EXHIBIT 10.9
FINANCING AGREEMENT
The CIT Group/Business Credit, Inc.
(as Agent and as Lender)
And
UNITED MERCHANDISING CORP.
[as Borrower)
Dated: March 8, 1996
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TABLE OF CONTENTS
PAGE
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SECTION 1. Definitions .................................................... 3
SECTION 2. Conditions Precedent ........................................... 16
SECTION 3. Revolving Loans ................................................ 19
SECTION 4. Letters of Credit .............................................. 22
SECTION 5. Collateral ..................................................... 25
SECTION 6. Representations. Warranties and Covenants ...................... 27
SECTION 7. Interest, Fees and Expenses .................................... 35
SECTION 8. Powers ......................................................... 38
SECTION 9. Events of Default and Remedies ................................. 39
SECTION 10. Termination ................................................... 42
SECTION 11. Agreements between the Lenders ................................ 43
SECTION 12. Agency ........................................................ 47
SECTION 13. Miscellaneous ................................................. 50
EXHIBIT A - Assignment and Transfer Agreement
EXHIBIT B - Blocked Account Agreement
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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation (hereinafter
"CITBC") with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
and the other lenders that may, subsequent to the date hereof, purchase from
CITBC a portion of CITBC's rights and obligations under this Financing Agreement
(CITBC and such other lenders each individually sometimes referred to as a
"Lender" and collectively as 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, advances
and other financial accommodations to United Merchandising Corp., a California
corporation (hereinafter referred to as the "Company") having a principal place
of business at ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
SECTION 1. DEFINITIONS
Accounts shall mean all of the Company's now existing and future: (a) accounts
receivable, including any Trade Accounts Receivable, all rights to payment under
bank or non-bank credit cards (whether or not specifically listed on schedules
furnished to the Agent) and any and all instruments, documents, contract rights,
chattel paper, created by or arising from the Company's sales of Inventory or
rendition of services to its customers, and all accounts arising from sales or
rendition of services made under any trade names or styles of the Company, or
through any divisions of the Company; (b) unpaid seller's rights (including
rescission, replevin, reclamation and stoppage in transit) relating to the
foregoing or arising therefrom; (c) rights to any Inventory represented by any
of the foregoing, including rights to returned or repossessed Inventory; (d)
credit balances arising hereunder; (e) guarantees or collateral for any of the
foregoing; (f) credit or property insurance policies or rights relating to any
of the foregoing; and (g) cash and non-cash proceeds of any and all the
foregoing.
Affiliate shall mean, as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person and the term "control" shall have
the meaning set forth in respect thereof in Rule 105 promulgated under the
Securities Act of 1933, as amended.
Anniversary Date shall mean the date occurring one (1) year from the date of
execution hereof and the same date in every year thereafter, provided, however,
that if the Company gives notice, in accordance with Section 10 of this
Financing Agreement, to terminate on an Anniversary Date and such date is not a
Business Day, then the Anniversary Date shall be the next succeeding Business
Day.
Assignment and Transfer Agreement shall mean the Assignment and Transfer
Agreement in the form of Exhibit A hereto.
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Availability shall mean at any time of determination the amount by which the
lesser of a) the Line of Credit or b) the amount determined by multiplying the
then sum of Eligible Inventory by the percentage provided for in paragraph 1 of
Section 3 of this Financing Agreement exceeds the sum of x) the outstanding
aggregate amount of all Obligations (excluding all obligations in respect of the
outstanding amounts of any Letters of Credit) and y) the Availability Reserve.
Availability Reserve shall mean at any time of determination an amount equal to
the sum of a) the then undrawn amount of all outstanding Letters of Credit, b)
the amount of all unpaid sales taxes due any state and which sales taxes have
been collected by the Company, and c) commencing June 14, 1996, an amount equal
to three times the monthly rent for leased facilities in lieu of landlord
waivers which have not been obtained in favor of the Agent for leased locations
at which Inventory is located, provided, however, that such reserve required
under this clause c shall cease upon receipt of landlord's waivers for the
distribution centers and not less than eighty-five (85) retail outlets.
Blocked Account shall mean any Concentration Account owned by the Company which
is governed by a blocked account or similar agreement in form substantially
similar to Exhibit B attached hereto and which account is subject to written
instructions only from the Company unless and until the Agent shall give the
institution holding such Concentration Account written instructions to the
contrary in accordance with the terms of paragraph 4 of Section 3 of this
Financing Agreement.
Business Day shall mean any date on which both the Agent and Chemical Bank are
open for business.
Capital Expenditures for any period shall mean the aggregate of all expenditures
of the Company during such period that in conformity with GAAP are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the balance sheet of the Company, reduced, to the
extent otherwise included therein, by the aggregate principal amount of all
Indebtedness (including obligations under capitalized lease obligations) assumed
or incurred after the date of this Financing Agreement in connection with the
acquisition of any capital asset after the date of this Financing Agreement,
other than the aggregate amount of principal payments (including the principal
component of payments under capitalized lease obligations) made during such
period on such Indebtedness, provided, however, that the following shall in any
event be excluded from the definition of Capital Expenditures: (i) any such
expenditures for Designated Sale-Leaseback Properties, provided that to the
extent any such Designated Sale-Leaseback Property shall not have been financed
pursuant to a sale-leaseback or mortgage financing permitted hereunder within
eighteen (18) months after the Company has designated the subject capital asset
as a Designated Sale-Leaseback Property, such expenditures shall be deemed to be
Capital Expenditures incurred on and as of the date of the expiration of
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such eighteen (18)-month period, (ii) any such expenditures made with (or, to
the extent of the receipt during the same fiscal year, expenditures in the
amount of) the proceeds of sales of Real Estate, or Equipment or similar fixed
assets or the proceeds of insurance, condemnation awards (or payments in lieu
thereof) or indemnity payments received from third parties for purposes of
replacing or repairing the assets in respect of which such proceeds, awards or
payments were received, so long as such expenditures are made within eighteen
(18) months of receipt by the Company of such proceeds, awards or payments and
(iii) any such expenditures for the purchase of assets pursuant to the terms of
the MLTC Documents, provided that if such assets shall not have been resold or
refinanced within nine (9) months after the purchase thereof, such expenditures
shall be deemed to be Capital Expenditures incurred on and as of the date of the
expiration of such nine (9) month period.
Capital Lease shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheet of the Company, but excluding leases of
property by the Company under the MLTC Documents.
Chemical Bank Rate shall mean the rate of interest per annum announced by
Chemical Bank, or its successor in interest, from time to time as its prime rate
in effect at its principal office in the County, City and State of New York. The
prime rate is not intended to be the lowest rate of interest charged by Chemical
Bank to its borrowers).
Collateral shall mean all present and future Accounts, Inventory, Documents of
Title and General Intangibles of the Company.
Commitment Letter shall mean the commitment letter, dated January 23, 1996,
issued by CITBC to, and accepted by, the Company.
Concentration Account shall mean any account owned by the Company which receives
funds from i) the Depository Accounts and ii) the credit card companies.
Collateral Management Fee shall mean the sum of $100,000.00 per annum which
shall be paid to the Agent in accordance with Section 7, Paragraph 7 of this
Financing Agreement to offset the expenses and costs of the Agent in connection
with record keeping, periodic examinations, analyzing and evaluating the
Collateral.
Consolidated Balance Sheet shall mean a consolidated balance sheet for the
Company and its Subsidiaries, if any, eliminating all intercompany transactions
and prepared, in the case of any such quarterly or annual balance sheet, in
accordance with GAAP consistently applied.
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Current Assets shall mean, whenever used throughout this Financing Agreement,
those assets of the Company and its Subsidiaries, on a consolidated basis, which
in accordance with GAAP, consistently applied, are classified as "current".
Current Liabilities shall mean, wherever used throughout this Financing
Agreement, those liabilities of the Company and its Subsidiaries, on a
consolidated basis, which in accordance with GAAP, consistently applied, are
classified as "current", provided, however, that notwithstanding GAAP, i) the
Revolving Loans and ii) the current portion of long term Permitted Indebtedness.
Customarily Permitted Liens shall mean
(a) liens of local or state authorities for franchise or other like taxes
provided the aggregate amounts of such liens shall not exceed $500,000.00 in the
aggregate at any one time;
(b) statutory liens of landlords and liens of carriers, work-men,
repairmen, warehousemen, mechanics, materialmen, vendors (other than Inventory
vendors or suppliers) and other like liens imposed by law, created in the
ordinary course of business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary course of
business including, without limitation, security deposits for leases, surety
bonds and appeal bonds, deposits in connection with utilities, workers'
compensation, unemployment insurance and other types of social security benefits
or to secure the performance of tenders, bids, contracts (other than for the
repayment or guarantee of borrowed money or purchase money obligations),
statutory obligations and other similar obligations; and
(d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), licenses, leases, restrictions, covenants,
rights of way, encroachments, minor defects or irregularities in title,
variation and other restrictions, liens, mortgage, charges or other encumbrances
(whether or not recorded) affecting the Company's Real Estate which do not
prohibit the use of the Real Estate for the retail sale of Inventory at the
Company's retail locations or the storage of Inventory at the Inventory
distribution centers.
Default shall mean any event specified in Section 9 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.
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Default Rate of Interest shall mean a rate of interest per annum equal to the
sum of: i) two percent (2%) and ii) the then applicable rate of interest, which
Default Rate of Interest Rate CITBC shall be entitled to charge the Company on
all Obligations due CITBC by the Company to the extent provided in Section 9,
Paragraph 2 of this Financing Agreement.
Depository Accounts shall mean those accounts (other than Concentration
Accounts) owned by the Company and designated for the deposit of proceeds of
Collateral.
Designated Sale-Leaseback Property means a capital asset developed or to be
developed by the Company after the date of this Financing Agreement and as to
which the Company has notified ClTBC in writing that such capital asset is, at
such time, a Designated Sale-Leaseback Property and as to which the Company
intends to enter into construction, sale-leaseback or mortgage financing,
provided that such Designated Sale-Leaseback Property shall cease to be a
Designated Sale-Leaseback property upon the earlier to occur of eighteen (18)
months after the date of such notice and the date on which such Designated
Sale-Leaseback Property is financed pursuant to a sale-leaseback or mortgage
financing permitted hereunder.
Documentation Fee shall mean i) the amount of $15,000.00 which is intended to
compensate the Agent for the use of the Agent's in-house Legal Department and
facilities in documenting, in whole or in part, the initial transaction solely
on behalf of the Agent, exclusive of Out-of-Pocket Expenses, and ii) the Agent's
standard and reasonable fees relating to any and all modifications, waivers,
releases, amendments or additional collateral with respect to this Financing
Agreement, the Collateral and/or the Obligations.
Document of Title shall mean all present and future warehouse receipts, bills of
lading, shipping documents, instruments and similar documents, all whether
negotiable or not, and all Inventory relating thereto and all cash and non-cash
proceeds of the foregoing.
Early Termination Date shall mean the date on which the Company terminates this
Financing Agreement or the Line of Credit which date is prior to the third
Anniversary Date.
Early Termination Fee shall: i) mean the fee the Agent for the account of the
Lenders is entitled to charge the Company in the event the Company terminates
the Line of Credit or this Financing Agreement on a date prior to the third
Anniversary Date; and ii) be determined by calculating the sum of (a) the
average daily balance of the Revolving Loans for the period from the date of
this Financing Agreement to the Early Termination Date and (b) the average daily
undrawn face amount of the Letters of Credit outstanding for the period from the
date of the Financing Agreement to the Early Termination Date and multiplying
that sum by x) one percent (1%) per annum
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for the number of days from the Early Termination Date to the third Anniversary
Date if such Early Termination Date is on or before the first Anniversary Date;
and y) one half of one percent (1/2%) per annum for the number of days from the
Early Termination Date to the third Anniversary Date if such Early Termination
Date is after the first Anniversary Date but prior to the third Anniversary
Date.
EBITDA shall mean, in any period, the net income (or net loss) of the Company
and its Subsidiaries, on a consolidated basis plus i) all amounts deducted in
determining net income in respect of Interest Expense, income tax obligations
(paid or accrued), depreciation expense and amortization expense, non-cash
straight line rent expense and all other non-cash items, each determined in
accordance with GAAP consistently applied and ii) any extraordinary loss
associated with the extinguishment of the debt due General Electric Capital
Corporation by the Company.
Eligible Inventory shall mean the gross cost of the Company's finished goods
Inventory that conforms to the warranties herein less any i) supplies, ii)
Inventory not present in the United States of America, iii) Inventory retuned or
rejected by the Company's customers other than Inventory that is undamaged and
resalable in the normal course of business, iv) Inventory to be returned to the
Company's suppliers, v) Inventory in transit to third parties, vi) shrinkage,
and vii) reserves required by the Agent in accordance with the standard set
forth below and without duplication but only for the following: (a) Inventory
specially ordered for specific customers which Inventory is uniquely different
in size, shape, quality or color and which uniquely different Inventory is not
customarily sold by the Company; (b) market value declines, to the extent the
Inventory's value is below its cost; (c) ▇▇▇▇ and hold (deferred shipment or
consignment sales); (d) markdowns, to the extent the Inventory's value is below
its cost; (e) Inventory which is not located at the Company's retail store
locations or warehouses (other than Inventory in transit between the Company's
facilities); (f) demonstration items, to the extent the Inventory's value is
below its cost; (g) damaged or defective Inventory; (h) obsolete Inventory (but
not including undamaged Inventory which is solely out-of-season); (i) inventory
at outlet locations not owned or operated by the Company; (j) Inventory held for
lease, but only to the extent such Inventory held for lease exceeds twenty-five
percent (25%) of the then aggregate gross cost of Inventory; and k) Inventory
imported under letters of credit issued without the assistance of the Letter of
Credit Guaranty and then only until the bank issuing such letters of credit has
been reimbursed by the Company for any drafts under such letters of credit. The
amount of such reserves shall be determined solely by the Agent in its
reasonable discretion and in the exercise of its reasonable business judgment
using standards customarily applied by the Agent to transactions involving
retail clients and taking into account the nature of the Company's business,
consistently applied by the Agent. Such standards shall take into consideration
amounts representing, historically, the Company's reserves, discounts, returns,
claims, credit and allowances.
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Equipment shall mean all present and hereafter acquired 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, as applicable.
Event(s) of Default shall have the meaning provided for in Section 9 of this
Financing Agreement.
Fixed Charge Coverage RATIO shall mean a ratio determined as of the relevant
calculation date by dividing EBITDA by the sum of i) Capital Expenditures and
ii) Interest Expense, for the relevant period.
GAAP shall mean generally accepted accounting principles in the United States of
America as in affect from time to time and for the period as to which such
accounting principles are to apply. Except as otherwise provided in this
Financing Agreement, all computations end determinations as to accounting or
financial matters and all quarterly and annual consolidated financial statements
to be delivered pursuant to this Financing Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP. If any change in accounting principles from
those effective December 31, 1995 and used in preparation of the financial
statements required hereunder occurs or are hereafter occasioned by promulgation
of rules, regulations, pronouncements or opinions by or are otherwise required
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or successors thereto or agencies with similar
functions), and any such changes results in a change of the method of
calculation of, or affect the results of such calculation of, any financial
covenant, standard or term found herein, then the parties shall amend such
financial covenants, financial standards or terms so as to equitably reflect
such changes, with the desired result that the criteria for evaluating the
financial condition and results of operations of the Company shall be the same
after such changes as if such changes had not been made.
General Intangibles shall have the meaning set forth in the Uniform Commercial
Code as in effect in the State of California and include, without limitation,
all present and future right, title and interest in and to all tradenames,
trademarks (together with the goodwill associated therewith), patents, licenses,
customer lists, distribution agreements, supply agreements and tax refunds,
together with an 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.
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Guarantor shall mean Parent.
Indebtedness shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, and (b) lease obligations which, in accordance
with GAAP, have been, or which should be capitalized, but excluding leases of
property by the Company under the MLTC Documents.
Interest Expenses shall mean i) total cash interest obligations (paid or
accrued) of the Company and its Subsidiaries determined in accordance with GAAP
on a basis consistent with the latest audited statements of the Company,
excluding amortization of financing fees related hereto and to other
Indebtedness of the Company and its Subsidiaries, prepayment penalties, fees or
premiums related to the payment, in whole or in part, of Indebtedness of the
Company and its Subsidiaries and original issue discounts, if any, minus
ii) interest income, if any.
Inventory shall mean all of the Company's present and hereafter acquired
merchandise and inventory held for sale or lease and all additions,
substitutions and replacements thereof, wherever located, together with all
packaging or shipping materials and all proceeds thereof of whatever sort.
Issuing Bank shall mean any bank issuing Letters of Credit for the Company.
Letters of Credit shall mean all letters of credit issued with the assistance of
the Lenders acting through the Agent by the Issuing Banks for or on behalf of
the Company.
Letter of Credit Guaranty shall mean any guaranty delivered by the Agent to the
Issuing Bank of the Company's reimbursement obligations under the Issuing Bank's
reimbursement agreement, application for Letters of Credit or other like
documents.
Letters of Credit Guaranty Fee shall mean the fee the Agent may charge under
paragraph 2 of Section 7 of this Financing Agreement for: i) issuing the Letter
of Credit Guaranty or ii) otherwise aiding the Company in obtaining Letters of
Credit pursuant to Section 4.
Leverage Ratio shall mean the ratio determined by dividing Total Liabilities by
Net Worth.
Libor shall mean, at any time of determination, and subject to availablility,
the London Interbank Offered Rate paid in London by Chemical Bank on one month,
two month, three month six month or nine month dollar deposits and if such rates
are not otherwise available, then those rates as published, under "Money Rates",
in the ▇▇▇
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▇▇▇▇ ▇▇▇▇ edition of the Wall Street Journal or if there is no such publication
or statement therein as to Libor, then in any publication used in the New York
City financial community.
Libor Loan shall mean the loans for which the Company has elected to use Libor
for interest rate computations.
Libor Period shall mean the Libor for one month, two month, three month, six
month or nine month dollar deposits, as selected by the Company.
Libor Processing Fee shall mean the sum of $500.00 which the Agent, for its own
account, shall be entitled to charge the Company in accordance with, but subject
to, the provisions of Section 7 of this Financing Agreement upon the election of
a Libor Loan.
Line of Credit shall mean the commitment of the Lenders acting through the Agent
to make loans and advances and issue Letter of Credit Guaranties, all pursuant
to and in accordance with, but subject to, Sections 3 and 4 of this Financing
Agreement, in the aggregate amount of $100,000,000.00 or such lesser amount as
the Company may elect in accordance with Section 7 of this Financing Agreement.
Loan Credit Fee shall: mean the fee due CITBC at the end of each month for the
Line of Credit, and ii) be determined by multiplying x) the difference between
the Line of Credit less the sum of a) the average daily Revolving Loans
outstanding during such month and b) the average daily undrawn face amount of
all outstanding Letters of Credit, for said month by y) three eights of one
percent (.375%) per annum for the number of days in said month during which this
Financing Agreement was in effect.
Loan Facility Fee shall mean the fee payable to the Agent for the account of the
Lenders in accordance with, and pursuant to, the provisions of Section 7 of this
Financing Agreement.
Loan Syndication Fee shall mean the fee payable to CITBC and solely for the
account of CITBC, in accordance with, and pursuant to, the provisions of Section
7 of this Financing Agreement
Margin Securities shall have the meaning assigned to such term in Regulation G
of the Board of Governors of the Federal Reserve System (12 C.F.R. 207, as
amended).
MLTC Documents means the Amended and Restated Master Lease Agreement dated April
20, 1994 between MLTC Funding, Inc. and Thrifty Corporation, the Amended and
Restated Master Lease Agreement dated April 20, 1994 between MLTC Funding, Inc.
and Thrifty Realty Company, and all other documents and instruments delivered
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or to be delivered pursuant thereto or in connection therewith, in each case, as
may be amended or otherwise modified from time to time in accordance with its
terms.
NET WORTH shall mean Total Assets of the Company and its Subsidiaries, on a
consolidated basis, in excess of Total Liabilities, and determined in accordance
with GAAP, on a consistent basis with the latest audited statements of the
Company and its Subsidiaries but without giving any effect to the prepayment
penalties, fees, expenses or premiums related to the extinguishment of the debt
due General Electric Capital Corporation by the Company.
OBLIGATIONS shall mean all obligations of the Company to pay, as and when due
and payable, all amounts from time to time owing by and in respect of this
Financing Agreement or any of loan documents related to this Financing
Agreement, including, without limitation, all loans and advances made or to be
made by the Agent on behalf of the Lenders to the Company, or to others for the
Company's account under this Financing Agreement or any loan document related to
this Financing Agreement; any and all indebtedness and obligations which may at
any time be owing by the Company under this Financing Agreement or any other
loan document related to this Financing Agreement, whether now in existence or
incurred by the Company from time to time hereafter; whether secured by pledge,
lien upon or security interest in the Company's assets or property or the assets
or property of any other person, firm, entity or corporation; whether such
indebtedness is absolute or contingent, matured or unmatured, direct or indirect
and whether the Company is liable for such indebtedness as principal, surety,
endorser, guarantor or otherwise. Obligations shall also include, without
duplication of the foregoing, all indebtedness owing by the Company under this
Financing Agreement or under any other agreement or arrangement hereafter
entered into between the Company and the Agent on behalf of the Lenders,
including, but not limited to, obligations to the Agent on behalf of the Lenders
in respect of Letters of Credit issued with the assistance of the Letter of
Credit Guaranty, indebtedness or obligations incurred by, or imposed on, the
Agent or the Lenders as a result of environmental claims arising out of the
Company's operations, premises or waste disposal practices or sites, the
Company's ability to the Agent on behalf of the Lenders under any instrument of
guaranty or indemnity, or arising under any guaranty, endorsement or undertaking
which the Agent on behalf of the Lenders may make or issue to others for the
Company's accounts, all at the Company's request hereafter, but in no event
shall Obligations include any obligations due any affiliate of a Lender.
OUT-OF-POCKET-EXPENSES shall mean all of the Agent's reasonable and documented
expenses incurred relative to the commitment letter or the closing of this
Financing Agreement and any amendment, modification or waiver thereof, whether
incurred heretofore or hereafter, and, in any case, at the Company's request,
with appropriate documentation delivered to the Company, which expenses shall
include, without being limited to, the cost of record searches, all costs and
expenses incurred by the Agent in opening bank accounts, depositing checks,
receiving and transferring funds, and
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any charges imposed on the Agent due to "insufficient funds" of deposited checks
the Agent's standard fee relating thereto, any amounts paid by the Agent on
behalf of the Lenders to an Issuing Bank or incurred by or charged to the Agent
on behalf of the Lenders by the Issuing Bank under the Letter of Credit Guaranty
or the Company's reimbursement agreement, application for letter of credit or
other like document which pertain either directly or indirectly to such Letters
of Credit, and the Agent's standard and reasonable fees relating to the Letters
of Credit and any drafts thereunder, local counsel fees, if any, fees and taxes
relative to the filing of financing statements, and all expenses, costs and fees
set forth in paragraph 3 of Section 9 of this Financing Agreement.
PARENT shall mean Big 5 Corporation, a Delaware corporation.
PERMITTED ENCUMBRANCES shall mean: i) liens expressly permitted, or consented
to, by the Agent on behalf of the Lenders; ii) Customarily Permitted Liens; iii)
liens granted the Agent on behalf of the Lenders by the Company; iv) liens of
judgment creditors, provided such liens do not exceed, in the aggregate, at any
time, $ 1,000,000.00 (other than liens stayed, satisfied, bonded or insured to
the reasonable satisfaction of the Agent within a) fifteen (15) calendar days of
the date the Company acquired actual knowledge of such judgment lien or b)
fifteen (15) calendar days of the date such lien attached by levy, whichever
first occurs); or; v) liens for taxes, levies or assessments not yet due and
payable or which are being diligently contested in good faith by the Company by
appropriate proceedings, and which liens are not a) senior to the lien of the
Agent on behalf of the Lenders; or b) for taxes due the United States of
America; vi) liens, if any, given to an Issuing Bank in connection with a Letter
of Credit obtained with the assistance of the Letter of Credit Guaranty; vii)
liens securing Purchase Money Obligations; viii) liens and other encumbrances
in existence on the date hereof; ix) liens given to issuers of letters of credit
issued without the assistance of the Letter of Credit Guaranty provided such
liens a) do not secure Indebtedness in excess of $1,000,000.00 in the aggregate
at any one time and b) attach only to the Inventory and/or Equipment acquired
with the assistance of such letter of credit; x) liens on assets, other than the
Collateral, of the Company, to secure the Indebtedness referenced in clause x of
the definition of Permitted Indebtedness; xi) liens on the Margin Securities;
and xii) any extension, renewal or replacement of any of the foregoing, provided
that any extension, renewal or replacement lien shall be limited to the property
or assets covered by the lien extended, renewal or replaced and the obligation
secured by such extension, renewed or replacement lien shall be in an amount not
greater than the obligations secured by the lien extended, renewed or replaced
plus the amount of all expenses, fees, premiums and penalties paid in connection
with such extension, renewals or replacement.
PERMITTED INDEBTEDNESS shall mean: i) Indebtedness incurred in the ordinary
course of business for Inventory, services, taxes or labor; ii) Indebtedness
arising in connection with Letters of Credit, this Financing Agreement and the
loan documents
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related to this Financing Agreement; iii) deferred taxes and other expenses
incurred in the ordinary course of business; iv) other Indebtedness existing on
the date of execution of this Financing Agreement and listed in the most recent
financial statement delivered to the Agent or otherwise disclosed to the Agent
in writing; v) Indebtedness arising in connection with or secured by, the
Permitted Encumbrances; vi) Indebtedness under any letters of credit issued
without the assistance of the Letter of Credit Guaranty provided such
Indebtedness does not exceed $1,000,000 in the aggregate at any one time; vii)
Indebtedness of the Company to the Parent or the Company's Subsidiaries in an
amount not to exceed $5,000,000 in the aggregate at any one time; viii) the
Subordinated Debt; ix) Indebtedness incurred in the form of surety, customs and
appeal bonds and other obligations of a similar nature; x) other Indebtedness of
the Company in an amount not to exceed $7,500,000.00 in the aggregate at any
time outstanding, provided such Indebtedness is a) not secured by the Collateral
and b) not due the Parent or any Subsidiaries of the Company or the Parent xi)
Indebtedness in an aggregate amount not to exceed $10,000,000 at any time which
is subordinated to the Obligations, provided such Indebtedness shall (a) have an
amortization schedule that results in the same or longer average life to
maturity than the Subordinated Debt and (b) contain subordination provisions
which are substantially similar to those in the documents evidencing the
Subordinated Debt ("Additional Subordinated Debt"); and xii) any extension,
renewal or replacement of any of the foregoing, provided that any extension,
renewal or replacement shall (a) be in an amount not greater than the
Indebtedness so extended, renewed or replaced (plus the amount of expenses, fees
and any premium or penalty paid in connection with such extension, renewal or
replacement), and (b) in the case of Subordinated Debt and Additional
Subordinated Debt, shall (1) have an amortization schedule that results in the
same or longer average life to maturity than the Subordinated Debt or Additional
Subordinated Debt, as applicable, and (2) contain subordination provisions which
are substantially similar to those in the documents evidencing the Subordinated
or Debt or Additional Subordinated Debt, as applicable.
PERMITTED INVESTMENTS shall mean (i) commercial paper and municipal bonds, in
each case issued or guaranteed by a Person rated P-l or better by ▇▇▇▇▇'▇
Investors Service, Inc. ("Moody's") or A-1 or MIG-1 or better by Standard &
Poor's Corporation ("S & P"), (ii) certificates of deposit, time deposits,
Eurodollar deposits or bankers' acceptances maturing not more then one year
after the date of issue, issued by any commercial banking institution, which is
a member of the Federal Reserve System and has a combined capital and surplus
and undivided profits of not less than $100,000,000 (iii) repurchase agreements
having maturities of not more than one year and which are secured by readily
marketable direct obligations of the Government of the United States of America
or any agency thereof, (iv) readily marketable obligations of the Government of
the United States of America or any agency thereof; (v) readily marketable
obligations issued by any state of the United States or any political
subdivision thereof having a rating by Moody's or S & P of "A" or its equivalent
or better; (vi) Margin Securities and (vii) mutual funds regularly traded in
-14-
the United States of America whose investments are limited to those described in
clauses (i) through (v) above.
PERSON shall mean an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, governmental
authority or other entity of whatever nature.
PURCHASE MONEY OBLIGATIONS shall mean the Indebtedness (a) incurred to
construct, purchase or lease Equipment and/or Real Estate and ii) secured solely
by a lien on the Equipment and/or Real Estate, including construction, sale
leaseback and mortgage financing incurred in connection with Designated
Sale-Leaseback Property; (b) of a Person existing at the time such Person is
acquired by, merged into or consolidated with the Company in accordance with
this Financing Agreement provided such Indebtedness is not secured by
Collateral; or c) secured by property (other than Collateral) acquired by the
Company existing at the time such property is or was acquired by the Company.
REAL ESTATE shall mean the Company's leasehold and fee interests in real
property.
REPORTING DATE shall mean any date on which the Company is to deliver to the
Agent any Collateral report pursuant to paragraph 2 of Section 3 of this
Financing Agreement, any financial statement or any other information requested
of the Company pursuant to the terms of this Financing Agreement.
REQUIRED LENDERS shall mean Lenders holding more than fifty percent (50%) of the
outstanding loans. advances, extensions of credit and commitments of the Company
hereunder.
RETAINED CASH shall mean an amount of cash sufficient to provide the Company
with cash in an amount necessary to stock the Company's cash registers at its
retail locations and consistent with the business practices of the Company.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to
or for the account of the Company by the Lenders acting through the Agent
pursuant to Section 3 of this Financing Agreement.
SETTLEMENT DATE shall mean the date, weekly, and more frequently, at the
discretion of the Agent, upon the occurrence of an Event of Default or a
continuing decline or increase of the Revolving Loans that the Agent and the
Lenders shell settle amongst themselves so that x) the Agent shall not have, as
Agent, any money at risk and y) on such Settlement Date the Lenders shall have a
pro rata amount of all outstanding Revoking 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.
-15-
SUBORDINATED DEBT shall mean the senior subordinated debt of the Company in the
original amount of $55,000,000.00 of which there is, as of the date hereof, an
unpaid balance of $36,450,000.00 due the holders (exclusive of that portion of
the Subordinated Debt held by the Company for its own account) of the
Subordinated Debt in September 2002 which is subordinate, by its terms, to the
prior payment and satisfaction of the Obligations.
SUBSIDIARY shall mean as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interest having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Financing Agreement shall refer to a Subsidiary or
Subsidiaries of the Company or the Parent.
TOTAL ASSETS shall mean total assets of the Company and its Subsidiaries, on a
consolidated basis, determined in accordance with GAAP, on a basis consistent
with the latest audited statements of the Company and its Subsidiaries.
TOTAL LIABILITIES shall mean total liabilities of the Company and its
Subsidiaries, on a consolidated basis, determined in accordance with GAAP, on a
basis consistent with the latest audited statements of the Company and its
Subsidiaries, provided, however, that for the purpose of computing Net Worth for
the covenant in Section 6 hereof and the Leverage Ratio in Section 6 hereof,
Total Liabilities shall not include any amount with respect to leases of
property by the Company under the MLTC Documents.
TRADE ACCOUNTS PAYABLE shall mean, at any time of determination, the amounts due
any supplier for inventory sold to the Company.
TRADE ACCOUNTS RECEIVABLE shall mean, at any time of determination, the amounts
due the Company by any i) credit card issuer and ii) any customer obligated an
invoice, in each instance due as a result of a sale of inventory or the
rendition of services by the Company.
WORKING CAPITAL shall mean Current Assets in excess of Current Liabilities.
SECTION 2. CONDITIONS PRECEDENT
The obligation of the Lenders acting through the Agent to make loans
hereunder is subject to the satisfaction of, or waiver of, immediately prior to
or concurrently with the making of such loans, the following conditions
precedent:
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a) 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 satisfactory to the Agent that casualty insurance policies covering the
Inventory listing the Agent on behalf of the Lenders as loss payee are in full
force and effect, all as set forth in Section 6, paragraph 4 of this Financing
Agreement.
c) UCC FILINGS - Any documents {including without limitation, financing
statements) required to be filed in order to create, in favor of the Agent on
behalf of the Lenders, subject to the Permitted Encumbrances, a first and
exclusive perfected security interest in the Collateral with respect to which a
security interest may be perfected by a filing under the Uniform Commercial Code
shall have been properly filed in each office in each jurisdiction required in
order to create in favor of the Agent on behalf of the Lenders a perfected lien
on the Collateral. The Agent shall have received acknowledgement copies of all
such filings (or, in lieu thereof, CITBC shall have received other evidence
satisfactory to the Agent that all such filings have been made); and the Agent
shall have received evidence that all necessary filing fees and all taxes or
other expenses related to such filings have been paid in full.
d) EXAMINATION & VERIFICATION - The Agent, for the benefit of the Lenders,
shall have completed to its satisfaction an examination and verification of the
Accounts, Inventory, books and records of the Company.
e) OPINIONS - Counsel for the Company shall have delivered to the Agent on
behalf of the Lenders opinions satisfactory to the Agent opining, inter alia,
that, subject to the i) filing, priority and remedies provisions of the Uniform
Commercial Code, ii) the provisions of the Bankruptcy Code, insolvency statutes
or other like laws, iii) the equity powers of a court of law and iv) such other
matters as may be agreed upon with the Lenders, the Financing Agreement of the
Company and the Guaranty of the Guarantor x) are valid, binding and enforceable
according to their terms, y) are duly authorized and z) do not violate any
terms, provisions, representations or covenants in the charter or by-laws of the
Company or the Guarantor, or, to the knowledge of such counsel, after reasonable
inquiry, of any loan agreement, mortgage, deed of trust, note, security or
pledge agreement or indenture, identified by the Company and the Guarantor to
such counsel as material, to which the Company and/or the Guarantor is a
signatory or by which the Company or the Guarantor or its assets are bound.
f) ADDITIONAL DOCUMENTS - The Company shall execute and deliver to the
Agent for the benefit of the Lenders all loan documents necessary to consummate
the lending arrangement contemplated between the Company and the Lenders.
-17-
g) COMMITMENT LETTER - The Company shall have fully complied, to the
satisfaction of CITBC, with all of the material terms and conditions of the
Commitment letter. To the extent that any terms of the Commitment Letter
conflict with the terms of this Financing Agreement, the terms of this Financing
Agreement shall apply.
h) BOARD RESOLUTION - The Agent for the benefit of the Lenders shall have
received a copy of the resolutions of the Board of Directors of the Company,
authorizing the execution, delivery and performance of (i) this Financing
Agreement and (ii) any related agreements, certified by the Secretary or
Assistant Secretary of the Company, as of the date hereof, together with a
certificate of the Secretary or Assistant Secretary of the Company as to the
incumbency and signature of the officers of the Company executing this Financing
Agreement and any certificate or other documents to be delivered by it pursuant
hereto, together with evidence of the incumbency of such Secretary or Assistant
Secretary.
i) CORPORATE ORGANIZATION - The Agent for the benefit of the Lenders shall
have received (i) a copy of the Certificate of Incorporation of the Company
certified by the Secretary of State of its incorporation, and (ii) a copy of the
By-Laws (as amended through the date hereof) of the Company and certified by the
Secretary or Assistant Secretary of the Company.
j) OFFICER'S CERTIFICATE - The Agent for the benefit of the Lenders shall
have received an executed Officer's Certificate of the Company, satisfactory in
form and substance to the Agent, certifying that: (i) the representations and
warranties contained herein are true and correct in all material respects on and
as of the date hereof; (ii) the Company is in compliance with all of the terms
and provisions set forth herein; and (iii) no Event of Default or Default has
occurred.
k) ABSENCE OF DEFAULT - No material adverse change in the financial
condition, business, prospects, profits (after giving affect to the seasonal
nature of the Company's business), operations or assets of the Company shall
have occurred since January 23, 1996. No Default or Event of Default shall exist
as of the date of this Financing Agreement.
l) LEGAL RESTRAINTS/LITIGATION - At the data of execution of this
Financing Agreement, there shall be, to the actual knowledge of the management
of the Company or to the actual knowledge of any Lender, no x) litigation,
investigation or proceeding (judicial or administrative) pending or threatened
against the Company or its assets, by any agency, division or department of any
county, city, state, province or federal government arising out of this
Financing Agreement, or the financing arrangement contemplated under this
Financing Agreement, y) injunction, writ or restraining order restraining or
prohibiting the consummation of the financing arrangements contemplated under
this Financing Agreement or z) suit, action, investigation or proceeding
(judicial or administrative) pending or threatened against
-18-
the Company, or its assets, which, is reasonably likely to result in a material
adverse effect on the business, operation, assets or financial condition of the
Company or the Collateral.
m) DISBURSEMENT AUTHORIZATION - The Company shall have delivered to the
Agent all information necessary for the Lenders acting through the Agent to
issue wire transfer instructions on behalf of the Company for the initial and
subsequent loans and/or advances to be made under this Financing Agreement
including, but not limited to, disbursement authorizations in a form acceptable
to the Agent.
n) BANKING AND/OR CREDIT CARD ARRANGEMENTS - As of the date of execution
of this Financing Agreement the Company shall have converted all of its
Concentration Accounts (other than operating accounts) into Blocked Accounts and
will have required the credit card companies to remit balances, when due, to a
Blocked Account.
o) GUARANTY - The Guarantor shall have executed and delivered to the Agent
for the benefit of the Lenders, a guaranty, in form and substance reasonably
acceptable to the Agent, under which the Guarantor has unconditionally
guaranteed the Obligations.
Upon the execution of this Financing Agreement and the initial
disbursement of loans hereunder, all of the above Conditions Precedent shall
have been deemed satisfied except as the Company and the Agent shall otherwise
agree herein or in a separate writing It is understood and agreed that as of the
date hereof the Company is unable to i) arrange for its Concentration Accounts
to become Blocked Accounts and ii) require the credit card companies to remit
balances, when due, to a Blocked Account. Notwithstanding such, the Agent will
waive such requirements for purposes of closing provided the Company within ten
(10) Business Days from the date hereof, delivers to the Agent executed
agreements, in form and substance reasonably satisfactory to the Agent, pursuant
to which the Concentration Accounts become Blocked Accounts and the credit card
companies have agreed to remit balances, when due, to a Blocked Account.
SECTION 3. REVOLVING LOANS
1. Lenders, acting through the Agent, agree, subject to the terms and
conditions of this Financing Agreement from time to time, and within x) the
Availability and y) the Line of Credit, but subject to the Agent's and the
Lenders' (acting through the Agent) rights to make "Overadvances", to make loans
and advances to the Company on a revolving basis, and subject to the limitations
set forth herein, the Company may borrow, repay and re-borrow Revolving Loans.
Such loans and advances shall be in amounts up to sixty-five percent (65%) of
the aggregate value of the Company's Eligible Inventory. The value of Eligible
Inventory shall be
-19-
determined at cost, by the cost inventory method, using a valuation on a first
in, first out basis in accordance with GAAP excluding capitalized buying,
handling and distribution costs, as reflected on the Company's books and
records. All requests for loans and advances (other than LIBOR Loans) must be
received by an officer of the Agent no later than 2:OO p.m. New York time on the
Business Day on which such loans and advances are required. Should the Agent for
any reason honor requests for advances in excess of the 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.
2. In furtherance of the continuing collateral assignment and security
interest in the Company's Accounts and Inventory, the Company shall deliver to
the Agent not later than: 1) thirty (30) days after the end of each month an
aging of the Company's Trade Accounts Receivable in such form and manner as the
Agent may reasonably require but consistent with the current practices of the
Company (provided, however, that such aging reports shall not be required in any
month when the amount of the Trade Accounts Receivable are less than
$2,500,000.00); 2) fourteen (14 days after the end of each month (other than
October, November and December, a monthly inventory confirmation statement
stating the aggregate amount of Eligible Inventory of the Company; and 3) five
(5) Business Days after each Sunday in the months of October, November and
December, a weekly Inventory confirmation statement stating the aggregate amount
of Eligible Inventory of the Company. With respect to all such reports, the
Company will provide to the Agent such additional information and material as
the Agent may reasonably request to effectively evaluate the Trade Accounts
Receivable and the collectability thereof and the mix of the Inventory and such
other information as the Agent may reasonably require to evaluate the Company's
Trade Accounts Receivable and Inventory, such as returns, claims, credits,
allowances and information identifying and describing the Trade Accounts
Receivable. Failure to provide the Agent with the foregoing information will in
no way effect, diminish, modify, or limit the security interest granted herein.
Such reports are to be executed by a responsible officer of the Company.
3. The Company hereby represents and warrants that: a) sales of Inventory
are, and shall be, based upon actual and bona fide sales and deliveries of
Inventory x) in the ordinary course of the Company's business, y) in connection
with the liquidation of an immaterial portion of the Inventory, or z) after the
occurrence of a casualty loss, bulk sales of salvageable Inventory, and that, in
any instance, the Inventory being sold and the proceeds thereof are the
exclusive property of the Company and are not and shall not be subject to any
lien, charge, arrangement, encumbrance, security interest, or financing
statement whatsoever other than the permitted Encumbrances, provided, however
that if there is then no Default or Event of Default, the Company may make
charitable transfers of Inventory in an amount not to exceed $500,000.00 in any
fiscal year; b) invoices representing Trade Accounts Receivable or credit card
receipts evidencing credit card sales are in the name of the
-20-
Company and except for disputes, offsets, defenses, counterclaims, contras,
returns or credits, all arising in the normal course of the Company's business
or except as may be promptly disclosed to the Agent, the purchasers of such
Inventory owe and are obligated to pay the amount stated in the invoices or
credit card receipts; and c) except for the Permitted Encumbrances, any and all
taxes and fees relating to its business are the Company's sole responsibility
and that same will be paid when due (except as otherwise provided in this
Financing Agreement), and that none of said taxes or fees represent a lien on or
claim against the proceeds of any sale of Inventory. The Company agrees to issue
credit memoranda promptly. The Company also warrants and represents that it is a
duly and validly existing corporation and is qualified to transact business in
all states where the failure to so qualify would have a material adverse effect
on the business of the Company or the ability of such Company to enforce
collection of Trade Accounts Receivable due from Persons residing in that state.
4. During the term of this Financing Agreement, the Company may and will,
at its expense, consistent with the Company's existing business practices,
enforce, collect and receive all amounts owing on the Accounts. Except for the
Retained Cash, all checks or cash from the sale of Inventory must be deposited
promptly to the Depository Accounts, and promptly thereafter and therefrom, to a
Blocked Account. The Company shall require that all amounts due under credit
card sales be remitted by the credit card companies to a Blocked Account. The
Company agrees that it will only direct the flow of funds from the Depository
Accounts and the credit card remitters to the Blocked Accounts. The institutions
holding such Blocked Accounts will be instructed that when it is satisfied that
such funds on deposit are "good funds", such institution will remit such "good
funds" to the Company's operating account. Notwithstanding anything herein
contained to the contrary, if x) there is then an Event of Default or y) the
Company has Availability of less than zero ($0) for three (3) consecutive
Business Days, then the Agent, acting on behalf of the Lenders, may advise the
banks holding the Blocked Accounts to remit all proceeds of Collateral to the
Agent for the account of the Lenders. The Agent will immediately rescind these
instructions a) upon the waiver of the Event of Default and b) when the Company
has Availability of zero ($0) or greater. All amounts received by the Agent for
the account of the Lenders will be credited to the Obligations upon the Agent's
receipt of "good funds" at its bank account in New York, New York on the
Business Day of receipt if received no later than 2 p.m. New York time or on the
next succeeding Business Day if received after 2 p.m. New York time. No checks,
drafts or other instruments received by the Agent will constitute final payment
unless and until such instruments have actually been collected. If the loan
account reflects a zero Revolving Loan balance and there is then no Event of
Default, then the Agent shall promptly remit to the operating account of the
Company any credit balances in the loan account.
-21-
5. The Agent shall maintain a separate account on its books in the
Company's name in which the Company will be charged with loans, advances and
payments under the Letter of Credit Guaranty, made to the Company or for its
account, and with any other Obligations, including any and all reasonable costs,
expenses and reasonable and documented attorney's fees which the Agent may incur
in connection with the exercise of any of the rights or powers herein conferred
or in the prosecution or defense of any action or proceeding to enforce or
protect any rights of the Agent or of any Lender in connection with this
Financing Agreement or the Collateral assigned hereunder, or any Obligations
owing by the Company. The Company will be credited with all amounts received by
the Agent from the Company or from others for the Company's account, including,
as above set forth, all amounts received by the Agent in payment of Accounts and
such amounts will be applied to payment of the Obligations. In no event shall
prior recourse to any Accounts or other security granted to or by the Company be
a prerequisite to the Agent's right to demand payment of any Obligation.
Further, it is understood that neither the Agent nor any Lender shall have no
obligation whatsoever to perform in any respect any of the Company's contracts
or obligations relating to the Accounts.
6. After the end of each month, the Agent, on its own behalf and/or acting
on behalf of the tenders, shall promptly send the Company a statement showing
the accounting for the charges, loans, advances, payments under the Letter of
Credit Guaranty, and other transactions occurring between the Agent, on its own
behalf, and/or on its own behalf or acting on behalf of the Lenders and the
Company during that month. The monthly statement shall be deemed correct and
binding upon the Company and shall constitute an account stated between the
Company, the Agent, and the Lenders unless the Agent receives a written
statement of the exceptions within thirty (30) days of the date of the monthly
statement.
SECTION 4. LETTERS OF CREDIT
In order to assist the Company in establishing or opening i) documentary
Letters of Credit with an Issuing Bank to cover the purchase and importation of
Inventory and ii) standby Letters of Credit with an Issuing Bank to cover such
other matters as the Company may so decide, other than for the purchase of
Inventory or to secure present or future Trade Accounts Payable, the Company has
requested the Agent, acting on behalf of the Lenders, to join in the
applications for such Letters of Credit and/or guarantee payment or performance
of such Letters of Credit and any drafts or acceptances thereunder through the
issuance of the Letters of Credit Guaranty, thereby lending the Lenders' credit
to the Company and the Lenders, acting through the Agent, have agreed to do so.
These arrangements shall be handled by the Agent acting on behalf of the
Lenders, subject to the terms and conditions set forth below.
-22-
1. Within the Line of Credit, the Lenders, acting through the Agent, shall
assist the Company in obtaining such Letters of Credit in an amount not to
exceed $15,000,000.00 in the aggregate outstanding at any one time. The Agent's
assistance with respect to Letters of Credit for amounts in excess of the
limitations set forth herein shall at all times and in all respects be in the
Agent's sole discretion. Notwithstanding anything herein to the contrary, upon
the occurrence of a Default and/or an Event of Default, the Agent's assistance
with respect to any Letters of Credit shall be in the Agent's sole discretion
unless such Event of Default is waived in writing, or such Default is cured to
the Agent's satisfaction in the exercise of its reasonable business judgment
during any applicable grace or cure period.
2. The Agent, acting on behalf of the Lenders, shall have the right,
without notice to the Company, to charge the loan account with the amount of any
and all indebtedness, liability or obligation of any kind paid or incurred under
the Letters of Credit Guaranty at the earlier of: a) payment by the Agent under
the Letters of Credit Guaranty, or b) termination of this Financing Agreement in
accordance with Section 10 of this Financing Agreement. Any mount so charged to
the loan account shall be charged against any credit balances then in the loan
account, and if there are then insufficient credit balances then to the extent
of such insufficiency such amount shall be deemed a Revolving Loan hereunder and
shall incur interest at the rate provided for in Section 7, paragraph 1 of this
Financing Agreement.
3. The Company unconditionally indemnifies the Agent and each Lender and
holds the Agent and each Lender harmless from any and all loss, claim or
liability incurred by the Agent and/or any Lender arising from any transactions
or occurrences relating to Letters of Credit established or opened for the
Company's account, the collateral relating thereto and any drafts or Acceptances
thereunder, and all Obligations thereunder, including any such loss or claim due
to any errors or actions taken by, or any omissions, negligence or misconduct
of, any Issuing Bank, other than for any such loss, claim or liability arising
out of the gross negligence or willful misconduct of the Agent and/or any
Lender. The Company's unconditional obligation to the Agent and each Lender
hereunder shall not be modified or diminished for any reason or in any manner
whatsoever, other than as a result of the gross negligence or willful misconduct
of the Agent and/or any Lender. The Company agrees that any charges of the
Issuing Bank incurred for the Company's account shall be conclusive on CITBC and
shall be charged to the loan account.
4. In connection with any Letter of Credit, neither the Agent nor any
Lender shall be responsible for: the existence, character, quality, quantity,
condition, packing, value or delivery of the goods purporting to be represented
by any documents; any difference or variation in the character, quality,
quantity, condition, packing, value or delivery of the goods from that expressed
in the documents; the validity, sufficiency or genuineness of any documents or
of any endorsements thereon, even if such documents should in fact prove to be
in any or all respects invalid,
-23-
insufficient, fraudulent or forged, other than as a result of the gross
negligence of the Agent and/or any Lender; the time, place, manner or order in
which shipment is made: partial or incomplete shipment, or failure or omission
to ship any or all of the goods referred to in the Letters of Credit or
documents; any deviation from instructions; delay, default, or fraud by the
shipper and/or anyone else in connection with any Inventory which is the subject
of any Letter of Credit or the shipping thereof; or any breach of contract
between the shipper or vendors and the Company. Furthermore, without being
limited by the foregoing, neither the Agent nor any Lender shall be responsible
for any act or omission with respect to or in connection with any Inventory
which is the subject of any Letter of Credit.
5. In connection with any Letter of Credit, the Company agrees that any
action taken by the Agent, if taken in good faith, or any action taken by any
Issuing Bank, under or in connection with the Letter of Credit, the guarantees.
the drafts or acceptances, or the Collateral, shall, as between the Company and
the Agent, be binding on the Company and shall not put the Agent or any Lender
in any resulting liability to the Company other than as a result of the gross
negligence or willful misconduct of the Agent or such Lender. After the
occurrence of an Event of Default which is not waived, the Agent shall have the
full right and authority to clear and resolve any questions of non-compliance of
documents; to give any instructions as to acceptance or rejection of any
documents or goods; to execute any and all steamship or airways guaranties (and
applications therefor), indemnities or delivery orders; to grant any extensions
of the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents; and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of
any of the applications, Letters of Credit, drafts or acceptances; all in the
Agent's sole name, and the Issuing Bank shall be entitled to comply with and
honor my and all such documents or instruments executed by or received solely
from the Agent, all without any notice to or any consent from the Company,
provided, however, that the Agent shall give the Company notice of the
acceptance or rejection of any goods.
6. In connection with any Letter of Credit, without the Agent's express
consent (which consent shall not be unreasonably withheld) and, where
applicable, endorsement in writing, the Company agrees: a) not to execute any
and all applications for steamship or airway guaranties, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances of documents; or to agree to any
amendments, renewals, extensions, modifications or changes of any of the terms
of conditions of any of the Letters of Credit, applications, drafts or
acceptances; and b) after the occurrence of an Event of Default which is not
waived, not to i) clear and resolve any questions of non-compliance of
documents, or ii) give any instructions as to acceptance or rejection of any
documents or goods.
-24-
7. In connection with any Letter of Credit, the Company agrees that any
necessary import, export or other licenses or certificates for the import or
handling of the Inventory will have been promptly procured, and all foreign and
domestic governmental laws and regulations in regard to the shipment and
importation of the Inventory, or the financing thereof will have been promptly
and fully complied with, except to the extent that any such non-procurement of
non-compliance will not have a material adverse effect on such Inventory; and
any certificates in that regard that the Agent, on behalf of the Lenders, may at
any time reasonably request will be promptly furnished. In this connection, the
Company warrants and represents that, to its actual knowledge, all shipments
made under any of the Letters of Credit are in accordance with the laws and
regulations of the countries in which the shipments originate and terminate, and
are not prohibited by any such laws and regulations, except to the extent that
any failure to so comply will not have a material adverse effect on such
shipments. The Company assumes all risk, liability and responsibility for, and
agrees to pay and discharge, all present and future local, state, federal or
foreign taxes, duties, or levies in connection with any Inventory or goods
purchased, imported or acquired under the Letter of Credit. Any embargo,
restriction, laws, customs or regulations of any country, state, province, city,
or other political subdivision, where the Inventory is or may be located or
wherein payments are to be made, or wherein drafts may be drawn, negotiated,
accepted, or paid, shall be solely the Company's risk, liability and
responsibility.
8. Upon any payments made to the Issuing Bank under the Letter of Credit
Guaranty, the Agent, for the benefit of the Lenders, shall acquire by
subrogation, any rights, remedies, duties or obligations granted or undertaken
by the Company to the Issuing Bank in any application for Letters of Credit, any
standing agreement relating to Letters of Credit or otherwise, all of which
shall be deemed to have been granted, to the Agent for the benefit of the
Lenders and apply in all respects to the Agent and the Lenders and shall be in
addition to any rights, remedies, duties or obligations contained herein.
9. Nothing in this Financing Agreement is intended to relieve any Issuing
Bank from any liability to any Person.
SECTION 5. COLLATERAL
1. As security for the prompt payment in full of all loans and advances
made and to be made to the Company from time to time by the Agent on behalf of
the Lenders pursuant hereto, as well as to secure the payment in full of the
other Obligations, the Company hereby pledges and grants to the Agent for the
benefit of the Lenders a continuing general lien upon and security interest in
all of its:
(a) present and hereafter acquired Inventory;
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(b) present and future Accounts;
(c) present and future Documents of Title: and
(d) present and future General Intangibles.
2. The security interests granted hereunder shall extend and attach to:
(a) All Collateral which is presently in existence and which is owned by
the Company or in which the Company has any interest (but only to the extent of
such interest), whether held by the Company or others for its account;
(b) All Inventory and any portion thereof which may be returned, rejected,
reclaimed or repossessed by either the Agent or the Company from any of the
Company's customers.
3. The Company agrees to take reasonable steps, consistent with current
business practices, to safeguard, protect and hold all Inventory and make no
disposition thereof except in the manner or for the purpose described in
paragraph 3 of Section 3 of this Financing Agreement. Inventory may be sold and
shipped by the Company to its customers in the ordinary course of the Company's
business, and the Company will collect all proceeds of such sales, consistent
with reasonable business practices in existence on the date of execution of this
Financing Agreement or consistent with the business practices of like companies
in the retail Industry, provided, however, that all proceeds of all such sales
(including cash, check and instruments for the payment of money), other than the
Retained Cash, are promptly deposited in accordance with paragraph 4 of Section
3 of this Financing Agreement. Upon the sale, exchange, or other disposition of
Inventory, as herein provided, the security interest in the Inventory provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, the proceeds, including any instruments for the
payment of money, accounts receivable, contract rights, documents of title,
shipping documents, chattel paper and all other cash and non-cash proceeds of
such sale, exchange or disposition. As to any such sale, exchange or other
disposition, the Agent on behalf of the Lenders shall have a security interest
in all of the rights of the Company as an unpaid seller, including stoppage in
transit, replevin, rescission and reclamation.
4. The rights and security interests granted to the Agent for the benefit
of the Lenders hereunder are to continue in full force and effect,
notwithstanding the termination of this Financing Agreement or the fact that the
loan account on the books of the Agent may from time to time be temporarily in a
credit position, until the satisfaction in full of all Obligations and the
termination of this Financing Agreement. Any delay or omission by the Agent to
exercise any right hereunder, shall not be deemed a waiver thereof, or be deemed
a waiver of any other right, unless such
-26-
waiver shall be in writing and signed by the Agent. A waiver on any one occasion
shall not be construed as a bar to or waiver of any right or remedy on any
future occasion. Upon satisfaction in full of all Obligations and the
termination of this Financing Agreement, the Agent will take, at the Company's
request and expense, all actions and do all things reasonably necessary to
release the rights and security interests in the Collateral, and upon any
partial release of Collateral, the Agent will take, at the Company's request and
expense, all actions and do all things reasonably necessary to release the
rights and security interests in the Collateral that is the subject of such
partial release.
5. To the extent that the Obligations are now or hereafter secured by any
assets or property other than the Collateral or by the guarantee, endorsement,
assets or property of any other person, then the Agent shall have the right in
its sole discretion to determine which rights, security, liens, security
interests or remedies the Agent shall at any time pursue, foreclose upon,
relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of the Agent's or
any Lenders' rights hereunder.
6. Any reserves or credit balances in the loan account and any other
property or assets of the Company in the possesion of the Agent may be held by
the Agent as security for any Obligations and applied in whole or partial
satisfaction of such Obligations when due. The liens and security interests
granted herein and any other lien or security interest the Agent may have in any
other assets of the Company, shall secure payment and performance of all now
existing and future Obligations.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
1. The Company hereby warrants and represents that: i) the fair value of
its assets exceed the book value of its liabilities; ii) the Company is
generally able to pay its debts as they become due and payable; and iii) the
Company does not have unreasonably small capital to carry on its business as it
is currently conducted absent extraordinary and unforeseen circumstances. The
Company further warrants and represents that except for the Permitted
Encumbrances and liens of which the Agent is aware on the date hereof, each of
the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral. Further, that except for
the Permitted Encumbrances, the Company is or will be at the time additional
Collateral is acquired by it, the absolute owner of the Collateral with full
right to pledge, sell, consign, transfer and create a security interest therein,
free and clear of any and all claims, consignments, or liens in favor of others,
that the Company will, at its expense, defend the same from any and all claims
and demands (other than the Permitted Encumbrances) of any other person.
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2. The Company agrees to maintain accurate books and records pertaining
to the Collateral. Prior to the occurrence of an Event of Default, the Agent or
its agents may, from time to time (but no more than once per fiscal quarter of
the Company) upon reasonable notice, enter upon the Company's premises at any
time during normal business hours, or at such other times as the Agent and the
Company may agree upon, for the purpose of inspecting the Collateral and any and
all records pertaining thereto, all at the Agent's expense. During the
continuance of an Event of Default, the Agent or its agents may, at the
Company's expense, enter the Company's premises, upon reasonable notice and
during normal business hours, and as often as it deems reasonably necessary, to
inspect the Collateral and the books and records of the Company. The Company
agrees to afford the Agent prior written notice of any change in the location of
any Collateral, other than to locations that are known to the Agent and at which
the Agent has filed financing statements and otherwise fully perfected its liens
thereon.
3. The Company agrees to comply with the requirements of all state and
federal laws in order to grant to the Agent for the benefit of the Lenders valid
and perfected first security interests in the Collateral, subject only to the
Permitted Encumbrances. The Agent is hereby authorized by the Company, to the
extent permitted by applicable law, to file any financing statements covering
the Collateral whether or not the Company's signature appears thereon and the
Agent agrees to provide the Company with copies of such financing statements.
The Company agrees to do whatever the Agent may reasonably request, from time to
time, by way of: filing notices of liens, financing statements, amendments,
renewals and continuations thereof; cooperating with the Agent's employees and
agent's keeping Inventory stock records; transferring proceeds of Collateral to
the Agent's possession in accordance with the terms of this Financing
Agreement; and performing such further acts as the Agent on behalf of the
Lenders may reasonably require in order to effect the purposes of this Financing
Agreement.
4. The Company agrees to i) maintain on Inventory, insurance under such
policies of insurance, with such insurance companies, in such reasonable amounts
and covering such insurable risks on as is reasonably acceptable to the Agent
and ii) maintain or caused to be maintained on Real Estate and Equipment,
insurance under such policies of insurance with such insurance companies
selected by the Company, on terms no less favorable than the insurance coverage
in place as of the date hereof (other than with respect to the deductible
amounts and limits of such coverage). All policies covering the Inventory are,
subject to the rights of any holders of Permitted Encumbrances holding claims
senior to the Agent, to be made payable to the Agent on behalf of the Lenders
under a standard non-contributory "mortgage", "lender" or "secured party" clause
and are to contain such other provisions as the Agent may reasonably require to
fully protect by insurance the Agent's interest in the Inventory and to any
payments to be made under such policies with respect to the Inventory. All
original policies or true copies thereof or certificates thereof are to be
delivered to
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the Agent, with all premiums current with the loss payable endorsement in the
Agent's favor, and shall provide for not less than ten (10) days prior written
notice to the Agent of the exercise of any right of cancellation. If the Company
fails to maintain such insurance, the Agent may arrange for such insurance, but
at the Company's expense and without any responsibility on the Agent's or any
Lender's part for: obtaining the insurance, the solvency of the insurance
companies, the adequacy of the coverage, or the collection of claims. Upon the
occurrence of an Event of Default which is not waived, the Agent shall, subject
to the rights of any holders of Permitted Encumbrances holding claims senior to
the Agent, have the sole right, in the name of the Agent or the Company, to file
claims under any insurance policies with respect to the Inventory, to receive,
receipt and give acquittance for any payments that may be payable thereunder
with respect to the Inventory, and to execute any and all endorsements,
receipts, releases, assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or settlement of any claims With
respect to the Inventory under any such insurance policies. In the event of any
loss or damage by fire or other casualty, insurance proceeds relating to
Collateral shall be deposited in the Depository Accounts in accordance with
paragraph 4 of Section 3 of this Financing Agreement.
5. The Company agrees to pay, when due, all local, domestic and foreign
(as applicable) taxes, assessments, and other charges (herein "taxes") lawfully
levied or assessed upon the Company or the Collateral, provided, however, that
such taxes need not be paid on or before the date fixed for payment thereof if:
i) such taxes are being diligently contested by the Company in good faith and by
appropriate proceedings; ii) the Company establishes such reserves as may be
required by GAAP; iii) such taxes are not secured by a filed lien which is
senior to the liens of the Agent on the Collateral and iv) such taxes secured by
a filed lien are not due the United States of America. To prevent the imminent
foreclosure of any tax liens (whether such liens are senior or junior to the
liens of the Agent) or in the event the Agent on behalf of the Lenders is
exercising its remedies as a secured creditor on Collateral, then the Agent may,
on the Company's behalf, pay any taxes then due in secured by a lien on the
Collateral and the amount thereof shall be an Obligation secured hereby.
6. Subject to the provisions of paragraph 5 above the Company: (a) agrees
to comply with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official, including, but not limited to, the
Fair Labor Standards Act, as set forth in Section 201 through Section 219 of
Title 29 of the United States Code, which the failure to comply with would have
a materially adverse impact on the Collateral, or on the operation of the
business of the Company, provided that the Company may contest any acts, rules,
regulations, orders and directions of such bodies or officials in any reasonable
manner which will not materially adversely effect the Agent's liens or priority
in the Collateral; and (b) agrees to comply with all environmental statutes,
acts, rules, regulations or orders as presently existing or as
-29-
adopted or amended in the future, applicable to the ownership and/or use of its
Real Estate and operation of its business, which the failure to comply with
would have a materially adverse impact on any material part of the Collateral,
or on the operation of the business of the Company. The Company hereby
indemnifies the Agent and each Lender and agrees to defend and hold the Agent
and each Lender harmless from and against any and all loss, damage, claim,
liability, injury or expense which the Agent and each Lender may sustain or
incur in connection with: any claim or expense asserted against the Agent and
each Lender as a result of any environmental pollution, hazardous material or
environmental clean-up of the Company's Real Estate, or any claim or expense
which results from the Company's operations (including, but not limited to, the
Company's off-site disposal practices). The Company further agrees that this
indemnification as to environmental liability shall survive for two (2) years
from the date of termination of this Financing Agreement and the payment of all
Obligations or amounts payable hereunder. The Company shall not be deemed to
have breached any provision of this paragraph 6 if (i) the failure to comply
with the requirements of this paragraph 6 resulted from good faith error or
innocent omission, (ii) the Company promptly commences and diligently pursues a
cure of such breach and such cure is eventually, within a reasonable time frame
based upon the circumstances and the amount of work required, completed and
(iii) such failure has not resulted in a materially adverse effect on any
material portion of the Collateral or the business, financial condition or
operations of the Company.
7. Until termination of this Financing Agreement and satisfaction in full
of all Obligations due hereunder, the Company agrees that, unless the Agent
shall have otherwise consented in writing, the Company will furnish, or cause to
be furnished, to the Agent, not later than: (a) one hundred and twenty 120)
days after the end of each fiscal year of the Company, an audited Consolidated
Balance Sheet as at the close of such year and consolidated statements of
operations, cash flows, shareholders' equity and reconciliation of surplus of
the Parent, the Company and their Subsidiaries for such year, audited by
independent public accountants selected by the Company and satisfactory to the
Agent, (the Agent hereby agrees that KPM Peat Marwick is satisfactory to the
Agent); (b) forty-five (45) days after the end of each month, other than a month
that constitutes a fiscal year end, a Consolidated Balance Sheet as at the end
of such period and consolidated statements of operations and cash flows of the
Parent, the Company and their Subsidiaries for such period, certified by an
authorized financial or accounting officer of the Company; and (c) a reasonable
time after request, such further information regarding the business affairs and
financial condition of the Company as the Agent may reasonably request,
including, without limitation, annual cash flow projections in form reasonably
satisfactory to the Agent. Each financial settlement required to be submitted
under clauses a and b above must be accompanied by an Officer's Certificate,
signed by the President, Senior Vice President, Vice President, Controller, or
Treasurer, of the Company pursuant to which such officer must certify that: (i)
the financial statement(s) fairly and accurately represent(s) the financial
condition of Parent, the Company and their Subsidiaries, at
-30-
the end of the particular accounting period, as well as the operating results of
Parent the Company and their Subsidiaries, during such accounting period,
subject to year end audit adjustments; (ii) during the particular accounting
period: (x) there has been no Default or Event of Default under this Financing
Agreement, provided, however, that if any such officer has knowledge that any
such Default or Event of Default has occurred during such period, the existence
of and a detailed description of same shall be set forth in such Officer's
Certificate; and (y) a senior officer of the Company has not received any notice
of cancellation with respect to its property insurance policies or certifying as
to replacement policies therefor; and (iii) the exhibits attached to such
monthly and annual financial statement(s) constitute detailed calculations
showing compliance with all financial covenants applicable for such period, if
any, contained in this Financing Agreement. Notwithstanding anything in this
Financing Agreement to the contrary, should the Parent purchase the assets of,
or capital stock of, a Person, or create or incorporate another Person of which
it owns a majority of such Person's capital stock, then the references to
Consolidated Balance Sheet shall mean the Consolidated Balance Sheet of the
Company and its Subsidiaries only and all references to Parent and its
Subsidiaries shall, without further action, be immediately deleted from this
paragraph 7.
8. The Company and its Subsidiaries shall have, as of the end of each
fiscal quarter, on a consolidated basis, a Net Worth, as defined herein, of not
less than $23,000,000.00:
9. Until termination of this Financing Agreement and satisfaction of all
Obligations due hereunder, the Company agrees that, without the prior written
consent of the Agent, except as otherwise herein provided, the Company will not:
A. Incur, create, assume or permit any lien, charge, security interest,
encumbrance or judgment, (whether as a result of a purchase money or
title retention transaction, or other security interest, or
otherwise) to exist on i) the collateral, except for the Permitted
Encumbrances and ii) any of its other assets whether real, personal
or mixed, whether now owned or hereafter acquired, except for the
Permitted Encumbrances;
B. Incur or create any Indebtedness other than the Permitted
Indebtedness;
C. Except for Permitted Indebtedness, borrow any money on the security
of the Collateral from sources other than the Agent acting on behalf
of the Lenders;
D. Sell, lease, assign, transfer or otherwise dispose of i) Collateral,
except as otherwise specifically permitted by this Financing
Agreement, or ii) either all or substantially all of the other
assets of the Company;
-▇▇-
▇. ▇▇▇▇▇, consolidate or otherwise alter or modify its corporate name,
principal place of business, structure or existence, or enter into
or engage in any operation or activity materially different from
that presently being conducted by the Company or otherwise related
to the retail sporting goods industry, provided, however, that on
fifteen (15) days prior notice to the Agent, the Company may,
without obtaining the consent of the Agent or any Lender i) merge
its Subsidiaries or a Person into itself provided x) the Company is
the survivor of the mergers; y) no liens on the assets of the
Subsidiaries or the Person survive such merger other than liens that
constitute Permitted Encumbrances; z) such Person was an entity with
its principal place of business, state of formation and assets in
the United States of America; aa) such Person was engaged in the
retail sporting goods industry; and bb) the Company, immediately
after giving effect to such merger, is in full compliance with all
of the terms and provisions of this Financing Agreement, provided,
however, that such Person's or Subsidiary's Inventory shall not be
deemed Eligible Inventory until such time as the Agent has
completed to its reasonable satisfaction an examination and review
of such inventory and such Person's or Subsidiary's books and
records; and ii) alter or modify its corporate name or principal
place of business;
F. Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, other than
i) by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business, ii) pursuant to obligations in effect on the date hereof,
iii) in connection with subleases pursuant to which the Company is
the sub-lessor, iv) in connection with the MLTC documents, v) home
relocation loans to or on behalf of employees or vi) in the ordinary
course of the Company's business or for purposes deemed reasonable
by the Company provided such obligations under this clause vi shall
not exceed $5,000,000.00 in the aggregate any one time;
G. Declare or pay any dividend of any kind on, or purchase, acquire,
redeem or retire, any of its capital stock or equity interest of any
class whatsoever, whether now or hereafter outstanding, except that
the Company may declare and pay dividends on its capital stock x) in
cash in i) amounts sufficient to enable the Parent to purchase,
acquire or redeem the capital stock owned by its employees or its
retired, deceased or terminated officers, directors or shareholders
which the Parent is contractually obligated or entitled to purchase,
acquire or redeem, and ii) additional amounts not to exceed the sum
of $3,000,000.00 and the net cash proceeds realized from sales by
the Company in such fiscal year of its capital stock in any fiscal
year, provided, however, that if the
-32-
Company does not declare and pay dividends in any fiscal year of up
to the sum of $3,000,000.00 and the net cash proceeds realized from
sales by the Company in such fiscal year of its capital stock, the
difference may be added to the amount permitted in subsequent fiscal
years and further, provided that such dividends may not be declared
and paid, on or after May 1, 1996,if a Default or Event of Default
is then in existence or will be in existence after giving effect to
such dividends; y) in kind; or z) in cash in an amount sufficient to
i) enable the Parent to pay income or franchise taxes of the Company
due as a result of the filing of a consolidated, combined or unitary
tax return in which the operations of the Company are included; or
ii) reimburse the Parent for out-of-pocket expenses incurred by the
Parent for the joint or several benefit of the Parent and the
Company, and fees and expenses of its directors for attending the
Board of Directors' meeting;
H. Make any advance or loan to, or any investment in, any Person,
except for i) advances, loans or investments in existence on the
date of execution of this Financing Agreement, including, without
limitation, the portion of Subordinated Debt owned by the Company;
ii) Permitted Investments; iii) loans and advances to employees in
the ordinary course of business for travel, entertainment and home
relocation; iv) loans and advances to employees to enable employees
to purchase the capital stock of Parent provided such loans and
advances do not exceed $2,000,000.00 in the aggregate at any one
time, provided, however, that such $2,000.000.00 limitation shall
not be applicable if the cash proceeds of such stock purchases are
immediately reinvested by the Parent in the capital stock of the
Company or are immediately used to repay indebtedness of Parent to
the Company; v) advances or loans to, or investments in, joint
ventures or Subsidiaries of the Company, provided, however, that if
such loans or advances are not being used to acquire, directly or
indirectly, assets for the benefit of the Company, such loans,
advances or investments may not exceed $l,000,000.00 in the
aggregate at any one time; and vi) other loans, advances and
investments to, or with the Parent, provided same do not exceed in
the aggregate outstanding at any one time $5,000,000.00.
10. The Company and its Subsidiaries shall have, as of the end of each
fiscal quarter, on a quarter, on a consolidated basis, Working Capital, as
defined herein, of not less than $55,000,000.00
11. If the Company's Availability on any one (1) Business Day of the sixty
(60) days immediately preceding the date on which the Company must deliver to
the Agent the Company's Consolidated Balance Sheet as of the relevant quarterend
was less than $5,000,000.00, then the Company and its Subsidiaries, shall have,
on a
-33-
consolidated basis, at all times for the relevant each fiscal period listed
below, a Fixed Charge Coverage Ratio of at least:
Fiscal Period Ending Ratio
-------------------- -----
a) On March 31, 1996 for the fiscal
quarter then ended .15 to 1
b) On June 30. 1996 for the two fiscal
quarters then ended .75 to 1
c) On September 30, 1996 for the three
fiscal quarters then ended .90 to 1
d) On December 31, 1996 for the four
fiscal quarters then ended 1.0 to 1
e) Thereafter, at the end of each fiscal
quarter for the four fiscal quarters
then ended 1.1 to 1
12. The Company and its Subsidiaries shall have, as of the end of each
fiscal quarter, on a consolidated basis, a Leverage Ratio, of not more than 8.0
to 1.
13. The Company agrees to advise the Agent, promptly, in writing of: a)
all quantifiable expenditures (actual or anticipated) in excess of $750,000.00
pertaining to the Real Estate and operations in any fiscal year for i)
environmental clean-up, ii) environmental compliance or iii) environmental
testing and the impact of said expenses on Working Capital; and b) any notices
the Company receives from any local, state or federal authority advising the
Company of any environmental liability (real or potential) stemming from any of
the Company's operations, premises, its waste disposal practices, or waste
disposal sites used by the Company and to provide the Agent with copies of all
such notices if so required.
14. Without the prior written consent of the Agent, the Company agrees
that it will not: a) enter into any transaction, including, without limitation,
any purchase, sale, transfer, lease, loan or exchange of property with Parent or
any Subsidiary or Affiliate other than i) transactions in the ordinary course of
the Company's business and on terms no less favorable than the terms otherwise
attainable by the Company from a Person not an Affiliate; ii) as otherwise
permitted in this Financing Agreement, including, without limitation, Permitted
Indebtedness, to the extent applicable; iii) reimbursement of fees and expenses
to directors for the expenses incurred by such directors for attending the
Company's Board of Directors' meetings; iv) all customary compensation
arrangements, including participation in employee benefit plans; v)
-34-
payment to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners of its x) management and transaction fees
and y) out-of-pocket expenses incurred for the benefit of the Company; and vi)
purchases by the Company of assets leased by the Company under the MLTC
Documents.
15. The Company shall conduct or cause to be conducted, not less than once
in any calendar year, an actual physical count of its Inventory at each store.
Such physical inventory count shall, in part, be conducted or reviewed by an
entity that is not an Affiliate of the Company and which entity shall be
experienced in conducting or reviewing such a physical inventory. The Company
shall within forty-five (45) days after the end of each month, provide to the
Agent for each Lender a schedule prepared by the Company of the results of the
Inventory counts completed at the Company's stores during that month.
Concurrently therewith, the Company shall provide the Agent for each Lender with
the results of the internally prepared cycle counts completed at the Company's
distribution centers during that month. Such cycle counts shall be reviewed by
the Company's independent public accountants in their normal annual review
process. Upon the Agent's reasonable request, the Company will provide the Agent
with further details of Inventory count and review results, so long as the
Agent's request is for information readily available to the Company on existing
internally or externally prepared Inventory reports.
16. The Company shall remit any and all sales taxes when due to the
appropriate sales tax authorities when any such remittances are due, provided,
however, that such remittances need not be made on or before such due date if:
i) such sales taxes are being diligently contested by the Company in good faith
and by appropriate proceedings; ii) the Company establishes such reserves as may
be required by GAAP; and iii) the failure to remit such sales taxes does not
create a lien in favor of such sales tax authorities or impose upon the Agent or
any Lender any obligation to segregate proceeds.
SECTION 7. INTEREST, FEES AND EXPENSES
1. Interest on the Revolving Loans (other than Libor Loans) shall be
payable monthly as of the and of each month and shall be an amount equal to the
sum of three-quarters of one percent (.75%) and the Chemical Bank Rate, on a
per annum basis, on the average of the net balances (other than Libor Loan)
owing by the Company in the Company's account at the close of each day during
such month. Interest on the Revolving Loans which are Libor Loans shall be
payable monthly as of the end of each month and shall be an amount equal to the
sum of two and one-half percent (2 1/2%) and the applicable Libor on each then
outstanding Revolving Loan which is a Libor Loan, on a per annum basis, on the
average of the net balance owing by the Company on such Libor Loan at the close
of each day during such month. The Company may elect to use Libor as to any new
or then outstanding Revolving Loans provided x) there is then no unwaived
Default or Event of Default, and y) the Company has so advised the Agent of its
election to use Libor and the Libor Period selected no
-35-
later than three (3) Business Days prior to the proposed borrowing or, in the
case of a Libor election with respect to a then outstanding Revolving Loan,
three (3) Business Days prior to the conversion of any then outstanding
Revolving Loans to Libor Loans and z) the election and Libor shall be effective,
provided, there is then no unwaived Default or Event of Default, on the fourth
Business Day following said notice. The Libor elections must be for $100,000.00
or whole multiples thereof. If no such election is timely made or can be made,
then the Agent shall use the Chemical Bank Rate to compute interest. In the
event of any change in said Chemical Bank Rate, the rate hereunder shall change,
as of the first of the month following any change, so as to remain three
quarters of one percent (.75%) above the Chemical Bank Rate. The rates hereunder
shall be calculated based on a 365-day year. The Agent shall be entitled to
charge the Company's account at the rate provided for herein when due until all
Obligations have been paid in full.
2. In consideration of the Letter of Credit Guaranty, the Company shall
pay to the Agent the Letter of Credit Guaranty Fee which shall be an amount
equal to one and one quarter percent (1 1/4%) per annum, payable a) monthly, on
the face amount of each outstanding stand-by Letter of Credit less the amount of
any and all amounts previously drawn under such Letters of Credit and b) on the
date of issuance on the face amount of each outstanding documentary Letter of
Credit.
3. Any charges, fees, commissions, costs and expenses charged to the Agent
for the Company's account by any Issuing Bank in connection with or arising out
of Letters of Credit issued pursuant to this Financing Agreement or out of
transactions relating thereto will be charged to the loan account in full when
charged to or paid by the Agent and when made by any such Issuing Bank shall be
conclusive on the Agent.
4. The Company shall reimburse or pay the Agent, as the case may be, for:
a) all Out-of-Pocket Expenses and b) any applicable Documentation Fees.
5. Upon the last Business Day of each month, commencing with March 29,
1996, the Company shall pay the Agent for the account of the Lenders the Line of
Credit Fee.
6. To induce CITBC, both as Lender and as Agent, to enter into this
Financing Agreement and to extend to the Company the Revolving Loans, the
Company hereby agrees to pay to CITBC a Loan Syndication Fee, in the amount set
forth in the Commitment Letter, less the Documentation Fee, payable upon
execution of this Financing Agreement.
7. Upon the date of execution of this Financing Agreement and on each
Anniversary Date thereafter so long as this Financing Agreement is in effect,
the Company shall pay to the Agent for the Agent's account only the Collateral
Management Fee which shall be non-refundable. Such fee shall be fully earned
when
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paid and shall not be refundable or rebateable by reason of prepayment,
acceleration upon an Event of Default or any other circumstances and shall be
retained notwithstanding any termination of this Agreement.
8. To induce the Lenders (including CITBC) to enter into this Financing
Agreement and to extent to the Company the Revolving Loans, the Company hereby
agrees to pay to the Agent for the account of the Lenders a Loan Facility Fee in
the amount of $500,000.00 payable upon execution of this Financing Agreement.
Such fee shall be fully earned when paid and shall not be refundable or
rebateable by reason of prepayment, acceleration upon an Event of Default or any
other circumstances and shall be retained notwithstanding any termination of
this Agreement.
9. Immediately upon the advise to the Agent by the Company of the
Company's election of a Libor Loan, the Company shall pay to the Agent for the
Agent's account only the Libor Processing Fee which shall be non-refundable.
10. The Company shall pay to the Agent for the account of the Lenders such
amount or amounts as shall compensate the Agent, the Lenders or their
Participants (as defined below), if any, for any loss, costs or expenses
incurred by the Agent, the Lenders or their Participants if any, (as reasonably
determined by the Agent, the Lenders or their Participants if any) as a result
of: (i) any payment or prepayment on a date other than the last day of a Libor
Period for such Libor Loan, or (ii) any failure of the Company to borrow a Libor
Loan on the date for such borrowing specified in the relevant notice; such
compensation to include, without limitation, an amount equal to any loss or
expense suffered by the Agent, the Lenders or their Participants if any, during
the period from the date of receipt of such payment or prepayment or the date of
such failure to borrow to the last day of such Libor Period if the rate of
interest obtained by the Agent, the Lenders or their Participants if any, upon
the reemployment of an amount of funds equal to the amount of such payment,
prepayment or failure to borrow is less than the rate of interest applicable to
such Libor Loan for such Libor Period. The determination by the Agent, the
Lenders or their Participants, if any, of the amount of any such loss or
expense, when set forth in a written notice to the Company, containing the
calculations thereof in reasonable detail, shall constitute prima facie evidence
thereof.
11. The Company may at any time, on ten (10) Business Days prior written
notice to the Agent, reduce the Line of Credit provided that: i) any reduction
shall be permanent and irrevocable; ii) a reduction must be for at least
$5,000,000.00 or whole multiples thereof; and iii) the Company shall immediately
repay the Agent the amount by which the Obligations exceed Availability.
12. The Company hereby confirms and authorizes the Agent, and the Agent
hereby agrees, to charge the loan account with the amount of all Obligations due
hereunder as such payment becomes due. In the unlikely event the Agent is unable
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or unwilling to charge any such Obligation to the loan account, then the Agent
shall so notify the Company in writing and the amount so requested shall be due
and payable thirty (30) days after such demand.
SECTION 8. POWERS
Subject to the last paragraph in this Section 8, the Company hereby
constitutes the Agent on behalf the Lenders or any person or agent the Agent may
reasonably designate as its attorney-in-fact, at the Company's cost and expense,
to exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all Obligations to the Agent and the Lenders have
been satisfied and this Financing Agreement terminated:
(a) To receive, take, endorse, sign, assign and deliver, all in the name
of the Agent or the Company, any and all checks, notes, drafts, and
other documents or instruments relating to the Collateral for i)
deposit to a Blocked Account (consistent with the terms of
paragraphs 4 of Section 3 of this Financing Agreement) or ii) after
the acceleration by the Agent of the Obligations for application to
satisfaction of the Obligations consistent with the terms of
Paragraph 3 of Section 9 hereof;
(b) To request, not more frequently than two (2) times a fiscal year,
from customers indebted on Trade Accounts Receivable, in the name of
the Company or the Agent's designee, information concerning the
amounts owing on the Trade Accounts Receivable provided, however,
that such request made be made only if the then aggregate balance of
the Trade Accounts Receivable is in excess of $2,500,000.00;
(c) To request from customers indebted on Trade Accounts Receivable at
any time, in the name of the Agent, information concerning the
amounts owing on the Trade Accounts Receivable;
(d) To transmit to customers indebted on Trade Accounts Receivable
notice of the Agent's interest therein and to notify customers
indebted on Trade Accounts Receivable to make payment directly to
the Agent for the Company's account; and
(e) To take or bring, in the name of CITBC or the Company, all steps,
actions, suits or proceedings reasonably deemed by CITBC necessary
or desirable to enforce or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the powers
set forth in (a), (c), (d) and (e) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived.
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SECTION 9. EVENTS OF DEFAULT AND REMEDIES
1. Notwithstanding anything hereinabove to the contrary, the Agent acting
for the Lenders may terminate this Financing Agreement immediately upon the
occurrence of any of the following (herein "Events of Default");
a) cessation of business of the Company or the calling of a general meeting
of the creditors of the Company for purposes of compromising the debts and
obligations of the Company;
b) the Company admits in writing its inability to generally pay its debts as
they mature;
c) the commencement by the Company of any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law;
d) the commencement against the Company of any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law provided, however, that such Default shall not be
deemed an Event of Default if the proceeding, petition, case or
arrangement is dismissed within sixty (60) days of the filing of, or the
commencement of, such petition, case, proceeding or arrangement;
e) material breach by the Company of any warranty, representation
(representations and warranties referred to in this subparagraph 8 shall
be deemed made as of each i) Reporting Date, whether or not any report is
in fact given to the Agent or ii) request for a Revolving Loan or
iii) request for the Agent's assistance in obtaining a Letter of Credit or
iv) the posting of any Obligation to the loan account) or any covenant
contained herein (other than those otherwise referred to in this Section
9) or in any other agreement between the Company and the Agent relating to
this Financing Agreement, provided THAT such Default by the Company of any
of the warranties, representations or covenants referred to in this clause
(e) shall not be deemed to be an Event of Default and until such Default
shall remain unwaived or unremedied to the Agent's reasonable satisfaction
for a period of fifteen (15) days from the date of the Agent's discovery
of such breach (the Agent shall endeavor to notify the Company of such
breach but the failure to so notify shall not detract from the Agent's
rights or give the Company any claim, course of action or defense;
f) breach by the Company of any warranty, representation or covenant of; i)
the first sentence of Paragraph 3 of Section 3; or; ii) Paragraph 4 of
Section 3 or iii) Paragraph 3 of Section 5; or iv) Paragraphs 4 (only as
it relates to insurance
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on the Inventory) and 5 of Section 6; or v) Paragraphs 9 (other than sub-
paragraphs A (ii), B and F thereof) and 16 of Section 6;
g) breach by the Company of sub-paragraphs A (ii), B or F of Paragraph 9 of
Section 6, provided that such Default by the Company shall not be deemed
to be an Event of Default unless and until such Default shall remain
unwaived or unremedied for a period of fifteen (15) days from the date of
such Default;
h) except as otherwise provided in Section 7, Paragraph 12 of this Financing
Agreement, failure of the Company to pay any of the Obligations within ten
(10) days of the due date thereof;
i) the Company shall i) engage in any "prohibited transaction" as defined in
ERISA, ii) have any "accumulated funding deficiency" as defined in ERISA,
iii) have any Reportable Event as defined in ERISA, iv) terminate any
Plan, as defined in ERISA or v) be engaged in any proceeding in which the
Pension Benefit Guaranty Corporation shall seek appointment, or is
appointed, as trustee or administrator of any Plan, as defined in ERISA,
and with respect to this sub-paragraph i) such event or condition x)
remains uncured for a period of ninety (90) days from date of occurrence
and y) could reasonably be expected to subject that Company to any tax,
penalty or other liability materially adverse to the business, operations
or financial condition of the Company and its Subsidiaries taken us a
whole;
j) the holder, trustee or beneficiary of any instrument referred to in this
subparagraph shall have a then current right to accelerate (whether or not
such right is actually exercised) pursuant to any instrument evidencing
outstanding recourse Indebtedness of the Company in excess of
$3,000,000.00; or
k) without the prior written consent of the Agent, the Company shall i) amend
or modify the Subordinated Debt or ii) make any payment on account of the
Subordinated Debt not otherwise required pursuant to the terms of the
Subordinated Debt, or iii) prepay, in whole or in part, the Subordinated
Debt.
2. Upon the occurrence of a Default and/or an Event of Default, at the
option of the Agent, all loans and advances provided for in Section 3, Paragraph
1 of this Financing Agreement shall be made thereafter in the Agent's sole
discretion and the obligation of the Agent acting for the Lenders to make
Revolving loans and/or assist the Company in obtaining Letters of Credit shall
cease until such time as the Default is timely cured to the Agent's reasonable
satisfaction or the Event of Default is waived. Further, at the option of the
Agent, or at the direction of the Required Lenders, upon the occurrence of an
Event of Default (unless waived): i) all Obligations shall upon notice
(provided, however, that no such notice is required if the Event of Default is
the Event of Default listed in paragraph l(c) or l(d) of this Section 9)
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become immediately due and payable; ii) the Agent may thereafter charge the
Company the Default Rate of Interest on all then outstanding or thereafter
incurred Obligations in lieu of the interest provided for in paragraph 1 of
Section 7 of this Financing Agreement provided a) the Agent has given the
Company written notice of the Event of Default, provided, however, that no
notice is required if the Event of Default is the Event of Default listed in
paragraph l(c) or 1(d) of this Section 9 and b) the Company has failed to cure
the Event of Default within fifteen (15) days after x) the Agent deposited such
notice in the United States mail or y) the occurrence of the Event of Default
listed in paragraph 1(c) or 1(d) of this Section 9; and ii) the Agent may, and
shall at the direction of the Required Lenders, immediately terminate this
Financing Agreement upon notice to the Company, provided, however, that no
notice of termination is required if the Event of Default is the Event of
Default listed in paragraph l(c) or l(d) of this Section 9. Notwithstanding
anything herein contained to the contrary, if the Agent waives all Events of
Default, then by written notice to the Company, the acceleration of the
Obligations will be rescinded and all remedies and actions then being exercised
by the Agent shall cease. The exercise of any option is not exclusive of any
other option which may be exercised at any time by the Agent.
3. Upon the Occurrence of any Event of Default, the Agent may, to the
extent permitted by law: (a) remove from any premises where same may be located
copies of any and all documents, instruments, files and records, relating to the
Accounts, or the Agent may use such of the Company's personnel, supplies or
space at the Company's places of business or otherwise, as may be necessary to
properly administer and control the Accounts or the handling of collections and
realizations thereon; b) bring suit, in the name of the Company or the Agent,
and generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part, any amounts owing on any
Accounts and issue credits in the name of the Company or The Agent; (c) sell,
assign and deliver the Collateral and any returned, reclaimed or repossessed
merchandise, with or without advertisement, at public or private sale, for cash,
on credit or otherwise, at the Agent's sole option and discretion, and, to the
extent permitted by applicable law, the Agent may bid or become a purchaser at
any such sale, free from any right of redemption, which right is hereby
expressly waived by the Company; (d) foreclose the security interests created
herein by any available judicial procedure, or to take possession of any or all
of the Inventory without judicial process, and to enter any premises where any
Inventory may be located for the purpose of taking possession of or removing the
same; and (a) 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
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other terms and conditions as the Agent in its sole discretion may deem
advisable, and, to the extent permitted by applicable law, the Agent shall have
the right to purchase at any such sale. If any Inventory shall require
repairing, maintenance or preparation, the Agent shall have the right, at its
option, to do such of the aforesaid as is necessary, for the purpose of putting
the Inventory in such saleable form as the Agent shall reasonably deem
appropriate. The Company agrees, at the request of the Agent, to assemble the
Inventory and to make it available to the Agent at premises of the Company or
such other location reasonably designated by the Agent for the purpose of the
Agent's taking possession of, removing or putting the Inventory in saleable
form. However, if notice of intended disposition of any Collateral is required
by law, it is agreed that ten (10) days notice shall constitute reasonable
notification and full compliance with the law. The net cash proceeds resulting
from the Agent's exercise of any of the foregoing rights, (after deducting all
reasonable charges, costs and expenses, including reasonable attorneys' fees)
shall be applied by the Agent to the payment of the Obligations, whether due or
to become due, and the Company shall remain liable to the Agent for any
deficiencies, and the Agent in turn agrees to remit to the Company or its
successor or assign, any surplus resulting therefrom. The enumeration of the
foregoing rights is not intended to be exhaustive and the exercise of any right
shall not preclude the exercise of any other rights, all of which shall be
cumulative.
SECTION 10. TERMINATION
Except as otherwise permitted herein, the Agent may, and shall at the
discretion of the Required Lenders, terminate this Financing Agreement and the
Line of Credit only as of the third or any subsequent Anniversary Date and then
only by giving the Company at least ninety (90) days prior written notice of
termination. Notwithstanding the foregoing, the Agent may terminate the
Financing Agreement immediately upon the occurrence of an Event of Default upon
notice to the Company, provided, however, that if the Event of Default is an
event listed in paragraph 1(c) or 1(d) of Section 9 of this Financing Agreement,
the Agent may, and shall at the direction of the Required Lenders, regard the
Financing Agreement as terminated and notice to that effect is not required.
This Financing Agreement, unless terminated as herein provided, shall
automatically continue from Anniversary Date to Anniversary Date. The Company
may, at any time, terminate this Financing Agreement and the Line of Credit upon
at least thirty (30) days' prior written notice to the Agent, provided, that the
Company pay to the Agent for the account of the Lenders, concurrent with payment
of the Obligations, the Early Termination Fee, provided, however, that the Agent
for the account of the Lenders shall not be entitled to the Early Termination
Fee if the termination is on or after the third Anniversary Date. All
Obligations shall become due and payable as of any termination hereunder or
under Section 9 hereof. All of the Agent's rights, liens and security interests
shall continue after any termination until all Obligations have been satisfied
in full. Pending payment in full of all Obligations, the Agent can withhold any
credit balances in the loan account (unless
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supplied with an indemnity satisfactory to the Agent) to cover all of the
Obligations, whether absolute or contingent, provided, however, that if the
remaining unpaid Obligations arise solely out of the outstanding amounts of
Letters of Credit, the Agent will, at the Company's request, retain, solely as
collateral, credit balances in an amount equal to one hundred and five percent
(105%) of the then outstanding amounts of Letters of Credit unless the Company
provides the Agent with back-to-back letters of credit from a financial
institution reasonably acceptable to the Agent, on terms reasonably acceptable
to the Agent, in an amount equal to one hundred and five percent (105%) of the
then outstanding amounts of Letters of Credit. When the outstanding amount of
Letters of Credit have been so secured by cash or by the back-to-back letter of
credit, in either event in an amount equal to one hundred and five percent
(105%) of the than outstanding amounts of Letters of Credit pursuant to a fully
executed agreement between the Agent and the Company and pursuant to which the
Company agrees to reimburse the Agent for any Letter of Credit claims that
exceed the cash collateral or the back to back letter of credit, then for all
purposes of this Financing Agreement, this Financing Agreement shall be treated
by the parties thereto as terminated and all other Collateral will be released.
SECTION 11. AGREEMENT BETWEEN THE LENDERS
1. a) The Agent, for the account of the Lenders, shall disburse all loans
and advances to the Company and shall handle all collection of Collateral and
repayment of Obligations. It is understood that for purposes of advances to the
Company and for purposes of this Section 11 the Agent is using the funds of the
Agent.
b) Unless the Agent shall have been notified in writing by any
Lender prior to any advance to the Company that such Lender will not make the
amount which would constitute its share of the borrowing on such date available
to the Agent, the Agent may assume that such Lender shall make such amount
available to the Agent on a Settlement Date, and the Agent may, in reliance upon
such assumption, make available to the Company a corresponding amount. A
certificate of the Agent submitted to any Lender with respect to any amount
owing under this subsection shall be conclusive, absent manifest error. If such
Lender's share of such borrowing is not in fact made available to the Agent by
such Lender on the Settlement Date, the Agent shall be entitled to recover such
amount with interest thereon at the rate per annum applicable to Revolving Loans
hereunder, on demand, from the Company without prejudice to any rights which the
Agent may have against such Lender hereunder. Nothing contained in this
subsection shall relieve any Lender which has failed to make available its
ratable portion of any borrowing hereunder from its obligation to do so in
accordance with the terms hereof. Nothing contained herein shall be deemed to
obligate Agent to make available to the Company the full amount of a requested
advance when the Agent has any notice (written or otherwise) that any of the
Lenders will not advance its ratable portion thereof.
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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.
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.
4. The Agent shall, after receipt of any interest and fees earned under
this Financing Agreement, promptly remit to the Lenders: a) their pro rata
portion of all fees, provided, however, that the Lenders (other than CITBC in
its role as Agent) shall x) not share in the Collateral Management Fee,
Documentation Fees, Loan Syndication Fee, Letter of Credit Guaranty Fee or Libor
Processing Fee; and y) receive their share of the Loan Facility Fee in
accordance with their respective agreements with the Agent; b) interest computed
at the rate provided for in the Assignment and Transfer Agreement on all
outstanding amounts advanced by the Lenders on each Segment Date, prior to
adjustment, that are subsequent to the last remittance by the Agent to the
Lenders of the Company's interest; and c) their share of the Letter of Credit
Guaranty Fee as provided for in the Assignment and Transfer Agreement.
5. (a) The Company acknowledges that the Lenders, with the consent of the
Agent, may sell participations in the loans and extensions of credit made and to
be made to the Company hereunder (the "Participants"), provided, however, that a
Participant may not so purchase a participation in an amount less than
$5,000,000 or the then aggregate amount of such Lender's interest in the loans
and advances and extensions of credit hereunder. The Company further
acknowledges that in doing so, the Lenders may grant to such Participant's
certain rights which would require the Participant's consent to certain waivers,
amendments and other actions with respect to the provisions of this Financing
Agreement, provided that the consent of any such Participant shall not be
required except for matters requiring the consent of all Lenders hereunder as
set forth in ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇.
(▇) The Company authorizes each Lender to disclose to any Participant
or purchasing lender (each, a "Transferee") and any prospective Transferee any
and all financial information in such Lender's possession concerning the Company
and their affiliates which has been delivered to such Lender by or on behalf of
the Company pursuant to this Agreement or which has been delivered to such
Lender by or on behalf of the Company in connection with such Lender's credit
evaluation of the Company and its affiliates prior to entering into this
Agreement, provided, however, that prior to such disclosure, to a then or
potential Participant the Lender must first obtain from the then or potential
Participant a confidentiality agreement in form and substance similar to the
confidentiality paragraph of this Financing Agreement.
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6. The Company has made and will, from time to time, make available to the
Agent and/or the Lenders certain financial and other business information (the
"Confidential Information") relating to its business. By their signatures hereto
or to the Assignment and Transfer Agreement, the Agent and each Lender agree to
maintain the confidentiality of all Confidential Information, and to disclose
such information only (a) to officers, directors or employees of such Agent or
Lender and their legal or financial advisors, in each case to the extent
necessary to carry out this Financing Agreement and in the case of CITBC, to The
CIT Group Holdings, Inc., The CIT Group, Inc., Chemical Bank Corporation or
Dai-Ichi Kanygo Bank, but only, in the case of all of the foregoing Persons
referred to in this clause (a), after the Agent or the Lender, as the case may
be, has advised each such Person to maintain the confidentiality of the
Confidential Information, (b) to any other Person to the extent the disclosure
of such information to such Person is required in connection with the
examination of a Lender's records by appropriate authorities, pursuant to court
order, subpoena or other legal process or otherwise as required by law or
regulation, and (c) to Transferees or potential Transferees but only after such
Transferees or potential Transferees have executed a written confidentiality
agreement substantially in the form of this paragraph. The Lenders, the Agent,
Transferees and potential Transferees shall not be required to maintain the
confidentiality of any portion of the Confidential Information which (a) is
known by such Person or its agents, advisors or representatives prior to
disclosure or (b) becomes generally available to the public provided that the
disclosure of such Confidential Information does not violate a confidentiality
agreement of which the Transferees, potential Transferees, the Agent or the
Lender, as the case may be, has actual knowledge.
7. The Company hereby agrees that each Lender is solely responsible for
its portion of the Line of Credit and that neither the Agent nor any Lender
shall be responsible for, nor assume any obligations for, the failure of any
Lender to make available its portion of the Line of Credit. Further, should any
Lender refuse to make available its portion of the Line of Credit, then another
Lender may, but without obligation to do so, increase, unilaterally, its portion
of the Line of Credit in which event the Company is so obligated to that other
Lender.
8. In the event that the Agent, the Lenders or any one of them is sued or
threatened with suit by the Company, or by any receiver, trustee, creditor or
any committee of creditors on account of any preference, voidable transfer or
lender liability issue, alleged to have occurred or been received as a result
of, or during the transactions contemplated under, this Financing Agreement,
then in such event any money paid in satisfaction or compromise of such suit,
action, claim or demand and any expenses, costs and attorneys' fees paid or
incurred in connection therewith, whether by the Agent, the Lenders or any one
of them, shall be shared proportionately by the Lenders. In addition, any costs,
expenses, fees or disbursements incurred by outside agencies or attorneys
retained by the Agent to effect collection or enforcement of any rights in the
Collateral, including enforcing, preserving or maintaining rights
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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 are unrelated, directly or indirectly, to
this Financing Agreement.
9. Each of the Lenders agrees with each other Lender that any money or
assets of the Company held or received by such Lender, no matter how or when
received, shall be applied to the reduction of the Obligations (to the extent
permitted hereunder) after x) the occurrence of an Event of Default and y) the
election by the Required Lenders to accelerate the Obligations. In addition, the
Company authorizes, and the Lenders shall have the right, without notice, upon
any amount becoming due and payable hereunder, to set-off and apply against any
and all property held by, or in the possession of such Lender the Obligations
due such Lenders.
10. CITBC shall have the right at any time to assign to one or more
commercial banks, commercial finance lenders or other financial institutions all
or a portion of its rights and obligations under this Financing Agreement
(including, without limitation. its obligations under the Line of Credit, the
Revolving Loans and its rights and obligations with respect to Letters of
Credit). The initial assignments by CITBC shall be for amounts not less than
$10,000,000 each. In any event, CITBC shall retain for its own account (without
taking into account Participants) the greater of a) $25,000,000.00 or
twenty-five percent (25%) of the Line of Credit, whichever is less or b) an
amount equal to the interest held by another Lender pursuant to the initial
assignment by CITBC ("CITBC Hold Position"), provided, however, that such CITBC
Hold Position shall cease while there is then an Event of Default and only until
such Event of Default is waived. Should CITBC during an Event of Default assign
additional interests, then the CITBC Hold Position shall be the remaining amount
of CITBC's position if and when such Event of Default is waived. Upon execution
of an Assignment and Transfer Agreement (i) the assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such assignment, have the rights and obligations of
CITBC as the case may be hereunder and (ii) CITBC shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
assignment, relinquish its rights and be released from its obligations under
this Financing Agreement. The Company shall, if necessary, execute any documents
reasonably required to effectuate the assignments. No other Lender may assign
its interest, in whole or in part, in the loans and advances and extensions of
credit hereunder without i) the prior written consent of the Agent; ii) the
payment to the Agent (solely for the Agent's account) by the current or
prospective Lender of a $5,000.00 fee for processing the assignment: and (iii)
if the Transferee is a Foreign Lender (as defined in Section 13, Paragraph 5
hereof), such Foreign Lender first complies with the provisions of Section 13,
Paragraph 5 hereof. Additionally, no other Lender shall assign such Lender's
interest in the loans and advances and extensions of credit hereunder (or any
portion thereof)
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unless the interest to be so assigned is either not less than $5,000,000 or all
of such Lender's entire interest in the loans and advances and extensions of
credit hereunder. Notwithstanding anything to the contrary herein contained,
prior to any such assignment and/or the disclosure of the Confidential
Information, such Transferee, actual or potential, shall execute a
confidentiality agreement in form and substance substantially similar to the
confidentiality paragraph of this Financing Agreement.
SECTION 12. Agency
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
Financing Agreement and the ancillary documents or otherwise exist against the
Agent.
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.
3. Neither the Agent nor any of its officers, directors, employees,
agents, or attorneys-in-fact shall be (i) liable to any Lender for any action
lawfully taken or omitted to be taken by it or such person under or in
connection with the Financing Agreement and all ancillary documents (except for
its or such person's own gross negligence or willful misconduct, or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Company or any officer thereof
contained in the Financing Agreement and all ancillary documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by, the Agent under or in connection with the Financing Agreement
and all ancillary documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Financing Agreement and all
ancillary documents or for any failure of the Company to perform its obligations
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, the Financing Agreement and all
ancillary documents or to inspect the properties, books or records of the
Company.
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4. The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper person or
persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Company), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or refusing
to take any action under the Financing Agreement and all ancillary documents
unless it shall first receive such advice or concurrence from all of the
Lenders, or the Required Lenders, as the case may be, as it deems appropriate or
it shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under the Financing Agreement
and all ancillary documents in accordance with a request from all of the
Lenders, or the Required Lenders, as the case may be, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders.
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 Required Lenders; provided that unless and until the Agent shall have
received such direction, the Agent may in the interim (but should 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.
8. 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
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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.
7. The Lenders agree to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Company and without limiting the obligation of
the Company to do so), from and against any and all liabilities, obligations.
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever (including negligence on the part of the
agent) which may at any time be imposed on, incurred by or asserted against the
Agent in anyway relating to or arising out of this Financing Agreement on any
ancillary documents or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Agent's gross negligence or willful
misconduct. The agreements in this paragraph shall survive the payment of the
obligations.
8. The Agent may make loans to, and generally engage in any kind of
business with the Company as though the Agent were not the Agent hereunder. With
respect to its loans made or renewed by it or loan obligations hereunder as
Lender, the Agent shall have the same rights and powers, duties and liabilities
under the Financing Agreement as any Lender and may exercise the same as though
they were not the Agent and the terms "Lender" and "Lenders" shall include the
Agent in its individual capacities.
9. The Agent may resign as Agent upon thirty (30) days' notice to the
Lenders and such resignation shall be effective upon the appointment of a
successor Agent. If the Agent shall resign as Agent, then the Lenders shall
appoint a successor agent for the Lenders whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent and the term "Agent" shall
mean such successor agent effective upon its appointment, and the former Agent's
fights, powers and duties as Agent shall be terminated without any other or
further act or deed on the part of such former Agent or any of the parties to
this Financing Agreement, provided, however, that the Lenders shall: a) notify
the Company of the successor Agent and b) request the consent of the Company to
such Successor Agent, which consent shall not be unreasonably withheld. The
Company shall be deemed to have consented to the successor Agent if the Lenders
do not receive from the Company, within ten (10) days of the Lenders' notice to
the Company, a written statement of the Company's objection to the successor
Agent. Should the Company not consent and no acceptable successor Agent is
agreed upon within thirty (30) days of the date the Company advised the Lenders
of its objection to the successor Agent, then the
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Lenders may appoint (without the Company's consent) another successor Agent.
After any retiring Agent's resignation hereunder as Agent the provisions of this
Section 14 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent.
10. Notwithstanding anything contained in this Financing Agreement to the
contrary, the Agent will not, without the prior written consent of all Lenders:
a) amend the Financing Agreement to v) increase the Line of Credit; w) reduce
the interest rates; x) reduce or waive i) any fees in which the Lenders share
hereunder; or ii) the repayment of any Obligations due the Lenders; y) extend
the maturity of the Obligations; or z) alter or amend 1) this Paragraph 10 or 2)
the definitions of Eligible Inventory, Collateral or Required Lenders, or the
Agent's criteria for determining compliance with such definitions of
eligibility; b) release Collateral in bulk without a corresponding reduction in
the Obligations to the Lenders, or c) intentionally make any Revolving Loan or
assist in opening any Letter of Credit hereunder if after giving effect thereto
the total of Revolving Loans and Letters of Credit hereunder for the Company
would exceed one hundred and ten percent (110%) of the maximum amount available
under Sections 3 and 4 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, deem such to be advisable and in the best interest of the Lenders,
including, but not 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.
11. Each Lender agrees that notwithstanding the provisions of Section 10
of this Financing Agreement any Lender may terminate this Financing Agreement or
the Line of Credit only as of the third or any subsequent Anniversary Date and
then only by giving the Agent one hundred and twenty (120) days prior written
notice thereof. Within thirty (30) days after receipt of any such termination
notice, the Agent shall, at its option, either (i) give notice of termination to
the Company hereunder or (ii) purchase the Lender's share of the Obligations
hereunder for the full amount thereof plus accrued interest thereon. Unless so
terminated this Financing Agreement and the Line of Credit shall be
automatically extended from Anniversary Date to Anniversary Date.
SECTION 13. MISCELLANEOUS
1. Except as otherwise expressly provided, the Company hereby waives
diligence, demand, presentment and protest and any notices thereof as well as
notice of nonpayment, notice of dishonor, notice of intent to accelerate and
notice of acceleration. No delay or omission of the Agent or the Company to
exercise any right or remedy hereunder, whether before or after the happening of
any Event of Default, shall impair any such right or shall operate as a waiver
thereof or as a waiver of any
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such Event of Default. No single or partial exercise by the Agent of any right
or remedy precludes any other or further exercise thereof, or precludes any
other right or remedy.
2. Neither this Financing Agreement nor any provision hereof may be
waived, amended or modified except as pursuant to an agreement or agreements in
writing entered into by the Company, the Agent, the Lenders or the Required
Lenders, as the case may be.
3. THIS WRITTEN AGREEMENT AND THE OTHER DOCUMENTS REFERENCED HEREIN OR
CONTEMPLATED HEREBY REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.
4. It is the intent of the Company, the Agent and the Lenders to conform
strictly to all applicable state and federal usury laws All agreements between
the Company and the Agent, acting on behalf of the Lenders, whether now existing
or hereafter arising and whether written or oral, are hereby expressly limited
so that in no contingency or event whatsoever, whether by reason of acceleration
of the maturity hereof or otherwise, shall the amount contracted for, charged or
received by the Agent, acting on behalf of the Lenders, for the use,
forbearance, or detention of the money loaned hereunder or otherwise, or for the
payment or performance of any covenant or obligation contained herein or in any
other document evidencing, securing or pertaining to the Obligations evidenced
hereby which may be legally deemed to be for the use, forbearance or detention
of money, exceed the maximum amount which the Agent, acting on behalf of the
Lenders, is legally entitled to contract for, charge or collect under applicable
state or federal law. If from any circumstance whatsoever fulfillment of any
provisions hereof or of such other documents, at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law, then the obligations to be fulfilled shall be automatically
reduced to the limit of such validity, and if from any such circumstance the
Agent, acting on behalf of the Lenders, shall ever receive as interest or
otherwise an amount in excess of the maximum that can be legally collected, then
such amount which would be excessive interest shall be applied to the reduction
of the principal indebtedness hereof and any other amounts due with respect to
the Obligations evidenced hereby, but not to the payment of interest and if such
amount which would be excessive interest exceeds the Obligations and all other
non-interest indebtedness described above, then such additional amount shall be
refunded to the Company. In determining whether or not all sums paid or agreed
to be paid by the Company for the use, forbearance or detention of the
Obligations of the Company to the Agent, acting on behalf of the Lenders, under
any specific contingency, exceeds the maximum amount permitted by applicable
law, the Company and the Agent, acting on behalf of the Lenders, shall, to the
maximum extent permitted under applicable law, (a)
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characterize any non-principal payment as an expense, fee or premium rather than
as sums paid or agreed to be paid by the Company for the use, forbearance or
detention of the Obligators of the Company to the Agent, acting on behalf of the
Lenders, (b) exclude voluntary prepayments and the effect thereof, and (c) to
the extent not prohibited by applicable law, amortize, prorate, allocate and
spread in equal parts, the total amount of all sums paid or agreed to be paid by
the Company for the use, forbearance or detention of the Obligations of the
Company to the Agent, acting on behalf of the Lenders, throughout the entire
contemplated term of the Obligations so that the interest rate is uniform
throughout the entire term of the Obligations. The terms and provisions of this
paragraph shall control and supersede every other provision hereof and all other
agreements between the Company and the Agent, acting on behalf of the Lenders.
5. Any Lender organized under the laws of a jurisdiction outside of the
United States (a "Foreign Lender") shall deliver to Agent and the Company (i)
two valid, duly completed copies of IRS Form 1001 or 4224 or successor
applicable form, as the case may be, and any other required form, certifying in
each case that such Foreign Lender is entitled to receive payments under this
Financing Agreement without deduction or withholding of any United States
federal income taxes, or (ii) if such Foreign Lender is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Internal Revenue Code and cannot deliver
either IRS Form 1001 or 4224 pursuant to clause (i) above, (A) a duly completed
certificate of non-withholding acceptable to the Company and the Agent in their
reasonable discretion (any such certificate, a "Tax Certificate") and (B) two
valid, duly completed copies of IRS Form W-8 or successor applicable form, as
the case may be, to establish an exemption from United States backup withholding
tax. Each such Foreign Lender shall also deliver to Agent and the Company two
further copies of said Form 1001 or 4224 or Form W-8 and a Tax Certificate, or
successor applicable forms, or other manner of required certification, as the
case may be, on or before the date that any such form expires or becomes
obsolete or otherwise is required to be resubmitted as a condition to obtaining
an exemption from a required withholding of United States of America federal
income tax or after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Company and Agent, and such
extensions or renewals thereof as may reasonable be requested by the Company and
Agent, certifying (x) in the case of a Form 1001 or 4224 that such Foreign
Lender is entitled to receive payments under this Financing Agreement without
deduction or withholding of any United States federal income taxes, or (y) in
the case of a Form W-8 and a Tax Certificate, establishing an exemption from
United States backup withholding tax.
6. If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable
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agreement a legal and enforceable provision as similar in terms to the severed
provision as may be possible.
7. TO THE EXTENT PERMITTED BY LAW, THE COMPANY, THE LENDERS AND THE AGENT
HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING
OUT OF THIS FINANCING AGREEMENT. THE COMPANY HEREBY IRREVOCABLY WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED. ANY JUDICIAL PROCEEDING BROUGHT BY OR AGAINST
THE COMPANY WITH RESPECT TO ANY OF THE OBLIGATIONS, THIS FINANCING AGREEMENT OR
ANY RELATED AGREEMENT MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN
THE STATE OF CALIFORNIA, UNITED STATES OF AMERICA, AND, BY EXECUTION AND
DELIVERY OF THIS FINANCING AGREEMENT, THE COMPANY ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
FINAL, NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
FINANCING AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE AGENT TO BRING
PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. THE
COMPANY WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OF
VENUE OR BASED UPON FORUM NON CONVENIENS.
8. Except as otherwise herein provided, any notice or other communication
required hereunder shall be in writing, and shall be deemed to have been validly
served, given or delivered when hand delivered, including overnight delivery by
a courier service or sent by facsimile, or five days after deposit in the United
States mails, with proper first class postage prepaid and addressed to the party
to be notified as follows:
(A) if to CITBC or the Agent, at:
The CIT Group/Business Credit, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Regional Manager
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
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(B) if to the Company at:
United Merchandising Corp.
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
(C) if to any other Lender, at the address specified in the Assignment and
Transfer Agreements
or to such other address as any party may designate for itself by like notice;
provided, however, that the failure of the Agent to send a copy of such material
notice to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners shall not invalidate in any way the effect of
the notice to a Company.
9. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
10. This Financing Agreement may be executed in counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be executed and delivered in Los Angeles, California by their
proper and duly authorized officers as of the date set forth above.
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THE CIT GROUP/BUSINESS
CREDIT, INC.
By /s/ [Illegible]
-----------------------------
Senior Vice President
UNITED MERCHANDISING CORP.
By /s/ [Illegible]
-----------------------------
President
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