EXHIBIT 10.2
FINANCING AGREEMENT
The CIT Group/Business Credit, Inc.
(as Agent and a Lender)
and
Factory 2-U Stores, Inc.
(as Borrower)
Dated: March 3, 2000
TABLE OF CONTENTS
Page
SECTION 1. Definitions..................................................1
SECTION 2. Conditions Precedent........................................13
SECTION 3. Revolving Loans.............................................16
SECTION 4. Intentionally Left Blank....................................20
SECTION 5. Letters of Credit...........................................20
SECTION 6. Collateral..................................................23
SECTION 7. Representations, Warranties and Covenants...................25
SECTION 8. Interest, Fees and Expenses.................................32
SECTION 9. Powers......................................................36
SECTION 10. Events of Default and Remedies..............................37
SECTION 11. Term and Termination........................................40
SECTION 12. Miscellaneous...............................................41
SECTION 13. Agreement between the Lenders...............................43
SECTION 14. Agency......................................................46
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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation,
(hereinafter "CITBC"), with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (CITBC and any other party hereafter
becoming a Lender hereunder pursuant to Section 13.9 hereof each individually
sometimes referred to as a "Lender" and collectively, the "Lenders"), and CITBC
as Agent for the Lenders (hereinafter the "Agent") are pleased to confirm the
terms and conditions under which the Lenders acting through the Agent shall make
revolving loans and other financial accommodations to FACTORY 2-U STORES, INC.,
a Delaware corporation (hereinafter the "Company"), with a principal place of
business at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 1 Definitions
For purposes of this Financing Agreement, the following terms shall be
defined in the following manner:
Accounts shall mean all of the Company's now existing and
future: (a) accounts (as defined in the U.C.C.), including, without limitation,
all accounts created by or arising from all of the Company's sales of goods or
rendition of services to its customers, and all accounts arising from sales or
rendition of services made under any of the Company's trade names or styles, or
through any of the Company's divisions, but the term Accounts shall not include
the Company's landlord receivables for tenant improvements and the Company's
employee stock subscription receivables; (b) Credit Card Receivables (whether or
not specifically listed on schedules furnished to the Agent); (c) any and all
instruments, documents, General Intangibles, payment intangibles, contract
rights and chattel paper (all as such terms are defined in the U.C.C.)
representing Accounts; (d) unpaid seller's rights (including rescission,
replevin, reclamation and stoppage in transit) relating to the foregoing or
arising therefrom; (e) rights to any goods represented by any of the foregoing,
including rights to returned or repossessed goods; (f) reserves and credit
balances arising hereunder; (g) guarantees or collateral for any of the
foregoing; (h) insurance policies or rights relating to any of the foregoing;
and (i) cash and non-cash proceeds of any and all the foregoing.
Agent Commitment Letter shall mean the commitment letter dated
February 10, 2000, issued by the Agent to, and accepted by, the Company.
Anniversary Date shall have the meaning set forth in Section
11.1 hereof.
Assignment and Transfer Agreement shall mean the Assignment
and Transfer Agreement in the form of Exhibit B hereto.
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Availability shall mean at any time the excess of the lesser
of (a) the Borrowing Base or (b) $50,000,000, over the sum of (x) the
outstanding aggregate amount of all Obligations, including without limitation,
all Obligations with respect to Revolving Loans and Letters of Credit and (y)
the Availability Reserve.
Availability Reserve shall mean an amount equal to any (a)
delinquent sales taxes, (b) delinquent rental payments for the Company's leased
premises, and (c) such other reserves as the Agent deems necessary in its
commercially reasonable judgment as a result of (i) negative forecasts and/or
trends in the Company's business, profits, operations or financial condition
that could reasonably be expected to have a material adverse effect on the
Company and its subsidiaries taken as a whole or (ii) other issues,
circumstances, or facts that could otherwise reasonably be expected to
negatively impact the Company, it's business, profits, operations, financial
condition or assets.
Borrowing Base shall mean the sum of (a) eighty-five percent
(85%) of the outstanding Eligible Accounts Receivable of the Company plus (b)
the aggregate value of Eligible Inventory (including Eligible In-Transit
Inventory) determined at the lower of cost or market on a first-in, first-out
basis multiplied by the Inventory Advance Percentage; provided that in no event
shall advances against Eligible In-Transit Inventory exceed the lesser of (A)
$5,000,000, or (B) forty percent (40%) of the aggregate value of Eligible
Inventory.
Business Day shall mean any day on which both the Agent and
The Chase Manhattan Bank are open for business.
Capital Lease shall mean any lease of property (whether real,
personal or mixed) which, in conformity with GAAP, is accounted for as a capital
lease on the balance sheet of the Company.
Chase Manhattan Rate shall mean the rate of interest per 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. (The prime rate is not
intended to be the lowest rate of interest charged by The Chase Manhattan Bank
to its borrowers).
Closing Date shall mean March 3, 2000.
Collateral shall mean all present and future Accounts,
Inventory, and Other Collateral of the Company.
Collateral Management Fee shall mean, for the initial term of
this Financing Agreement, the sum of $105,000 which shall be paid to the Agent
in accordance with Section 8.8 hereof to offset the expenses and costs of the
Agent in connection with record keeping, analyzing and evaluating the
Collateral. Following
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the initial term of this Financing Agreement, an annual
Collateral Management Fee shall be established in an amount as agreed between
the Agent and the Company.
Consolidated Balance Sheet shall mean a consolidated balance
sheet for the Company, prepared in accordance with GAAP and in a form acceptable
to the Agent.
Contract Rate shall mean the applicable rate of interest
computed as set forth in Section 8.1 of this Financing Agreement.
Credit Card Acknowledgments shall mean, individually and
collectively, the agreements by Credit Card Issuers or Credit Card Processors
who are parties to Credit Card Agreements in favor of Agent acknowledging
Agent's first priority security interest in the monies due and to become due to
the Company (including, without limitation, credits and reserves) under the
Credit Card Agreements, and agreeing to transfer such amounts to the Depository
Account established for such purposes, as the same now exist or may hereafter by
amended, modified, supplemented, extended, renewed, restated or replaced.
Credit Card Agreements shall mean all agreements now or
hereafter entered into by the Company with any Credit Card Issuer or any Credit
Card Processor, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
Credit Card Issuer shall mean any person (including, without
limitation, a bank) (other than the Company) who issues or whose members issue
credit cards, including, without limitation, MasterCard or VISA bank credit or
debit cards or other bank credit or debit cards issued through MasterCard
International, Inc., Visa, U.S.A., Inc. or Visa International and American
Express, Discover, Diners Club, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and other bank or non-bank credit
or debit cards.
Credit Card Processor shall mean any servicing or processing
agent or any factor or financial intermediary who facilitates, services,
processes or manages the credit authorization, billing, transfer and/or payment
procedures with respect to sales transactions of the Company involving credit
cards or debit card purchases by customers using credit cards or debit cards
issued by any Credit Card Issuer.
Credit Card Receivables shall mean collectively, (a) all
present and future rights of the Company to payment from any Credit Card Issuer,
Credit Card Processor or other third party arising from sales of goods or
rendition of services to customers who have purchased such goods or services
using a credit or debit card and (b) all present and future rights of the
Company to payment from any Credit Card Issuer, Credit Card Processor or other
third party in connection with the sale or transfer of Accounts arising pursuant
to the sale of goods or rendition of services to
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customers who have purchased
such goods or services using a credit card or a debit card.
Customarily Permitted Liens shall mean:
(a) liens of local or state authorities for franchise or other
like taxes provided the aggregate amount of such liens shall not exceed $250,000
in the aggregate at any one time;
(b) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, materialmen and other like liens imposed by law,
created in the ordinary course of business and for amounts not yet due (or which
are being contested in good faith by appropriate proceedings or other
appropriate actions which are sufficient to prevent imminent foreclosure of such
liens) and with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with GAAP; and
(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) in connection with 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 arising as a result of progress
payments under government contracts.
Default shall mean any event specified in Section 10 hereof,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, event or act, has been satisfied.
Default Rate of Interest shall mean a rate of interest per
annum equal to the lesser of (a) the Maximum Legal Rate or (b) the sum of (i)
two percent (2%) and (ii) the applicable Contract Rate based upon the applicable
increment over the Chase Manhattan Rate as determined under Section 8.1 hereof,
which the Agent on behalf of the Lenders shall be entitled to charge the Company
on all Obligations due the Agent on behalf of the Lenders by the Company to the
extent provided in Section 10.2 of this Financing Agreement. Agent on behalf of
Lenders acknowledges that no "breakage fee" will be charged to Borrower in the
event that Agent converts the interest rate on a Libor Loan to a rate of
interest based on the Chase Manhattan Rate as the result of an Event of Default.
Depository Accounts shall have the meaning specified in
Section 3.4 hereof.
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Documentation Fee shall mean the Agent's standard fees
relating to any and all modifications, waivers, releases, amendments or
additional collateral with respect to this Financing Agreement, the Collateral
and/or the Obligations.
Documents of Title shall mean all present and future documents
(as defined in the U.C.C.) including, without limitation all warehouse receipts,
bills of lading, shipping documents, chattel paper, instruments and similar
documents, all whether negotiable or not and all goods and Inventory relating
thereto and all cash and non-cash proceeds of the foregoing.
Early Termination Date shall mean any date (other than an
Anniversary Date) on which this Financing Agreement or the Line of Credit
(including the Letter of Credit Sub-Line) is terminated.
Early Termination Fee shall: (a) mean the fee the Agent is
entitled to charge the Company in the event the Line of Credit (including the
Letter of Credit Sub-Line) or this Financing Agreement is terminated on a date
prior to an Anniversary Date; and (b) be determined by multiplying the Line of
Credit (including the Letter of Credit Sub-Line) by (i) one percent (1.0%) if
the Early Termination Date occurs on or prior to one (1) year after the Closing
Date, and (ii) one-half percent (0.5%) if the Early Termination Date occurs
after one (1) year after the Closing Date but prior to two (2) years after the
Closing Date.
EBITDA shall mean, for any period, all earnings before all
interest, tax obligations, depreciation and amortization expense for said
period, all determined in accordance with GAAP on a basis consistent with the
latest audited financial statements of the Company but excluding noncash stock
option compensation charges and the effect of extraordinary and/or non-recurring
gains or losses for such period.
Eligible Accounts Receivable shall mean the gross amount of
the Company's Credit Card Receivables that are subject to a valid, first
priority and fully perfected security interest in favor of the Agent on behalf
of the Lenders, less, without duplication, the sum of (a) any returns,
discounts, claims, credits and allowances of any nature (whether issued, owing,
granted or outstanding), (b) accounts that remain unpaid for more than ten (10)
days from the date of the transaction, and (c) reserves for (i) amounts
representing historic returns, discounts, claims, credits and allowances, and
(ii) amounts as deemed necessary by the Agent in the exercise of reasonable
business judgment and which are customary in the commercial finance industry.
Eligible In-Transit Inventory shall mean the gross amount of
the Company's Eligible Inventory which is in transit to and/or from third
parties with respect to which the Company has title and that is subject to a
valid, first priority and fully perfected security interest in favor of the
Agent on behalf of the Lenders and which conforms to the warranties contained
herein and which at all times continues to
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be acceptable to the Agent in the
exercise of its reasonable business judgment, less, without duplication, (a)
goods in transit to and from third parties (other than the Company's agents or
warehouses) with respect to which there exists no proof of the Company's
ownership thereof reasonably acceptable to the Agent in conformity with
commercial finance industry standards, (b) Inventory in possession of a
warehouseman, bailee or other third party unless such warehouseman, bailee or
third party has executed a notice of security interest agreement (in form and
substance satisfactory to the Agent) and the Agent has taken all other action
required to perfect its security interest in such Inventory, (c) Inventory in
transit in excess of thirty (30) days, and (d) Inventory at vendors.
Eligible Inventory shall mean the gross amount of the
Company's Inventory that is subject to a valid, first priority and fully
perfected security interest in favor of the Agent on behalf of the Lenders and
which conforms to the warranties contained herein and which at all times
continues to be acceptable to the Agent in the exercise of its reasonable
business judgment, including the Eligible In-Transit Inventory, less, without
duplication, any (a) work-in-process, (b) supplies, (c) goods not present in the
United States of America, (d) goods returned or rejected by the Company's
customers other than goods that are undamaged and resaleable in the normal
course of business, (e) goods to be returned to the Company's suppliers, (f)
goods in transit to and from third parties (other than the Company's agents or
warehouses) with respect to which there exists no proof of the Company's
ownership thereof reasonably acceptable to the Agent in conformity with
commercial finance industry standards, (g) Inventory in possession of a
warehouseman, bailee or other third party unless such warehouseman, bailee or
third party has executed a notice of security interest agreement (in form and
substance satisfactory to the Agent) and the Agent has taken all other action
required to perfect its security interest in such Inventory, and (h) any
reserves required by the Agent in its reasonable discretion for special order
goods, market value declines, shrinkage, slow-moving, damaged or obsolete goods,
and ▇▇▇▇ and hold (deferred shipment) or consignment sales to the extent that
Company has not already taken reserves for such in its reports to Agent.
Equipment shall mean all present and hereafter acquired
equipment (as defined in the U.C.C.) including, without limitation, all
machinery, equipment, furnishings and fixtures, and all additions, substitutions
and replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all proceeds of whatever sort.
ERISA shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time and the rules and regulations promulgated
thereunder from time to time.
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Event(s) of Default shall have the meaning provided for
in Section 10 of this Financing Agreement.
Executive Officers shall mean the Chairman, President, Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, Executive
Vice President(s), Senior Vice President(s), Treasurer, Controller and Secretary
of the Company.
Financing Agreement, hereof, hereto, hereunder and words of
similar meaning shall mean this Financing Agreement including any exhibits or
schedules, as such Financing Agreement may from time to time be amended,
modified or supplemented.
GAAP shall mean generally accepted accounting principles in
the United States of America as in effect from time to time and for the period
as to which such accounting principles are to apply.
General Intangibles shall have the meaning set forth in the
U.C.C. and shall include, without limitation, all present and future right,
title and interest in and to all trade names, Trademarks (together with the
goodwill associated therewith), Patents, licenses, customer lists, distribution
agreements, supply agreements, indemnification rights and tax refunds, together
with all monies and claims for monies now or hereafter due and payable in
connection with any of the foregoing or otherwise, and all cash and non-cash
proceeds thereof.
Indebtedness shall mean, without duplication, all liabilities,
contingent or otherwise, which are any of the following: (a) obligations in
respect of money (borrowed or otherwise) or for the deferred purchase price of
property, services or assets, other than Inventory, or (b) lease obligations
which, in accordance with GAAP, have been, or which should be capitalized.
Inventory shall mean all of the Company's present and
hereafter acquired inventory (as defined in the U.C.C.), and all additions,
substitutions and replacements thereof, wherever located, together with all
General Intangibles and materials used or usable in processing, packaging or
shipping same and all cash and noncash proceeds thereof.
Inventory Advance Percentage shall mean the lesser of (a)
seventy percent (70%) of the aggregate value of Eligible Inventory or (b) ninety
percent (90%) of the Net Orderly Liquidation Value of the Inventory as a
percentage of the total Inventory as determined by the most recent Inventory
appraisal, as provided for in Section 7.13 hereof.
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Investment Property shall mean all of the Company's present
and hereafter acquired securities, securities entitlements, securities accounts
and other investment property (as such terms are defined in the U.C.C.).
Issuing Bank shall mean the bank issuing Letters of Credit for
the account of the Company.
Letters of Credit shall mean all letters of credit issued
hereunder with the assistance of the Agent on behalf of the Lenders by the
Issuing Bank for or on behalf of the Company.
Letter of Credit Guaranty shall mean the guaranty delivered by
the Agent on behalf of the Lenders to the Issuing Bank of the Company's
reimbursement obligation under the Issuing Bank's reimbursement agreement,
application for letter of credit or other like document.
Letter of Credit Guaranty Fee shall mean the fee the Agent on
behalf of the Lenders may charge the Company under Section 8.3 of this Financing
Agreement for: (a) issuing the Letter of Credit Guaranty or (b) otherwise aiding
the Company in obtaining Letters of Credit.
Letter of Credit Sub-Line shall mean $5,000,000 in the
aggregate.
Libor shall mean at any time of determination, and subject to
availability, for each Libor Period, the highest of the applicable London
Interbank Offered rate paid in London on dollar deposits from other banks for
such Libor Period as (a) quoted by The Chase Manhattan Bank, (b) 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 or (c) determined by
the Agent based upon information presented on Telerate Systems at Page 3750 as
of 11:00 a.m. (London Time).
Libor Loan shall mean that portion of the Revolving Loans for
which the Company has elected to use Libor for interest rate computations.
Libor Period shall mean the Libor for one month, two month,
three month or six month U.S. dollar deposits, as selected by the Company.
Line of Credit shall mean the commitment of the Lenders to
make Revolving Loans pursuant to Section 3 of this Financing Agreement and to
assist the Company in opening Letters of Credit pursuant to Section 5 of this
Financing Agreement, in the aggregate amount of up to $50,000,000.
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Line of Credit Fee shall mean the fee due the Agent for the
benefit of the Lenders at the end of each month for the Line of Credit,
determined by multiplying the difference between (a) the Line of Credit and (b)
the sum of (i) the average daily balance of the Revolving Loans plus (ii) the
average daily balance of Letters of Credit for said month by one-eighth percent
(0.125%) per annum for the number of days in said month.
Loan Facility Fee shall mean the fee payable to the Agent for
the benefit of the Lenders in accordance with, and pursuant to, the provisions
of Section 8.7 of this Financing Agreement.
Maximum Legal Rate shall mean the highest maximum lawful
interest rate which may be contracted for, charged, taken, received or reserved
under this Financing Agreement by the Agent and/or the Lenders in accordance
with applicable state or federal law, taking into account all items contracted
for, charged or received in connection with the Obligations evidenced hereby
which are treated as interest under the applicable state or federal law, as such
rate may change from time to time.
Net Orderly Liquidation Value shall mean the orderly
liquidation value, as determined pursuant to Section 7.13 hereof, after
deduction of associated costs, fees and liquidation expenses.
Obligations shall mean all loans and advances made or to be
made by the Agent and/or the Lenders to the Company or to others for the
Company's account (including, without limitation, all Revolving Loans and
Letters of Credit); any and all indebtedness and obligations which may at any
time be owing by the Company to the Agent and/or the Lenders and that arise
under this Financing Agreement, as it may be amended, renewed, supplemented or
otherwise modified from time to time, whether now in existence or incurred by
the Company from time to time hereafter; whether secured by pledge, lien upon or
security interest in any of 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, joint or several, matured or unmatured,
direct or indirect and whether the Company is liable to the Agent and/or the
Lenders for such indebtedness as principal, surety, endorser, guarantor or
otherwise. Obligations shall also include indebtedness owing to the Agent and/or
the Lenders by the Company under this Financing Agreement or under any other
agreement or arrangement now or hereafter entered into between the Company and
the Agent and/or the Lenders relating to this Financing Agreement; indebtedness
or obligations incurred by, or imposed on, the Agent and/or the Lenders as a
result of environmental claims (other than as a result of actions of the Agent
and/or the Lenders) arising out of the Company's operation, premises or waste
disposal practices or sites; the Company's liability to the Agent and/or the
Lenders as maker or endorser on any promissory note or other instrument for the
payment of money; the Company's
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liability to the Agent and/or the Lenders under
any instrument of guaranty or indemnity, or arising under any guaranty,
endorsement or undertaking which the Agent and/or the Lenders may make or issue
to others for the Company's account, including any accommodation extended with
respect to applications for Letters of Credit, the Agent's (on behalf of the
Lenders) acceptance of drafts or the Agent's (on behalf of the Lenders)
endorsement of notes or other instruments for the Company's account and benefit.
Other Collateral shall mean (a) all now owned and hereafter
acquired deposit accounts maintained by or on behalf of the Company with any
bank or financial institution in which any proceeds of the Accounts or Inventory
are deposited; (b) all of the Company's cash and other monies and property in
the possession or control of the Agent and/or the Lenders; (c) all of the
Company's books, records, ledger cards, disks and related data processing
software at any time evidencing or containing information relating to any of the
Collateral or otherwise necessary or helpful in the collection thereof or
realization thereon; and (d) all cash and non-cash proceeds of the foregoing.
Out-of-Pocket Expenses shall mean all of the Agent's present
and future expenses incurred relative to this Financing Agreement, whether
incurred heretofore or hereafter, which expenses shall include, without being
limited to, the cost of record searches, all appraisal fees, third party field
examination fees, 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 and/or the Lenders due to "insufficient funds" of deposited
checks and the Agent's and/or the Lenders' standard fee relating thereto, any
amounts paid by the Agent on behalf of the Lenders, 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, travel, lodging and similar expenses of the
Agent's personnel inspecting and monitoring the Collateral from time to time
hereunder, local counsel fees, fees and taxes relative to the filing of
financing statements, and all attorneys' fees, expenses, costs and fees set
forth in Section 10.3 of this Financing Agreement.
Patents shall mean all present and hereafter acquired patents
and/or patent rights of the Company and all cash and non-cash proceeds thereof.
Permitted Encumbrances shall mean: (a) liens existing on the
date hereof on specific items of Equipment and listed on Schedule 1 hereto (but
only to the extent such liens do not encumber the Collateral) and other liens
expressly permitted, or consented to, by the Agent; (b) Permitted Purchase Money
Liens; (c) Customarily Permitted Liens; (d) liens created in connection with
sale leasebacks or loans secured
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by the Company's equipment to the extent that
such transactions constitute Permitted Indebtedness hereunder; (e) liens granted
the Agent by the Company; (f) liens of judgment creditors provided such liens do
not exceed, in the aggregate, at any time, $200,000 (other than liens bonded or
insured to the reasonable satisfaction of the Agent); and (g) liens for taxes
not yet due and payable or which are being diligently contested in good faith by
the Company by appropriate proceedings for which the Company has posted a bond
in the required amount or otherwise has taken action necessary to stay
enforcement of such lien. In no event shall any Collateral be subject to
foreclosure proceedings or, in the Agent's discretion, subject to any loss of
perfection or priority in favor of the Agent and/or the Lenders.
Permitted Indebtedness shall mean (a) current indebtedness
maturing in less than one year and incurred in the ordinary course of business
for raw materials, supplies, equipment, services, taxes or labor; (b) the
indebtedness secured by the Permitted Purchase Money Liens; (c) indebtedness
arising under the Letters of Credit and this Financing Agreement; (d) deferred
taxes and other expenses incurred in the ordinary course of business; (e)
Subordinated Debt, if unsecured and subject to a subordination agreement in form
and substance satisfactory to the Agent; (f) indebtedness arising from sale
leaseback transactions or loans secured by the Company's equipment, but only if
(i) the Company gives prior written notice to the Agent of each such
transaction, (ii) an Event of Default has not occurred and is continuing at the
time any such transaction is entered into, (iii) such indebtedness does not
exceed the cost of the Company's equipment being given as collateral for such
indebtedness, and (iv) the transaction does not involve the Company's intangible
assets (including, but not limited to, trademarks, trade names and trade
styles); and (g) other indebtedness existing on the date of execution of this
Financing Agreement and listed in the most recent financial statement delivered
to the Agent and the Lenders or otherwise disclosed to the Agent in writing; and
(h) indebtedness secured by liens on real estate acquired after the date of this
Financing Agreement, provided that (i) each such lien shall attach only to the
real estate acquired, (ii) the aggregate amount of such real estate debt shall
not, at any time, exceed $10,000,000, (iii) the Company shall give the Agent
prior written notice before incurring any such real estate indebtedness, and
(iv) no Event of Default shall have occurred and be continuing at the time the
Company incurs any such indebtedness.
Permitted Purchase Money Liens shall mean liens on any item of
equipment acquired after the date of this Financing Agreement provided that (a)
each such lien shall attach only to the item(s) of equipment to be acquired, (b)
the Company shall give the Agent prior written notice before incurring any such
indebtedness, and (c) no Event of Default shall have occurred and be continuing
at the time the Company incurs any such indebtedness.
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Required Lenders shall mean Lenders holding more than fifty
percent (50%) of the outstanding loans, advances, extensions of credit and
commitments to the Company hereunder.
Revolving Loans shall mean the loans and advances made, from
time to time, to or for the account of the Company by the Agent on behalf of the
Lenders pursuant to Section 3 of this Financing Agreement.
Revolving Loan Account shall have the meaning specified in
Section 3.6 hereof.
Revolving Loan Promissory Note shall mean the promissory note
in the form of Exhibit A hereto executed by the Company to evidence the
Revolving Loans made by the Agent on behalf of the Lenders to the Company
pursuant to Section 3 hereof.
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 (a) the Agent
shall not have, as Agent, any money at risk and (b) 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.
Subordinated Debt shall mean unsecured debt due (and the notes
evidencing such) which has been subordinated, by a Subordination Agreement (in
form and substance reasonably satisfactory to the Agent), to the prior payment
and satisfaction of the Obligations of the Company to the Agent and/or the
Lenders, including without limitation the debt of the Company to American
Endeavour Fund Ltd. and Landmark Secondary Partners IX, L.P., or their permitted
assigns.
Subordination Agreement shall mean the agreement among the
Company, the then holder of Subordinated Debt and the Agent pursuant to which
Subordinated Debt of such holder is subordinated to the prior payment and
satisfaction of the Company's Obligations to the Agent and the Lenders (in form
and substance reasonably satisfactory to the Agent).
Tangible Net Worth shall mean, as determined in accordance
with GAAP, the difference between (i) the assets of the Company after deducting
adequate reserves in each case where, a reserve is proper and (ii) all
Indebtedness of the Company other than Subordinated Debt; provided, however,
that notwithstanding the foregoing in no event shall there be included as such
assets: intangibles, goodwill, patents, trademarks, trade names, copyrights,
licenses, goodwill, receivables from
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affiliates, directors, officers or
employees, deferred charges or treasury stock or any securities or Indebtedness
of the Company or any other securities unless the same are readily marketable in
the United States of America or entitled to be used as a credit against federal
income tax liabilities, and any other assets designated from time to time by the
Agent, in its reasonable credit judgment.
Trademarks shall mean all present and hereafter acquired
trademarks and/or trademark rights (together with the goodwill associated
therewith) and all cash and non-cash proceeds thereof.
U.C.C. shall mean the Uniform Commercial Code as in effect
from time to time in the State of California. Terms defined by reference to
the U.C.C. in this Financing Agreement shall be deemed amended without
any action of the parties hereto when the U.C.C. is amended, including
without limitation when revised Division 9 of the U.C.C. becomes
effective on July 1, 2001.
SECTION 2 Conditions Precedent
2.1 The obligation of the Agent and the Lenders to make loans hereunder is
subject to the satisfaction of, or waiver of, immediately prior to or
concurrently with the making of such loans, the following conditions precedent:
(a) Lien Searches - The Agent shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to the Agent for all locations presently
occupied or used by the Company.
(b) Casualty Insurance - The Company shall have delivered to the Agent
evidence reasonably satisfactory to the Agent that casualty insurance policies
listing the Agent, for the benefit of the Lenders, as loss payee or mortgagee,
as the case may be, are in full force and effect, all as set forth in Section
7.5 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 for
the benefit of the Lenders a first and exclusive perfected security interest in
the Collateral (subject to Permitted Encumbrances) with respect to which a
security interest may be perfected by a filing under the U.C.C. shall have been
properly filed in each office in each jurisdiction required in order to create
in favor of the Agent for the benefit of the Lenders a perfected lien on the
Collateral. The Agent shall have received acknowledgment 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.
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(d) Opinion - Counsel for the Company shall have delivered to the Agent an
opinion satisfactory to counsel for the Agent opining, inter alia, that, subject
to the (i) filing, priority and remedies provisions of the Uniform Commercial
Code, (ii) the provisions of the Bankruptcy Code, insolvency statutes or other
like laws, (iii) the equity powers of a court of law and (iv) such other matters
as may be agreed upon with the Agent: (A) this Financing Agreement and all other
loan documents of the Company are (1) valid, binding and enforceable according
to their terms, (2) are duly authorized and (3) do not violate any terms,
provisions, representations or covenants in the charter or by-laws of the
Company or, to the best knowledge of such counsel, of any loan agreement,
mortgage, deed of trust, note, security or pledge agreement or indenture to
which the Company is a signatory or by which the Company or its assets are
bound; and (B) the provisions of all federal and state securities laws and the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Anti-Trust Improvements Act have been fully complied with or
that compliance is not legally required.
(e) Additional Documents - The Company shall have executed and delivered to
the Agent all loan documents necessary to consummate the lending arrangement
contemplated hereunder.
(f) Subordination Agreements - American Endeavour Fund Ltd., Landmark
Secondary Partners IX, L.P. and any other holder of Subordinated Debt shall have
executed and delivered to the Agent a Subordination Agreement, in form and
substance satisfactory to the Agent, subordinating the debt due to each of them
by the Company to the prior payment and satisfaction of the Obligations of the
Company to the Agent and/or the Lenders.
(g) Landlord Waivers - The Agent shall have received satisfactory landlord
waivers from ▇▇▇▇▇▇ San Diego Corporation and Pacific Gulf Properties.
(h) Bailee Agreements - The Agent shall have received satisfactory bailee
agreements from FMI International and Streamline Shippers Association.
(i) Board Resolution - The Agent shall have received a copy of the
resolutions of the Board of Directors of the Company authorizing the execution,
delivery and performance of this Financing Agreement any related agreements, in
each case certified by the Secretary or Assistant Secretary of the Company (as
the case may be) as of the date hereof, together with a certificate of the
Secretary or Assistant Secretary of the Company as to the incumbency and
signature of the officers of the Company executing such agreements and any
certificate or other documents to be delivered by them pursuant hereto, together
with evidence of the incumbency of such Secretary or Assistant Secretary.
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(j) Corporate Organization - The Agent shall have received (i) a copy of
the Certificate of Incorporation of the Company certified by the Secretary of
State of its incorporation, and (ii) a copy of the By-Laws (as amended through
the date hereof) of the Company certified by the Secretary or Assistant
Secretary of the Company.
(k) Officer's Certificate - The Agent 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 Default or Event of Default has occurred.
(l) Absence of Default and Material Adverse Change - No Default, Event of
Default or material adverse change in the financial condition, business,
prospects, profits, operations or assets of the Company shall have occurred.
(m) Legal Restraints/Litigation - At the date of execution of this
Financing Agreement, there shall be no (i) 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 or federal government arising out of this Financing Agreement, (ii)
injunction, writ or restraining order restraining or prohibiting the
consummation of the financing arrangements contemplated under this Financing
Agreement or (iii) to the best knowledge of the Company, suit, action,
investigation or proceeding (judicial or administrative) pending or threatened
against the Company or its assets, which, in the opinion of the Agent if
adversely determined could have a material adverse effect on the business,
operation, assets, financial condition or Collateral of the Company.
(n) Disbursement Authorization - The Company shall have delivered to the
Agent all information necessary for 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 form acceptable to the Agent.
(o) Examination & Verification - The Agent shall have completed to the
satisfaction of the Agent an examination and verification of the Accounts,
Inventory, and books and records of the Company which examination shall indicate
that, after giving effect to all loans, advances and extensions of credit to be
made at closing, the Company shall have an opening additional Availability of
not less than $10,000,000 all as more fully required by the Agent Commitment
Letter. It is understood that such requirement contemplates that all debts,
obligations and payables are current.
-15-
(p) Cash Budget Projections - The Agent shall have received, reviewed and
be satisfied with a 12 month cash budget projection prepared by the Company in
the form provided by the Agent.
(q) Depository Accounts - The Company shall have established a system of
bank accounts with respect to the collection of Accounts and the deposit of
proceeds of Inventory and other Collateral as shall be acceptable to the Agent
in all respects. In addition, the Company, the applicable financial institution
holding the Depositary Account, and the Agent shall (and any such future
financial institution shall in the future) enter into such blockage and control
agreements as may be acceptable to Agent.
(r) Existing Revolving Credit Agreement - (i) The Company's existing credit
agreement with FINOVA Capital Corporation shall be terminated, (ii) all loans
and obligations of the Company thereunder shall be paid or satisfied in full
utilizing the proceeds of the initial Revolving Loans to be made under this
Financing Agreement, and (iii) all liens upon or security interest in favor of
FINOVA Capital Corporation in connection therewith shall be terminated and/or
released upon such payment.
(s) The Agent Commitment Letter - The Company shall have fully complied, to
the satisfaction of the Agent, with all of the terms and conditions of the Agent
Commitment Letter.
(t) Credit Card Acknowledgments and Credit Card Agreements - The Agent
shall have received, in form and content acceptable to it, the Credit Card
Acknowledgments and the Credit Card Agreements.
2.2 Upon the execution of this Financing Agreement and the initial disbursement
of loans hereunder, all of the above Conditions Precedent set forth in Section
2.1 shall have been deemed satisfied except as the Company and the Agent shall
otherwise agree in a separate writing.
SECTION 3 Revolving Loans
3.1 The Lenders agree, subject to the terms and conditions of this Financing
Agreement from time to time, and within the Availability, but subject to the
Lenders' right to make "overadvances", to make loans and advances to the Company
on a revolving basis (i.e. subject to the limitations set forth herein, the
Company may borrow, repay and re-borrow Revolving Loans). Each request shall
constitute, unless otherwise disclosed in writing to the Agent and the Lenders a
representation and warranty by the Company that after giving effect to the
requested advance, no Default or Event of Default has occurred and such
requested Revolving Loan is within the Availability. All requests for loans and
advances must be received by an officer of the
-16-
Agent no later than 1:00 p.m.,
New York time, of 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 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 assignment and security interest in the
Company's Accounts, the Company will, upon the creation of Accounts, execute and
deliver to the Agent in such form and manner as the Agent may reasonably
require, solely for the Agent's convenience in maintaining records of
Collateral, such confirmatory schedules of Accounts as the Agent may reasonably
request, and such other appropriate reports designating, identifying and
describing the Accounts as the Agent may reasonably require. In addition, upon
the Agent's request the Company shall provide the Agent with copies of
agreements (including Credit Card Agreements) and such other documentation and
information relating to said Accounts and other Collateral as the Agent may
reasonably require. Failure to provide the Agent with any of the foregoing shall
in no way affect, diminish, modify or otherwise limit the security interests
granted herein. The Company hereby authorizes the Agent to regard the Company's
printed name or rubber stamp signature on assignment schedules or invoices as
the equivalent of a manual signature by one of the Company's authorized officers
or agents.
3.3 The Company hereby represents and warrants that: (a) each Credit Card
Receivable is based on an actual and bona fide sale and delivery of goods or
rendition of services to customers, made by the Company in the ordinary course
of its business; (b) the Inventory being sold and the Credit Card Receivables
created are the exclusive property of the Company and are not and shall not be
subject to any lien, consignment arrangement, encumbrance, security interest or
financing statement whatsoever, other than the Permitted Encumbrances; (c) the
invoices evidencing such Credit Card Receivables are in the name of the Company;
and (d) the customers of the Company have accepted the goods or services, owe
and are obligated to pay the full amounts stated in the invoices according to
their terms, without dispute, offset, defense, counterclaim or contra, except
for disputes and other matters arising in the ordinary course of business. The
Company confirms to the Agent that any and all taxes or fees relating to its
business, its sales, the Accounts or goods relating thereto, are its sole
responsibility and that same will be paid by the Company when due and that none
of said taxes or fees represent a lien on or claim against the Accounts. The
Company also warrants and represents that it is a duly and validly existing
corporation and is qualified in all states where the failure to so qualify would
have a adverse effect on the business of the Company or the ability of the
Company to enforce collection of Accounts due from customers residing in that
state. The Company agrees to maintain such books and records regarding Accounts
as the Agent may reasonably require and agrees that the books and records of the
Company will reflect the Agent's interest in
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the Accounts. All of the books and
records of the Company will be available to the Agent upon reasonable advance
notice during normal business hours (except that no advance notice need be given
if an Event of Default or Default has occurred and has not been waived by the
Agent or cured as allowed hereunder), including any records handled or
maintained for the Company by any other company or entity.
3.4 All checks, cash, notes or other instruments or property received by the
Companies from collections on Accounts or from the sale or other disposition of
Inventory and Other Collateral shall be held by the Company in trust for the
benefit of the Agent and Lenders, separate from the Company's other property and
funds and shall immediately be deposited in the Depository Accounts. Such
Depository Accounts shall be subject to blockage and control agreements
satisfactory to Agent.
The Company may and will enforce, collect and receive all amounts owing
on the Accounts and/or received from sales or other dispositions of Inventory at
the Company's expense, and may manage and direct its Depository Accounts;
however, such privilege shall terminate automatically upon the institution by or
against the Company of any proceeding under any bankruptcy or insolvency law or,
at the election of the Agent in its sole discretion: (x) if the Availability
(computed without regard to the $50,000,000 Line of Credit maximum Availability)
is at any time less than $10,000,000 and at all times thereafter until such time
the Company maintains minimum Availability (computed without regard to the
$50,000,000 Line of Credit maximum Availability) of $10,000,000 for a period of
ninety (90) days, or (y) upon the occurrence of any other Event of Default and
until such Event of Default is waived in writing by the Agent or cured to the
Agent's satisfaction.
Upon the occurrence of an event under (x) or (y) immediately above,
Agent shall have the right, at its option, to notify the financial institutions
where such Depository Accounts are located and institute its blockage and
control rights with respect to such Depository Accounts. If the Company
thereafter maintains an Availability of more than $10,000,000 for a period of
not less than ninety (90) consecutive days or, if applicable, such Event of
default has been waived in writing by the Agent or cured to the Agent's
satisfaction, upon the Company's request, Agent will authorize the Company to
manage and direct such Depository Accounts.
All amounts received by the Agent in payment of Accounts
("Collections") will be credited to the Company's account upon the Agent's
receipt of "good funds" at the Agent's bank account in New York, New York on the
Business Day of receipt if received no later than 1:00 p.m. or on the next
succeeding Business Day if received after 1:00 p.m. No checks, drafts or other
instrument received by the Agent shall constitute final payment to the Agent
unless and until such instruments have actually been collected.
-18-
3.5 The Company agrees to notify the Agent promptly of any matters materially
affecting the value, enforceability or collectibility of any Account and of all
material customer disputes, offsets, defenses, counterclaims, returns,
rejections and all reclaimed or repossessed merchandise or goods. The Company
agrees to issue credit memoranda promptly (with duplicates to the Agent upon
request after the occurrence of an Event of Default) upon accepting returns or
granting allowances, and may continue to do so until the Agent has notified the
Company that an Event of Default has occurred and that all future credits or
allowances are to be made only after the Agent's prior written approval.
3.6 The Agent shall maintain a separate account on its books in the Company's
name (the "Revolving Loan Account") in which the Company will be charged with
loans and advances made by the Agent to it 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 by or
for the Agent of any of the rights or powers herein conferred upon the Agent, or
in the prosecution or defense of any action or proceeding to enforce or protect
any rights of the Agent in connection with this Financing Agreement or the
Collateral assigned hereunder, or any Obligations owing to the Agent and the
Lenders by the Company. The Company will be credited with all amounts received
by the Agent and/or the Lenders from the Company or from others for the
Company's account, including, as set forth above, all amounts received by the
Agent in payment of assigned Accounts and such amounts will be applied to
payment of the Obligations. In no event shall prior recourse to any Accounts or
other security granted to or by the Company be a prerequisite to the Agent's
right to demand payment of any Obligation. Further, it is understood that the
Agent and/or the Lenders shall have no obligation whatsoever to perform in any
respect any of the Company's contracts or obligations relating to the Accounts.
3.7 After the end of each month, the Agent shall promptly send the Company a
statement showing in reasonable detail the accounting for the charges, loans,
advances and other transactions occurring between the Agent and the Company
during that month. The monthly statements shall be deemed correct and binding
upon the Company and shall constitute an account stated between the Company and
the Agent unless the Agent receives a written statement of the exceptions within
thirty (30) days of the date of the monthly statement.
3.8 In the event that the sum of (a) the outstanding balance of Revolving Loans
and (b) the outstanding balance of Letters of Credit exceeds the maximum amount
thereof available under Sections 3 and 5 hereof (herein the amount of any such
excess shall be referred to as the "Excess") such Excess shall be due and
payable to the Agent for the benefit of the Lenders immediately upon the Agent's
demand therefor.
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SECTION 4 Intentionally Left Blank
SECTION 5 Letters of Credit
In order to assist the Company in establishing or opening
documentary and/or standby Letters of Credit with an Issuing Bank to cover the
purchase of Inventory and for other purposes approved by the Agent, the Company
has requested the Agent 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 a
Letter of Credit Guaranty, thereby lending the Agent's and the Lenders' credit
to the Company and the Agent and the Lenders have agreed to do so. These
arrangements shall be handled by the Agent subject to the terms and conditions
set forth below.
5.1 Within the Line of Credit and Availability, the Agent and the Lenders shall
assist the Company in obtaining Letter(s) of Credit in an aggregate amount
outstanding at any one time equal to or less than the Letter of Credit Sub-Line.
The Agent's and the Lenders' assistance for amounts in excess of the limitation
set forth herein shall at all times and in all respects be in the Agent's sole
discretion. It is understood that the form and purpose of each Letter of Credit,
and any modifications thereof, must be acceptable to the Agent in its reasonable
business judgment. Any and all outstanding Letters of Credit shall be treated as
a Revolving Loan for Availability purposes. Notwithstanding anything herein to
the contrary, upon the occurrence of a Default and/or Event of Default, the
Agent's and Lenders' assistance in connection with any Letter of Credit Guaranty
shall be in the Agent's sole discretion unless such Default and/or Event of
Default is cured to the Agent's satisfaction or waived by the Agent in writing.
5.2 The Agent shall have the right, without notice to the Company, to charge the
Company's Revolving Loan Account on the Agent's books with the amount of any and
all indebtedness, liability or obligation of any kind incurred by the Agent
under any Letter of Credit Guaranty at the earlier of (a) payment by the Agent
under such Letter of Credit Guaranty, or (b) the occurrence of an Event of
Default that has not been waived in writing by the Agent or cured to the Agent's
satisfaction. Any amount charged to Company's Revolving Loan Account shall be
deemed a Revolving Loan hereunder and shall incur interest at the rate provided
in Section 8.1 of this Financing Agreement.
5.3 The Company unconditionally indemnifies the Agent and the Lenders and holds
the Agent and the Lenders harmless from any and all loss, claim or liability
incurred by the Agent and/or the Lenders arising from any transactions or
occurrences relating to Letters of Credit established or opened for the
Company's
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account, the collateral relating thereto and any drafts or acceptances
thereunder, and all Obligations thereunder, including any such loss or claim due
to any action taken by any Issuing Bank, other than for any such loss, claim or
liability arising out of the gross negligence or willful misconduct by the Agent
and/or the Lenders under the Letters of Credit Guaranty. The Company further
agrees to hold the Agent and the Lenders harmless from any errors or omission,
negligence or misconduct by the Issuing Bank. The Company's unconditional
obligation to the Agent and the Lenders hereunder shall not be modified or
diminished for any reason or in any manner whatsoever, other than as a result of
the Agent's and/or the Lenders' gross negligence or willful misconduct. Subject
to this Section 5.3, the Company agrees that any charges incurred by the Agent
and/or the Lenders for the Company's account by the Issuing Bank shall be
conclusive on the Company, the Agent and the Lenders and may be charged to the
Company's Revolving Loan Account.
5.4 In connection with the issuance of Letters of Credit, the Agent and/or the
Lenders shall not be responsible for: (a) the existence, character, quality,
quantity, condition, packing, value or delivery of the goods purporting to be
represented by any documents; (b) any difference or variation in the character,
quality, quantity, condition, packing, value or delivery of the goods from that
expressed in the Letter of Credit documents; (c) 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; (d) the time, place, manner or order in
which shipment is made; (e) 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; (f) any deviation from instructions; (g) delay, default, or fraud by
the shipper and/or anyone else in connection with the Collateral or the shipping
thereof; or (h) any breach of contract between the shipper or vendors and the
Company. Furthermore, without being limited by the foregoing, the Agent and/or
the Lenders shall not be responsible for any act or omission in connection with
the issuance of any Letter of Credit with respect to or in connection with any
Collateral.
5.5 Except as otherwise provided herein, the Company agrees that any action
taken by the Agent and/or the Lenders, 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 be binding
on the Company and shall not put the Agent and/or the Lenders in any resulting
liability to the Company. In furtherance thereof, but subject to Section 5.6,
the Agent shall have the full right and authority to clear and resolve any
questions of non-compliance of Letter of Credit documents; to give any
instructions as to acceptance or rejection of any Letter of Credit 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 with the consent of the Company (such consent
-21-
not
to be unreasonably withheld and being needed only if no Event of Default has
occurred and is continuing) 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. Such actions may
be taken in the Agent's sole name, and the Issuing Bank shall be entitled to
comply with and honor any and all such documents or instruments executed by or
received solely from the Agent.
5.6 Without the Agent's express consent and endorsement in writing, the Company
agrees: (a) not to execute any applications for steamship or airway guaranties,
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; or 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; and (b) after the
occurrence of an Event of Default which is not cured within any applicable grace
period, if any, or waived by the Agent, not to (i) clear and resolve any
questions of non-compliance of Letter of Credit documents, or (ii) give any
instructions as to acceptances or rejection of any Letter of Credit documents or
goods.
5.7 The Company agrees that any necessary import, export or other licenses or
certificates for the import or handling of the Collateral will have been
promptly procured; all foreign and domestic governmental laws and regulations in
regard to the shipment and importation of the Collateral, or the financing
thereof will have been promptly and fully complied with; and any certificates in
that regard that the Agent may at any time request will be promptly furnished.
In this connection, the Company warrants and represents that all shipments made
under any such 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. 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, city,
or other political subdivision, where the Collateral 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.
5.8 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
-22-
Agent for the benefit of the Lenders and shall be
in addition to any rights, remedies, duties or obligations contained herein.
SECTION 6 Collateral
6.1 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 and/or the Lenders
pursuant hereto, as well as to secure the payment in full of any other
Obligations, the Company hereby pledges and grants to the Agent for the benefit
of the Lenders a continuing general lien upon and security interest in all of
its:
(a) present and hereafter acquired Inventory;
(b) present and future Accounts; and
(c) present and future Other Collateral.
6.2 The security interests granted hereunder shall extend and attach to:
(a) All Collateral which is presently in existence and which is owned by
the Company or in which the Company has any interest, whether held by the
Company or others for its account; and
(b) All Inventory and any portion thereof which may be returned, rejected,
reclaimed or repossessed by either the Agent or the Company from the Company's
customers, as well as to all supplies, incidentals, packaging materials, labels,
trademarks and any other items which contribute to the finished goods, including
the sale, promotion or shipment thereof.
6.3 The Company agrees to safeguard, protect and hold all Inventory for the
Agent's account and make no disposition thereof except in the regular course of
the business of the Company as herein provided. Until the Agent has given the
Company notice to the contrary, as provided for below, any Inventory may be sold
and shipped by the Company to its customers in the ordinary course of the
Company's business, on open account and on terms currently being extended by the
Company to its customers, provided that, if required by Section 3.4 of this
Financing Agreement, all proceeds of all sales (including cash, accounts
receivable, checks, notes, Credit Card Receivables, instruments for the payment
of money and similar proceeds) shall be forthwith transferred, endorsed, and
turned over and delivered to the Agent for the benefit of the Lenders. The Agent
shall have the right to withdraw this permission at any time upon the occurrence
of an Event of Default and until such time as such Event of Default is waived or
cured to the Agent's satisfaction, in which event no further disposition shall
be made of the Inventory by the Company without the Agent's prior
-23-
written
approval. Upon the sale, exchange, or other disposition of Inventory, as herein
provided, the security interest in the Company's Inventory provided for herein
shall, without break in continuity and without further formality or act,
continue in, and attach to, all 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 shall have all of the rights of an unpaid seller,
including stoppage in transit, replevin, rescission and reclamation.
6.4 The Company agrees at its own cost and expense to keep its Equipment in as
good and substantial repair and condition, reasonable wear and tear excepted,
making any and all repairs and replacements when and where necessary. If an
Event of Default has occurred and is continuing, the Company also agrees to make
no disposition of Equipment unless the Company first obtains the prior written
approval of the Agent.
6.5 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 account
maintained in the Company's name on the books of the Agent may from time to time
be temporarily in a credit position, until the final payment in full to the
Agent and the Lenders of all Obligations and the termination of this Financing
Agreement. Any delay, or omission by the Agent and/or the Lenders to exercise
any right hereunder, shall not be deemed a waiver thereof, or be deemed a waiver
of any other right, unless such waiver 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.
6.6 To the extent that the Obligations are hereafter secured by any assets or
property other than the Collateral or by the guarantee, endorsement, assets or
property of any other person, then the Agent shall have the right in its sole
discretion to determine which rights, security, liens, security interests or
remedies the Agent shall at any time pursue, foreclose upon, relinquish,
subordinate, modify or take any other action with respect to, without in any way
modifying or affecting any of them, or any of the Agent's or the Lenders' rights
hereunder.
6.7 Any reserves or balances to the credit of the Company and any other property
or assets of the Company in the possession of the Agent and/or the Lenders 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
-24-
existing and future Obligations. The Agent may in its discretion charge
any or all of the Obligations to the Revolving Loan Account when due.
SECTION 7 Representations, Warranties and Covenants
7.1 The Company hereby warrants and represents and/or covenants that: (a) the
fair value of the Company's assets exceeds the book value of the Company's
liabilities; (b) the Company is generally able to pay its debts as they become
due and payable; (c) the Company does not have unreasonably small capital to
carry on its business as it is currently conducted absent extraordinary and
unforeseen circumstances; (d) Schedule 2 hereto correctly and completely sets
forth the Company's chief executive office, all of the Company's Collateral
locations and all trade names of the Company; (e) except for the Permitted
Encumbrances, the security interests granted herein constitute and shall at all
times constitute the first and only liens on the assets of the Company; (f)
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; (g) the Company will at its expense forever warrant and, at the Agent's
request, defend the same from any and all claims and demands of any other person
other than the Permitted Encumbrances; and (h) the Company will not grant,
create or permit to exist, any lien upon or security interest in the Collateral,
or any proceeds thereof, or in any other assets of the Company, including
without limitation the Equipment, General Intangibles, Investment Property or
real estate, or any proceeds thereof, in favor of any other person other than
the holders of the Permitted Encumbrances.
7.2 The Company agrees to maintain books and records pertaining to the
Collateral in such detail, form and scope as the Agent shall reasonably require.
The Company agrees that the Agent or its agents may enter upon the Company's
premises with reasonable notice (such notice not being required if an Event of
Default has occurred and is continuing) at any time during normal business
hours, and from time to time, for the purpose of inspecting the Collateral, and
any and all records pertaining thereto. The Company agrees to afford the Agent
prior written notice of any change in the location of any Collateral, other than
to locations, that as of the date hereof, are known to the Agent and at which
the Agent has filed financing statements and otherwise fully perfected its liens
thereon. The Company is also to advise the Agent promptly, in sufficient detail,
of any material adverse change relating to the type, quantity or quality of the
Collateral or the security interests granted to the Agent therein.
7.3 The Company agrees to: execute and deliver to the Agent, from time to time,
solely for the Agent's convenience in maintaining a record of the Collateral,
the loans, the Borrowing Base, Accounts and Inventory, such written
-25-
statements,
accounting reports, schedules and other information and documentation in the
form and with such frequency as the Agent may reasonably require.
Notwithstanding the foregoing, the Company shall deliver to Agent, on a weekly
basis (by Wednesday of the following week) during the months of November,
December and January, and on a monthly basis during the other months of the year
(by the fifteenth (15th) day of the following month), the reports described
below for the preceding week or month, as the case may be:
(a) a borrowing base report;
(b) a retail stock ledger report; and
(c) a report of Credit Card Receivables and Accounts.
Upon demand by the Agent, the Company shall provide the report listed above as
(c) on a weekly basis. At any time the Company's Availability is less than ten
million dollars ($10,000,000) (computed without regard to the $50,000,000 Line
of Credit maximum Availability) or upon the occurrence and during the
continuance of any Event of Default, the Company shall, upon demand by Agent,
provide the reports listed above as (a) and (b) on a weekly basis.
7.4 The Company agrees to comply with the requirements of all state and federal
laws in order to grant to the Agent valid and perfected first and only security
interests in the Collateral except as expressly provided herein. The Agent is
hereby authorized by the Company, to the extent permitted by applicable law, to
file any financing statements covering the Collateral whether or not the
Company's signature appears thereon. The Company agrees to do whatever the Agent
may reasonably request, from time to time, by way of: (a) filing notices of
liens, financing statements, amendments, renewals and continuations thereof; (b)
cooperating with the Agent's custodians; (c) keeping Collateral records; (d)
transferring proceeds of Collateral to the Agent's possession; and (e)
performing such further acts as the Agent may reasonably require in order to
effect the purposes of this Financing Agreement.
7.5 (a) The Company agrees to maintain insurance on the assets of the
Company, including the Inventory, under such policies of insurance, with such
insurance companies, in such reasonable amounts and covering such insurable
risks as are at all times reasonably satisfactory to the Agent. 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
for the benefit of the Lenders, in case of loss, under a standard
non-contributory "mortgagee", "lender" or "secured party" clause and are to
contain such other provisions as the Agent may require to fully protect the
Agent's interest in the Inventory and to any payments to be
-26-
made under such policies. All original policies or true copies thereof are to be
delivered to the Agent, with the loss payable endorsement with respect to
Inventory in the Agent's favor for the benefit of the Lenders, and shall provide
for not less than thirty (30) days prior written notice to the Agent of the
exercise of any right of cancellation. At the Company's request, or 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 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 or cured to the Agent's
satisfaction, 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,
to receive, receipt and give acquittance for any payments that may be payable
thereunder, 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 under any such insurance
policies.
(b) (i) In the event of any loss or damage by fire or
other casualty, insurance proceeds relating to Inventory shall reduce
the Revolving Loans.
(ii) The Company agrees to pay any reasonable costs,
fees or expenses which the Agent may reasonably incur in connection with this
Section 7.5.
7.6 The Company agrees to pay, when due, all taxes, assessments, claims and
other charges (herein "taxes") lawfully levied or assessed upon the Company or
the Company's assets, including the Collateral, and if such taxes remain unpaid
after the date fixed for the payment thereof unless such taxes are being
diligently contested in good faith by the Company by appropriate proceedings or
if any lien shall be claimed thereunder (a) for taxes due the United States of
America or (b) which in the Agent's opinion might create a valid obligation
having priority over the rights granted to the Agent herein, then the Agent may,
on the Company's behalf, pay such taxes, and the amount thereof shall be an
Obligation secured hereby and due to the Agent on demand.
7.7 The Company: (a) agrees to comply with all acts, rules, regulations and
orders of any legislative, administrative or judicial body or official, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the Company's
business; 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, in the Agent's reasonable opinion, materially and adversely effect the
Agent's rights or priority in the Collateral; and (b) agrees to comply with all
environmental statutes,
-27-
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 property and operation of its business, which the failure to comply
with would have a material and adverse impact on the Collateral, or any material
part thereof, or on the operation of the business of the Company. The Company
hereby indemnifies the Agent and the Lenders and agrees to defend and hold the
Agent and the Lenders harmless from and against any and all loss, damage, claim,
liability, injury or expense which the Agent and/or the Lenders may sustain or
incur (other than as a result of actions of the Agent and/or the Lenders) in
connection with: any claim or expense asserted against the Agent and/or the
Lenders as a result of any environmental pollution, hazardous material or
environmental clean-up of the Company's real property; or any claim or expense
which results from the Company's operations (including, but not limited to, the
Company's off-site disposal practices) and the Company further agrees that this
indemnification shall survive termination of this Financing Agreement as well as
the payment of all Obligations or amounts payable hereunder. The Company shall
not be deemed to have breached any provision of this Section 7.7 if (x) the
failure to comply with the requirements of this Section 7.7 resulted from good
faith error or innocent omission, (y) the Company promptly commences and
diligently pursues a cure of such breach and (z) such failure is cured within
thirty (30) days following the Company's receipt of notice of such failure.
7.8 Until termination of the Financing Agreement and payment and satisfaction of
all Obligations due hereunder, the Company agrees that, unless the Agent shall
have otherwise consented in writing, the Company will furnish to the Agent and
each Lender, within ninety (90) days after the end of each fiscal year of the
Company, an audited Consolidated Balance Sheet as at the close of such fiscal
year, and statements of profit and loss, cash flow and reconciliation of surplus
the Company for such fiscal year, audited by independent public accountants
selected by the Company and satisfactory to the Agent (the current auditor,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, is deemed satisfactory); within sixty (60) days after the end
of each fiscal quarter of the Company a Consolidated Balance Sheet as at the end
of such period and statements of profit and loss, cash flow and surplus of the
Company, certified by an authorized financial or accounting officer of the
Company; and within thirty (30) days after the end of each month a Consolidated
Balance Sheet as at the end of such period and statements of profit and loss,
cash flow and surplus of the Company and all subsidiaries for such period,
certified by an authorized financial or accounting officer of the Company; and
from time to time, such further information regarding the business affairs and
financial condition of the Company as the Agent may reasonably request,
including without limitation (a) the accountant's management practice letter and
(b) annual cash flow projections in form satisfactory to the Agent. Each
financial statement which the Company is required to submit hereunder must be
accompanied by an officer's certificate, signed by the President, Vice
President, Controller, or Treasurer of the Company, pursuant to which any one
such officer must certify that:
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(x) the financial statement(s) fairly and
accurately represent(s) the Company's financial condition at the end of the
particular accounting period, as well as the Company's operating results during
such accounting period, subject to year-end audit adjustments; (y) during the
particular accounting period: (i) 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 (ii) the Company has not received any notice
of cancellation with respect to its property insurance policies; and (z) the
exhibits attached to such financial statement(s) constitute detailed
calculations showing compliance with all financial covenants contained in this
Financing Agreement.
7.9 Until termination of the Financing Agreement and payment and satisfaction of
all Obligations due hereunder, the Company agrees that unless the Agent provides
its prior written consent, (which shall not be unreasonably withheld), or except
as otherwise herein provided, the Company will not:
(a) Mortgage, assign, pledge, transfer or otherwise 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 or goods, whether real, personal or
mixed, whether now owned or hereafter acquired, including without limitation the
Equipment, General Intangibles, the Documents of Title and/or Investment
Property, except for the Permitted Encumbrances;
(b) Incur or create any Indebtedness other than the Permitted Indebtedness
or Indebtedness incurred hereunder;
(c) Borrow any money on the security of the Company's Collateral from
sources other than the Agent and the Lenders;
(d) Sell, lease, assign, transfer or otherwise dispose of (i) Collateral,
except in the ordinary course of business, pursuant to sale leaseback
transactions meeting the requirements of Permitted Indebtedness or as otherwise
specifically permitted by this Financing Agreement, or (ii) either all or
substantially all of the Company's assets, which do not constitute Collateral;
(e) Merge or consolidate or otherwise alter or modify its corporate name,
principal place of business, structure, status or existence, or enter into or
engage in any operation or activity materially different from that presently
being conducted by the Company, except that the Company may change its corporate
name or address; provided that (i) the Company shall give the Agent thirty (30)
days prior written notice thereof and (ii) the Company shall execute and deliver
prior to or simultaneously with any such action any and all documents and
agreements requested
-29-
by the Agent (including, without limitation, any and all
U.C.C. financing statements) to confirm the continuation and preservation of all
security interests and liens granted to the Agent for the benefit of the Lenders
hereunder;
(f) Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business;
(g) Declare or pay any dividend of any kind on, or purchase, acquire,
redeem or retire, any of the capital stock or equity interest, of any class
whatsoever, whether now or hereafter outstanding, other than dividends paid in
capital stock of the Company;
(h) Make any advance or loan to, or any investment in, any firm, entity,
person or corporation, provided, however, that the Company may make noncash
Company stock loans to employees secured by such stock or other advances to
employees for expenses, travel and the like in the ordinary course of business;
(i) Prepay any Subordinated Debt, except to the following extent and
provided no Event of Default has occurred and is continuing: (1) if the Company
issues additional equity, the Company may prepay Subordinated Debt to the extent
of the net cash proceeds the Company receives from such issuance; (2) if the
Company issues additional Subordinated Debt, the Company may prepay existing
Subordinated Debt to the extent of the net cash proceeds the Company receives
from such issuance, provided such new Subordinated Debt is on more favorable
terms to the Company (in the opinion of Agent) than such existing Subordinated
Debt; and (3) notwithstanding clauses (1) and (2) above, the Company may prepay
Subordinated Debt to the extent Availability (computed without regard to the
$50,000,000 Line of Credit maximum Availability) after giving effect to such
prepayment exceeds $15,000,000, provided that (a) the Company has maintained a
trailing twelve (12) month EBITDA of not less than thirty million dollars
($30,000,000) and (b) the Company is in compliance with the Tangible Net Worth
requirements set forth in Section 7.10 below; or
(j) Amend, modify or otherwise alter the terms of any Subordinated Debt
without the prior written approval of the Agent.
7.10 Until termination of the Financing Agreement and payment and satisfaction
in full of all Obligations hereunder, at any time that the Availability
(computed without regard to the $50,000,000 Line of Credit maximum Availability)
is less than $7,500,000, the Company shall maintain at such time during the
periods below a Tangible Net Worth greater than:
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Period Tangible Net Worth
-------------------------------- ----------------------------------------
March 3, 2000 (Closing Date) until $22,000,000 (at January 29, 2000)
April 3, 2000
April 4, 2000 until February 3, 2001 $22,000,000000 plus 80% of the Company's
cumulative income after January 29,
2000 computed on a monthly basis based
upon the most recent monthly financial
statements delivered pursuant
to Section 7.8 (in the event of a loss,
this amount shall not be decreased
below $22,000,000)
(such amount at February 3, 2001, the
"February 3, 2001 Amount")
February 4, 2001 until May 5, 2001 February 3, 2001 Amount plus $400,000
May 6, 2001 until August 4, 2001 February 3, 2001 Amount plus $1,400,000
August 5, 2001 until November 3, 2001 February 3, 2001 Amount plus $3,500,000
November 4, 2001 until February 3, 2001 Amount plus $10,000,000
February 2, 2002
February 3, 2002 until May 4, 2002 February 3, 2001 Amount plus $10,400,000
May 5, 2002 until August 3, 2002 February 3, 2001 Amount plus $11,400,000
August 4, 2002 until November 2, 2002 February 3, 2001 Amount plus $13,500,000
November 3, 2002 and thereafter February 3, 2001 Amount plus $20,000,000
7.11 The Company agrees to advise the Agent in writing of: (a) any expenditures
(actual or anticipated), or series of related expenditures, in excess of
$150,000 for (i) environmental clean-up, (ii) environmental compliance, and
(iii) environmental testing; 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 the Company's operations, its
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,
to the extent permitted by applicable law.
7.12 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, lease, loan or exchange of property with any subsidiary or
affiliate of the Company; provided that the Company may pay an aggregate amount
of not more
-31-
than $250,000 in any fiscal year to Three Cities Research, Inc. and
its affiliates for payment or reimbursement of management fees and expenses
incurred in the Company's ordinary course of business.
7.13 The Company has provided to the Agent, and agrees to provide to the Agent
on an annual basis commencing with the first anniversary of the Closing Date, an
appraisal indicating the Net Orderly Liquidation Value of the Inventory,
provided, however, that if Availability (computed without regard to the
$50,000,000 Line of Credit maximum Availability) is less than $20,000,000 for a
period of sixty (60) days, such appraisals will be conducted on a semi-annual
basis. Such appraisals shall be performed by an appraiser reasonably acceptable
to and engaged by the Agent, but shall be paid for by the Company.
7.14 The Company has taken and shall continue to take all action reasonably
necessary to assure that its computer-based systems are able to effectively
process date-sensitive data functions. The Company represents and warrants that
the "Year 2000" problem (that is, the inability of certain computer applications
to recognize and properly perform date-sensitive functions involving certain
dates on or about or subsequent to December 31, 1999) has not resulted in a
material adverse effect on the Company's business, assets or operations. The
Company represents and warrants that all computer applications which are
material to its business were and shall be, on a timely basis, able to properly
perform date-sensitive functions for all dates on and after January 1, 2000.
Upon the Agent's request from time to time, the Company shall provide to the
Agent assurances that the Company's computer systems and software are or will be
Year 2000 compliant on a timely basis, all in form and substance reasonably
satisfactory to the Agent.
SECTION 8 Interest, Fees and Expenses
8.1 Interest on the outstanding balance of Revolving Loans shall be payable
monthly as of the end of each month and shall accrue at a rate per annum set
forth below, based on the Company's EBITDA, as determined on a rolling four
fiscal quarter basis for the most recent fiscal quarter of the Company;
provided, however, that Level III shall apply throughout the first ninety (90)
days following the Closing Date. Except for the change on the ninetieth (90th)
day after the Closing Date, which shall become effective on such day, any change
in the interest rate will be effective on the first day of the month following
the Agent's receipt of the quarterly financial statements delivered pursuant to
Section 7.8, on the average of the net balances owing by the Company to the
Agent and/or the Lenders in the Company's Revolving Loan Account at the close of
each day during such month. Failure of the Company to deliver the financial
statements pursuant to Section 7.8, shall result in the highest applicable
interest rate being charged on all Revolving Loans, provided, as of the first
-32-
day of the month after which such failure is cured or waived, the interest rate
set forth below will be charged:
Level EBITDA Libor Rate plus Or Chase Manhattan Rate plus
------ ----------------------------------- ----------------- ----- --------------------------
I Greater than $28,000,000 1.50% or 0.00%
II Greater than $20,000,000 but less
than or equal to $28,000,000 1.75% or 0.00%
III Greater than $15,000,000, but less
than or equal to $20,000,000 2.00% or 0.00%
IV Greater than $10,000,000, but less
than or equal to $15,000,000 2.25% or 0.25%
V Less than $10,000,000 2.50% or 0.50%
In the event of any change in said Chase Manhattan Rate, the
rate provided for in the first sentence above shall change, as of the first of
the month following any change. The rate hereunder shall be calculated based on
a 360-day year. The Agent and the Lenders shall be entitled to charge the
Company's Revolving Loan Account for all interest provided for herein when due
until all Obligations have been paid in full. Notwithstanding anything to the
contrary contained herein, in no event shall the interest rate applicable
hereunder decrease by more than one-quarter percent (0.25%) within any six-month
period, except for the six-month period following the Closing Date, during which
the interest rate applicable hereunder shall not decrease in excess of one-half
percent (0.50%).
8.2 The Company may elect to use Libor as to any outstanding Revolving Loans
provided that there then exists no Default or Event of Default and 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 preceding the first day of a
Libor Period. The election of Libor shall be effective provided there then
exists no Default or Event of Default, on the fourth Business Day following said
notice. The Libor elections must be for $1,000,000 or whole multiples thereof
and there shall be no more than three (3) Libor Loans outstanding at one time.
If no such election is timely made or can be made, or if the Libor rate can not
be determined, then the Agent shall use the Chase Manhattan Rate, plus the
applicable margin as determined pursuant to Section 8.1 hereof, to compute
interest. In the event the Company requests any Libor election the Company shall
pay to the Agent a $500 processing fee upon the effective date of each such
Libor election hereunder. In addition, the Company shall pay to the Agent for
the benefit of the Lenders, upon the request of the Agent such amount or amounts
as shall compensate the Agent and/or the Lenders for any loss, costs or expenses
incurred by the Agent and/or the Lenders (as reasonably determined by the Agent
and the Lenders) as a result of: (a) any payment or prepayment on a date other
than the last day of a Libor Period for such Libor Loan, or (b) any failure of
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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 and/or the Lenders 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 and/or the Lenders 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 and/or the Lenders of the amount of
any such loss or expense, when set forth in a written notice to the Company,
containing the Agent's and/or the Lenders' calculations thereof in reasonable
detail, shall be conclusive on the Company, in the absence of manifest error.
Calculation of all amounts payable to the Agent and/or the Lenders under this
Section 8.2 with regard to Libor Loans shall be made as though the Agent and the
Lenders had actually funded the Libor Loans through the purchase of deposits in
the relevant market and currency, as the case may be, bearing interest at the
rate applicable to such Libor Loans in an amount equal to the amount of the
Libor Loans and having a maturity comparable to the relevant interest period;
provided, however, that the Agent and the Lenders may fund each of the Libor
Loans in any manner the Agent and the Lenders see fit and the foregoing
assumption shall be used only for calculation of amounts payable under this
Section 8.2. In addition, notwithstanding anything to the contrary contained
herein, the Agent and the Lenders shall apply all proceeds of Collateral,
including the Accounts, and all other amounts received by it from or on behalf
of the Company, initially to the loans accruing interest at the Chase Manhattan
Rate and subsequently to Libor Loans; provided, however, that upon the
occurrence of an Event of Default or in the event the aggregate amount of
outstanding Libor Loans exceeds Availability or the applicable maximum levels
set forth therefor, the Agent and the Lenders may apply all such amounts
received by them to the payment of Obligations in such manner and in such order
as the Agent may elect in its reasonable business judgment.
8.3 In consideration of the Letter of Credit Guaranty of the Agent, the Company
shall pay the Agent for the benefit of the Lenders the Letter of Credit Guaranty
Fee which shall be an amount equal to one and one-half percent (1.50%) per
annum, payable monthly in arrears, on the face amount of each Letter of Credit
less the amount of any and all amounts previously drawn under the Letter of
Credit.
8.4 Any charges, fees, commissions, costs and expenses charged to the Agent
and/or the Lenders 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
Company's 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.
-34-
8.5 The Company shall reimburse or pay the Agent, as the case may be, for all
Out-of-Pocket Expenses, which shall be invoiced in reasonable detail, and any
applicable Documentation Fee.
8.6 Upon the last Business Day of each month, commencing with the last day of
the month in which this Financing Agreement is executed, the Company shall pay
the Agent for the benefit of the Lenders the Line of Credit Fee.
8.7 To induce the Agent and the Lenders to enter into this Financing Agreement
and to extend to the Company the Revolving Loan and Letters of Credit, the
Company shall pay to the Agent for the benefit of the Lenders a Loan Facility
Fee in the amount $125,000, fully earned and payable upon the Closing Date.
8.8 On the dates and in the amounts set forth below, the Company shall pay to
the Agent the Collateral Management Fee for the initial term of this Financing
Agreement, which shall be fully earned on the Closing Date and not refundable or
rebateable:
Date of Payment Amount of Payment
------------------- -----------------------------
On the Closing Date $25,000
On the first and second
anniversaries of the Closing Date $40,000
Any unpaid balance of the Collateral Management Fee shall be immediately due and
payable upon a termination hereof or a Default hereunder and acceleration of the
balance owing hereunder. Following the initial term of this Financing Agreement,
an annual Collateral Management Fee shall be established in an amount as agreed
between the Agent and the Company.
8.9 In no event shall the rates of interest hereunder exceed the Maximum Legal
Rate. In the event that the Contract Rate computed under this Section 8 would
exceed the Maximum Legal Rate, the rates of interest under this Financing
Agreement for any such period shall be limited to the Maximum Legal Rate, but
any subsequent reductions in the Contract Rate shall not reduce the rates of
interest under the Financing Agreement below the Maximum Legal Rate until the
total amount of interest charged hereunder equals the amount of interest that
would have been charged had the Contract Rate been charged at all times.
8.10 After the occurrence and during the continuation of an Event of Default,
the Company shall pay the Agent's standard charges for, and the fees and
expenses of, the Agent's personnel used by the Agent for reviewing the books and
-35-
records of the Company and for verifying, testing, protecting, safeguarding,
preserving or disposing of all or any part of the Collateral, which shall be in
addition to the Collateral Management Fee.
8.11 The Company hereby authorizes the Agent to charge the Company's Revolving
Loan Account with the Agent with the amount of all payments due hereunder as
such payments become due. The Company confirms that any charges which the Agent
may so make to the Company's Revolving Loan Account as herein provided will be
made as an accommodation to the Company and solely at the Agent's discretion.
SECTION 9 Powers
9.1 The Company hereby constitutes the Agent on behalf of the Lenders or any
person or agent the Agent may 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 of the Company's
Obligations to the Agent and the Lenders have been paid in full:
(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;
(b) To receive, open and dispose of all mail addressed to the Company which
Agent reasonably believes may represent payment of Accounts and to notify postal
authorities to change the address for delivery thereof to such address as the
Agent may designate;
(c) To request from customers indebted on Accounts at any time, in the name
of the Agent or the Company or that of the Agent's designee, information
concerning the amounts owing on the Accounts;
(d) To transmit to customers indebted on Accounts notice of the Agent's
interest therein and to notify customers indebted on Accounts to make payment
directly to the Agent for the Company's account;
(e) To take or bring, in the name of the Agent or the Company, all steps,
actions, suits or proceedings deemed by the Agent necessary or desirable to
enforce or effect collection of the Accounts; and
(f) To execute financing statements in the name of the Company as
attorney-in-fact at any time as the Agent may deem necessary to establish or
maintain perfection of the security interest in the Collateral.
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9.2 Notwithstanding anything hereinabove contained to the contrary, the powers
set forth in Section 9.1(b), (d) and (e) may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived in writing by the Agent or cured to the Agent's satisfaction. In
addition, the powers set forth in Section 9.1(c) above will only be exercised in
the name of the Company or a certified public accountant designated by the Agent
prior to the occurrence of such Event of Default.
SECTION 10 Events of Default and Remedies
10.1 Notwithstanding anything hereinabove to the contrary, the Lenders acting
through the Agent may terminate this Financing Agreement immediately upon the
occurrence of any of the following (herein "Events of Default"):
(a) failure of the Company to pay any of the Obligations within five (5)
Business Days of the due date thereof, provided that nothing contained herein
shall prohibit the Agent from charging such amounts to the Company's Revolving
Loan Account on the due date thereof;
(b) cessation of the business of the Company or the calling of a meeting of
the creditors of the Company for purposes of compromising the debts and
obligations of the Company;
(c) the failure of the Company to generally meet debts as they mature;
(d) the commencement by or against the Company of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law, provided that in the event of any involuntary
proceeding commenced against the Company such proceeding is not dismissed or
discharged within thirty (30) days after commencement thereof;
(e) breach by the Company of any warranty, representation or covenant
contained herein (other than those referred to in sub-paragraph (f) below) or in
any other written agreement between the Company and the Lenders, provided that
such breach by the Company of any of the warranties, representations or
covenants referred in this sub-paragraph (e) shall not, unless otherwise
provided herein, be deemed to be an Event of Default unless and until such
breach shall remain unremedied to the Agent's satisfaction for a period of
twenty (20) days from the date of such breach;
(f) breach by the Company of any warranty, representation or covenant of
Section 3.3 (other than the third sentence of Section 3.3), Section 3.4,
-▇▇-
▇▇▇▇▇▇▇▇.▇, ▇▇▇▇▇▇▇ 7.1, Section 7.5, Section 7.6, and Section 7.9 through
Section 7.10 inclusive;
(g) 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) engage 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 (h), such event or condition (x) remains uncured for a period of
thirty (30) days from date of occurrence and (y) could, in the reasonable
opinion of the Agent, subject the Company to any tax, penalty or other liability
material to the business, operations or financial condition of the Company;
(h) without the prior written consent of the Agent, the Company shall (i)
amend or modify the Subordinated Debt existing on the date of this Financing
Agreement, or (ii) make any payment on account of the Subordinated Debt except
as permitted herein or in the Subordination Agreements relating to such
Subordinated Debt; or
(i) any default or event of default (after giving effect to any applicable
grace or cure periods) under any instrument or agreement evidencing any
Indebtedness of the Company having a principal amount in excess of $750,000.
10.2 Upon the occurrence of a Default and/or an Event of Default, the Agent may
(at its option) and shall at the direction of the Required Lenders declare that
all loans, advances and extensions of credit provided for in Sections 3 and 5 of
this Financing Agreement shall be thereafter in the Agent's sole discretion and
the obligation of the Agent and/or the Lenders to make Revolving Loans and/or
arrange for the issuance of Letters of Credit shall cease unless such Default or
Event of Default is waived in writing by the Agent on behalf of the Lenders or
cured to the Agent's satisfaction, and upon the occurrence of an Event of
Default the Agent may (at its option) and shall at the direction of the Required
Lenders declare that: (a) all Obligations shall become immediately due and
payable; (b) the Default Rate of Interest shall be charged on all then
outstanding or thereafter incurred Obligations in lieu of the interest provided
for in Section 8 of this Financing Agreement provided that with respect to this
clause (b): (i) 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 listed in Section 10.1(d); (ii) the Company has failed to cure the
Event of Default within ten (10) days after (A) the Agent deposited such notice
in the United States mail or (B) the occurrence of the Event of Default listed
in Section 10.1(d); and (iii) this Financing Agreement shall immediately
terminate upon notice to the Company, provided, however, that no notice of
termination is required if
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the Event of Default is the Event listed in Section
10.1(d). The exercise of any option is not exclusive of any other option which
may be exercised at any time by the Agent and/or the Lenders.
10.3 Immediately upon the occurrence of any Event of Default, the Agent may and
at the direction of the Required Lenders shall to the extent permitted by law:
(a) remove from any premises where same may be located any and all documents,
instruments, files and records, and any receptacles or cabinets containing same,
relating to the Accounts, or the Agent may use, at the Company's expense, 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 on behalf of the Lenders, and
generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Company or the Agent; (c) sell,
assign and deliver the Collateral and any 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 the Agent
may bid or become a purchaser at any such sale, free from any right of
redemption, which right is hereby expressly waived by the Company; (d) foreclose
the security interests in the Collateral created herein by any available
judicial procedure, or to take possession of any or all of the Inventory and/or
Other Collateral without judicial process, and to enter any premises where any
Inventory and/or Other Collateral may be located for the purpose of taking
possession of or removing the same and (e) exercise any other rights and
remedies provided in law, in equity, by contract or otherwise. The Agent shall
have the right, without notice or advertisement, to sell, lease, or otherwise
dispose of all or any part of the Collateral, whether in its then condition or
after further preparation or processing, in the name of the Company or the
Agent, or in the name of such other party as the Agent may designate, either at
public or private sale or at any broker's board, in lots or in bulk, for cash or
for credit, with or without warranties or representations, and upon such other
terms and conditions as the Agent in its sole discretion may deem advisable, and
the Agent shall have the right to purchase at any such sale. If any Inventory
shall require rebuilding, 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
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 elsewhere and to make available to the Agent the premises and facilities of
the Company for the purpose of the Agent's taking possession of, removing or
putting the Inventory in saleable form. However, if notice of intended
disposition of any Collateral is required by law, it is agreed that ten (10)
days notice shall constitute reasonable notification and full compliance with
the law. The net cash
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proceeds resulting from the Agent's exercise of any of the
foregoing rights (after deducting all charges, costs and expenses, including
reasonable attorneys' fees) shall be applied by the Agent to the payment of the
Company's Obligations, whether due or to become due, in such order as the Agent
may elect, and the Company shall remain liable to the Agent and the Lenders for
any deficiencies, and the Agent in turn agrees to remit to the Company or its
successors or assigns, any surplus resulting therefrom. The enumeration of the
foregoing rights is not intended to be exhaustive and the exercise of any right
shall not preclude the exercise of any other rights, all of which shall be
cumulative.
SECTION 11 Term and Termination
11.1 This Financing Agreement shall become effective as of the date set forth on
the first page hereof and shall continue in full force and effect for the
initial term ending three (3) years from the Closing Date (the "Anniversary
Date"), and from year to year thereafter (each, an "Anniversary Date"), unless
sooner terminated pursuant to the terms hereof.
11.2 Except as otherwise permitted herein, the Company or any Lender acting
through the Agent may terminate this Financing Agreement and the Line of Credit
only as of the initial or any subsequent Anniversary Date and then only by
giving the other at least sixty (60) days prior written notice of termination.
Notwithstanding the foregoing the Lenders acting through the Agent may terminate
the Financing Agreement immediately upon the occurrence of an Event of Default,
provided, however, that if the Event of Default is an event listed in Section
10.1(d) of this Financing Agreement, the Agent and the Lenders may regard the
Financing Agreement as terminated and notice to that effect is not required.
This Financing Agreement, unless terminated as herein provided, shall
automatically continue from Anniversary Date to Anniversary Date.
Notwithstanding the foregoing, the Company may terminate this Financing
Agreement and the Line of Credit prior to any applicable Anniversary Date upon
sixty (60) days' prior written notice to the Agent and the Lenders, provided
that the Company pays to the Agent for the benefit of the Lenders immediately on
demand, the Early Termination Fee, if applicable. Notwithstanding anything to
the contrary contained herein: (x) there shall be no Early Termination Fee if
the Early Termination Date occurs two (2) years after the Closing Date or at any
time thereafter, and (y) there shall be no Early Termination Fee if this
Financing Agreement terminates because a controlling interest in the Company is
acquired by some entity (the "purchaser") and CITBC participates in the credit
facility such purchaser enters into with another lender. This Financing
Agreement, unless terminated as herein provided, shall automatically continue
from Anniversary Date to Anniversary Date. All Obligations shall become due and
payable as of any termination hereunder or under Section 10 hereof and, pending
a final accounting, the Agent and the Lenders may withhold any balances in the
Company's loan account
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(unless supplied with an indemnity satisfactory to the
Agent) to cover all of the Company's Obligations, whether absolute or
contingent. All of the Agent's and Lenders' rights, liens and security interests
shall continue after any termination until all Obligations have been paid and
satisfied in full.
SECTION 12 Miscellaneous
12.1 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 Lenders 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 or the Lenders of any
right or remedy precludes any other or further exercise thereof, or precludes
any other right or remedy.
12.2 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.
12.3 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, the Agent and 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 and/or 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 Company is legally entitled to contract for, charge or collect
under applicable state or federal law. If from any circumstances whatsoever
fulfillment of any provision 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 obligation to be fulfilled shall be
automatically reduced to the limit of such validity, and if from any such
circumstance the Agent and/or 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
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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 excess 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 and/or the Lenders, under any specific
contingency, exceeds the maximum amount permitted by applicable law, the
Company, the Agent and the Lenders shall to the maximum extent permitted under
applicable law, (a) treat all Obligations as but a single extension of credit,
(b) characterize any nonprincipal 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 and/or the Lenders,
(c) exclude voluntary prepayments and the effect thereof, and (d) amortize,
prorate, allocate and spread in equal parts, the total amount of such 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 and the Lenders throughout the entire
contemplated term of the Obligations so that the interest rate is uniform
through the entire term of the Obligations. The terms and provisions of this
Section 12.3 shall control and supersede every other provision hereof and all
other agreements between the Company, the Agent and the Lenders.
12.4 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.
12.5 TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY, THE AGENT AND THE
LENDERS EACH 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.
12.6 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 or sent by facsimile, or three
Business Days after deposit in the United State mail, with proper first class
postage prepaid and addressed to the party to be notified as follows:
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(a) if to the Agent, at:
The CIT Group/Business Credit, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Regional Credit Manager
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to any other party becoming a Lender hereunder,
at the address specified in the Assignment and Transfer Agreement
(c) if to the Company, at:
FACTORY 2-U STORES, INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
copies of any notices of an Event of Default
shall also be provided to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esquire
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇;
provided that Agent's failure to send a
notice of an Event of Default shall not
result in any such notice to the Company not
being fully effective
or to such other address as any party may designate for itself by like notice.
12.7 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
12.8 This Financing Agreement can be amended, modified or changed only by a
writing signed by the Company, the Agent and the Required Lenders (unless the
consent of all Lenders is required pursuant to Section 14.10 hereof).
SECTION 13 Agreement between the Lenders
13.1 (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
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the Company and for purposes of this Section 13 the Agent is using the funds of
the Agent. The Company agrees that the Agent may allow up to two (2) Lenders to
participate as Lenders under this Financing Agreement without the prior consent
of the Company and that one (1) additional Lender may participate with the prior
consent of the Company which consent shall not be unreasonably withheld;
provided, however, that Agent shall, at all times, hold a greater percentage of
outstanding loans than any other Lender.
(b) Unless the Agent shall have been notified in writing by any Lender
prior to any advance to the Company that such Lender will not make the amount
which would constitute its share of the borrowing on such date available to the
Agent, the Agent may assume that such Lender shall make such amount available to
the Agent on a Settlement Date, and the Agent may, in reliance upon such
assumption, make available to the Company a corresponding amount. A certificate
of the Agent submitted to any Lender with respect to any amount owing under this
subsection shall be conclusive, absent manifest error. If such Lender's share of
such borrowing is not in fact made available to the Agent by such Lender on the
Settlement Date, the Agent shall be entitled to recover such amount with
interest thereon at the rate per annum applicable to Revolving Loans hereunder,
on demand, from the Company without prejudice to any rights which the Agent may
have against such Lender hereunder. Nothing contained in this subsection shall
relieve any Lender which has failed to make available its ratable portion of any
borrowing hereunder from its obligation to do so in accordance with the terms
hereof. Nothing contained herein shall be deemed to obligate the 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.
13.2 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.
13.3 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.
13.4 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 the Agent) shall (i) not share in the Collateral Management Fee or
Documentation Fees or the fees provided for in Section 8.10; and (ii) receive
their share of the Loan Facility Fee in accordance with their respective
agreements with the Agent; and (b) interest computed at the rate and as provided
for in Section 8 of this Financing Agreement on all outstanding amounts advanced
by the Lenders on each Settlement
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Date, prior to adjustment, that are subsequent
to the last remittance by the Agent to the Lenders of the Company's interest.
13.5 The Company acknowledges that each of the Lenders may sell one or more
participations in the loans and extensions of credit made and to be made to the
Company hereunder to participants without the Company's prior consent, so long
as such participants are not granted rights that would require the participant's
consent to waivers, amendments and other actions with respect to the provisions
of this Financing Agreement. 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 Financing 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 Financing Agreement.
13.6 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 the other
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.
13.7 In the event that the Agent, the Lenders or any one of them is sued or
threatened with suit by the Company, or by any receiver, trustee, creditor or
any committee of creditors on account of any preference, voidable transfer or
lender liability issue, alleged to have occurred or been received as a result
of, or during the transactions contemplated under this Financing Agreement, then
in such event any money paid in satisfaction or compromise of such suit, action,
claim or demand and any expenses, costs and attorneys' fees paid or incurred in
connection therewith, whether by the Agent, the Lenders or any one of them,
shall be shared proportionately by the Lenders. In addition, any costs,
expenses, fees or disbursements incurred by outside agencies or attorneys
retained by the Agent to effect collection or enforcement of any rights in the
Collateral, including enforcing, preserving or maintaining rights under this
Financing Agreement shall be shared proportionately between and among the
Lenders to the extent not reimbursed by the Company or from the proceeds of
Collateral. The provisions of this paragraph shall not apply to any suits,
actions, proceedings or claims that (a) predate the date of this Financing
Agreement or (b) are based on transactions, actions or omissions that predate
the date of this Financing Agreement.
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13.8 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 (a) the occurrence of an Event of Default and (b) 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.
13.9 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). Upon
execution of an Assignment and Transfer Agreement, (a) 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 (b) 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 the loans and advances and extensions of credit hereunder
without the prior written consent of the Agent. In the event of an assignment in
violation of this Section 13.9, the Company may, upon notice given to the Agent
within ten (10) days after the Company receives notice of such assignment and
within sixty (60) days of such notice, terminate this Financing Agreement and
the Line of Credit by payment in full of all Obligations, but without any
obligation to pay an Early Termination Fee.
SECTION 14 Agency
14.1 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 this
-46-
Financing Agreement and the
ancillary documents or otherwise exist against the Agent.
14.2 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.
14.3 Neither the Agent nor any of its officers, directors, employees, agents, or
attorneys-in-fact shall be (a) 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 (b) 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 this
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, this Financing Agreement and all ancillary
documents or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this 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, this Financing Agreement and all ancillary documents or to
inspect the properties, books or records of the Company.
14.4 The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper person or
persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Company), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Financing Agreement and all ancillary documents
unless it shall first receive such advice or concurrence 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 this Financing Agreement and all ancillary
documents in accordance with a request 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.
-47-
14.5 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 with
respect to such Default or Event of Default as shall be reasonably directed by
the Lenders, or Required Lenders, as the case may be; 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.
14.6 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 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.
14.7 The Lenders agree to indemnify the Agent in its capacity as such (to the
extent not reimbursed by the Company and without limiting the obligation of the
Company to do so), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever (including negligence on the part of the
agent) which may at any time be imposed on, incurred by or asserted against the
Agent in anyway relating to or arising out of this Financing Agreement or any
ancillary documents or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Agent's gross negligence or
-48-
willful misconduct. The agreements in this paragraph shall survive the
payment of the obligations.
14.8 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 this
Financing Agreement as any Lender and may exercise the same as though it was not
the Agent and the terms "Lender" and "Lenders" shall include the Agent in its
individual capacities.
14.9 The Agent may resign as the Agent upon 30 days' notice to the Lenders and
such resignation shall be effective upon the appointment of a successor Agent.
If the Agent shall resign as Agent, then the Lenders shall appoint a successor
Agent for the Lenders whereupon such successor Agent shall succeed to the
rights, powers and duties of the Agent and the term "Agent" shall mean such
successor Agent effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any of the parties to this Financing
Agreement. After any retiring Agent's resignation hereunder as the Agent the
provisions of this Section 14 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was the Agent. If CITBC resigns as Agent,
the Company may, upon notice given to the Agent within ten (10) days after the
Company receives notice of such appointment, terminate this Financing Agreement
and the Line of Credit by payment in full of all Obligations but without any
obligation to pay an Early Termination Fee, unless the Company consents to the
successor Agent, such consent not to be unreasonably withheld.
14.10 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 (i) increase the Line of Credit; (ii)
reduce the interest rates; (iii) reduce or waive (A) any fees in which the
Lenders share hereunder; or (B) the repayment of any Obligations due the
Lenders; (b) extend the maturity of the Obligations; (c) alter or amend (i) this
Section 14.10 or (ii) the definitions of Borrowing Base, Eligible Accounts
Receivable, Eligible Inventory, Eligible In-Transit Inventory, Collateral or
Required Lenders, or the Agent's criteria for determining compliance with such
definitions of eligibility; (d) release Collateral in bulk without a
corresponding reduction in the Obligations to the Lenders, or (e) intentionally
make any Revolving Loan or assist in opening any Letter of Credit hereunder if
after giving effect thereto the total of Revolving Loans and Letters of Credit
hereunder for the Company would exceed one hundred and ten percent (110%) of the
maximum amount available under Section 3 hereof. In all other respects 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
-49-
limited to, the making of an overadvance or
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.
14.11 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 shall have the
right (but not the obligation) to purchase such Lender's share of the Loans for
the full amount thereof together with accrued interest thereon to the date of
such purchase.
14.12 Each Lender agrees that notwithstanding the provisions of Section 11 of
this Financing Agreement any Lender may terminate this Financing Agreement and
the Line of Credit only as of the initial or any subsequent Anniversary Date and
then only by giving the Agent 90 days prior written notice thereof. Within 30
days after receipt of any such termination notice, the Agent shall, at its
option, either (a) give notice of termination to the Company hereunder or (b)
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.
IN WITNESS WHEREOF, the parties hereto have caused this
Financing Agreement to be executed, agreed to, accepted and delivered by their
proper and duly authorized officers as of the date set forth above.
FACTORY 2-U STORES, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: EVP - CFO
-50-
Executed and Accepted at
Los Angeles, California,
March 3, 2000
THE CIT GROUP/BUSINESS CREDIT, INC., as Agent
and Lender
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
-51-
EXHIBIT A
REVOLVING LOAN PROMISSORY NOTE
$50,000,000.00 March 3, 2000
FOR VALUE RECEIVED, the undersigned, FACTORY 2-U STORES, INC.,
a Delaware corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CITBC"), as Agent for the Lenders under a
certain Financing Agreement of even date herewith between CITBC as Agent and
Lender, other Lenders parties thereto and the Company (herein the "Financing
Agreement") at its office located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, in lawful money of the United States of America and
in immediately available funds, the principal amount of Fifty Million Dollars
($50,000,000.00), or such other principal amount advanced pursuant to Section
3.1 of the Financing Agreement. The balance of such Revolving Loan will
fluctuate as a result of the daily application of the proceeds of collections of
the Accounts and the making of additional Revolving Loans as described in
Section 3. The Revolving Loans may be borrowed, repaid and reborrowed by the
Company. A final payment in an amount equal to the outstanding aggregate balance
of principal and interest remaining unpaid, if any, under this Revolving Loan
Promissory Note as shown on the books and records of the Agent shall be due and
payable upon any termination of the Financing Agreement.
All capitalized terms used herein shall have the meaning
provided therefor in the Financing Agreement, unless otherwise defined herein.
The Company further promises to pay interest at such office,
in like money, on the unpaid principal amount owing hereunder from time to time
from the date hereof on the dates and at the rates specified in Section 8.1 of
the Financing Agreement.
If any payment on this Revolving Loan Promissory Note becomes
due and payable on a day other than a Business Day, the maturity thereof shall
be extended to the next succeeding Business Day, and with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.
This Revolving Loan Promissory Note is the Revolving Loan
Promissory Note referred to in the Financing Agreement, and is subject to, and
entitled to, all provisions and benefits thereof and is subject to optional and
mandatory prepayment, in whole or in part, as provided therein.
-52-
The date and amount of the advance(s) made hereunder may be
recorded on the schedule which is attached hereto and hereby made part of this
Revolving Loan Promissory Note or the separate ledgers maintained by the Agent,
provided that any failure to record any such information on such schedule shall
not in any manner affect the obligation of the Company to make payments of
principal and interest in accordance with the terms of this Revolving Loan
Promissory Note. The aggregate unpaid principal amount of all advances made
pursuant hereto may be set forth in the balance column on said schedule or such
ledgers maintained by the Agent. All such advances, whether or not so recorded,
shall be due as part of this Revolving Loan Promissory Note.
The Company confirms that any amount received by or paid to
the Agent in connection with the Financing Agreement and/or any balances
standing to its credit on any of its accounts on the Agent's books under the
Financing Agreement may in accordance with the terms of the Financing Agreement
be applied in reduction of this Revolving Loan Promissory Note, but no balance
or amounts shall be deemed to effect payment in whole or in part of this
Revolving Loan Promissory Note unless the Agent shall have actually charged such
account or accounts for the purposes of such reduction or payment of this
Revolving Loan Promissory Note.
Upon the occurrence of any one or more of the Events of
Default specified in the Financing Agreement or upon termination of the
Financing Agreement, all amounts then remaining unpaid on this Revolving Loan
Promissory Note may become, or be declared to be, immediately due and payable as
provided in the Financing Agreement.
The Company and any and all guarantors, sureties and endorses
jointly and severally waive grace, demand, presentment for payment, notice of
dishonor or default, notice of intent to accelerate, notice of acceleration,
protest and diligence in collecting.
This Revolving Loan Promissory Note shall be governed by, and
construed in accordance with, the laws of the state of California and the
applicable federal laws of the United States.
FACTORY 2-U STORES, INC.,
a Delaware corporation
By:
Name:
Title:
-53-
Attest:
Secretary
-54-
SCHEDULE TO GRID
Date Loan Payment Balance
-55-
EXHIBIT B
ASSIGNMENT AND TRANSFER AGREEMENT
Dated: _____________, 20__
Reference is made to the Financing Agreement dated as of March
3, 2000 (as amended, modified, supplemented and in effect from time to time, the
"Financing Agreement"), among Factory 2-U Stores, Inc., a Delaware corporation
(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 (a) 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,
genuiness, 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
(b) 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 (a) represents and warrants that it is legally authorized to
enter into this Assignment and Transfer Agreement; (b) confirms that it has
received a copy of the Financing Agreement, together with the copies of the most
-56-
recent financial statements of the Company, and such other documents and
information as it has deemed appropriate to make its own credit analysis; (c)
agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Financing Agreement; (d) 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;
(e) 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 (f) 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, (a) 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 (b) 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.
-57-
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.
-58-
Schedule 1 to Assignment and Transfer Agreement
Name of Assignor:
Name of Assignee:
Effective Date of Assignment: ____________________, 20__
Percentage Assigned of each facility (Shown as
Principal Amount (or, with a percentage of aggregate principal amount or,
respect to Letters of Credit with respect to Letters of Credit, fact amount
Assigned Facilities face amount Assigned of all Lenders)
Revolving Loans $______________ ______________%
Letter of Credit
participation interest $______________ ______________%
Total: $______________ ______________%
THE CIT GROUP/BUSINESS CREDIT, INC., As Agent
As Assignee
By:
Name: By:
-----------------------------
Title: Name:
-----------------------------
Title:
Factory 2-U Stores, Inc.
(the "Company")
By:
Name:
Title:
-59-
Schedule 1
Existing Liens
ARIZONA
------------------------------------- ------------------------ ------------------ ----------------------------------------
DEBTOR FILING NUMBER FILING DATE SECURED PARTY
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Factory 2-U Stores, Inc. 995040 11/28/97 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Factory 2-U, Inc. 718725 09/21/92 Metlife Capital Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Factory 2-U, Inc. 769305 12/21/93 Metlife Capital Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Factory 2-U, Inc. 946305 12/04/96 EUA Cogenex Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Factory 2-U, Inc. 980552 08/12/97 GTE Leasing Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Family Bargain Center 504538 10/16/87 Easton Sports, Inc.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Family Bargain Center 790999 06/20/94 Southern Pacific Thrift & Loan Assn.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Family Bargain Center 790000 06/20/94 Southern Pacific Thrift & Loan Assn.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 930441 08/12/96 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 930442 08/12/96 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 941038 10/25/96 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 995041 11/28/97 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 1011591 04/08/98 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
CALIFORNIA
------------------------------------- ------------------------ ------------------ ----------------------------------------
DEBTOR FILING NUMBER FILING DATE SECURED PARTY
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Factory 2-U Stores, Inc. 0004060398 02/03/00 Crown Credit Company
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Factory 2-U, Inc. 9610660915 04/16/96 Metlife Capital Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Family Bargain Corp. ▇▇▇▇▇▇▇▇▇▇ 08/03/95 Megabank of Arapahoe
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Family Bargain Corp. 9803660143 01/30/98 IBM Credit Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Family Bargain Corp. 9805860694 02/24/98 IBM Credit Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Family Bargain Corp. 9809060907 03/30/98 IBM Credit Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Family Bargain Center 9533560109 11/28/95 Minnesota Mining and Manufacturing Co.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Family Bargain Center 9612360424 05/01/96 EUA Cogenex Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles, Inc. ▇▇▇▇▇▇▇▇▇▇ 06/07/95 IBM Credit Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles, Inc. 9621860629 08/02/96 EUA Cogenex Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles, Inc. 9702860482 01/27/97 EUA Cogenex Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles, Inc. 9706961264 03/10/97 EUA Cogenex Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles, Inc. 9724860177 09/04/97 EUA Cogenex Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 9515260139 05/31/95 Graybar Financial Services
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 9524060630 08/25/95 Leasetec Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 9622260426 08/08/96 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 9630360291 10/28/96 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 9723061059 08/15/97 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 9725160339 09/04/97 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 9733560592 11/26/97 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 9810060294 04/09/98 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 9925060787 09/01/99 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 9928860025 10/12/99 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
NEVADA
------------------------------------- ------------------------ ------------------ ----------------------------------------
DEBTOR FILING NUMBER FILING DATE SECURED PARTY
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 96-12999 08/15/96 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 97-19857 12/01/97 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
NEW MEXICO
------------------------------------- ------------------------ ------------------ ----------------------------------------
DEBTOR FILING NUMBER FILING DATE SECURED PARTY
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Factory 2-U Stores, Inc. 971201074 12/01/97 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 960812011 08/12/96 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 960812012 08/12/96 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 971201073 12/01/97 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
-61-
OREGON
------------------------------------- ------------------------ ------------------ ----------------------------------------
DEBTOR FILING NUMBER FILING DATE SECURED PARTY
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 418473 04/16/98 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 419356 04/22/98 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
SAN DIEGO COUNTY, CA
------------------------------------- ------------------------ ------------------ ----------------------------------------
DEBTOR FILING NUMBER FILING DATE SECURED PARTY
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Family Bargain Corp. 1995-0409158 09/14/95 Megabank of Arapahoe
------------------------------------- ------------------------ ------------------ ----------------------------------------
TEXAS
------------------------------------- ------------------------ ------------------ ----------------------------------------
DEBTOR FILING NUMBER FILING DATE SECURED PARTY
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
Factory 2-U Stores, Inc. 242622 11/26/97 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles 242623 11/26/97 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
WASHINGTON
------------------------------------- ------------------------ ------------------ ----------------------------------------
DEBTOR FILING NUMBER FILING DATE SECURED PARTY
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles ▇▇-▇▇▇-▇▇▇▇ 08/09/96 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles ▇▇-▇▇▇-▇▇▇▇ 11/12/96 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
------------------------------------- ------------------------ ------------------ ----------------------------------------
General Textiles ▇▇-▇▇▇-▇▇▇▇ 12/01/97 Sensormatic Electronics Corp.
------------------------------------- ------------------------ ------------------ ----------------------------------------
-62-
Schedule 2
Collateral Locations, Chief Executive Office and Trade Names
Chief Executive ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Collateral Locations
See Attached
Trade Names
Factory 2-U
Family Bargain Centers
-63-