, including sale leaseback and
mortgage financing incurred in connection with Designated Sale-Leaseback
Property.
Real Estate shall mean the Company's leasehold and fee
-----------
interests in real property.
Real Estate Collateral shall mean the parcel or parcels of
----------------------
Real Estate identified on Schedule R-1 and any fee interest in Real Estate
------------
hereafter acquired by the Company.
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
commitments 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.
Revolver Libor Margin shall mean (subject to contingent
---------------------
prospective reduction and/or reinstatement as set forth below) 2.00 % per annum.
The foregoing notwithstanding, with respect to monthly periods ending after the
first Anniversary Date, the Revolver Libor Margin will be adjusted,
prospectively only, (a) to 1.50% per annum, if the Company's TFFQ EBITDA for its
four fiscal quarters most recently ended is equal to or greater than
$80,000,000, (b) to 1.75% per annum, if the Company's TFFQ EBITDA for its four
fiscal quarters most recently ended is equal to or greater than $70,000,000 and
less than $80,000,000, (c) to 2.00% per annum if the Company's TFFQ EBITDA for
its four fiscal quarters most recently ended is equal to or greater than
$60,000,000 and less than $70,000,000, or (d) to 2.25% per annum, if the
Company's TFFQ EBITDA for its four fiscal quarters most recently ended is less
than $60,000,000, each such change to occur on the first day of the month
following the Agent's receipt and review of a copy the Company's financial
statements that establish the required level of TFFQ EBITDA. Should the Company
fail to timely provide to the Agent (as required by Section 6.7, clauses (a) and
(b) of the Agreement) a copy of the aforementioned financial statements, then
interest will be computed based on the highest margin set forth above during
such period of delinquency until the Agent's receipt and review of the
applicable financial statements.
Revolver Non-Libor Margin shall mean (subject to contingent
-------------------------
prospective reduction and/or reinstatement as set forth below) 0.00 % per annum.
The foregoing notwithstanding, with respect to monthly periods ending after the
first Anniversary Date, the Revolver Non-Libor Margin will be increased,
prospectively only, to 0.25% per annum, if the Company's TFFQ EBITDA for its
four fiscal quarters most recently ended is less than
16
$60,000,000, such change to occur on the first day of the month following the
Agent's receipt and review of a copy the Company's financial statements that
establish the required level of TFFQ EBITDA. Should the Company fail to timely
provide to the Agent (as required by Section 6.7, clauses (a) and (b) of the
-----------
Agreement) a copy of the aforementioned financial statements, then interest will
be computed based on the higher margin set forth above during such period of
delinquency until the Agent's receipt and review of the applicable financial
statements.
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.
---------
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 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.
Sportdepot shall mean Sportdepot Stores, Inc., a Canadian
----------
corporation.
Sportmart has the meaning ascribed thereto in the introductory
---------
paragraph hereof.
Stock shall mean all shares, options, warrants, interests,
-----
participations, or other equivalents (regardless of how designated) of or in a
corporation or equivalent entity (including membership interests in a limited
liability company), whether voting or nonvoting, including common stock,
preferred stock, or any other "equity security" (as such term is defined in Rule
3a11-1 promulgated by the United States Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended).
Subsidiary shall mean as to any Person, a corporation, limited
----------
liability company, partnership or other entity of which shares of Stock ordinary
voting power (other than Stock 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.
Subsidiary Guarantor shall mean any direct or indirect
--------------------
Subsidiary of the Parent which is a party to the Guaranty.
Suretyship Agreement shall mean an agreement between the
--------------------
Agent, Gart, Sportmart and ▇▇▇▇▇▇'▇, for the benefit of the Agent and the
Lenders, in the form of Exhibit S-1 hereto.
-----------
Tangible Net Worth shall mean, as of any date of
------------------
determination, the result of (a) Net Worth, minus (b) the sum of: (i) all
-----
Intangible Assets of the Company and (ii) all amounts
17
due to any of Gart, Sportmart or ▇▇▇▇▇▇'▇ from Affiliates, except to the extent
previously deducted in determining Net Worth.
TFFQ EBITDA shall mean, with respect to any specified trailing
-----------
four fiscal quarter period of the Company, EBITDA during such period.
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, excluding the Company's LIFO reserve.
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.
UCC shall mean the Uniform Commercial Code as in effect from
---
time to time in the State of California. The terms accounts, chattel paper,
documents, equipment, instruments, general intangibles and inventory, as and
when used (without being capitalized) in this Financing Agreement or the other
loan documents, shall have the meanings given those terms in the UCC.
SECTION 2. Conditions Precedent
--------------------
The obligation of the Lenders acting through the Agent to make
the initial loans hereunder is subject to the satisfaction of, or waiver of,
immediately prior to or concurrently with the making of such initial loans, the
following conditions precedent:
(a) Lien Searches -- The Agent shall have received tax,
-------------
judgment and UCC searches satisfactory to the Agent for all locations presently
occupied or used by the Company.
(b) Casualty Insurance -- Except as otherwise provided
------------------
in the last sentence of this Section 2, the Company shall have delivered to the
---------
Agent evidence satisfactory to the Agent that casualty insurance policies
listing the Agent on behalf of the Lenders as loss payee are in full force and
effect, all as set forth in Section 6.4 of this Financing Agreement.
-----------
(c) UCC Filings -- Any documents (including without
-----------
limitation, financing statements) required to be filed in order to create, in
favor of the Agent on behalf of the Lenders, subject to the Permitted
Encumbrances, a first and exclusive perfected security interest in the Personal
Property Collateral with respect to which a security interest may be perfected
by a filing under the Uniform Commercial Code shall have been properly filed in
each office in each jurisdiction required in order to create in favor of the
Agent on behalf of the Lenders a
18
perfected lien on the Personal Property Collateral. The Agent shall have
received acknowledgement copies of all such filings (or, in lieu thereof, the
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.
(d) Examination & Verification -- The Agent, for the
--------------------------
benefit of the Lenders, shall have completed to the satisfaction of the Agent an
examination and verification of the Accounts, Inventory, books and records of
the Company.
(e) Opinions -- Counsel for the Company and Parent
--------
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 UCC, (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 and each Additional Document of the Company or the Parent,
as the case may be, is (x) valid, binding and enforceable according to its
terms, (y) is duly authorized and (z) does not violate any terms, provisions,
representations or covenants in the charter or by-laws of the Company or the
Parent, as the case may be, 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 or the
Parent, as the case may be, to such counsel as material, to which the Company or
the Parent, as the case may be, is a signatory or by which the Company or its
assets are bound. In addition, such opinions shall confirm in form and substance
satisfactory to the Agent the consummation of the Acquisition-Related
Transactions in compliance in all material respects with the Merger Agreement
referred to in the definition of "Acquisition-Related Transactions," and all
applicable provisions of law, including, without limitation, the provisions of
federal and Delaware corporate and securities laws, to the extent applicable,
and the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act.
(f) 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, including, without limitation, the Fee Letter, the Suretyship
Agreement, the Company Stock Pledge Agreement, the Guaranty, and the Parent
Stock Pledge Agreement (collectively, the "Additional Documents").
(g) Commitment Letter -- The Company shall have fully
-----------------
complied, to the satisfaction of the Agent, with all of the material terms and
conditions of the commitment letter, dated February 9, 2001, issued by CITBC to,
and accepted on February 21, 2001 by, the Parent. To the extent that any terms
of the Commitment Letter conflict with the terms of this Financing Agreement,
the terms of this Financing Agreement shall apply.
(h) Board Resolution -- The Agent for the benefit of
----------------
the Lenders shall have received a copy of the resolutions of the Boards of
Directors of the Company and the Parent, authorizing the execution, delivery and
performance of (i) this Financing Agreement and the Additional Documents, as
applicable, and (ii) any related agreements, certified by the Secretary or
Assistant Secretary of the Company or the Parent, as the case may be, as of the
date hereof, together with a certificate of the Secretary or Assistant Secretary
of the Company or the
19
Parent, as the case may be, as to the incumbency and signature of the officers
of the Company or the Parent, as the case may be, executing this Financing
Agreement and the Additional Documents, as applicable, 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.
(i) Corporate Organization -- The Agent for the benefit
----------------------
of the Lenders shall have received (i) a copy of the Amended and Restated
Certificate of Incorporation of the Company and the Parent certified by the
Secretaries of the States of their incorporation, and (ii) a copy of the By-Laws
(as amended through the date hereof) of the Company and the Parent and certified
by the Secretary or Assistant Secretary of the Company or the Parent, as the
case may be.
(j) 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 Company is in
compliance with all of the terms and provisions set forth herein; and (iii) no
Event of Default or Default has occurred; (iv) as of the date hereof, the
Company is current with respect to the payment of all sales taxes due by the
Company to any state taxing authorities except to the extent specifically noted
to the contrary on a schedule attached to such Officer's Certificate; and (v) as
of May 31, 2001, the Company is current with respect to the payment of all rent
due to landlords of the Company except to the extent specifically noted to the
contrary on a schedule attached to such Officer's Certificate.
(k) Absence of Default -- Since February 3, 2001, 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. No Default or Event of
Default shall exist as of the date of this Financing Agreement.
(l) Legal Restraints/Litigation -- At the date of
---------------------------
execution of this Financing Agreement, there shall be, to the knowledge of the
management of the Company or to the knowledge of the Agent, 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, if adversely determined could have a material adverse effect on
the business, operation, assets or financial condition of the Company or the
Collateral.
(m) Disbursement Authorization -- The Company shall
--------------------------
have delivered to the Agent all information necessary for the Lenders acting
through the Agent to issue wire transfer instructions on behalf of the Company
for the initial and subsequent loans and/or advances to be made under this
Financing Agreement including, but not limited to, disbursement authorizations
in a form acceptable to the Agent.
20
(n) Banking and/or Credit Card Arrangements -- Except as otherwise
---------------------------------------
provided in the last sentence of this Section 2, as of the date of execution of
---------
this Financing Agreement the Borrowers shall have converted all of their
Concentration Accounts (other than operating accounts) into Blocked Accounts,
or, as the case may be, updated existing Blocked Accounts and will have required
the credit card companies to remit balances, when due, to a Blocked Account.
(o) Inventory Reporting -- The Agent for the benefit of the Lenders
-------------------
shall have received a satisfactory inventory valuation indicating the fair
market value of the Company's current finished goods Inventory, sufficient in
the Agent's reasonable judgment, to support the proposed financing arrangement
and/or a satisfactory review of Inventory controls and reporting procedures
conducted by an independent third party acceptable to the Agent.
(p) Landlord Waivers -- Except as otherwise provided in the last
----------------
sentence of this Section 2, the Agent for the benefit of the Lenders shall have
---------
received landlord waivers in form and substance reasonably acceptable to the
Agent with respect to (i) all of the Company's warehouse or distribution centers
and (ii) store locations of ▇▇▇▇▇▇'▇ (to the extent previously obtained by CITBC
with respect to the ▇▇▇▇▇▇'▇ Credit Facility) by assignment to Agent (provided
that the Company shall not be required to incur additional expense to obtain
such waivers (such as payment of waiver fees or increased rent to landlords)
other than the Company's own transactional fees and expenses in connection with
seeking, negotiating, and obtaining such waivers on a best efforts basis, and
the transactional fees and expenses of the Agent and its counsel in reviewing
and approving them).
(q) Warehouse Documents -- Except as otherwise provided in the last
-------------------
sentence of this Section 2, the Agent for the benefit of the Lenders shall have
---------
received from each public warehouse in which Inventory is stored, if any, other
than Inventory in warehouses while such Inventory is clearing customs, an
acknowledgment, in form and substance reasonably satisfactory to the Agent,
concerning the Agent's security interest for the benefit of the Lenders in such
Inventory and the original negotiable warehouseman's receipts, if any, duly
endorsed by the Company to the order of the Agent for the benefit of the
Lenders.
(r) Consummation of the Acquisition-Related Transactions -- The Agent
----------------------------------------------------
shall have received satisfactory evidence of the consummation of the
Acquisition-Related Transactions in compliance in all material respects with all
applicable contracts and provisions of law, including, without limitation, the
Merger Agreement, the provisions of federal, Delaware, and Colorado corporate
and securities laws, to the extent applicable, and the provisions of the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act.
(s) Minimum Availability -- After giving effect to all extensions of
--------------------
credit, transfers, and repayments that are to be made on the closing date of the
transactions contemplated by this Financing Agreement, the Company on such
closing date shall have one-time minimum Availability of $20,000,000 applying
the Applicable Percentage calculated using the lesser of (i) a 70% advance rate
or (ii) 85% of the Net Liquidation Percentage.
(t) Payoff of Certain Existing Lenders -- The existing obligations of
----------------------------------
▇▇▇▇▇▇'▇ under the ▇▇▇▇▇▇'▇ Credit Facility each shall have been repaid or
otherwise
21
satisfied in full pursuant to payoff documentation reasonably satisfactory to
the Agent, and CITBC shall have released, terminated, or assigned its liens and
security interests in favor of CITBC, as the Agent, for the benefit of the
Lenders, in property of ▇▇▇▇▇▇'▇, or shall have unconditionally agreed to do so
pursuant to documentation reasonably satisfactory 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. It is understood and agreed that as of
the date hereof (i) ▇▇▇▇▇▇'▇ is unable to list the Agent as loss payee on its
casualty insurance policies; (ii) ▇▇▇▇▇▇'▇ and Gart may be unable completely to
(A) arrange for their Concentration Accounts to become Blocked Accounts, and (B)
require the credit card companies to remit balances, when due, to a Blocked
Account; and (iii) the Company may be unable completely to deliver the landlord
waivers and warehouse documents provided for in Section 2(p) and Section 2(q),
------------ ------------
respectively. Notwithstanding such, the Agent will waive such requirements for
purposes of closing provided the Company (w) delivers to the Agent prior to or
concurrent with the Agent's execution of this Financing Agreement, proof that
the ▇▇▇▇▇▇'▇ Inventory is insured and that the Company has the exclusive right
to any casualty insurance proceeds relating thereto, (x) delivers to the Agent,
within forty-five (45) days from the date hereof, the loss payable endorsement
called for in paragraph b above, (y) within forty-five (45) days from the date
hereof, delivers to the Agent executed agreements, with respect to Borrowers, in
form and substance reasonably satisfactory to the Agent, pursuant to which the
Concentration Accounts become Blocked Accounts and the credit card companies
have agreed to remit balances, when due, to a Blocked Account, and (z) delivers
to the Agent, within forty-five (45) days from the date hereof, the landlord
waivers and warehouse documents called for in paragraphs p and q, respectively,
above; provided, that any failure by the Company to comply with paragraphs b, p,
--------
and q within the time frames set forth in x, y, or z, above shall constitute an
Event of Default.
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) right 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. Such loans and advances shall be in amounts up to the
Applicable Percentage at any time in effect of the aggregate value of the
Company's 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, in-
bound freight, handling and distribution costs, as reflected on the Company's
books and records. The orderly liquidation value of Inventory shall be
determined by physical appraisal by an appraisal firm reasonably acceptable to
the Agent, no more frequently than annually so long as no Event of Default has
occurred and is continuing, and as frequently as deemed necessary by the Agent
following the occurrence and during the continuation of an Event of Default. 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 Agent for any reason
honor requests for advances in excess of the
22
limitations set forth herein, such advances shall be considered "Overadvances"
and shall be made in the Agent's sole discretion, subject to any additional
terms the Agent deems necessary.
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) upon the Agent's reasonable request,
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; and (2) sixteen (16) days after the end of each month, a monthly
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 the Company may make charitable transfers of Inventory in an
amount not to exceed $1,000,000 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 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 Collections must be deposited promptly to the
Depository Accounts, and, and except as otherwise provided in the last sentence
of Section 2 of this Financing Agreement, promptly thereafter and therefrom, to
---------
a Blocked Account. Except as otherwise provided in the last sentence of Section
-------
2 of this
-
23
Financing Agreement, 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 once the Blocked
Accounts have been established. 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 no Availability 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
Collections 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 greater than zero ($0). 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 and advances,
payments by the Agent under the Letter of Credit Guaranty, made to the Company
or for its account, and with any other Obligations, including any and all costs,
expenses and reasonable 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 or other Collections
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 Accounts.
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 by
the Agent under its 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.
24
3.7. Prior to the date hereof, certain of the Lenders made
"Revolving Loans" (as such term is defined in the Original Loan Agreement; such
loans are hereinafter referred to as the "Original Revolving Loans") to Gart and
------------------------
Sportmart from time to time. As of June 6, 2001, the aggregate outstanding
principal balance of such Original Revolving Credit Loans was $116,000,000. Upon
the terms and subject to the conditions of this Financing Agreement, such
outstanding Original Revolving Loans shall constitute Revolving Loans under this
Financing Agreement from and after the date hereof as fully as if such
outstanding Original Revolving Loans had been made under this Financing
Agreement, each Lender shall have an interest in such Revolving Loans equal to
such Lender's pro rata portion of the Line of Credit set forth in this Agreement
(regardless of such Lender's pro rata portion of the Original Revolving Loans),
and shall henceforth be governed by the terms and conditions of this Financing
Agreement in all respects.
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, the Lenders, acting through the
Agent, shall assist the Company in obtaining such Letters of Credit in an amount
not to exceed $25,000,000 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 by the Agent in writing, or
such Default is cured to the Agent's satisfaction in the exercise of its
reasonable business judgment during any applicable grace 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 by the Agent 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. 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.
-----------
25
4.3. The Company unconditionally indemnifies the Agent and each
Lender and holds the Agent and each Lender harmless from any and all loss, claim
or liability incurred by the Agent and/or any Lender arising from 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 Bank, other than for any such loss, claim or
liability arising out of the gross negligence or willful misconduct of the Agent
and/or any Lender. The Company's unconditional obligation to the Agent and each
Lender hereunder shall not be modified or diminished for any reason or in any
manner whatsoever, other than as a result of the gross negligence or willful
misconduct of the Agent and/or any Lender. The Company agrees that any charges
of the Issuing Bank incurred by the Agent or any Lender for the Company's
account shall be conclusive on the Agent, the Lenders, and the Company and shall
be charged to the loan account.
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 or willful misconduct 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, except to the extent that such act or omission is the result
of the gross negligence or willful misconduct of the Agent and/or any Lender.
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
26
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 and, where applicable, endorsement in writing, the Company
agrees: (a) not to (i) execute any and all applications for steamship or airway
guaranties, indemnities or delivery orders; (ii) grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or (iii) agree to any amendments, renewals,
extensions, modifications, changes or cancellations 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 by the
Agent, 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 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. 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 Section 4 of the Financing Agreement is
---------
intended to relieve any Issuing Bank from any liability to any Person.
4.10. The letters of credit set forth under the caption "Outstanding
Letters of Credit" on Schedule 4.7 annexed hereto and made a part hereof were
------------
issued pursuant to the Original Loan Agreement and will remain outstanding as of
the date hereof (the "Outstanding Letters of Credit"). The Company, the Agent
-----------------------------
and each of Lenders hereby agree with respect to
27
the Outstanding Letters of Credit that such Outstanding Letters of Credit, for
all purposes under this Financing Agreement shall be deemed to be Letters of
Credit governed by the terms and conditions of this Financing Agreement. Each
Lender agrees to participate in each Outstanding Letter of Credit issued by any
Issuing Bank as provided in this Section 4 according to its pro rata portion of
---------
the Line of Credit.
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 the Personal Property Collateral including its:
(a) present and hereafter acquired Inventory;
(b) present and future Accounts;
(c) present and future Documents of Title;
(d) present and future Equipment constituting Collateral;
(e) present and future General Intangibles;
(f) present and future books and records relating to any of
the Collateral (except that such books and records shall not include any
Equipment not owned by the Company or in which another Person has a Permitted
Encumbrance with priority over what would be that of the Agent, the terms of
which other Permitted Encumbrance would be violated by the attachment of the
Agent's security interest therein); and
(g) present and future proceeds of any of the Personal
Property Collateral, including insurance proceeds and supporting obligations of
any and all of the foregoing and proceeds of proceeds.
5.2. The security interests granted hereunder shall extend and
attach to:
(a) All Personal Property 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.
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
28
Company's business, and the Company will collect all proceeds of such sales,
consistent with its business practices in existence on the date of execution of
this Financing Agreement, 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.
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 Personal Property 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 Lender's 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.
5.7. The Company shall execute and deliver to Agent concurrently
with the execution of this Agreement, and the Company hereby authorizes the
Agent to file (with or without the Company's signature), at any time and from
time to time thereafter, all financing
29
statements, assignments, continuation financing statements, termination
statements, account control agreements, and other documents and instruments, in
form reasonably satisfactory to the Agent, and take all other action, as Agent
may reasonably request, to perfect and continue perfected, maintain the priority
of or provide notice of the security interest of the Agent in the Personal
Property Collateral and to accomplish the purposes of this Financing Agreement.
The Company will cooperate with the Agent in obtaining control (as defined in
the UCC) of Personal Property Collateral consisting of deposit accounts,
investment property, letter of credit rights and electronic chattel paper. The
Company will join with the Agent in notifying any third party who has possession
of any Personal Property Collateral of the Agent's security interest therein and
obtaining an acknowledgment from the third party that is holding the Personal
Property Collateral for the benefit of the Agent. The Company will not create
any chattel paper without placing a legend on the chattel paper acceptable to
the Agent indicating that the Agent has a security interest in the chattel
paper.
5.8. Upon the (i) sale of any Equipment or Real Estate Collateral,
or (ii) the sale leaseback or other financing of any Equipment or Real Estate
Collateral through a transaction in which the Indebtedness incurred by the
Company in connection with such sale leaseback or other financing would
constitute a Purchase Money Obligation, Agent agrees, provided that any such
sale or sale leaseback or other financing is otherwise permitted by this
Financing Agreement, to release any security interest or lien it may have in the
Equipment or Real Estate which is the subject of the sale or sale leaseback or
other financing (which release to include the release of all assets comprising
real property directly-related to any Real Estate Collateral which is the
subject of the sale or sale-leaseback or mortgage financing and which real
property would customarily be the subject of any mortgage lien securing Purchase
Money Obligations, such as future rents, fixtures and proceeds which may be
received on any future sale or other disposition of the Real Estate which is the
subject of such sale leaseback or mortgage financing), and, at the expense of
the Company, file or record, or deliver to the Company for filing or
recordation, such termination statements, amendments to financing statements,
reconveyances, mortgage releases, or such other instruments or documents as the
Person acquiring the Equipment or Real Estate Collateral or providing the sale
leaseback or mortgage financing may reasonably require. All net Collections
received by the Company from the (i) sale of any Equipment or Real Estate
Collateral, or (ii) the sale leaseback or other financing of any Equipment or
Real Estate Collateral shall be immediately deposited by the Company to
Depository Accounts as provided in Section 5.4 hereof.
-----------
SECTION 6. Representations, Warranties and Covenants
-----------------------------------------
6.1. Each of Gart, Sportmart and ▇▇▇▇▇▇'▇ hereby warrants and
represents that: (i) the fair value of its assets exceeds the book value of its
liabilities; (ii) it is generally able to pay its debts as they become due and
payable; and (iii) it does not have unreasonably small capital to carry on its
business as it is currently conducted absent extraordinary and unforeseen
circumstances. Sportmart further warrants that its wholly-owned subsidiary,
Sportdepot, has no assets other that that certain real property located at
▇▇▇▇▇-▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, and has no liabilities other than
taxes and utilities related to such real property. 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
or in any Mortgage constitute and shall at all times constitute the first and
only liens on the Collateral.
30
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 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 or
its agents may, from time to time (but no more than once per fiscal quarter 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 expense. During the
continuance of an Event of Default, the Agent or its agents may, at the
Company's expense, enter the Company's premises, upon reasonable notice and
during normal business hours, and as often as it deems reasonably necessary, to
inspect the Collateral and the books and records of the Company. Each of Gart,
Sportmart and ▇▇▇▇▇▇'▇ agrees to afford the Agent prompt written notice of any
change in the location of any Personal Property Collateral outside of the
ordinary course of the Company's business, other than to locations that are
known to the Agent and at which the Agent has filed financing statements and
otherwise fully perfected its liens thereon. The Company also agrees to advise
the Agent promptly, in sufficient detail, of any materially adverse change
(other than seasonal changes) relating to the type, quantity or quality of the
Personal Property Collateral or on the security interests granted to the Agent
for the benefit of the Lenders therein.
6.3. 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 or liens 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 Personal Property Collateral whether or not the Company's signature
appears thereon. The Company agrees to do whatever the Agent may reasonably
request, from time to time, by way of: filing notices of liens, financing
statements, mortgages, deeds of trust, 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.
6.4. The Company agrees to maintain insurance under such policies of
insurance, with such insurance companies, in such reasonable amounts and
covering such insurable risks on (i) Inventory , as is reasonably acceptable to
the Agent and ii) Real Estate and Equipment, on terms no less favorable than the
insurance coverage in place as of the date hereof (other than with respect to
the 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
31
Inventory. Except as otherwise provided in the last paragraph of Section 2 of
---------
this Financing Agreement, all original policies or true copies 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 thirty
(30) 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.
-----------
6.5. The Company agrees to pay, when due, all local, domestic and foreign
(as applicable) taxes, assessments, claims 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.
6.6. Subject to the provisions of Section 6.5 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 affect 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
hereby indemnifies the Agent and each Lender and agrees to defend and hold the
Agent and each Lender harmless from and against any and all loss, damage, claim,
liability, injury or expense which the Agent and each Lender may sustain or
incur in connection with: any
32
claim or expense asserted against the Agent or any Lender as a result of any
environmental pollution, hazardous material or environmental clean-up of the
Company's 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). The Company further agrees that this indemnification as to
environmental liability shall survive for two (2) years from the date of
termination of this Financing Agreement and the payment of all Obligations or
amounts payable hereunder. The Company shall not be deemed to have breached any
provision of this Section 6.6 if (i) the failure to comply with the requirements
-----------
of this Section 6.6 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.
6.7. 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) ninety (90) 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 Deloitte & Touche 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 (and except with respect to the first fiscal month of each fiscal year of
the Company, with respect to which the applicable period for delivery shall be
sixty days (60) rather than forty-five (45) days), 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,
certified by an authorized financial or accounting officer of the Company; (c)
sixty (60) days after the end of each fiscal year of the Company, annual cash
flow projections in form satisfactory to the Agent, and (d) a reasonable time
after request, such further information regarding the business affairs and
financial condition of the Company as the Agent may reasonably request. 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, 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; (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; (iv) as of the last day
of the particular accounting period, the Company is current with respect to the
payment of all sales taxes due by the Company to any state taxing authorities
except to the extent specifically noted to the contrary on a schedule attached
to such Officer's Certificate; and (v) as of the last day of the particular
accounting period, the Company is current with respect to
33
the payment of all rent due to landlords of the Company except to the extent
specifically noted to the contrary on a schedule attached to such Officer's
Certificate. 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 6.7.
-----------
6.8. (a) The Company and its Subsidiaries, on a consolidated basis, shall
at all times maintain a Tangible Net Worth of not less than: (i) $45,000,000
from June 7, 2001 until the day preceding the fiscal year end January 2002; (ii)
$55,000,000 from the fiscal year end January 2002 until the day preceding the
fiscal year end January 2003; (iii) $70,000,000 from the fiscal year end January
2003 until the day preceding the fiscal year end January 2004; (iv) $85,000,000
from the fiscal year end January 2004 until the day preceding the fiscal year
end January 2005; and (v) an amount equal to the preceding fiscal period plus
$15,000,000 for each fiscal year thereafter.
(b) The Company and its Subsidiaries, on a consolidated basis, shall
at all times maintain as of the last day of any fiscal quarter of the Company, a
ratio of (i) EBITDA for the four fiscal quarter period ending on such date to
(ii) Interest Expense as of the end of any fiscal quarter of the Company,
measured for the four fiscal quarter period then ending, of not less than (A)
3.0:1.0 for each fiscal quarter end, beginning with the fiscal quarter ending
near July 31, 2001 and until the fiscal quarter ending near July 31, 2002; or
(B) 3.5:1.0 thereafter. For the first three fiscal quarters ending after the
date of this Financing Agreement, the foregoing calculations shall be made on
the basis of the pro forma combined results of the Company.
6.9. 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 any of its assets whether real, personal or mixed, whether now owned or
hereafter acquired, except for the Permitted Encumbrances, provided, however,
-------- -------
that nothing in this subparagraph A shall prohibit the Company from mortgaging,
assigning, pledging, transferring or otherwise permitting any lien to exist on
any of the Margin Stock;
(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;
34
(d) Sell, lease, assign, transfer or otherwise dispose of (i)
Collateral, except as otherwise specifically permitted by this Financing
Agreement, and provided that any Borrower may transfer Personal Property
Collateral to any other Borrower, or (ii) either all or substantially all of the
other assets of the Company, provided, however, that the Agent agrees, as to
-------- -------
this clause ii, that it shall not unreasonably withhold its consent to any such
sale, lease, assignment, transfer, or other disposition, provided, further, that
-------- -------
nothing in this subparagraph d shall prohibit the Company from selling,
transferring or disposing of the Margin Stock;
(e) Merge, consolidate or otherwise alter or modify its corporate name,
principal place of business, 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, any of Gart, Sportmart or ▇▇▇▇▇▇'▇ Parent may, without obtaining the
consent of the Agent or any Lender (i) merge or liquidate any one or more of its
Subsidiaries into any Borrower provided a Borrower is the survivor of any such
merger, (ii) merge or liquidate any Subsidiary Guarantor into any other
Subsidiary Guarantor or into any Borrower, so long as a Subsidiary Guarantor or
Borrower is the surviving corporation, 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) in connection with the MLTC Documents, (v)
home relocation loans to or on behalf of employees, (vi) in the ordinary course
of the Company's business or for purposes deemed reasonable by the Company
provided such obligations under this clause vi shall not exceed $8,000,000 in
the aggregate at any one time, or (vii) assumptions, guarantees, endorsements,
or other incurrences of liability by any Borrower with respect to obligations
(A) of any other Borrower, or (B) of any Subsidiary Guarantor provided such
obligations under this clause vii B shall not exceed $5,000,000 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 (i) that any Subsidiary
may declare and pay dividends on its capital stock to any Borrower, and (ii)
Gart or ▇▇▇▇▇▇'▇ may declare and pay dividends on its capital stock (A) in cash
in an amount (1) sufficient to enable the Parent to purchase, acquire or redeem
the capital stock owned by its employees or its retired, deceased or terminated
officers, directors or shareholders which the Parent is contractually obligated
to purchase, acquire or redeem, or (2) not to exceed $6,000,000 in any fiscal
year, provided, however, that such dividends 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; or (C) in cash in an amount
sufficient to (1) enable the Parent to 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; or (2) reimburse the
Parent for out-of-pocket expenses incurred by the Parent for the joint or
several benefit of the Parent and the Company, and fees and expenses of its
directors for attending the Board of Directors' meeting;
35
(h) Except as expressly permitted by Section 6.11, 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 $6,000,000 in the
aggregate at any one time, provided, however, that such $6,000,000 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 $4,000,000 in the aggregate at any one
time; (vi) advances or loans between or among the Borrowers; (vii) investments
between or among the Borrowers; (viii) 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, and (ix) investments in customers and suppliers in the
ordinary course of business which (A) generate Trade Accounts Receivable or (B)
are accepted in settlement of disputes or in a bankruptcy, insolvency or similar
proceeding involving such customer or supplier.
6.10. The Company agrees to advise the Agent, promptly, in writing of:
(a) all quantifiable expenditures (actual or anticipated) in excess of
$1,000,000 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.
6.11. Except as otherwise specifically permitted herein, without the prior
written consent of the Agent, the Company agrees that it will not 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) transactions in connection with the Acquisition-
Related Transactions; (iii) as otherwise permitted in this Financing Agreement,
including, without limitation, Permitted Indebtedness, to the extent applicable;
(iv) reimbursement of fees and expenses to directors for the expenses incurred
by such directors for attending the Company's Board of Directors' meetings; (v)
all customary compensation arrangements, including participation in employee
benefit plans; (vi) payment to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners of its (x) management
and transaction fees and (y) out-of-pocket expenses incurred for the benefit of
the Company; (vii) transfers of Personal Property Collateral between or among
the Borrowers; (viii) purchases by the Company of assets leased by the Company
under the MLTC Documents, (ix) employment arrangements with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, (x) investments permitted by Section 6.9(h), and (xi) real
--------------
property leases entered into prior to the date hereof with former or current
shareholders of Sportmart or ▇▇▇▇▇▇'▇ Parent or any of their Family Members or
Family Trusts.
36
6.12. The Company shall conduct or cause to be conducted, not less than
once in any calendar year, an actual physical count of its Inventory. 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
sixty (60) days after the completion of such physical count (including full
reconciliation of all exceptions noted in the physical count or review), deliver
or cause to be delivered, to the Agent for each Lender a copy of the final
inventory report.
6.13. 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.
6.14. The Company shall use its continuous best efforts to obtain as soon
as possible after the date of execution hereof landlord waivers in form and
substance reasonably acceptable to the Agent with respect to all (or as many as
possible) of the Company's store locations and/or distribution centers or
warehouses (provided that the Company shall not be required to incur additional
expense to obtain such waivers (such as payment of waiver fees or increased rent
to landlords) other than the Company's own transactional fees and expenses in
connection with seeking, negotiating, and obtaining such waivers, and the
transactional fees and expenses of the Agent and its counsel in reviewing and
approving them).
6.15. If, at any, time Inventory shall be stored in a public warehouse
(other than Inventory in warehouses while such Inventory is clearing customs),
the Company shall use its continuous best efforts to obtain as soon as possible
and deliver, or cause to be delivered, to the Agent for the benefit of the
Lenders, from each such public warehouse in which Inventory is stored, other
than Inventory in warehouses while such Inventory is clearing customs, an
acknowledgment, in form and substance reasonably satisfactory to the Agent,
concerning the Agent's security interest for the benefit of the Lenders in such
Inventory and the original negotiable warehouseman's receipts, if any, duly
endorsed by the Company to the order of the Agent for the benefit of the
Lenders.
6.16. Without Agent's prior consent, Sportmart shall not permit Sportdepot
to, directly or indirectly: (a) sell, transfer or assign to any Person any of
Sportdepot's Stock or any of Sportdepot's assets, unless (i) Sportmart or
Sportdepot, as the case may be, receives consideration in the form of cash at
the time of such sale, transfer or assignment in an amount not less than the
fair market value of the Stock or assets subject to such sale, transfer or
assignment and (ii) the net proceeds thereof are received by or distributed to
Sportmart within five (5) Business Days after the closing of such sale, transfer
or assignment, (b) in the case of Sportdepot, incur any Indebtedness other than
the guaranty described in clause (c) of this Section 6.16, (c) create, incur,
-------------
assume, or suffer to exist any lien on any asset of Sportdepot, or on any income
or profits therefrom, or assign or convey any right to receive income therefrom;
provided, however, that, if Sportmart has not sold, transferred or assigned its
-------- -------
Stock in Sportdepot, and Sportdepot has not sold, transferred or assigned its
real property assets, to any
37
Person within one year of the date of this Financing Agreement, Sportmart shall
cause Sportdepot immediately to grant in favor of Agent a guaranty, in form and
substance satisfactory to Agent, of the Obligations under this Financing
Agreement, which guaranty shall be secured by an appropriate mortgage or
security agreement, in form and substance satisfactory to Agent, granting to
Agent liens on and security interests in all of Sportdepot's assets, (d) declare
or pay any dividend or make any distribution on account of any Stock in
Sportdepot, unless such distributions are made to Sportmart, and (e) purchase,
redeem or otherwise acquire or retire for value any Stock of Sportdepot.
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 an amount equal to the
sum of the applicable Revolver Non-Libor Margin plus the Chase Manhattan Bank
Rate per annum, 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. The rates hereunder shall be calculated on a per annum basis and
will be based on a 360-day year. Interest on the Revolving Loans which are
Libor Loans shall be payable monthly as of the end of each month and shall be an
amount equal to the sum of the applicable Revolver Libor Margin and the
applicable Libor on each then outstanding Revolving Loan which is a Libor Loan,
on a per annum basis, on the 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 Event of Default (after giving effect to any cure
period expressly provided for herein), 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 Event of Default, on the fourth Business Day following said
notice. The Libor elections must be for $100,000 or whole multiples thereof.
If no such election is timely made or can be made, then the Agent shall use the
Chase Manhattan Bank Rate to compute interest. In the event of any change in
said Chase Manhattan Bank Rate, the rate hereunder shall change correspondingly,
as of the first of the month following any change. The rates hereunder shall be
calculated based on a 360-day year. The Agent shall be entitled to charge the
Company's account at the rate provided for herein when due until all Obligations
have been paid in full.
7.2. In consideration of the Letter of Credit Guaranty, the Company shall
pay to the Agent the Letter of Credit Guaranty Fee which shall be an amount
equal to one and one quarter percent (1.25%) 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 Letters 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.
38
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 June
30, 2001, the Company shall pay the Agent for the account of the Lenders the
Line of Credit Fee.
7.6. As and when due and payable under the terms of the Fee Letter,
Company shall pay to Agent, for the sole and separate account of the Agent, the
fees set forth in the Fee Letter and, as and when due thereunder, such fees
shall constitute Obligations thereunder.
7.7. [Intentionally Omitted].
7.8. 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
of the amount due from the Company.
7.9. 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 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 of 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 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
39
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 may be made only if
-------- -------
the then aggregate balance of the Trade Accounts Receivable is in excess of
$1,000,000;
(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 the Agent or the Company, all
steps, actions, suits or proceedings reasonably deemed by the Agent 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 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) any of Gart, Sportmart or ▇▇▇▇▇▇'▇ admits in writing its inability
to generally pay its debts as they mature;
(c) the commencement by any of Gart, Sportmart or ▇▇▇▇▇▇'▇ of any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law;
(d) the commencement against any of Gart, Sportmart or ▇▇▇▇▇▇'▇ 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 thirty (30) days of the filing of, or the
commencement of, such petition, case, proceeding or arrangement;
40
(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 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 thirty (30) days from the date
of the Agent's written notice to the Company of such breach;
(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 6.4 (only as it relates to insurance on the
----------- -----------
Inventory) and Section 6.5; or v) Section 6.9 (other than sub-paragraphs b and f
----------- -----------
thereof) and Section 6.13;
------------
(g) breach by the Company of sub-paragraphs b or f of Section
-------
6.9, 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 thirty (30) days from the date of such Default;
(h) except as otherwise provided in Section 7.9 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 thirty (30) days from date of occurrence and (y) could reasonably be expected
to subject that Company to any tax, penalty or other liability materially
adverse to the business, operations or financial condition of the Company and
its Subsidiaries taken as a whole;
(j) the holder, trustee or beneficiary of any instrument
referred to in this subparagraph shall have a then current right to accelerate
(whether or not such right is actually exercised) pursuant to any instrument
evidencing outstanding Indebtedness of the Company in excess of $5,000,000;
(k) the failure of the Company to deliver to the Agent within
forty-five (45) days from the date hereof the loss payee endorsement required
under paragraph b of Section 2 of this Financing Agreement, provided, however,
---------
that such Default shall not be deemed an Event of Default if such loss payee
endorsement is delivered to the Agent within thirty (30) days from the date of
such Default; or
41
(l) the failure of the Company to deliver within forty-five (45)
days from the date hereof, executed agreements, in form and substance reasonably
satisfactory to the Agent, pursuant to which the Company's Concentration
Accounts become Blocked Accounts and the credit card companies have agreed to
remit balances, when due, to a Blocked Account provided, however, that such
Default shall not be deemed an Event of Default if such delivery occurs within
fifteen (15) days from the date of such Default.
9.2. Upon the occurrence of 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 unless Agent
is directed, in writing, by the Required Lenders to discontinue such advances
after ten (10) Business Days following Agent's knowledge of such Event of
Default, 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 Required Lenders'
reasonable satisfaction or the Event of Default is waived by the Required
Lenders and at the option of the Agent upon the occurrence of an Event of
Default (unless waived by the Required Lenders): (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 paragraphs (c) or (d) of Section 9.1)
-----------
become immediately due and payable; (ii) the Agent may 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 paragraphs (c) or (d) of
Section 9.1 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 paragraphs (c) or
(d) of Section 9.1; and (iii) the Agent may 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 paragraphs (c) or (d) of Section 9.1. Notwithstanding anything herein
-----------
contained to the contrary, if the Required Lenders waive 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 Personal Property Collateral and any 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
42
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 Personal Property 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 Personal Property
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.
9.4. The Agent has no obligation to clean-up or otherwise prepare the
Personal Property Collateral for sale. The Agent has no obligation to attempt
to satisfy the Obligations by collecting them from any other person liable for
them and the Agent may release, modify or waive any Personal Property Collateral
provided by any other person to secure any of the Obligations, all without
affecting the Agent's rights against the Company. The Company waives any right
it may have to require the Agent or any Lender to pursue any third person for
any of the Obligations. The Agent may comply with any applicable state or
federal law requirements in connection with a disposition of the Personal
Property Collateral and compliance will not be considered adversely to affect
the commercial reasonableness of any sale of the Personal Property Collateral.
The Agent may sell the Personal Property Collateral without giving any
warranties as to the Personal Property Collateral. The Agent may specifically
disclaim any warranties of title or the like. This procedure will not be
considered adversely to affect the commercial reasonableness of any sale of the
Personal Property Collateral.
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 fourth or any subsequent Anniversary Date and then
only by giving the Company at least sixty (60) days prior written notice of
termination. Notwithstanding the foregoing, the
43
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 paragraphs (c) or (d) of Section 9.1 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 have an initial term of four (4) years from the date
hereof and shall automatically continue from Anniversary Date to Anniversary
Date thereafter. The Company may, at any time, terminate this Financing
Agreement and the Line of Credit, upon at least sixty (60) days' prior written
notice to the Agent, by paying to Agent for the benefit of the Lenders, in cash,
the Obligations, in full, together with a premium (the "Early Termination
-----------------
Premium") equal to: (a) during the period of time from and after the date of the
-------
execution and delivery of this Financing Agreement up to the second Anniversary
Date, 0.50% of the amount of the Line of Credit; (b) during the period of time
from and including the second Anniversary Date up to the third Anniversary Date,
0.25% of the amount of the Line of Credit; and (c) thereafter (if applicable),
zero. The Agent and the Lenders hereby waive any Early Termination Fee that
would otherwise be due and payable hereunder as a result of a refinancing of the
Obligations arranged or provided by Agent. 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 may 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 ten
percent (110%) of the then outstanding amounts of Letters of Credit. When the
outstanding amount of Letters of Credit have been so secured by cash in an
amount equal to one hundred and ten percent (110%) 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, then for
all purposes of this Financing Agreement, this Financing Agreement shall be
treated by the parties thereto as terminated and all other Collateral will be
released.
SECTION 11. Agreement among 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
44
amount. A certificate of the Agent submitted to any Lender with respect to any
amount owing under this subsection shall be prima facie evidence of the amount
due from such Lender to the Agent. 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 such
Lender or, if not made available by such Lender after three Business Days have
passed from demand having been made by the Agent on such Lender, 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 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: a) their
pro rata portion of all fees, provided, however, that the Lenders (other than
-------- -------
CITBC in its role as Agent and except as otherwise agreed to by Agent) shall not
share in the fees provided for in the Fee Letter; b) interest computed at the
rate provided for in the Assignment and Transfer Agreement on all outstanding
amounts advanced by the Lenders on each Settlement Date, prior to adjustment,
that are subsequent to the last remittance by the Agent to the Lenders of the
Company's interest; and c) their share of the Letter of Credit Guaranty Fee as
provided for in the Assignment and Transfer Agreement.
11.5. (a) The Company acknowledges that the Lenders, with the
consent of the Agent, which 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
$10,000,000 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, unless the Agent and the Company otherwise agree, 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
45
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 Section 11.6.
------------
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 The CIT Group Holdings, Inc., The CIT Group, Inc., or Dai-Ichi
Kanygo Bank, and in the case of any other Lender, to such other 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
46
extent not reimbursed by the Company or from the proceeds of Collateral. The
provisions of this paragraph shall not apply to (i) any suits, actions,
proceedings or claims that are unrelated, directly or indirectly, to this
Financing Agreement, or (ii) costs, fees, expenses, or disbursements resulting
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
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, its obligations under the Line of
Credit, the Revolving Loans and its rights and obligations with respect to
Letters of Credit). The initial assignments by CITBC shall be for amounts not
less than $15,000,000 each. In any event, CITBC shall retain for its own account
(without taking into account Participants) at least $50,000,000 or approximately
sixteen and seven-tenths percent (16.7%) of the Line of Credit, whichever is
less ("CITBC Hold Position"), provided, however, that such CITBC Hold Position
-------------------
shall cease while there is then a Designated Event of Default and only until
such Designated Event of Default is waived. Should CITBC during a Designated
Event of Default assign additional interests, then the CITBC Hold Position shall
be the remaining amount of CITBC's position if and when such Designated Event of
Default is waived, if such remaining amount is less than what the CITBC Hold
Position otherwise would be as determined above. 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 will 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 fee for processing the assignment; and (iii) if the Transferee is a
Foreign Lender (as defined in Section 13.6 hereof), such Foreign Lender first
------------
complies with the provisions of Section 13.6 hereof. 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 not less than $15,000,000 or all of the 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 Section 11.6. Other than upon the
------------
occurrence and during the continuance of a Designated Event of Default, no
Lender (including CITBC) shall assign all or any part of its rights and
obligations under this Financing Agreement
47
except to an assignee approved by the Company, provided that (x) the Company
shall not unreasonably withhold, delay, or condition its consent, (y) any
existing Lender (whether CITBC or another Lender previously approved by the
Company as an assignee) shall be deemed to have been approved by the Company as
an assignee with respect to any and all future assignments to such Lender,
without need for further approval with respect to additional assignments by any
other Lender to such Lender, and (z) this sentence shall not be applicable to
sales of participation interests (as opposed to direct assignments).
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 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 the
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, telecopy, 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
48
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 the Lenders. The Agent shall take such action or
refrain from taking 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 visits 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 any way relating to or arising out of this Financing
Agreement or any ancillary
49
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 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 the Company, 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
-------
12 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 (u) increase the Line of Credit;
(v) increase the rate of advance against Eligible Inventory as set forth in
Section 3.1 of this Financing Agreement; (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
Collateral in bulk 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 five percent (105%) of the maximum amount available under Sections 3 and 4
---------- -
hereof (and provided that, unless the Required Lenders agree otherwise, the
Agent shall require that any Overadvance be repaid within 14 days). In all
50
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. In the event any Lender's consent is required pursuant to the
provisions of this Financing Agreement and such lender does not respond to any
request by the Agent for such consent within 10 days after such request is made
to such Lender, such failure to respond shall be deemed a consent. In addition,
in the event that any Lender declines to give its consent to any such request,
it is hereby mutually agreed that the Agent and/or any other Lender (with the
consent of the Agent, which shall not unreasonably be withheld) shall have the
right (but not the obligation) to purchase such Lender's share of the loans and
advances made by it hereunder for the full amount thereof together with accrued
interest thereon to the date of such purchase.
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 Credit only as of the fourth 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.
51
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 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. 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.
13.6. 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
52
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 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.
13.7. 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, COUNTY OF LOS ANGELES, 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.
----- --- ----------
53
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:
(A) if to CITBC or the Agent, at:
The CIT Group/Business Credit, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Regional Manager
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
(B) if to any Borrower, at:
Gart Bros. Sporting Goods Company
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
(C) if to any other Lender, at its address set forth
on the signature pages hereto or as specified in
the relevant Assignment and Transfer Agreement
or to such other address as any party may designate for itself by like notice;
provided, however, that the failure of the Agent to send a copy of such material
notice to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners shall not invalidate in any way the effect of
the notice to the Company.
13.9. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
13.10. To the extent the Company uses the proceeds of any of the
Obligations to purchase Collateral, the Company's repayment of the Obligations
shall apply on a "first-in, first-out" basis so that the portion of the
Obligations used to purchase a particular item of Collateral shall be paid in
the chronological order the Company purchased the Collateral.
54
13.11. 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.
13.12. (a) Subject to the conditions set forth in Section 2 hereof,
---------
Gart, Sportmart, ▇▇▇▇▇▇'▇, the Lenders, and the Agent agree that the Original
Loan Agreement (including all Exhibits and Schedules thereto) is hereby amended
and restated, effective as of the date hereof, to read in its entirety as set
forth herein.
(b) On the date hereof, upon the effectiveness of this
Financing Agreement, (i) each Original Revolving Loan constituting a Revolving
Loan under and as defined in the Original Loan Agreement shall be deemed to be a
Revolving Loan under this Financing Agreement and (ii) each Outstanding Letter
of Credit shall be deemed to be a Letter of Credit issued under this Financing
Agreement, and the amount of the unused commitments under the Original Loan
Agreement shall be adjusted accordingly. This Financing Agreement does not
evidence a novation or a repayment and reborrowing of the Existing Loans.
(c) Each Borrower shall: (i) cause all Revolving Loans (as
defined in the Original Loan Agreement) outstanding immediately prior to the
date hereof to be Revolving Loans (other than Libor Loans)and pay to the Agent
all breakage costs pursuant to the applicable provisions of the Original Loan
Agreement, with the exception of any breakage costs incurred by CITBC, which
breakage costs are hereby waived, and (ii) pay all other Obligations (as defined
in the Original Loan Agreement) accrued to and including the date hereof,
regardless of whether such amounts would then be due under the terms of the
Original Loan Agreement, including all commitment and other fees, interests and
costs, but excluding the Outstanding Letters of Credit.
13.13. Each Borrower is obligated to repay the Obligations as joint
and several obligors under this Agreement. To the extent that any of Gart,
Sportmart or ▇▇▇▇▇▇'▇ shall, under this Financing Agreement as a joint and
several obligor, repay any of the Obligations constituting loans or advances
made to another Borrower hereunder or other Obligations incurred directly and
primarily by any other Borrower (an "Accommodation Payment"), then the Borrower
---------------------
making such Accommodation Payment shall be entitled to contribution and
indemnification from, and be reimbursed by, each of the other Borrowers in an
amount, for each of such other Borrowers, equal to a fraction of such
Accommodation Payment, the numerator of which fraction is such other Borrower's
"Allocable Amount" (as defined below) and the denominator of which is the sum of
the Allocable Amounts of all of the Borrowers. As of any date of determination,
the "Allocable Amount" of each Borrower shall be equal to the maximum amount of
----------------
liability for Accommodation Payments which could be asserted against such
Borrower hereunder without (a) rendering such Borrower "insolvent" within the
meaning of Section 101(31) of Title 11 of the United States Code entitled
"Bankruptcy" (the "Bankruptcy Code"), Section 2 of the Uniform Fraudulent
---------------
Transfer Act (the "UFTA"), Section 2 of the Uniform Fraudulent Conveyance Act
----
("UFCA"), (b) leaving such Borrower with unreasonably small capital or assets,
----
within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA,
or Section 4 of the UFCA, or (c) leaving such Borrower generally unable to pay
its debts as they become due within the meaning of Section 548 of the Bankruptcy
Code, Section 4 of the UFTA, or Section 5 of the UFCA. All rights and claims of
contribution, indemnification and
55
reimbursement under this Section 13.13 shall be subordinate in right of payment
-------------
to the prior payment in full of the Obligations.
[Balance of page intentionally omitted]
56
IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be executed and delivered by their proper and duly authorized
officers as of the date set forth above.
Read and Agreed to: Executed and Accepted at
Los Angeles, California
GART BROS. SPORTING GOODS THE CIT GROUP/BUSINESS
COMPANY, a Colorado corporation CREDIT, INC.
By_____________________________ By________________________________
Title Vice President
SPORTMART, INC., a Delaware
corporation
By_____________________________
Title
▇▇▇▇▇▇'▇ SPORTING GOODS, INC.,
a Delaware corporation
By_____________________________
Title
▇▇▇▇▇▇ SPORTING GOODS CO.,
OKLAHOMA, a Texas corporation
By_____________________________
Title
▇▇▇▇▇▇ SPORTING GOODS CO.,
TENNESSEE, a Texas corporation
By_____________________________
Title
▇▇▇▇▇▇ SPORTING GOODS CO.,
LOUISIANA, a Delaware corporation
By_____________________________
Title
▇▇▇▇▇▇'▇ SPORTING GOODS, INC. -
SERVICES, a Delaware corporation
By______________________________
Title
58
EXHIBIT A - ASSIGNMENT AND TRANSFER AGREEMENT
---------------------------------------------
Dated: _______________, _______
Reference is made to the Amended and Restated Financing Agreement dated as of
June 7, 2001 (as amended, modified, supplemented and in effect from time to
time, the "Financing Agreement"), among Gart Bros. Sporting Goods Company, a
-------------------
Colorado corporation, Sportmart, Inc., a Delaware corporation, ▇▇▇▇▇▇'▇ Sporting
Goods, Inc., a Delaware corporation, and certain Subsidiaries of ▇▇▇▇▇▇'▇
Sporting Goods, Inc. (such corporations, collectively and individually, jointly
and severally, as co-borrowers, the "Company"), the Lenders named therein, and
-------
The CIT Group/Business Credit, Inc., as Agent (the "Agent"). 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
1
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 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.
----------
Accepted: as Assignor
THE CIT GROUP/BUSINESS
CREDIT, INC., as Agent
By___________________________ By______________________________
Title Title
2
GART BROS. SPORTING GOODS ___________________________________
COMPANY, a Colorado corporation as Assignee
By_________________________________
By_____________________________________ Title
Title
SPORTMART, INC., a Delaware
corporation
By_____________________________________
Title
▇▇▇▇▇▇'▇ SPORTING GOODS,
INC., a Delaware corporation
By_____________________________________
Title
3
▇▇▇▇▇▇ SPORTING GOODS CO.,
OKLAHOMA, a Texas corporation
By_____________________________________
Title
▇▇▇▇▇▇ SPORTING GOODS CO.,
TENNESSEE, a Texas corporation
By_____________________________________
Title
▇▇▇▇▇▇ SPORTING GOODS CO.,
LOUISIANA, a Delaware corporation
By_____________________________________
Title
▇▇▇▇▇▇'▇ SPORTING GOODS,
INC. - SERVICES, a Delaware
corporation
By______________________________________
Title
4
Schedule 1 to Assignment and Transfer Agreement
Name of Assignor:
Name of Assignee:
Effective Date of Assignment: ________________, ________
Percentage Assigned of
Each Facility (Shown as a percentage
Amount of aggregate amount (or, with
(or, with respect to Letter of respect to Letters of Credit, Face
Credit, Face Amount) Amount) of all Lenders)
Assigned
Assigned
Facilities
Revolving Loans $_______________________________ _______________________________%
Letter of Credit $_______________________________ _______________________________%
Total $_______________________________
Fees:
Rates:
1
EXHIBIT S -- SURETYSHIP AGREEMENT
---------------------------------
SURETYSHIP AGREEMENT
--------------------
THIS SURETYSHIP AGREEMENT (this "Agreement"), is entered into
as of June 7, 2001, between (a) THE CIT GROUP/BUSINESS CREDIT, INC., a New York
corporation (hereinafter "CITBC") with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
-----
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, as Agent for the Lenders under that certain
Amended and Restated Financing Agreement of even date herewith (as from time to
time amended, modified, supplemented, renewed, or restated, the "Financing
---------
Agreement"), which Financing Agreement is between CITBC, the "Debtors" defined
---------
below, and the "Lenders" referred to therein, (b) GART BROS. SPORTING GOODS
COMPANY, a Colorado corporation (hereinafter referred to as "Gart") having a
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (c)
SPORTMART, INC., a Delaware corporation (hereinafter referred to as "Sportmart")
having a principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
and (d) ▇▇▇▇▇▇'▇ SPORTING GOODS, INC., a Delaware corporation, as
successor-in-interest to GSC Acquisition Corp., a Delaware corporation
(hereinafter referred to as "▇▇▇▇▇▇'▇ Parent") having a principal place of
---------------
business at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and each of the Subsidiaries
of ▇▇▇▇▇▇'▇ Parent identified on the signatory pages hereof (such Subsidiaries
together with ▇▇▇▇▇▇'▇ Parent. are referred to hereinafter collectively as
"▇▇▇▇▇▇'▇", and Gart, Sportmart and ▇▇▇▇▇▇'▇ collectively and individually,
--------
jointly and severally, as co-borrowers, are referred to hereinafter as
"Debtors"). As used herein, "Lender" means CITBC as the Agent for the "Lenders"
------- ------ -------
under the Financing Agreement, and the "Lenders" under the Financing Agreement
-------
(as therein defined), and each of them, and any one or more of them; and "Loan
----
Documents" means, individually and collectively, the Financing Agreement, and
---------
any other documents, agreements, or instruments executed or delivered by the
Debtors pursuant thereto or in accordance therewith, in each case as they may
from time to time be amended, modified, supplemented, renewed, or restated. This
Agreement is made with reference to the following facts:
A. Lender and Debtors are entering into the Financing
Agreement;
B. In order to induce Lender to enter into the Financing
Agreement, and in consideration thereof, and in
consideration of any loan or other financial
accommodations hereinafter extended by Lender to
Debtors, whether pursuant to the Financing Agreement
or otherwise, Debtors have agreed to enter into this
Agreement; and
C. Any and all initially capitalized terms used herein
and not defined herein shall have the meaning
ascribed thereto in the Financing Agreement as
amended, restated, supplemented, renewed, extended or
modified from time to time.
1
NOW THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, Lender and Debtors hereby agree as follows:
1. SURETYSHIP WAIVERS AND CONSENTS.
1.1 The Debtors each are, and at all times shall be, jointly and severally
liable for each and every one of the Obligations under the Financing Agreement
and under the Loan Documents, regardless of which Debtor or Debtors requested,
received, used, or directly enjoyed the benefit of, the extensions of credit
hereunder. Unless otherwise expressly set forth to the contrary in any of the
Loan Documents, all of the Collateral shall secure all of the Obligations. Each
Debtor's Obligations under the Financing Agreement are independent Obligations
and are absolute and unconditional. Each Debtor, to the extent permitted by law,
hereby waives any defense to such Obligations that may arise by reason of the
disability or other defense or cessation of liability of any other Debtor for
any reason other than payment in full. Each Debtor also waives any defense to
such Obligations that it may have as a result of Lender's election of or failure
to exercise any right, power, or remedy, including the failure to proceed first
against another Debtor or any security it holds from such other Debtor. Without
limiting the generality of the foregoing, each Debtor expressly waives all
demands and notices whatsoever (except for any demands or notices, if any, that
such Debtor expressly is entitled to receive pursuant to the terms of any Loan
Document), and agrees that Lender may, without notice (except for such notice,
if any, as such Debtor expressly is entitled to receive pursuant to the terms of
any Loan Document) and without releasing the liability of such Debtor, extend
for the benefit of any other Debtor the time for making any payment, waive or
extend the performance of any agreement or make any settlement of any agreement
for the benefit of any other Debtor, and may proceed against each Debtor,
directly and independently of any other Debtor, as Lender may elect in
accordance with the Financing Agreement.
1.2 Each Debtor acknowledges that the Obligations undertaken herein or in
the other Loan Documents, and the grants of security interests and liens by such
Debtor to secure Obligations of the other Debtor, could be construed to consist,
at least in part, of the guaranty of Obligations of the other Debtor and, in
full recognition of that fact, each Debtor consents and agrees as hereinafter
set forth in the balance of this Section 1. The consents, waivers, and
---------
agreements of the Debtors that are contained in the balance of this Section 1
---------
are intended to deal with the suretyship aspects of the transactions evidenced
by the Loan Documents (to the extent that a Debtor may be deemed a guarantor or
surety for the Obligations of another Debtor) and thus are intended to be
effective and applicable only to the extent that any Debtor has agreed to answer
for the Obligation of another Debtor or has granted a lien or security interest
in Collateral to secure the Obligation of another Debtor; conversely, the
consents, waivers, and agreements of the Debtors that are contained in the
balance of this Section 1 shall not be applicable to the direct Obligation of a
---------
Debtor with respect to credit extended directly to such Debtor, and shall not be
applicable to security interests or liens on Collateral of a Debtor given to
directly secure direct Obligations of such Debtor where no aspect of guaranty or
suretyship is involved. Each Debtor consents and agrees that Lender may, at any
time and from time to time, without notice or demand, whether before or after
any actual or purported termination, repudiation or revocation of the Financing
Agreement by any one or more Debtors, and without affecting the enforceability
or continuing effectiveness hereof as to such Debtor, in accordance with the
terms of the Loan Documents:
2
(a) with respect to any other Debtor, supplement, restate, modify,
amend, increase, decrease, extend, renew, accelerate or otherwise change the
time for payment or the terms of the Obligations of such other Debtor or any
part thereof, including any increase or decrease of the rate(s) of interest
thereon with the agreement of such other Debtor;
(b) supplement, restate, modify, amend, increase, decrease or waive,
or enter into or give any agreement, approval or consent with respect to, the
Obligations or any part thereof, or any of the Loan Documents or any security or
guarantees granted or entered into by any Person(s) other than such Debtor, or
any condition, covenant, default, remedy, right, representation or term thereof
or thereunder;
(c) accept new or additional instruments, documents or agreements in
exchange for or relative to any of the Loan Documents or the Obligations or any
part thereof;
(d) accept partial payments on the Obligations;
(e) receive and hold additional security or guarantees for the
Obligations or any part thereof;
(f) release, reconvey, terminate, waive, abandon, fail to perfect,
subordinate, exchange, substitute, transfer or enforce any security or
guarantees, and apply any security and direct the order or manner of sale
thereof as Lender in its sole and absolute discretion may determine;
(g) release any other Person (including, without limitation, any
other Debtor) from any personal liability with respect to the Obligations or any
part thereof;
(h) with respect to any Person other than such Debtor (including,
without limitation, any other Debtor), settle, release on terms satisfactory to
Lender or by operation of applicable laws or otherwise liquidate or enforce any
Obligations and any security therefor or guaranty thereof in any manner, consent
to the transfer of any security and bid and purchase at any sale; or
(i) consent to the merger or any other restructuring or termination
of the corporate or partnership existence of any other Debtor or any other
Person, and correspondingly agree, in accordance with all applicable provisions
of the Loan Documents, to the restructure of the Obligations, and any such
merger, restructuring or termination shall not affect the liability of any
Debtor or the continuing effectiveness hereof, or the enforceability hereof with
respect to all or any part of the Obligations.
1.3 Upon the occurrence and during the continuance of any Event of
Default, Lender may enforce the Loan Documents independently as to each Debtor
and independently of any other remedy or security Lender at any time may have or
hold in connection with the Obligations, and it shall not be necessary for
Lender to marshal assets in favor of any Debtor or any other Person or to
proceed upon or against or exhaust any security or remedy before proceeding to
enforce any of the Loan Documents. Each Debtor expressly waives any right to
require Lender to marshal assets in favor of any Debtor or any other Person or
to proceed against any other Debtor, any other Person, or any collateral
provided by any Person, and agrees that
3
Lender may proceed against any Debtor, any other Person, or any Collateral in
such order as it shall determine in its sole and absolute discretion.
1.4 Lender may file a separate action or actions against any Debtor,
whether such action is brought or prosecuted with respect to any security or
against any other Person, or whether any other Person is joined in any such
action or actions. Each Debtor agrees, for itself, that Lender and any other
Debtor, or any Affiliate of any other Debtor (other than such Debtor itself),
may deal with each other in connection with the Obligations or otherwise, or
alter any contracts or agreements now or hereafter existing between any of them,
in any manner whatsoever, all without in any way altering or affecting the
continuing efficacy as to such Debtor of the Loan Documents.
1.5 The rights of Lender created or granted herein with respect to any
Debtor and the enforceability of the Loan Documents as to any Debtor at all
times shall remain effective to cover the full amount of all the Obligations
even though the Obligations, including any part thereof or any other security or
guaranty therefor, may be or hereafter may become invalid or otherwise
unenforceable as against any other Debtor and whether or not any other Debtor
shall have any personal liability with respect thereto.
1.6 To the maximum extent permitted by applicable law, each Debtor, for
itself, expressly waives any and all defenses now or hereafter arising or that
otherwise might be asserted by reason of
(a) any disability or other defense of any other Debtor with respect
to the Obligations, or with respect to the enforceability of Lender's security
interest in or lien on any collateral securing any of the Obligations
(including, without limitation, the Collateral),
(b) the unenforceability or invalidity of any security or guaranty
for the Obligations or the lack of perfection or continuing perfection or
failure of priority of any security for the Obligations,
(c) the cessation for any cause whatsoever of the liability of any
other Debtor (other than to the extent of payment and performance of all
Obligations),
(d) any failure of Lender to marshal assets in favor of any Debtor or
any other Person,
(e) except as otherwise expressly provided in the Financing
Agreement, any failure of Lender to give notice of sale or other disposition of
collateral to any other Debtor or any other Person other than such waiving
Debtor, or any defect in any notice that may be given to any other Debtor or any
other Person other than such waiving Debtor, in connection with any sale or
disposition of any collateral securing the Obligations or any of them
(including, without limitation, the Collateral),
(f) except as otherwise expressly provided in the Financing Agreement
any failure of Lender to comply with applicable law in connection with the sale
or other disposition of any collateral or other security for any Obligation that
is owned by another Debtor or by any other Person other than such waiving
Debtor, including any failure of Lender to conduct a
4
commercially reasonable sale or other disposition of any such collateral or
other security for any Obligation,
(g) any act or omission of Lender or others that directly or
indirectly results in or aids the discharge or release of any other Debtor, or
the Obligations of any other Debtor, or any security or guaranty therefor, by
operation of law or otherwise,
(h) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation,
(i) any failure of Lender to file or enforce a claim in any
bankruptcy or other proceeding with respect to any Person other than such
waiving Debtor,
(j) the election by Lender of the application or non-application of
Section 1111(b)(2) of the Bankruptcy Code,
(k) any extension of credit or the grant of any lien under Section
364 of the Bankruptcy Code,
(l) any use of cash collateral under Section 363 of the Bankruptcy
Code,
(m) any agreement or stipulation with respect to the provision of
adequate protection in any bankruptcy proceeding of any Person,
(n) the avoidance of any lien in favor of Lender for any reason, or
(o) any action taken by Lender that is authorized by this section or
any other provision of any Loan Document. Until such time, if any, as all of the
Obligations have been paid and performed in full and no portion of any
commitment of Lender to any Debtor under any Loan Document remains in effect, no
Debtor shall have any right of subrogation, contribution, reimbursement or
indemnity, and each Debtor expressly waives any right to enforce any remedy that
Lender now has or hereafter may have against any other Person and waives the
benefit of, or any right to participate in, any collateral now or hereafter held
by Lender. Except to the extent expressly provided for in any Loan Document,
each Debtor expressly waives, to the maximum extent permitted by applicable law,
all rights or entitlements to presentments, demands for payment or performance,
notices of nonpayment or nonperformance, protests, notices of protest, notices
of dishonor and all other notices or demands of any kind or nature whatsoever
with respect to the Obligations, and all notices of acceptance of the Loan
Documents or of the existence, creation or incurring of new or additional
Obligations.
1.7 In the event that all or any part of the Obligations at any time
should be or become secured by any one or more deeds of trust or mortgages or
other instruments creating or granting liens on any interests in real property,
each Debtor authorizes Lender, upon the occurrence of and during the continuance
of any Event of Default, at its sole option, without notice or demand except as
is or may be expressly required by the terms of any Loan Document or by the
provisions of any applicable law, to foreclose any or all of such deeds of trust
or mortgages or other instruments by judicial or nonjudicial sale, without
affecting or diminishing,
5
except to the extent of the effect of the application of the proceeds realized
therefrom, and except to the extent mandated by any non-waivable provision of
applicable law, the Obligations of any Debtor (other than the Obligations of a
grantor of a foreclosed deed of trust, mortgage, or other instrument, to the
extent, if any, that applicable law affects or diminishes the Obligations of
such grantor), the enforceability of the Financing Agreement or any other Loan
Document, or the validity or enforceability of any remaining security interests
or liens of, or for the benefit of, Lender on any collateral.
1.8 To the fullest extent permitted by applicable law, each Debtor
expressly waives any defenses to the enforcement of the Financing Agreement, or
to the enforcement of any other Loan Document, or to any rights of Lender
created or granted hereby or thereby, or to the recovery by Lender against any
Debtor or any other Person liable therefor of any deficiency after a judicial or
nonjudicial foreclosure or sale of any Collateral, whether real or personal,
from time to time securing any of the Obligations, even though such a
foreclosure or sale may impair the subrogation rights of one or more of the
Debtors and may preclude one or more of the Debtors from obtaining reimbursement
or contribution from other Debtors. To the fullest extent permitted by
applicable law, each Debtor expressly waives any defenses or benefits that may
be derived from all suretyship defenses it otherwise might or would have under
California or any other applicable law. To the fullest extent permitted by
applicable law, each Debtor, for itself, expressly waives any right to receive
notice of any judicial or nonjudicial foreclosure or sale of any real property
or interest therein of another Debtor that is subject to any such deeds of trust
or mortgages or other instruments, and any Debtor's failure to receive any such
notice shall not impair or affect such Debtor's obligations or the
enforceability of the Loan Documents or any rights of Lender created or granted
hereby or thereby.
1.9 Each Debtor hereby agrees to keep each other Debtor fully apprised at
all times as to the status of its business, affairs, finances, and financial
condition, and its ability to perform its Obligations under the Loan Documents,
and in particular as to any adverse developments with respect thereto. Each
Debtor hereby agrees to undertake to keep itself apprised at all times as to the
status of the business, affairs, finances, and financial condition of each other
Debtor, and of the ability of each other Debtor to perform its Obligations under
the Loan Documents, and in particular as to any adverse developments with
respect to any thereof. Each Debtor hereby agrees, in light of the foregoing
mutual covenants to inform each other, and to keep themselves and each other
informed as to such matters, that Lender shall have no duty to inform any Debtor
of any information pertaining to the business, affairs, finances, or financial
condition of any other Debtor, or pertaining to the ability of any other Debtor
to perform its Obligations under the Loan Documents, even if such information is
adverse, and even if such information might influence the decision of one or
more of the Debtors to continue to be jointly and severally liable for, or to
provide Collateral for, Obligations of the other Debtor. To the fullest extent
permitted by applicable law, each Debtor hereby expressly waives any duty of
Lender to inform any Debtor of any such information.
1.10 Debtors and each of them warrant and agree that each of the waivers
and consents set forth herein are made after consultation with legal counsel and
with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy, or otherwise adversely affect rights that Debtors otherwise
may have against other Debtors, Lender, or others, or against Collateral, and
that, under the
6
circumstances, the waivers and consents herein given are reasonable and not
contrary to public policy or law. If any of the waivers or consents herein are
determined to be contrary to any applicable law or public policy, such waivers
and consents shall be effective to the maximum extent permitted by law.
1.11 Anything to the contrary in this Agreement notwithstanding, nothing in
this Agreement shall constitute a waiver or relinquishment by any Debtor (a) of
any right to notice from Lender expressly provided for in favor of such Debtor
in any Loan Document, or (b) of any duty or obligation of Lender expressly
provided for in favor of such Debtor in any Loan Document.
2. MISCELLANEOUS.
2.1 Section headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire agreement.
[Remainder of page intentionally omitted]
7
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above, and agree that it
shall be governed by the laws of the State of California.
Read and Agreed to: Executed and Accepted at
Los Angeles, California
GART BROS. SPORTING THE CIT GROUP/BUSINESS
GOODS COMPANY, a Colorado CREDIT, INC., as Agent
corporation
By___________________________________ By_______________________________
Title Vice President
SPORTMART, INC., a Delaware
corporation
By___________________________________
Title
8
▇▇▇▇▇▇'▇ SPORTING GOODS
INC., a Delaware corporation
By__________________________________
Title
▇▇▇▇▇▇ SPORTING GOODS CO.,
OKLAHOMA, a Texas corporation
By__________________________________
Title
▇▇▇▇▇▇ SPORTING GOODS CO.,
TENNESSEE, a Texas corporation
By__________________________________
Title
▇▇▇▇▇▇ SPORTING GOODS CO.,
LOUISIANA, a Delaware corporation
By__________________________________
Title
▇▇▇▇▇▇'▇ SPORTING GOODS,
INC. - SERVICES, a Delaware
corporation
By__________________________________
Title
9