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EXHIBIT 99.1
FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
(as the Agent and as a Lender)
And
GART BROS. SPORTING GOODS COMPANY
And
SPORTMART, INC.
(collectively, as co-borrowers)
Dated: January 9, 1998
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TABLE OF CONTENTS
Page
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SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2. Conditions Precedent . . . . . . . . . . . . . . . . . 14
SECTION 3. Revolving Loans . . . . . . . . . . . . . . . . . . . . 18
SECTION 4. Letters of Credit . . . . . . . . . . . . . . . . . . . 20
SECTION 5. Collateral . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6. Representations, Warranties and Covenants . . . . . . . 25
SECTION 7. Interest, Fees and Expenses . . . . . . . . . . . . . . 31
SECTION 8. Powers . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 9. Events of Default and Remedies . . . . . . . . . . . . 34
SECTION 10. Termination . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 11. Agreements between the Lenders . . . . . . . . . . . . 38
SECTION 12. Agency . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 45
EXHIBIT A - Assignment and Transfer Agreement
EXHIBIT S - Suretyship 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 GART BROS.
SPORTING GOODS COMPANY, a Colorado corporation (hereinafter referred to as
"Gart") having a principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, and to SPORTMART, INC., a Delaware corporation (hereinafter referred
to as "Sportmart") having a principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇. Gart and Sportmart, collectively and individually, jointly
and severally, as co-borrowers, are referred to hereinafter as the "Company."
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, general intangibles, including, without
limitation, all accounts 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.
ACQUISITION-RELATED TRANSACTIONS means the merger of Merger Sub with and into
Sportmart, with Sportmart as the surviving corporation, pursuant to the Amended
and Restated Agreement and Plan of Merger dated as of December 2, 1997, among
Parent, Gart, Merger Sub, and Sportmart, followed immediately by the transfer
by Parent to Gart of all of the outstanding shares of capital stock of
Sportmart, such that, at the conclusion of such transactions, Gart is a wholly-
owned Subsidiary of Parent, and Sportmart is a wholly-owned Subsidiary of Gart.
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.
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APPLICABLE PERCENTAGE means: (a) Except as otherwise provided in clause (b),
70%; and (b) for any consecutive period of up to 90 days as designated in
writing by the Company in advance to the Agent, 75%, provided that only one
such designation may be made by the Company during any fiscal year of the
Company, and, provided, further, that at least 60 days shall elapse following
the conclusion of such a period during which the higher percentage is
applicable before another such designation by the Company may become effective.
ASSIGNMENT AND TRANSFER AGREEMENT shall mean the Assignment and Transfer
Agreement in the form of Exhibit A hereto.
AVAILABILITY shall mean at any time of determination the amount by which the
lesser of a) the Line of Credit or b) the amount determined by multiplying the
then sum of Eligible Inventory by the then Applicable Percentage provided for
in 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, and
b) the amount of all sales taxes that have been collected by the Company and
not remitted to any state taxing authority when due.
BLOCKED ACCOUNT shall mean any Concentration Account owned by the Company which
is governed by a blocked account or similar agreement and which account is
subject to written instructions only from the Company unless and until the
Agent shall give the institution holding such Concentration Account written
instructions to the contrary in accordance with the terms of paragraph 4 of
Section 3 of this Financing Agreement.
BUSINESS DAY shall mean any date on which both the Agent and The Chase
Manhattan Bank are open for business.
CHASE MANHATTAN BANK RATE shall mean the rate of interest per annum announced
by The Chase Manhattan Bank from time to time as its prime rate in effect at
its principal office in the City of New York. (The prime rate is not intended
to be the lowest rate of interest charged by The Chase Manhattan Bank to its
borrowers).
COLLATERAL shall mean all present and future Accounts, Inventory, Documents of
Title and General Intangibles of the Company, all present and future books and
records relating to any of the foregoing Collateral (except that such books and
records shall not include any Equipment not owned by the Company or in which
another Person has a Permitted Encumbrance with priority over what would be
that of the Agent, the terms of which other Permitted Encumbrance would be
violated by the attachment of the Agent's security interest therein), and all
present and future proceeds of any of the foregoing Collateral, including
proceeds of proceeds.
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COLLATERAL MANAGEMENT FEE shall mean the sum of $100,000 per annum (subject to
conditional reduction as provided below) 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. The foregoing
notwithstanding, the Collateral Management Fee due on the first and subsequent
Anniversary Dates shall be reduced to $75,000 if TFFQ EBITDA for the
immediately preceding four fiscal quarters is greater than $25,000,000.
COMPANY means Gart and Sportmart, individually and collectively, and jointly
and severally, as co-borrowers. For purposes of determining covenant
compliance herein, and for purposes of financial and accounting calculations
herein, unless otherwise expressly provided, or unless the context otherwise
requires, the "Company" means Gart and Sportmart, and their consolidated
Subsidiaries, on a consolidated basis.
CONCENTRATION ACCOUNT shall mean any account owned by the Company which receives
funds from i) the Depository Accounts and ii) the credit card companies.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for the
Company and its Subsidiaries, eliminating all inter-company transactions and
prepared, in the case of any such quarterly or annual balance sheet, in
accordance with GAAP consistently applied.
CUSTOMARILY PERMITTED LIENS shall mean
(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 in the aggregate at any one time;
(b) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, materialmen, vendors (other than Inventory vendors or
suppliers) and other like liens imposed by law, created in the ordinary course
of business and for amounts not yet due (or which are being contested in good
faith by appropriate proceedings or other appropriate actions which are
sufficient to prevent imminent foreclosure of such liens) and with respect to
which adequate reserves or other appropriate provisions are being maintained 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
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agreements), rights of way, encroachments, minor defects or irregularities in
title, variation and other restrictions, liens, mortgages, charges or other
encumbrances (whether or not recorded) affecting the Company's Real Estate
which do not materially detract from the value or materially adversely affect
the intended use of the Real Estate.
DEFAULT shall mean any event specified in Section 9 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal to the
sum of: i) two and one-quarter percent (2-1/4%) and ii) the Chase Manhattan
Bank Rate, which rate the Lenders and the Agent shall be entitled to charge the
Company on all Obligations due the Lenders or the Agent by the Company to the
extent provided in Section 9, 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 EVENT OF DEFAULT means any Event of Default arising under
subparagraphs a), b), c), d), or h) of Paragraph 1 of Section 9 hereof.
DESIGNATED SALE-LEASEBACK PROPERTY means a capital asset developed or to be
developed by the Company after the date of this Financing Agreement and as to
which the Company has notified the Agent in writing that such capital asset is,
at such time, a Designated Sale-Leaseback Property and as to which the Company
intends to enter into a sale-leaseback or mortgage financing, provided that
such Designated Sale-Leaseback Property shall cease to be a Designated
Sale-Leaseback Property upon the earlier to occur of twelve (12) months after
the date of such notice and the date on which such Designated Sale-Leaseback
Property is financed pursuant to a sale-leaseback or mortgage financing
permitted hereunder.
DOCUMENTATION FEE shall mean the Agent's standard fees relating to any and all
modifications, waivers, releases, amendments or additional collateral with
respect to this Financing Agreement, the Collateral and/or the Obligations.
DOCUMENTS OF TITLE shall mean all present and future warehouse receipts, bills
of lading, shipping documents, instruments and similar documents, all whether
negotiable or not, and all Inventory relating thereto and all cash and non-cash
proceeds of the foregoing.
EBITDA shall mean, in any period, the net income (or net loss) of the Company
and its Subsidiaries, on a consolidated basis plus all amounts deducted in
determining net income in respect of Interest Expense, income tax obligations
(paid or accrued), depreciation expense and amortization expense, and all other
non-cash items, including, but not limited to, the Company's LIFO reserve, each
determined in accordance with GAAP consistently applied.
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ELIGIBLE INVENTORY shall mean the gross cost of the Company's finished goods
Inventory that conforms to the warranties herein less any i) supplies, ii)
Inventory not present in the United States of America, iii) Inventory returned
or rejected by the Company's customers other than Inventory that is undamaged
and resalable in the normal course of business, iv) Inventory to be returned to
the Company's suppliers, v) Inventory in transit to third parties, vi)
shrinkage, vii) consigned goods, viii) Inventory stored in any public warehouse
(other than Inventory in a public warehouse while such Inventory is clearing
customs) with respect to which the Agent for the benefit of the Lenders has not
received from such public warehouse an acknowledgement of the type contemplated
by paragraph q of Section 2 hereof or paragraph 15 of Section 6 hereof, and ix)
reserves required by the Agent in its reasonable judgment and without
duplication but only for the following: (a) special order Inventory; (b)
market value declines, to the extent the Inventory's value is below its cost;
(c) ▇▇▇▇ and hold (deferred shipment or consignment sales); (d) markdowns, to
the extent the Inventory's value is below its cost; (e) Inventory which is not
located at the Company's retail store locations or warehouses, (f)
demonstration items, to the extent the Inventory's value is below its cost; (g)
damaged or defective Inventory; (h) obsolete Inventory; (i) Inventory at outlet
locations not owned or operated by the Company; (j) from and after the date
that is 90 days after the making of the initial loan hereunder, with respect to
any and each distribution facility of the Company as to which there is not in
effect in favor of the Agent a landlord waiver in form and content reasonably
satisfactory to the Agent, but only with respect to any period that such a
landlord waiver is not in effect, a reserve not to exceed three month's rent
payable to such landlord with respect to such distribution facility; k)
Inventory imported under letters of credit issued without the assistance of the
Letter of Credit Guaranty and then only until the bank issuing such letters of
credit has been reimbursed by the Company for any drafts under such letters of
credit; and l) Inventory subject to a lien that has priority over the lien of
the Agent therein, but only to the extent of the aggregate obligations or
indebtedness secured by such priority lien. The amount of such reserves shall
be determined solely by the Agent in its reasonable business judgment and in
good faith using standards consistently applied by the Agent. Such standards
shall take into consideration amounts representing, historically, the Company's
reserves, discounts, returns, claims, credits and allowances.
EQUIPMENT shall mean all present and hereafter acquired 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.
GAAP shall mean generally accepted accounting principles in the United States
of America as in effect from time to time and for the period as to which such
accounting principles are to apply.
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Except as otherwise provided in this Financing Agreement, all computations and
determinations as to accounting or financial matters and all quarterly and
annual consolidated financial statements to be delivered pursuant to this
Financing Agreement shall be made and prepared in accordance with GAAP
(including principles of consolidation where appropriate), and all accounting
or financial terms shall have the meanings ascribed to such terms by GAAP.
GART has the meaning ascribed thereto in the introductory paragraph hereof.
GENERAL INTANGIBLES shall have the meaning set forth in the Uniform Commercial
Code as in effect in the State of New York and shall include, without
limitation, all present and future right, title and interest in and to all
tradenames, trademarks (together with the goodwill associated therewith),
patents, licenses, customer lists, distribution agreements, supply agreements
and tax refunds, together with all monies and claims for monies now or
hereafter due and payable in connection with any of the foregoing or otherwise,
and all cash and non-cash proceeds thereof.
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 EXPENSE shall mean i) total cash interest obligations (paid or
accrued) of the Company and its Subsidiaries determined in accordance with GAAP
on a basis consistent with the latest audited statements of the Company,
excluding amortization of financing fees related hereto and 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.
LETTER 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.
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LIBOR shall mean, at any time of determination, and subject to availability,
the London Interbank Offered Rate paid in London by The Chase Manhattan Bank on
one month, two month, three month, six month or nine month dollar deposits and
if such rates are not otherwise available, then those rates as published, under
"Money Rates", in the New York City edition of the Wall Street Journal or if
there is no such publication or statement therein as to Libor, then in any
publication used in the New York City financial community.
LIBOR LOAN shall mean the loans for which the Company has 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.
LIFO shall mean the last in-first out method of accounting for Inventory.
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 Sections 3 and 4 of this Financing
Agreement, in the aggregate amount of $175,000,000.
LINE OF CREDIT FEE shall: I) mean the fee due the Agent for the account of the
Lenders at the end of each month for the Line of Credit, and II) be determined
by multiplying x) the difference between the Line of Credit less the sum of a)
the average daily Revolving Loans outstanding during such month and b) the
average daily undrawn face amount of all outstanding Letters of Credit, for
said month by y) three eighths of one percent (0.375%) per annum ("Line of
Credit Fee Rate") for the number of days in said month during which this
Financing Agreement was in effect.
LOAN FACILITY FEE shall mean the fee payable to the Agent in accordance with,
and pursuant to, the provisions of paragraph 6 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).
MERGER SUB means GB Acquisition, Inc., a Delaware corporation.
MLTC DOCUMENTS means the Amended and Restated Master Lease Agreement dated as
of a date on or the date of this Financing Agreement between MLTC Funding, Inc.
and Thrifty Corporation, the Amended and Restated Master Lease Agreement dated
as of a date on or the date of this Financing Agreement between MLTC Funding,
Inc. and Thrifty Realty Company, and all other documents and instruments
delivered or to be delivered pursuant thereto or in connection therewith, in
each case, as may be amended or otherwise modified from time to time in
accordance with its terms.
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NET WORTH shall mean Total Assets of the Company and its Subsidiaries, on a
consolidated basis, in excess of Total Liabilities, and determined in
accordance with GAAP, on a consistent basis with the latest audited statements
of the Company and its Subsidiaries.
OBLIGATIONS shall mean all obligations of the Company to pay, as and when due
and payable, all amounts from time to time owing by and in respect of this
Financing Agreement or any of loan documents related to this Financing
Agreement, including, without limitation, all loans and advances made or to be
made by the Agent on behalf of the Lenders to the Company, or to others for the
Company's account under this Financing Agreement or any loan document related
to this Financing Agreement; any and all indebtedness and obligations which may
at any time be owing by the Company to the Agent or any Lender under the
Financing Agreement or any other loan document related to this Financing
Agreement, whether now in existence or incurred by the Company from time to
time hereafter; whether secured by pledge, lien upon or security interest in
the Company's assets or property or the assets or property of any other person,
firm, entity or corporation; whether such indebtedness is absolute or
contingent, matured or unmatured, direct or indirect and whether the Company is
liable to the Agent or any Lender for such indebtedness as principal, surety,
endorser, guarantor or otherwise. Obligations shall also include, without
duplication of the foregoing, all indebtedness owing to the Agent or any Lender
by the Company under this Financing Agreement or under any other agreement or
arrangement hereafter entered into between the Company and the Agent on behalf
of the Lenders, including, but not limited to, obligations to the Agent on
behalf of the Lenders in respect of Letters of Credit issued with the
assistance of the Letter of Credit Guaranty, indebtedness or obligations
incurred by, or imposed on, the Agent or the Lenders as a result of
environmental claims arising out of the Company's operations, premises or waste
disposal practices or sites, the Company's liability to the Agent on behalf of
the Lenders under any instrument of guaranty or indemnity, or arising under any
guaranty, endorsement or undertaking which the Agent on behalf of the Lenders
may make or issue to others for the Company's accounts, all at the Company's
request hereafter, but in no event shall Obligations include any obligations
due any affiliate of a Lender.
OUT-OF-POCKET EXPENSES shall mean all of the Agent's reasonable expenses
incurred relative to the commitment letter or the closing of this Financing
Agreement and any amendment, modification or waiver thereof, whether incurred
heretofore or hereafter, and, in any case, at the Company's request, with
appropriate documentation delivered to the Company, which expenses shall
include, without being limited to, the cost of record searches, the cost of
appraisals, all costs and expenses incurred by the Agent in opening bank
accounts, depositing checks, receiving and transferring funds, and any charges
imposed on the Agent due to "insufficient funds" of deposited checks and the
Agent's standard fee relating thereto, any amounts paid by the Agent on behalf
of the Lenders to an Issuing Bank or incurred by or charged to the Agent on
behalf of the Lenders by the Issuing Bank under the Letter of Credit Guaranty
or the Company's reimbursement agreement, application for letter of credit or
other like document which pertain either directly or indirectly to such Letters
of Credit, and the Agent's standard fees relating to the Letters of Credit and
any drafts thereunder, reasonable legal fees and disbursements of outside
counsel for the Agent, fees and taxes relative to the filing of financing
statements, and all expenses, costs and fees set forth in paragraph 3 of
Section 9 of this Financing Agreement.
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PARENT shall mean Gart Sports Company, 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, $750,000 (other than liens bonded or insured to the reasonable
satisfaction of the Agent); V) filed liens for taxes not yet due and payable or
which are being diligently contested in good faith by the Company by
appropriate proceedings, and which liens are not a) senior to the lien of the
Agent on behalf of the Lenders; or b) for taxes due the United States of
America; VI) liens, if any, given to an Issuing Bank in connection with a
Letter of Credit obtained with the assistance of the Letter of Credit Guaranty;
VII) liens securing Purchase Money Obligations; VIII) liens and other
encumbrances in existence on the date hereof; IX) liens given to an issuer of a
sight letter of credit issued without the assistance of the Letter of Credit
Guaranty provided such liens do not secure Indebtedness in excess of $2,000,000
in the aggregate at any one time; X) liens in favor of consignors on consigned
goods, not to exceed at any time 2% of the total Inventory of the Company; XI)
liens on property or assets of the Company, including but not limited to the
Collateral, securing obligations or indebtedness of the Company in the
aggregate at any time not in excess of $250,000; and XII) any extension,
renewal or replacement of any of the foregoing, provided that any extension,
renewal or replacement lien shall be limited to the property or assets covered
by the lien extended, renewed or replaced and the obligation secured by such
extension, renewal or replacement lien shall be in an amount not greater than
the obligations secured by the lien extended, renewed or replaced.
PERMITTED INDEBTEDNESS shall mean: I) indebtedness incurred in the ordinary
course of business for Inventory, services, taxes or labor; II) indebtedness
arising in connection with Letters of Credit, this Financing Agreement and the
loan documents related to this Financing Agreement; III) deferred taxes and
other expenses incurred in the ordinary course of business; IV) other
Indebtedness existing on the date of execution of this Financing Agreement and
listed in the most recent financial statement delivered to the Agent or
otherwise disclosed to the Agent in writing, and any extension, renewal or
replacement of any of such Indebtedness, provided that any such extension,
renewal or replacement Indebtedness shall be in an amount not greater than the
amount of the Indebtedness being extended, renewed or replaced; V) Indebtedness
arising in connection with or secured by, the Permitted Encumbrances; VI)
Indebtedness under any sight letters of credit issued without the assistance of
the Letter of Credit Guaranty provided such Indebtedness does not exceed
$2,000,000 in the aggregate at any one time; VII) Indebtedness owed by Gart to
Sportmart or by Sportmart to Gart; VIII) 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; IX) Indebtedness in an aggregate amount not to
exceed $20,000,000 at any time which is subordinated to the Obligations,
provided the terms and conditions of such Indebtedness are reasonably
satisfactory to the Agent; X) Indebtedness incurred in the form of surety,
customs and appeal bonds and other obligations of a similar nature; and XI)
other Indebtedness of the Company in an
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amount not to exceed $5,000,000 in the aggregate at any time outstanding,
provided, such Indebtedness is a) not secured by the Collateral and b) not due
the Parent or any Subsidiaries of the Company or the Parent.
PERMITTED INVESTMENTS shall mean (i) commercial paper and municipal bonds, in
each case issued or guaranteed by a Person rated P-1 or better by ▇▇▇▇▇'▇
Investors Service, Inc. ("Moody's") or A-1 or MIG-1 or better by Standard &
Poor's Corporation ("S & P"), (ii) certificates of deposit, time deposits,
Eurodollar deposits or bankers' acceptances maturing not more than one year
after the date of issue, issued by any commercial banking institution, which is
a member of the Federal Reserve System and has a combined capital and surplus
and undivided profits of not less than $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 ▇▇▇▇▇'▇ or S & P of "A" or its
equivalent or better; (vi) Margin Securities and (vii) mutual funds regularly
traded in the United States of America whose investments are limited to those
described in clauses (i) through (v) above.
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 i) incurred to purchase
or lease Equipment and Real Estate and ii) secured solely by a lien on the
Equipment and/or Real Estate, including sale leaseback and mortgage financing
incurred in connection with Designated Sale-Leaseback Property.
REAL ESTATE shall mean the Company's leasehold and fee interests in real
property.
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.
REVOLVER LIBOR MARGIN shall mean (subject to contingent prospective reduction
and/or
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reinstatement as set forth below) 1.75 % per annum. The foregoing
notwithstanding, with respect to monthly periods ending after January 31, 1999,
the Revolver Libor Margin will be reduced, prospectively only, to 1.50% per
annum, if the Company's TFFQ EBITDA for its four fiscal quarters most recently
ended is greater than $25,000,000, such change to occur on the first day of the
month following the Agent's receipt and review of a copy the Company's
financial statements that establish the required level of TFFQ EBITDA. If,
after such reduction, the Company subsequently fails to meet the foregoing test
for a future period, the Revolver Libor Margin shall revert to 1.75% per annum,
on the first day of the month following the receipt and review by the Agent of
a copy of the Company's financial statements that establish such failure.
Should the Company fail to timely provide to the Agent (as required by Section
6, Paragraph 7, clauses (a) and (b) of the Agreement) a copy of the
aforementioned financial statements, then interest will be computed based on
the higher margin set forth above during such period of delinquency until the
Agent's receipt and review of the applicable financial statements.
REVOLVER NON-LIBOR MARGIN shall mean (subject to contingent prospective
reduction and/or reinstatement as set forth below) 0.25 % per annum. The
foregoing notwithstanding, with respect to monthly periods ending after January
31, 1999, the Revolver Non-Libor Margin will be reduced, prospectively only, to
0.00% per annum, if the Company's TFFQ EBITDA for its four fiscal quarters most
recently ended is greater than $25,000,000, such change to occur on the first
day of the month following the Agent's receipt and review of a copy the
Company's financial statements that establish the required level of TFFQ
EBITDA. If, after such reduction, the Company subsequently fails to meet the
foregoing test for a future period, the Revolver Non-Libor Margin shall revert
to 0.25% per annum, on the first day of the month following the receipt and
review by the Agent of a copy of the Company's financial statements that
establish such failure. Should the Company fail to timely provide to the Agent
(as required by Section 6, Paragraph 7, clauses (a) and (b) of the Agreement) a
copy of the aforementioned financial statements, then interest will be computed
based on the higher margin set forth above during such period of delinquency
until the Agent's receipt and review of the applicable financial statements.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to
or for the account of the Company by the Lenders acting through the Agent
pursuant to Section 3 of this Financing Agreement.
SETTLEMENT DATE shall mean the date, weekly, and more frequently, at the
discretion of the Agent, upon the occurrence of an Event of Default or a
continuing decline or increase of the Revolving Loans that the Agent and the
Lenders shall settle amongst themselves so that x) the Agent shall not have, as
Agent, any money at risk and y) on such Settlement Date the Lenders shall have
a pro rata amount of all outstanding Revolving Loans and Letters of Credit,
provided that each Settlement Date for a Lender shall be a Business Day on
which such Lender and its bank are open for business.
SPORTMART has the meaning ascribed thereto in the introductory paragraph
hereof.
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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.
SURETYSHIP AGREEMENT means an agreement between the Agent, Gart, and Sportmart,
for the benefit of the Agent and the Lenders, in the form of Exhibit S hereto.
TFFQ EBITDA means, with respect to any specified trailing four fiscal quarter
period of the Company, EBITDA during such period.
TOTAL ASSETS shall mean total assets of the Company and its Subsidiaries, on a
consolidated basis, determined in accordance with GAAP, on a basis consistent
with the latest audited statements of the Company and its Subsidiaries,
excluding i) reserves taken at Sportmart with respect to Inventory during
January, 1998, and ii) the Company's LIFO reserve.
TOTAL LIABILITIES shall mean total liabilities of the Company and its
Subsidiaries, on a consolidated basis, determined in accordance with GAAP, on a
basis consistent with the latest audited statements of the Company and its
Subsidiaries.
TRADE ACCOUNTS PAYABLE shall mean, at any time of determination, the amounts
due any supplier for Inventory sold to the Company.
TRADE ACCOUNTS RECEIVABLE shall mean, at any time of determination, the amounts
due the Company by any i) credit card issuer and ii) any customer obligated on
an invoice, in each instance due as a result of a sale of Inventory or the
rendition of services by the Company.
SECTION 2. CONDITIONS PRECEDENT
The obligation of the Lenders acting through the Agent to make the
initial loans hereunder is subject to the satisfaction of, or waiver of,
immediately prior to or concurrently with the making of such initial loans,
the following conditions precedent:
a) LIEN SEARCHES - The Agent shall have received tax, judgment
and Uniform Commercial Code searches satisfactory to the Agent for all
locations presently occupied or used by the Company.
b) CASUALTY INSURANCE - Except as otherwise provided in the last
sentence of this Section 2, the Company shall have delivered to the Agent
evidence satisfactory to the Agent that
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casualty insurance policies listing the Agent on behalf of the Lenders as loss
payee are in full force and effect, all as set forth in Section 6, 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, the Agent
shall have received other evidence satisfactory to the Agent that all such
filings have been made); and the Agent shall have received evidence that all
necessary filing fees and all taxes or other expenses related to such filings
have been paid in full.
d) EXAMINATION & VERIFICATION - The Agent, for the benefit of the
Lenders, shall have completed to the satisfaction of the Agent an examination
and verification of the Accounts, Inventory, books and records of the Company.
e) OPINIONS - Counsel for the Company 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 is X) valid, binding and enforceable
according to its terms, Y) is duly authorized and Z) does not violate any
terms, provisions, representations or covenants in the charter or by-laws of
the Company, or, 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 to such counsel as material, to which
the Company is a signatory or by which the Company or its assets are bound. In
addition, such opinions shall confirm in form and substance satisfactory to the
Agent the consummation of the Acquisition-Related Transactions in compliance in
all material respects with all applicable contracts and provisions of law,
including, without limitation, the Amended and Restated Agreement and Plan of
Merger referred to in the definition of "Acquisition-Related Transactions," the
provisions of federal, Delaware, and Colorado corporate and securities laws, to
the extent applicable, and the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act.
f) ADDITIONAL DOCUMENTS - The Company shall execute and deliver
to the Agent for the benefit of the Lenders all loan documents necessary to
consummate the lending arrangement contemplated between the Company and the
Lenders, including, without limitation, the Suretyship Agreement.
g) COMMITMENT LETTER - The Company shall have fully complied, to
the satisfaction of the Agent, with all of the material terms and conditions of
the commitment letter, dated
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December 10, 1997, issued by CITBC to, and accepted on December 16, 1997 by,
the Company. 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 Amended and Restated 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; (iv) as of the date hereof, the
Company is current with respect to the payment of all sales taxes due by the
Company to any state taxing authorities except to the extent specifically noted
to the contrary on a schedule attached to such Officer's Certificate; and (v)
as of the date hereof, the Company is current with respect to the payment of
all rent due to landlords of the Company except to the extent specifically
noted to the contrary on a schedule attached to such Officer's Certificate.
k) ABSENCE OF DEFAULT - Since November 2, 1997, no material
adverse change in the financial condition, business, prospects, profits (after
giving affect to the seasonal nature of the Company's business), operations or
assets of the Company shall have occurred. No Default or Event of Default
shall exist as of the date of this Financing Agreement.
l) LEGAL RESTRAINTS/LITIGATION - At the date of execution of this
Financing Agreement, there shall be, to the knowledge of the management of the
Company or to the knowledge of the Agent, no X) litigation, investigation or
proceeding (judicial or administrative) pending or threatened against the
Company or its assets, by any agency, division or department of any county,
city, state, province or federal government arising out of this Financing
Agreement, or the financing arrangement contemplated under this Financing
Agreement, Y) injunction, writ or restraining order restraining or prohibiting
the consummation of the financing
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arrangements contemplated under this Financing Agreement or Z) suit, action,
investigation or proceeding (judicial or administrative) pending or threatened
against the Company, or its assets, which, if adversely determined could have a
material adverse effect on the business, operation, assets or financial
condition of the Company or the Collateral.
m) DISBURSEMENT AUTHORIZATION - The Company shall have delivered
to the Agent all information necessary for the Lenders acting through the Agent
to issue wire transfer instructions on behalf of the Company for the initial
and subsequent loans and/or advances to be made under this Financing Agreement
including, but not limited to, disbursement authorizations in a form acceptable
to the Agent.
n) BANKING AND/OR CREDIT CARD ARRANGEMENTS - Except as otherwise
provided in the last sentence of this Section 2, as of the date of execution of
this Financing Agreement the 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) {Intentionally omitted}
p) INVENTORY REPORTING - The Agent for the benefit of the Lenders
shall have received a satisfactory inventory valuation indicating the fair
market value of the Company's current finished goods Inventory, sufficient in
the Agent's reasonable judgment, to support the proposed financing arrangement
and/or a satisfactory review of Inventory controls and reporting procedures
conducted by an independent third party acceptable to the Agent.
q) WAREHOUSE DOCUMENTS - The Agent for the benefit of the Lenders
shall have received from each public warehouse in which Inventory is stored, if
any, other than Inventory in warehouses while such Inventory is clearing
customs, an acknowledgment, in form and substance reasonably satisfactory to
the Agent, concerning the Agent's security interest for the benefit of the
Lenders in such Inventory and the original negotiable warehouseman's receipts,
if any, duly endorsed by the Company to the order of the Agent for the benefit
of the Lenders.
r) CONSUMMATION OF THE ACQUISITION-RELATED TRANSACTIONS - The
Agent shall have received satisfactory evidence of the consummation of the
Acquisition-Related Transactions in compliance in all material respects with
all applicable contracts and provisions of law, including, without limitation,
the Amended and Restated Agreement and Plan of Merger referred to in the
definition of "Acquisition-Related Transactions," the provisions of federal,
Delaware, and Colorado corporate and securities laws, to the extent applicable,
and the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act.
s) MINIMUM AVAILABILITY - After giving effect to all extensions
of credit, transfers, and repayments that are to be made on the closing date of
the transactions contemplated by this Financing Agreement, the Company on such
closing date shall have one-time minimum
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Availability of $10,000,000, and all of its debts, obligations, and payables
shall then be current in accordance with its usual business practices.
t) PAYOFF OF CERTAIN EXISTING LENDERS - The existing obligations
of Gart to CITBC under the April 20, 1994 Financing Agreement with CITBC, as
heretofore amended, and the existing obligations of Sportmart to BT Commercial
Corporation, as Agent, and various lenders, under pre-existing credit
documents, each shall have been repaid or otherwise satisfied in full pursuant
to payoff documentation satisfactory to the Agent, and such lenders shall have
released or terminated their liens and security interests in property of the
Company, or shall have unconditionally agreed to do so pursuant to
documentation satisfactory to the Agent, provided that filings in favor of
CITBC as a prior lender to Gart need not be terminated so long as CITBC and
Gart acknowledge (and they hereby do) that such filings from and after the
closing date of the transactions contemplated by this Financing Agreement shall
run in favor of CITBC, as the Agent, for the benefit of the Lenders (in
addition to the new filings that the Agent will be making against the Company).
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 list the Agent as loss payee on its
casualty insurance policies and may be unable completely 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 x) delivers to the Agent prior to or concurrent
with the Agent's execution of this Financing Agreement, proof that the
Company's Inventory is insured and that the Company has the exclusive right to
any casualty insurance proceeds relating thereto, y) delivers to the Agent,
within forty-five (45) days from the date hereof, the loss payable endorsement
called for in paragraph b above and z) within forty-five (45) 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. The Lenders, acting through the Agent, agree, subject to the
terms and conditions of this Financing Agreement from time to time, and within
x) the Availability and y) the Line of Credit, but subject to the Agent's and
the Lenders' (acting through the Agent) right to make "Overadvances", to make
loans and advances to the Company on a revolving basis,and subject to the
limitations set forth herein, the Company may borrow, repay and re-borrow
Revolving Loans. Such loans and advances shall be in amounts up to the
Applicable Percentage at any time in effect of the aggregate value of the
Company's Eligible Inventory. The value of Eligible Inventory shall be
determined at cost, by the cost inventory method, using a valuation on a first
in, first out basis in accordance with GAAP excluding capitalized buying,
in-bound freight,
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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 2:00 p.m. New York time on
the Business Day on which such loans and advances are required. Should the
Agent for any reason honor requests for advances in excess of the 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; and 2) fourteen (14) days after the end of each
month, a monthly inventory confirmation statement stating the aggregate amount
of Eligible Inventory of the Company. With respect to all such reports, the
Company will provide to the Agent such additional information and material as
the Agent may reasonably request to effectively evaluate the Trade Accounts
Receivable and the collectability thereof and the mix of the Inventory and such
other information as the Agent may reasonably require to evaluate the Company's
Trade Accounts Receivable and Inventory, such as returns, claims, credits,
allowances and information identifying and describing the Trade Accounts
Receivable. Failure to provide the Agent with the foregoing information will
in no way effect, diminish, modify, or limit the security interest granted
herein. Such reports are to be executed by a responsible officer of the
Company.
3. The Company hereby represents and warrants that: a) sales
of Inventory are, and shall be, based upon actual and bona fide sales and
deliveries of Inventory x) in the ordinary course of the Company's business, y)
in connection with the liquidation of an immaterial portion of the Inventory or
z) after the occurrence of a casualty loss, bulk sales of salvageable
Inventory, and that, in any instance, the Inventory being sold and the proceeds
thereof are the exclusive property of the Company and are not and shall not be
subject to any lien, charge, arrangement, encumbrance, security interest, or
financing statement whatsoever other than the Permitted Encumbrances, provided,
however, that the Company may make charitable transfers of Inventory in an
amount not to exceed $500,000 in any fiscal year; b) invoices representing
Trade Accounts Receivable or credit card receipts evidencing credit card sales
are in the name of the Company and except for disputes, offsets, defenses,
counterclaims, contras, returns or credits, all arising in the normal course of
the Company's business or except as may be promptly disclosed to the Agent, the
purchasers of such Inventory owe and are obligated to pay the amount stated in
the invoices or credit card receipts; and c) except for the Permitted
Encumbrances, any and all taxes and fees relating to its business are the
Company's sole responsibility and that same will be paid when due (except as
otherwise provided in this Financing Agreement), and that none of said taxes or
fees represent a lien on or claim against the proceeds of any sale of
Inventory. The Company agrees to issue credit memoranda promptly. The Company
also warrants and represents that it is a duly and validly existing corporation
and is qualified to transact business in all states where the failure to so
qualify would have a material adverse effect on the business of the Company or
the ability of such Company to enforce collection of Trade Accounts Receivable
due from Persons residing in that state.
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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, and except as
otherwise provided in the last sentence of Section 2 of this Financing
Agreement, promptly thereafter and therefrom, to a Blocked Account. Except as
otherwise provided in the last sentence of Section 2 of this Financing
Agreement, the Company shall require that all amounts due under credit card
sales be remitted by the credit card companies to a Blocked Account. The
Company agrees that it will only direct the flow of funds from the Depository
Accounts and the credit card remitters to the Blocked Accounts once the Blocked
Accounts have been established. The institutions holding such Blocked Accounts
will be instructed that when it is satisfied that such funds on deposit are
"good funds", such institution will remit such "good funds" to the Company's
operating account. Notwithstanding anything herein contained to the contrary,
if x) there is then an Event of Default or y) the Company has no Availability
for three (3) consecutive Business Days, then the Agent, acting on behalf of
the Lenders, may advise the banks holding the Blocked Accounts to remit all
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 greater than zero ($0).
All amounts received by the Agent for the account of the Lenders will be
credited to the Obligations upon the Agent's receipt of "good funds" at its
bank account in New York, New York on the Business Day of receipt if received
no later than 2 p.m. New York time or on the next succeeding Business Day if
received after 2 p.m. New York time. No checks, drafts or other instruments
received by the Agent will constitute final payment unless and until such
instruments have actually been collected. If the loan account reflects a zero
Revolving Loan balance and there is then no Event of Default, then the Agent
shall promptly remit to the operating account of the Company any credit
balances in the loan account.
5. The Agent shall maintain a separate account on its books in the
Company's name in which the Company will be charged with loans and advances,
payments by the Agent under the Letter of Credit Guaranty, made to the Company
or for its account, and with any other Obligations, including any and all
costs, expenses and reasonable attorney's fees which the Agent may incur in
connection with the exercise of any of the rights or powers herein conferred or
in the prosecution or defense of any action or proceeding to enforce or protect
any rights of the Agent or of any Lender in connection with this Financing
Agreement or the Collateral assigned hereunder, or any Obligations owing by the
Company. The Company will be credited with all amounts received by the Agent
from the Company or from others for the Company's account, including, as above
set forth, all amounts received by the Agent in payment of Accounts and such
amounts will be applied to payment of the Obligations. In no event shall prior
recourse to any Accounts or other security granted to or by the Company be a
prerequisite to the Agent's right to demand payment of any Obligation.
Further, it is understood that neither the Agent nor any Lender shall have any
obligation whatsoever to perform in any respect any of the Company's contracts
or obligations relating to the Accounts.
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6. After the end of each month, the Agent, on its own behalf and/or
acting on behalf of the Lenders, shall promptly send the Company a statement
showing the accounting for the charges, loans, advances, payments by the Agent
under its Letter of Credit Guaranty, and other transactions occurring between
the Agent, on its own behalf, and/or acting on behalf of the Lenders, and the
Company during that month. The monthly statement shall be deemed correct and
binding upon the Company and shall constitute an account stated between the
Company, the Agent, and the Lenders unless the Agent receives a written
statement of the exceptions within thirty (30) days of the date of the monthly
statement.
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.
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 $12,000,000 in the aggregate outstanding at any one time. The
Agent's assistance with respect to Letters of Credit for amounts in excess of
the limitations set forth herein shall at all times and in all respects be in
the Agent's sole discretion. Notwithstanding anything herein to the contrary,
upon the occurrence of a Default and/or an Event of Default, the Agent's
assistance with respect to any Letters of Credit shall be in the Agent's sole
discretion unless such Event of Default is waived by the Agent in writing, or
such Default is cured to the Agent's satisfaction in the exercise of its
reasonable business judgment during any applicable grace period.
2. The Agent, acting on behalf of the Lenders, shall have the right,
without notice to the Company, to charge the loan account with the amount of
any and all indebtedness, liability or obligation of any kind paid or incurred
by the Agent under the Letters of Credit Guaranty at the earlier of: a) payment
by the Agent under the Letters of Credit Guaranty, or b) termination of this
Financing Agreement. Any amount so charged to the loan account shall be
charged against any credit balances then in the loan account, and if there are
then insufficient credit balances then to the extent of such insufficiency such
amount shall be deemed a Revolving Loan hereunder and shall incur interest at
the rate provided for in Section 7, paragraph 1 of this Financing Agreement.
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3. The Company unconditionally indemnifies the Agent and each Lender
and holds the Agent and each Lender harmless from any and all loss, claim or
liability incurred by the Agent and/or any Lender arising from any transactions
or occurrences relating to Letters of Credit established or opened for the
Company's account, the collateral relating thereto and any drafts or
acceptances thereunder, and all Obligations thereunder, including any such loss
or claim due to any errors or actions taken by, or any omissions, negligence or
misconduct of, any Issuing Bank, other than for any such loss, claim or
liability arising out of the gross negligence or willful misconduct of the
Agent and/or any Lender. The Company's unconditional obligation to the Agent
and each Lender hereunder shall not be modified or diminished for any reason or
in any manner whatsoever, other than as a result of the gross negligence or
willful misconduct of the Agent and/or any Lender. The Company agrees that any
charges of the Issuing Bank incurred by the Agent or any Lender for the
Company's account shall be conclusive on the Agent, the Lenders, and the
Company and shall be charged to the loan account.
4. In connection with any Letter of Credit, neither the Agent nor any
Lender shall be responsible for: the existence, character, quality, quantity,
condition, packing, value or delivery of the goods purporting to be represented
by any documents; any difference or variation in the character, quality,
quantity, condition, packing, value or delivery of the goods from that
expressed in the documents; the validity, sufficiency or genuineness of any
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged,
other than as a result of the gross negligence or willful misconduct of the
Agent and/or any Lender; the time, place, manner or order in which shipment is
made; partial or incomplete shipment, or failure or omission to ship any or all
of the goods referred to in the Letters of Credit or documents; any deviation
from instructions; delay, default, or fraud by the shipper and/or anyone else
in connection with any Inventory which is the subject of any Letter of Credit
or the shipping thereof; or any breach of contract between the shipper or
vendors and the Company. Furthermore, without being limited by the foregoing,
neither the Agent nor any Lender shall be responsible for any act or omission
with respect to or in connection with any Inventory which is the subject of any
Letter of Credit, except to the extent that such act or omission is the result
of the gross negligence or willful misconduct of the Agent and/or any Lender.
5. In connection with any Letter of Credit, the Company agrees that
any action taken by the Agent, if taken in good faith, or any action taken by
any Issuing Bank, under or in connection with the Letters of Credit, the
guarantees, the drafts or acceptances, or the Collateral, shall, as between the
Company and the Agent, be binding on the Company and shall not put the Agent or
any Lender in any resulting liability to the Company other than as a result of
the gross negligence or willful misconduct of the Agent or such Lender. After
the occurrence of an Event of Default which is not waived, the Agent shall have
the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute any and all steamship or
airways guaranties (and applications therefor), indemnities or delivery orders;
to grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents; and to
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agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances; all in the Agent's sole name, and the
Issuing Bank shall be entitled to comply with and honor any and all such
documents or instruments executed by or received solely from the Agent, all
without any notice to or any consent from the Company, provided, however, that
the Agent shall give the Company notice of the acceptance or rejection of any
goods.
6. In connection with any Letter of Credit, without the Agent's
express consent and, where applicable, endorsement in writing, the Company
agrees: a) not to 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 or documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of
any of the Letters of Credit, applications, drafts or acceptances; and b) after
the occurrence of an Event of Default which is not waived by the Agent, not to
i) clear and resolve any questions of non-compliance of documents, or ii) give
any instructions as to acceptance or rejection of any documents or goods.
7. In connection with any Letter of Credit, the Company agrees that
any necessary import, export or other licenses or certificates for the import
or handling of the Inventory will have been promptly procured, and all foreign
and domestic governmental laws and regulations in regard to the shipment and
importation of the Inventory, or the financing thereof will have been promptly
and fully complied with, except to the extent that any such non-procurement or
non-compliance will not have a material adverse effect on such Inventory; and
any certificates in that regard that the Agent, on behalf of the Lenders, may
at any time reasonably request will be promptly furnished. In this connection,
the Company warrants and represents that all shipments made under any of the
Letters of Credit are in accordance with the laws and regulations of the
countries in which the shipments originate and terminate, and are not
prohibited by any such laws and regulations, except to the extent that any
failure to so comply will not have a material adverse effect on such shipments.
The Company assumes all risk, liability and responsibility for, and agrees to
pay and discharge, all present and future local, state, federal or foreign
taxes, duties, or levies. Any embargo, restriction, laws, customs or
regulations of any country, state, province, city, or other political
subdivision, where the Inventory is or may be located, or wherein payments are
to be made, or wherein drafts may be drawn, negotiated, accepted, or paid,
shall be solely the Company's risk, liability and responsibility.
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.
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9. Nothing in this Section 4 of the 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;
(b) present and future Accounts;
(c) present and future Documents of Title;
(d) present and future General Intangibles;
(e) present and future books and records relating to any of the
foregoing Collateral (except that such books and records shall
not include any Equipment not owned by the Company or in which
another Person has a Permitted Encumbrance with priority over
what would be that of the Agent, the terms of which other
Permitted Encumbrance would be violated by the attachment of
the Agent's security interest therein); and
(f) present and future proceeds of any of the foregoing
Collateral, including proceeds of proceeds.
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 its
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business practices in existence on the date of execution of this Financing
Agreement, provided, however, that all proceeds of all such sales (including
cash, checks and instruments for the payment of money), other than the Retained
Cash, are promptly deposited in accordance with 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 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 Lender's rights hereunder.
6. Any reserves or credit balances in the loan account and any
other property or assets of the Company in the possession of the Agent may be
held by the Agent as security for any Obligations and applied in whole or
partial satisfaction of such Obligations when due. The liens and security
interests granted herein and any other lien or security interest the Agent may
have in any other assets of the Company, shall secure payment and performance
of all now existing and future Obligations.
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SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
1. Each of Gart and Sportmart hereby warrants and represents
that: i) the fair value of its assets exceed the book value of its
liabilities; ii) it is generally able to pay its debts as they become due and
payable; and iii) it does not have unreasonably small capital to carry on its
business as it is currently conducted absent extraordinary and unforeseen
circumstances. 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 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.
2. The Company agrees to maintain accurate books and records
pertaining to the Collateral. Prior to the occurrence of an Event of Default,
the Agent or its agents may, from time to time (but no more than once per
fiscal quarter of the Company) upon reasonable notice, enter upon the Company's
premises at any time during normal business hours, or at such other times as
the Agent and the Company may agree upon, for the purpose of inspecting the
Collateral and any and all records pertaining thereto, all at the Agent's
expense. During the continuance of an Event of Default, the Agent or its
agents may, at the Company's expense, enter the Company's premises, upon
reasonable notice and during normal business hours, and as often as it deems
reasonably necessary, to inspect the Collateral and the books and records of
the Company. Each of Gart and Sportmart agrees to afford the Agent prior
written notice of any change in the location of any Collateral, other than to
locations of such Person that are known to the Agent and at which the Agent has
filed financing statements and otherwise fully perfected its liens thereon.
The Company also agrees to advise the Agent promptly, in sufficient detail, of
any materially adverse change (other than seasonal changes) relating to the
type, quantity or quality of the Collateral or on the security interests
granted to the Agent for the benefit of the Lenders therein.
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. The Company agrees to do whatever the Agent may reasonably
request, from time to time, by way of: filing notices of liens, financing
statements, amendments, renewals and continuations thereof; cooperating with
the Agent's employees and agents; keeping Inventory stock records; transferring
proceeds of Collateral to the Agent's possession in accordance with the terms
of this Financing Agreement; and performing such further acts as the Agent on
behalf of the Lenders may reasonably require in order to effect the purposes of
this Financing Agreement.
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4. The Company agrees to maintain insurance under such policies of
insurance, with such insurance companies, in such reasonable amounts and
covering such insurable risks on i) Inventory , as is reasonably acceptable to
the Agent and ii) Real Estate and Equipment, on terms no less favorable than
the insurance coverage in place as of the date hereof (other than with respect
to the limits of such coverage). All policies covering the Inventory are,
subject to the rights of any holders of Permitted Encumbrances holding claims
senior to the Agent, to be made payable to the Agent on behalf of the Lenders
under a standard non-contributory "mortgagee", "lender" or "secured party"
clause and are to contain such other provisions as the Agent may reasonably
require to fully protect by insurance the Agent's interest in the Inventory and
to any payments to be made under such policies with respect to the Inventory.
Except as otherwise provided in the last paragraph of Section 2 of this
Financing Agreement, all original policies or true copies thereof are to be
delivered to the Agent, with all premiums current with the loss payable
endorsement in the Agent's favor, and shall provide for not less than thirty
(30) days prior written notice to the Agent of the exercise of any right of
cancellation. If the Company fails to maintain such insurance, the Agent may
arrange for such insurance, but at the Company's expense and without any
responsibility on the Agent's or any Lender's part for: obtaining the
insurance, the solvency of the insurance companies, the adequacy of the
coverage, or the collection of claims. Upon the occurrence of an Event of
Default which is not waived, the Agent shall, subject to the rights of any
holders of Permitted Encumbrances holding claims senior to the Agent, have the
sole right, in the name of the Agent or the Company, to file claims under any
insurance policies with respect to the Inventory, to receive, receipt and give
acquittance for any payments that may be payable thereunder with respect to the
Inventory, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims with respect to the
Inventory under any such insurance policies. In the event of any loss or
damage by fire or other casualty, insurance proceeds relating to Collateral
shall be deposited in the Depository Accounts in accordance with 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, claims and other charges (herein
"taxes") lawfully levied or assessed upon the Company or the Collateral,
provided, however, that such taxes need not be paid on or before the date fixed
for payment thereof if: i) such taxes are being diligently contested by the
Company in good faith and by appropriate proceedings; ii) the Company
establishes such reserves as may be required by GAAP; iii) such taxes are not
secured by a filed lien which is senior to the liens of the Agent on the
Collateral and iv) such taxes secured by a filed lien are not due the United
States of America. To prevent the imminent foreclosure of any tax liens
(whether such liens are senior or junior to the liens of the Agent) or in the
event the Agent on behalf of the Lenders is exercising its remedies as a
secured creditor on Collateral, then the Agent may, on the Company's behalf,
pay any taxes then due and secured by a lien on the Collateral and the amount
thereof shall be an Obligation secured hereby.
6. 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
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official, including, but not limited to, the Fair Labor Standards Act, as set
forth in Section 201 through Section 219 of Title 29 of the United States Code,
which the failure to comply with would have a materially adverse impact on the
Collateral, or on the operation of the business of the Company; provided that
the Company may contest any acts, rules, regulations, orders and directions of
such bodies or officials in any reasonable manner which will not materially
adversely effect the Agent's liens or priority in the Collateral; and (b)
agrees to comply with all environmental statutes, acts, rules, regulations or
orders as presently existing or as adopted or amended in the future, applicable
to the ownership and/or use of its Real Estate and operation of its business,
which the failure to comply with would have a materially adverse impact on any
material part of the Collateral, or on the operation of the business of the
Company. The Company 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 or any Lender as a result of any environmental pollution,
hazardous material or environmental clean-up of the Company's Real Estate, or
any claim or expense which results from the Company's operations (including,
but not limited to, the Company's off-site disposal practices). The Company
further agrees that this indemnification as to environmental liability shall
survive for two (2) years from the date of termination of this Financing
Agreement and the payment of all Obligations or amounts payable hereunder. The
Company shall not be deemed to have breached any provision of this 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) ninety (90) days after
the end of each fiscal year of the Company, an audited Consolidated Balance
Sheet as at the close of such year and consolidated statements of operations,
cash flows, shareholders' equity and reconciliation of surplus of the Parent,
the Company and their Subsidiaries for such year, audited by independent public
accountants selected by the Company and satisfactory to the Agent, (the Agent
hereby agrees that KPMG Peat Marwick is satisfactory to the Agent); (b)
forty-five (45) days after the end of each month, other than a month that
constitutes a fiscal year end (and except with respect to the first fiscal
month of each fiscal year of the Company, with respect to which the applicable
period for delivery shall be sixty days (60) rather than forty-five (45) days),
a Consolidated Balance Sheet as at the end of such period and consolidated
statements of operations and cash flows of the Parent, the Company and their
Subsidiaries for such period, certified by an authorized financial or
accounting officer of the Company; 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,
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without limitation, annual cash flow projections in form reasonably
satisfactory to the Agent. Each financial statement required to be submitted
under clauses a and b above must be accompanied by an Officer's Certificate,
signed by the President, Vice President, Controller, or Treasurer, of the
Company pursuant to which such officer must certify that: (i) the financial
statement(s) fairly and accurately represent(s) the financial condition of
Parent, the Company and their Subsidiaries, at the end of the particular
accounting period, as well as the operating results of Parent, the Company and
their Subsidiaries, during such accounting period, subject to year-end audit
adjustments; (ii) during the particular accounting period: (x) there has been
no Default or Event of Default under this Financing Agreement, provided,
however, that if any such officer has knowledge that any such Default or Event
of Default has occurred during such period, the existence of and a detailed
description of same shall be set forth in such Officer's Certificate; and (y) a
senior officer of the Company has not received any notice of cancellation with
respect to its property insurance policies or certifying as to replacement
policies therefor; (iii) the exhibits attached to such monthly and annual
financial statement(s) constitute detailed calculations showing compliance with
all financial covenants applicable for such period, if any, contained in this
Financing Agreement; (iv) as of the last day of the particular accounting
period, the Company is current with respect to the payment of all sales taxes
due by the Company to any state taxing authorities except to the extent
specifically noted to the contrary on a schedule attached to such Officer's
Certificate; and (v) as of the last day of the particular accounting period,
the Company is current with respect to the payment of all rent due to landlords
of the Company except to the extent specifically noted to the contrary on a
schedule attached to such Officer's Certificate. Notwithstanding anything in
this Financing Agreement to the contrary, should the Parent purchase the assets
of, or capital stock of, a Person, or create or incorporate another Person of
which it owns a majority of such Person's capital stock, then the references to
Consolidated Balance Sheet shall mean the Consolidated Balance Sheet of the
Company and its Subsidiaries only and all references to Parent and its
Subsidiaries shall, without further action, be immediately deleted from this
paragraph 7.
8. The Company and its Subsidiaries, on a consolidated basis,
shall at all times maintain a Net Worth of not less than $50,000,000.
9. Until termination of this Financing Agreement and satisfaction
of all Obligations due hereunder, the Company agrees that, without the prior
written consent of the Agent, except as otherwise herein provided, the Company
will not:
A. Incur, create, assume or permit any lien, charge, security
interest, encumbrance or judgment, (whether as a result of a
purchase money or title retention transaction, or other
security interest,or otherwise) to exist on any of its assets
whether real, personal or mixed, whether now owned or
hereafter acquired, except for the Permitted Encumbrances,
provided, however, that nothing in this subparagraph A shall
prohibit the Company from mortgaging, assigning, pledging,
transferring or otherwise permitting any lien to exist on any
of the Margin Securities;
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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, and provided that Gart may transfer
Collateral to Sportmart and Sportmart may transfer Collateral
to Gart, or ii) either all or substantially all of the other
assets of the Company, provided, however, that the Agent
agrees, as to this clause ii, that it shall not unreasonably
withhold its consent to any such sale, lease, assignment,
transfer, or other disposition, provided, however, that
nothing in this subparagraph D shall prohibit the Company from
selling, transferring or disposing of the Margin Securities;
E. Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure or existence, or
enter into or engage in any operation or activity materially
different from that presently being conducted by the Company
or otherwise related to the retail sporting goods industry,
provided, however, that on fifteen (15) days prior notice to
the Agent, either of Gart or Sportmart may, without obtaining
the consent of the Agent or any Lender i) merge any one or
more of its Subsidiaries into either of Gart or Sportmart
provided either Gart or Sportmart is the survivor of any such
merger, and ii) alter or modify its corporate name or
principal place of business;
F. Assume, guarantee, endorse, or otherwise become liable upon
the obligations of any person, firm, entity or corporation,
other than i) by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business, ii) pursuant to obligations in effect on
the date hereof, iii) in connection with subleases pursuant to
which the Company is the sub-lessor, iv) in connection with
the MLTC Documents, v) home relocation loans to or on behalf
of employees, vi) in the ordinary course of the Company's
business or for purposes deemed reasonable by the Company
provided such obligations under this clause vi shall not
exceed $4,000,000 in the aggregate at any one time, or vii)
assumptions, guarantees, endorsements, or other incurrences of
liability by Gart with respect to obligations of Sportmart or
by Sportmart with respect to obligations of Gart;
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 Sportmart may declare and pay
dividends on its capital stock to Gart, and Gart may declare
and pay dividends on its capital stock x) in cash in an amount
i) sufficient to enable the Parent to purchase, acquire
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or redeem the capital stock owned by its employees or its
retired, deceased or terminated officers, directors or
shareholders which the Parent is contractually obligated to
purchase, acquire or redeem, or ii) not to exceed $3,000,000
in any fiscal year, provided, however, that such dividends may
not be declared and paid if a Default or Event of Default is
then in existence or will be in existence after giving effect
to such dividends; 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; 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 $3,000,000 in the
aggregate at any one time, provided, however, that such
$3,000,000 limitation shall not be applicable if the cash
proceeds of such stock purchases are immediately reinvested by
the Parent in the capital stock of the Company or are
immediately used to repay indebtedness of Parent to the
Company; v) advances or loans to, or investments in, joint
ventures or Subsidiaries of the Company, provided, however,
that if such loans or advances are not being used to acquire,
directly or indirectly, assets for the benefit of the Company,
such loans, advances or investments may not exceed $2,000,000
in the aggregate at any one time; vi) advances or loans by
Gart to Sportmart or by Sportmart to Gart; vii) investments of
Gart in Sportmart or of Sportmart in Gart; and viii) 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.
10. The Company agrees to advise the Agent, promptly, in writing of:
a) all quantifiable expenditures (actual or anticipated) in excess of $500,000
pertaining to the Real Estate and operations in any fiscal year for i)
environmental clean-up, ii) environmental compliance or iii) environmental
testing and the impact of said expenses on working capital; and b) any notices
the Company receives from any local, state or federal authority advising the
Company of any environmental liability (real or potential) stemming from any of
the Company's operations, premises, its waste disposal practices, or waste
disposal sites used by the Company and to provide the Agent with copies of all
such notices if so required.
11. Without the prior written consent of the Agent, the Company agrees
that it will not enter into any transaction, including, without limitation, any
purchase, sale, transfer, lease, loan
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or exchange of property with Parent or any Subsidiary or Affiliate other than:
i) transactions in the ordinary course of the Company's business and on terms
no less favorable than the terms otherwise attainable by the Company from a
Person not an Affiliate; ii) transactions in connection with the
Acquisition-Related Transactions; iii) as otherwise permitted in this Financing
Agreement, including, without limitation, Permitted Indebtedness, to the extent
applicable; iv) reimbursement of fees and expenses to directors for the
expenses incurred by such directors for attending the Company's Board of
Directors' meetings; v) all customary compensation arrangements, including
participation in employee benefit plans; vi) payment to ▇▇▇▇▇▇▇ ▇▇▇▇▇ &
Partners of its x) management and transaction fees and y) out-of-pocket
expenses incurred for the benefit of the Company; vii) transfers of Collateral
by Gart to Sportmart or by Sportmart to Gart; and viii) purchases by the
Company of assets leased by the Company under the MLTC Documents.
12. The Company shall conduct or cause to be conducted, not less than
once in any calendar year, an actual physical count of its Inventory. Such
physical inventory count shall, in part, be conducted or reviewed by an entity
that is not an Affiliate of the Company and which entity shall be experienced
in conducting or reviewing such a physical inventory. The Company shall,
within sixty (60) days after the completion of such physical count (including
full reconciliation of all exceptions noted in the physical count or review),
deliver or cause to be delivered, to the Agent for each Lender a copy of the
final inventory report.
13. The Company shall remit any and all sales taxes when due to the
appropriate sales tax authorities when any such remittances are due, provided,
however, that such remittances need not be made on or before such due date if:
i) such sales taxes are being diligently contested by the Company in good faith
and by appropriate proceedings; ii) the Company establishes such reserves as
may be required by GAAP; and iii) the failure to remit such sales taxes does
not create a lien in favor of such sales tax authorities or impose upon the
Agent or any Lender any obligation to segregate proceeds.
14. The Company shall use its continuous best efforts to obtain as
soon as possible after the date of execution hereof landlord waivers in form
and substance reasonably acceptable to the Agent with respect to all (or as
many as possible) of the Company's store locations and/or distribution centers
(provided that the Company shall not be required to incur additional expense to
obtain such waivers (such as payment of waiver fees or increased rent to
landlords) other than the Company's own transactional fees and expenses in
connection with seeking, negotiating, and obtaining such waivers, and the
transactional fees and expenses of the Agent and its counsel in reviewing and
approving them).
15. If, at any time after the making of the initial loans hereunder,
Inventory shall be stored in a public warehouse (other than Inventory in
warehouses while such Inventory is clearing customs), the Company shall use its
continuous best efforts to obtain as soon as possible and deliver, or cause to
be delivered, to the Agent for the benefit of the Lenders, from each such
public warehouse in which Inventory is stored, other than Inventory in
warehouses while such
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Inventory is clearing customs, an acknowledgment, in form and substance
reasonably satisfactory to the Agent, concerning the Agent's security interest
for the benefit of the Lenders in such Inventory and the original negotiable
warehouseman's receipts, if any, duly endorsed by the Company to the order of
the Agent for the benefit of the Lenders.
SECTION 7. INTEREST, FEES AND EXPENSES
1. Interest on the Revolving Loans (other than Libor Loans) shall
be payable monthly as of the end of each month and shall be an amount equal to
the sum of the applicable Revolver Non-Libor Margin plus the Chase Manhattan
Bank Rate per annum, on the average of the net balances (other than Libor
Loans) owing by the Company in the Company's account at the close of each day
during such month. The rates hereunder shall be calculated on a per annum
basis and will be based on a 360-day year. Interest on the Revolving Loans
which are Libor Loans shall be payable monthly as of the end of each month and
shall be an amount equal to the sum of the applicable Revolver Libor Margin and
the applicable Libor on each then outstanding Revolving Loan which is a Libor
Loan, on a per annum basis, on the average of the net balances owing by the
Company on such Libor Loan at the close of each day during such month. The
Company may elect to use Libor as to any new or then outstanding Revolving
Loans provided x) there is then no unwaived Event of Default (after giving
effect to any cure period expressly provided for herein), and y) the Company
has so advised the Agent of its election to use Libor and the Libor Period
selected no later than three (3) Business Days prior to the proposed borrowing
or, in the case of a Libor election with respect to a then outstanding
Revolving Loan, three (3) Business Days prior to the conversion of any then
outstanding Revolving Loans to Libor Loans and z) the election and Libor shall
be effective, provided, there is then no unwaived Event of Default, on the
fourth Business Day following said notice. The Libor elections must be for
$100,000 or whole multiples thereof. If no such election is timely made or can
be made, then the Agent shall use the Chase Manhattan Bank Rate to compute
interest. In the event of any change in said Chase Manhattan Bank Rate, the
rate hereunder shall change correspondingly, as of the first of the month
following any change. The rates hereunder shall be calculated based on a
360-day year. The Agent shall be entitled to charge the Company's account at
the rate provided for herein when due until all Obligations have been paid in
full.
2. In consideration of the Letter of Credit Guaranty, the Company
shall pay to the Agent the Letter of Credit Guaranty Fee which shall be an
amount equal to one and one quarter percent (1.25%) per annum, payable monthly,
on the face amount of each outstanding Letter of Credit less the amount of any
and all amounts previously drawn under such Letters of Credit.
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.
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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 January
31, 1998, the Company shall pay the Agent for the account of the Lenders the
Line of Credit Fee.
6. To induce CITBC, both as a Lender and as the Agent, to enter into
this Financing Agreement and to extend to the Company the Revolving Loans, the
Company hereby agrees to pay to the Agent (to be shared with the Lenders to the
extent, and only to the extent, as may be agreed to between the Agent and
individual Lenders), a non-refundable Loan Facility Fee in the amount of
$875,000 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 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. The Company shall pay to the Agent for the account of the Lenders
such amount or amounts as shall compensate the Agent, the Lenders, or their
Participants (as defined below), if any, for any loss, costs or expenses
incurred by the Agent, the Lenders, or their Participants, if any (as
reasonably determined by the Agent, the Lenders, or their Participants, if
any), as a result of: (i) any payment or prepayment on a date other than the
last day of a Libor Period for such Libor Loan, or (ii) any failure of the
Company to borrow a Libor Loan on the date for such borrowing specified in the
relevant notice; such compensation to include, without limitation, an amount
equal to any loss or expense suffered by the Agent, the Lenders, or their
Participants, if any, during the period from the date of receipt of such
payment or prepayment or the date of such failure to borrow to the last day of
such Libor Period if the rate of interest obtained by the Agent, the Lenders,
or their Participants, if any, upon the reemployment of an amount of funds
equal to the amount of such payment, prepayment or failure to borrow is less
than the rate of interest applicable to such Libor Loan for such Libor Period.
The determination by the Agent, the Lenders, or their Participants, if any, of
the amount of any such loss or expense, when set forth in a written notice to
the Company, containing the calculations thereof in reasonable detail, shall
constitute prima facie evidence of the amount due from the Company.
9. The Company hereby confirms and authorizes the Agent, and the
Agent hereby agrees, to charge the loan account with the amount of all
Obligations due hereunder as such payment becomes due. In the unlikely event
the Agent is unable or unwilling to charge any such Obligation to the loan
account, then the Agent shall so notify the Company in writing and the amount
so requested shall be due and payable thirty (30) days after such demand.
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SECTION 8. POWERS
Subject to the last paragraph in this Section 8, the Company hereby
constitutes the Agent on behalf of the Lenders or any person or agent the Agent
may reasonably designate as its attorney-in-fact, at the Company's cost and
expense, to exercise all of the following powers, which being coupled with an
interest, shall be irrevocable until all Obligations to the Agent and the
Lenders have been satisfied and this Financing Agreement terminated:
(a) To receive, take, endorse, sign, assign and deliver, all in
the name of the Agent or the Company, any and all checks,
notes, drafts, and other documents or instruments relating to
the Collateral for i) deposit to a Blocked Account (consistent
with the 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 $500,000;
(c) To request from customers indebted on Trade Accounts
Receivable at any time, in the name of the Agent, information
concerning the amounts owing on the Trade Accounts Receivable;
(d) To transmit to customers indebted on Trade Accounts Receivable
notice of the Agent's interest therein and to notify customers
indebted on Trade Accounts Receivable to make payment directly
to the Agent for the Company's account; and
(e) To take or bring, in the name of the Agent or the Company, all
steps, actions, suits or proceedings reasonably deemed by the
Agent necessary or desirable to enforce or effect collection
of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (a), (c), (d) and (e) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES
1. Notwithstanding anything hereinabove to the contrary, the Agent
may terminate this Financing Agreement immediately upon the occurrence of any
of the following (herein "Events of Default"):
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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) either Gart or Sportmart admits in writing its inability to generally
pay its debts as they mature;
c) the commencement by either Gart or Sportmart of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law;
d) the commencement against either Gart or Sportmart of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law provided, however, that
such Default shall not be deemed an Event of Default if the
proceeding, petition, case or arrangement is dismissed within thirty
(30) days of the filing of, or the commencement of, such petition,
case, proceeding or arrangement;
e) material breach by the Company of any warranty, representation
(representations and warranties referred to in this subparagraph e
shall be deemed made as of each i) Reporting Date, whether or not any
report is in fact given to the Agent or ii) request for a Revolving
Loan or iii) request for the Agent's assistance in obtaining a Letter
of Credit or iv) the posting of any Obligation to the loan account) or
any covenant contained herein (other than those otherwise referred to
in this Section 9) or in any agreement between the Company and the
Agent relating to this Financing Agreement, provided that such Default
by the Company of any of the warranties, representations or covenants
referred to in this clause (e) shall not be deemed to be an Event of
Default unless and until such Default shall remain unwaived or
unremedied to the Agent's reasonable satisfaction for a period of
fifteen (15) days from the date of the Agent's discovery of such
breach;
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 on the Inventory) and 5 of Section 6;
or v) Paragraphs 9 (other than sub-paragraphs B and F thereof) and 13
of Section 6;
g) breach by the Company of sub-paragraphs 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 9 of this
Financing Agreement, failure of the Company to pay any of the
Obligations within ten (10) days of the due date thereof;
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i) the Company shall i) engage in any "prohibited transaction" as defined
in ERISA, ii) have any "accumulated funding deficiency" as defined in
ERISA, iii) have any Reportable Event as defined in ERISA, iv)
terminate any Plan, as defined in ERISA or v) be engaged in any
proceeding in which the Pension Benefit Guaranty Corporation shall
seek appointment, or is appointed, as trustee or administrator of any
Plan, as defined in ERISA, and with respect to this sub-paragraph i)
such event or condition x) remains uncured for a period of thirty (30)
days from date of occurrence and y) could reasonably be expected to
subject that Company to any tax, penalty or other liability materially
adverse to the business, operations or financial condition of the
Company and its Subsidiaries taken as a whole;
j) the holder, trustee or beneficiary of any instrument referred to in
this subparagraph shall have a then current right to accelerate
(whether or not such right is actually exercised) pursuant to any
instrument evidencing outstanding Indebtedness of the Company in
excess of $2,000,000;
k) the failure of the Company to deliver to the Agent within forty-five
(45) days from the date hereof the loss payee endorsement required
under paragraph b of Section 2 of this Financing Agreement, provided,
however, that such Default shall not be deemed an Event of Default if
such loss payee endorsement is delivered to the Agent within fifteen
(15) days from the date of such Default; or
l) the failure of the Company to deliver within forty-five (45) days from
the date hereof, executed agreements, in form and substance reasonably
satisfactory to the Agent, pursuant to which the Company's
Concentration Accounts become Blocked Accounts and the credit card
companies have agreed to remit balances, when due, to a Blocked
Account provided, however, that such Default shall not be deemed an
Event of Default if such delivery occurs within fifteen (15) days from
the date of such Default.
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 and at the option of the Agent
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 1(c) or 1(d) of
this Section 9) become immediately due and payable; II) the Agent may charge
the Company the Default Rate of Interest on all then outstanding or thereafter
incurred Obligations in lieu of the interest provided for in 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 1(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
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of Default listed in paragraph 1(c) or 1(d) of this Section 9; and III) the
Agent may immediately terminate this Financing Agreement upon notice to the
Company, provided, however, that no notice of termination is required if the
Event of Default is the Event of Default listed in paragraph 1(c) or 1(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 (E) exercise any other rights and
remedies provided in law, in equity, by contract or otherwise. The Agent shall
have the right, without notice or advertisement, to sell, lease, or otherwise
dispose of all or any part of the Collateral whether in its then condition or
after further preparation or processing, in the name of the Company or the
Agent, or in the name of such other party as the Agent may designate, either at
public or private sale or at any broker's board, in lots or in bulk, for cash
or for credit, with or without warranties or representations, and upon such
other terms and conditions as the Agent in its sole discretion may deem
advisable, and, to the extent permitted by applicable law, the Agent shall have
the right to purchase at any such sale. If any Inventory shall require
repairing, maintenance or preparation, the Agent shall have the right, at its
option, to do such of the aforesaid as is necessary, for the purpose of putting
the Inventory in such saleable form as the Agent shall reasonably deem
appropriate. The Company agrees, at the request of the Agent, to assemble the
Inventory and to make it available to the Agent at premises of the Company or
such other location reasonably designated by the Agent for the purpose of the
Agent's taking possession of, removing or putting the Inventory in saleable
form. However, if notice of intended disposition of any Collateral is required
by law, it is agreed that ten (10) days notice shall constitute reasonable
notification and full compliance with the law. The net cash proceeds resulting
from the Agent's exercise of any of the foregoing rights, (after deducting all
reasonable charges, costs
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and expenses, including reasonable attorneys' fees) shall be applied by the
Agent to the payment of the Obligations, whether due or to become due, and the
Company shall remain liable to the Agent for any deficiencies, and the Agent in
turn agrees to remit to the Company or its successor or assign, any surplus
resulting therefrom. The enumeration of the foregoing rights is not intended
to be exhaustive and the exercise of any right shall not preclude the exercise
of any other rights, all of which shall be cumulative.
SECTION 10. TERMINATION
Except as otherwise permitted herein, the Agent may, and shall at the
direction of the Required Lenders, terminate this Financing Agreement and the
Line of Credit only as of the fifth 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, without penalty, terminate this Financing Agreement
and the Line of Credit upon at least sixty (60) days' prior written notice to
the Agent. All Obligations shall become due and payable as of any termination
hereunder or under Section 9 hereof. All of the Agent's rights, liens and
security interests shall continue after any termination until all Obligations
have been satisfied in full. Pending payment in full of all Obligations, the
Agent may withhold any credit balances in the loan account (unless supplied
with an indemnity satisfactory to the Agent) to cover all of the Obligations,
whether absolute or contingent, provided, however, that if the remaining unpaid
Obligations arise solely out of the outstanding amounts of Letters of Credit,
the Agent will, at the Company's request, retain, solely as collateral, credit
balances in an amount equal to one hundred and ten percent (110%) of the then
outstanding amounts of Letters of Credit. When the outstanding amount of
Letters of Credit have been so secured by cash in an amount equal to one
hundred and ten percent (110%) of the then outstanding amounts of Letters of
Credit pursuant to a fully executed agreement between the Agent and the Company
and pursuant to which the Company agrees to reimburse the Agent for any Letter
of Credit claims that exceed the cash collateral, then for all purposes of this
Financing Agreement, this Financing Agreement shall be treated by the parties
thereto as terminated and all other Collateral will be released.
SECTION 11. AGREEMENT 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 collections of
Collateral and repayment of Obligations. It is understood that for purposes of
advances to the Company and for purposes of this Section 11 the Agent is using
the funds of the Agent.
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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 prima facie evidence of the amount due
from such Lender to the Agent. If such Lender's share of such borrowing is not
in fact made available to the Agent by such Lender on the Settlement Date, the
Agent shall be entitled to recover such amount with interest thereon at the
rate per annum applicable to Revolving Loans hereunder, on demand, from such
Lender or, if not made available by such Lender after three Business Days have
passed from demand having been made by the Agent on such Lender, from the
Company without prejudice to any rights which the Agent may have against such
Lender hereunder. Nothing contained in this subsection shall relieve any
Lender which has failed to make available its ratable portion of any borrowing
hereunder from its obligation to do so in accordance with the terms hereof.
Nothing contained herein shall be deemed to obligate Agent to make available to
the Company the full amount of a requested advance when the Agent has any
notice (written or otherwise) that any of the Lenders will not advance its
ratable portion thereof.
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, or Letter of Credit Guaranty Fee; and y) receive such part
of the Loan Facility Fee as provided for in the Assignment and Transfer
Agreement; b) interest computed at the rate provided for in the Assignment and
Transfer Agreement on all outstanding amounts advanced by the Lenders on each
Settlement Date, prior to adjustment, that are subsequent to the last
remittance by the Agent to the Lenders of the Company's interest; and c) their
share of the Letter of Credit Guaranty Fee as provided for in the Assignment
and Transfer Agreement.
5. (a) The Company acknowledges that the Lenders, with the
consent of the Agent, which shall not be unreasonably withheld, may sell
participations in the loans and extensions of credit made and to be made to the
Company hereunder (the "Participants"), provided, however, that a Participant
may not so purchase a participation in an amount less than $10,000,000 or the
then aggregate amount of such Lender's interest in the loans and advances and
extensions of credit hereunder. The Company further acknowledges that in doing
so, the Lenders may grant to such
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Participants certain rights which would require the Participant's consent to
certain waivers, amendments and other actions with respect to the provisions of
this Financing Agreement, provided that, unless the Agent and the Company
otherwise agree, the consent of any such Participant shall not be required
except for matters requiring the consent of all Lenders hereunder as set forth
in ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇.
(▇) 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 Paragraph 6 of this Section 11.
6. The Company has made and will, from time to time, make
available to the Agent and/or the Lenders certain financial and other business
information (the "Confidential Information") relating to its business. By
their signatures hereto or to the Assignment and Transfer Agreement, the Agent
and each Lender agree to maintain the confidentiality of all Confidential
Information, and to disclose such information only (a) to officers, directors
or employees of such Agent or Lender and their legal or financial advisors, in
each case to the extent necessary to carry out this Financing Agreement and in
the case of CITBC, to The CIT Group Holdings, Inc., The CIT Group, Inc., or
Dai-Ichi Kanygo Bank, and in the case of any other Lender, to such other
Lender's parent organization, but only, in the case of all of the foregoing
Persons referred to in this clause (a), after the Agent or the Lender, as the
case may be, has advised each such Person to maintain the confidentiality of
the Confidential Information, (b) to any other Person to the extent the
disclosure of such information to such Person is required in connection with
the examination of a Lender's records by appropriate authorities, pursuant to
court order, subpoena or other legal process or otherwise as required by law or
regulation, and (c) to Transferees or potential Transferees but only after such
Transferees or potential Transferees have executed a written confidentiality
agreement substantially in the form of this paragraph. The Lenders, the Agent,
Transferees and potential Transferees shall not be required to maintain the
confidentiality of any portion of the Confidential Information which (a) is
known by such Person or its agents, advisors or representatives prior to
disclosure or (b) becomes generally available to the public provided that the
disclosure of such Confidential Information does not violate a confidentiality
agreement of which the Transferees, potential Transferees, the Agent or the
Lender, as the case may be, has actual knowledge.
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
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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
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 i)
any suits, actions, proceedings or claims that are unrelated, directly or
indirectly, to this Financing Agreement, or ii) costs, fees, expenses, or
disbursements resulting from the gross negligence or willful misconduct of the
Agent or any Lender.
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
$15,000,000 each. In any event, CITBC shall retain for its own account
(without taking into account Participants) at least $40,000,000 or twenty-four
percent (24%) of the Line of Credit, whichever is less ("CITBC Hold Position"),
provided, however, that such CITBC Hold Position shall cease while there is
then a Designated Event of Default and only until such Designated Event of
Default is waived. Should CITBC during a Designated Event of Default assign
additional interests, then the CITBC Hold Position shall be the remaining
amount of CITBC's position if and when such Designated Event of Default is
waived, if such remaining amount is less than what the CIT Hold Position
otherwise would be as determined above. Upon execution of an Assignment and
Transfer Agreement, (i) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such assignment, have the rights and obligations of CITBC as the
case may be hereunder and (ii) CITBC shall, to the extent that rights
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and obligations hereunder have been assigned by it pursuant to such assignment,
relinquish its rights and be released from its obligations under this Financing
Agreement. The Company shall, if necessary, execute any documents reasonably
required to effectuate the assignments. No other Lender may assign its
interest, in whole or in part, in the loans and advances and extensions of
credit hereunder without i) the prior written consent of the Agent which
consent will not be unreasonably withheld; ii) the payment to the Agent (solely
for the Agent's account) by the current or prospective Lender of a $5,000 fee
for processing the assignment; and (iii) if the Transferee is a Foreign Lender
(as defined in Section 13, Paragraph 6 hereof), such Foreign Lender first
complies with the provisions of Section 13, Paragraph 6 hereof. Additionally,
no other Lender shall assign such Lender's interest in the loans and advances
and extensions of credit hereunder (or any portion thereof) unless the interest
to be so assigned is not less than $15,000,000 or all of the such Lender's
entire interest in the loans and advances and extensions of credit hereunder.
Notwithstanding anything to the contrary herein contained, prior to any such
assignment and/or the disclosure of the Confidential Information, such
Transferee, actual or potential, shall execute a confidentiality agreement in
form and substance substantially similar to Paragraph 6 of this Section 11.
Other than upon the occurrence and during the continuance of a Designated Event
of Default, no Lender (including CITBC) shall assign all or any part of its
rights and obligations under this Financing Agreement except to an assignee
approved by the Company, provided that (x) the Company shall not unreasonably
withhold, delay, or condition its consent, (y) any existing Lender (whether
CITBC or another Lender previously approved by the Company as an assignee)
shall be deemed to have been approved by the Company as an assignee with
respect to any and all future assignments to such Lender, without need for
further approval with respect to additional assignments by any other Lender to
such Lender, and (z) this sentence shall not be applicable to sales of
participation interests (as opposed to direct assignments).
SECTION 12. AGENCY
1. Each Lender hereby irrevocably designates and appoints CITBC as
the Agent for the Lenders under this Financing Agreement and any ancillary loan
documents and irrevocably authorizes CITBC as Agent for such Lender, to take
such action on its behalf under the provisions of the Financing Agreement and
all ancillary documents and to exercise such powers and perform such duties as
are expressly delegated to the Agent by the terms of this Financing Agreement
and all ancillary documents together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Financing Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into the
Financing Agreement and the ancillary documents or otherwise exist against the
Agent.
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.
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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.
4. The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, telecopy, message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper person or persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Company),
independent accountants and other experts selected by the Agent. The Agent
shall be fully 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 shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable and in
the best interests of the Lenders.
6. Each Lender expressly acknowledges that neither the Agent nor any
of its officers, directors, employees, agents or attorneys-in-fact has made any
representations or warranties to it
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and that no act by the Agent hereinafter taken, including any review of the
affairs of the Company, shall be deemed to constitute any representation or
warranty by the Agent to any Lender. Each Lender represents to the Agent that
it has, independently and without reliance upon the Agent or any other Lender
and based on such documents and information as it has deemed appropriate, made
its own appraisal of, and investigation into, the business, operations,
property, financial and other condition and creditworthiness of the Company and
made its own decision to enter into this Financing Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under the Financing Agreement and
to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition or
creditworthiness of the Company. The Agent, however, shall provide the Lenders
with copies of all inventory confirmation statements, Collateral examinations
and/or reviews, financial statements, projections and business plans which come
into the possession of the Agent or any of its officers, employees, agents or
attorneys-in-fact. Further, the Agent shall use reasonable efforts to give
the Lenders reasonable prior notice of the date of the Agent's visits to the
Company's premises for purposes of inspecting the Collateral and books and
records pertaining thereto.
7. The Lenders agree to indemnify the Agent in its capacity as such
(to the extent not reimbursed by the Company and without limiting the
obligation of the Company to do so), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever (including negligence on the
part of the Agent) which may at any time be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of this Financing
Agreement or any ancillary 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 the Company, and such resignation shall be effective upon the
appointment of a successor Agent. If the Agent shall resign as Agent, then the
Lenders shall appoint a successor agent for the Lenders whereupon such
successor agent shall succeed to the rights, powers and duties of the Agent and
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the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Financing Agreement, provided, however,
that the Lenders shall: a) notify the Company of the successor Agent and b)
request the consent of the Company to such successor Agent, which consent shall
not be unreasonably withheld. The Company shall be deemed to have consented to
the successor Agent if the Lenders do not receive from the Company, within ten
(10) days of the Lenders' notice to the Company, a written statement of the
Company's objection to the successor Agent. Should the Company not consent and
no acceptable successor Agent is agreed upon within thirty (30) days of the
date the Company advised the Lenders of its objection to the successor Agent,
then the Lenders may appoint (without the Company's consent) another successor
Agent. After any retiring Agent's resignation hereunder as Agent the
provisions of this Section 12 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent.
10. Notwithstanding anything contained in this Financing Agreement to
the contrary, the Agent will not, without the prior written consent of all
Lenders: a) amend the Financing Agreement to u) increase the Line of Credit;
v) increase the rate of advance against Eligible Inventory as set forth in
Paragraph 1 of Section 3 of this Financing Agreement; w) reduce the interest
rates; x) reduce or waive i) any fees in which the Lenders share hereunder; or
ii) the repayment of any Obligations due the Lenders; y) extend the maturity of
the Obligations; or z) alter or amend 1) this 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 five percent (105%) of the maximum amount
available under Sections 3 and 4 hereof (and provided that, unless the Required
Lenders agree otherwise, the Agent shall require that any Overadvance be repaid
within 14 days). In all other respects, and except as otherwise specifically
provided to the contrary in this Financing Agreement, the Agent is authorized
to take such actions or fail to take such actions if the Agent, in its
reasonable discretion, deems such to be advisable and in the best interest of
the Lenders, including, but not limited to, the termination of the Financing
Agreement upon the occurrence of an Event of Default unless it is specifically
instructed to the contrary by the Required Lenders. In the event any Lender's
consent is required pursuant to the provisions of this Financing Agreement and
such lender does not respond to any request by the Agent for such consent
within 10 days after such request is made to such Lender, such failure to
respond shall be deemed a consent. In addition, in the event that any Lender
declines to give its consent to any such request, it is hereby mutually agreed
that the Agent and/or any other Lender (with the consent of the Agent, which
shall not unreasonably be withheld) shall have the right (but not the
obligation) to purchase such Lender's share of the loans and advances made by
it hereunder for the full amount thereof together with accrued interest thereon
to the date of such purchase.
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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 fifth 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 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
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automatically reduced to the limit of such validity, and if from any such
circumstance the Agent, acting on behalf of the Lenders, shall ever receive as
interest or otherwise an amount in excess of the maximum that can be legally
collected, then such amount which would be excessive interest shall be applied
to the reduction of the principal indebtedness hereof and any other amounts due
with respect to the Obligations evidenced hereby, but not to the payment of
interest and if such amount which would be excessive interest exceeds the
Obligations and all other non-interest indebtedness described above, then such
additional amount shall be refunded to the Company. In determining whether or
not all sums paid or agreed to be paid by the Company for the use, forbearance
or detention of the Obligations of the Company to the Agent, acting on behalf
of the Lenders, under any specific contingency, exceeds the maximum amount
permitted by applicable law, the Company and the Agent, acting on behalf of the
Lenders, shall, to the maximum extent permitted under applicable law, (a)
characterize any non-principal payment as an expense, fee or premium rather
than as sums paid or agreed to be paid by the Company for the use, forbearance
or detention of the Obligations of the Company to the Agent, acting on behalf
of the Lenders, (b) exclude voluntary prepayments and the effect thereof, and
(c) to the extent not prohibited by applicable law, amortize, prorate, allocate
and spread in equal parts, the total amount of all sums paid or agreed to be
paid by the Company for the use, forbearance or detention of the Obligations of
the Company to the Agent, acting on behalf of the Lenders, throughout the
entire contemplated term of the Obligations so that the interest rate is
uniform throughout the entire term of the Obligations. The terms and
provisions of this paragraph shall control and supersede every other provision
hereof and all other agreements between the Company and the Agent, acting on
behalf of the Lenders.
5. If any provision hereof or of any other agreement made in
connection herewith is held to be illegal or unenforceable, such provision
shall be fully severable, and the remaining provisions of the applicable
agreement shall remain in full force and effect and shall not be affected by
such provision's severance. Furthermore, in lieu of any such provision, there
shall be added automatically as a part of the applicable agreement a legal and
enforceable provision as similar in terms to the severed provision as may be
possible.
6. Any Lender organized under the laws of a jurisdiction outside of
the United States (a "Foreign Lender") shall deliver to Agent and the Company
(i) two valid, duly 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
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required certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or otherwise is required to be resubmitted as
a condition to obtaining an exemption from a required withholding of United
States of America federal income tax or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Company and Agent, and such extensions or renewals thereof as may reasonably be
requested by the Company and Agent, certifying (x) in the case of a Form 1001
or 4224 that such Foreign Lender is entitled to receive payments under this
Financing Agreement without deduction or withholding of any United States
federal income taxes, or (y) in the case of a Form W-8 and a Tax Certificate,
establishing an exemption from United States backup withholding tax.
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 NEW YORK, 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.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attn: Regional Manager
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
(B) if to the Company at:
Gart Bros. Sporting Goods Company
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Sportmart, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
(C) if to any other Lender, at its address specified in the relevant
Assignment and Transfer Agreement
or to such other address as any party may designate for itself by like notice;
provided, however, that the failure of the Agent to send a copy of such
material notice to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners shall not invalidate in any way the
effect of the notice to the Company.
9. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
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.
[Balance of page intentionally omitted]
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IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be executed and delivered by their proper and duly authorized
officers as of the date set forth above.
Read and Agreed to: Executed and Accepted at
Chicago, Illinois
GART BROS. SPORTING
GOODS COMPANY
THE CIT GROUP/BUSINESS
CREDIT, INC.
By
----------------------------
Title: By
-------------------------
Vice President
SPORTMART, INC.
By
----------------------------
Title:
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EXHIBIT A - ASSIGNMENT AND TRANSFER AGREEMENT
Dated: ________________, 199______
Reference is made to the Financing Agreement dated as of January 9, 1998 (as
amended, modified, supplemented and in effect from time to time, the "Financing
Agreement"), among Gart Bros. Sporting Goods Company, a Colorado corporation,
Sportmart, Inc., a Delaware corporation (such two corporations, collectively
and individually, jointly and severally, as co-borrowers, the "Company"), the
Lenders named therein, and The CIT Group/Business Credit, Inc., as Agent (the
"Agent"). Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to such terms in the Financing Agreement. This
Assignment and Transfer Agreement, between the Assignor (as defined and set
forth on Schedule 1 hereto and made a part hereof) and the Assignee (as defined
and set forth on Schedule 1 hereto and made a part hereof) is dated as of the
Effective Date (as set forth on Schedule 1 hereto and made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date, an undivided interest (the "Assigned Interest") in and to all
the Assignor's rights and obligations under the Financing Agreement respecting
those, and only those, financing facilities contained in the Financing
Agreement as are set forth on Schedule 1 (collectively, the "Assigned
Facilities" and individually, an "Assigned Facility"), in a principal amount
for each Assigned Facility as set forth on Schedule 1.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Financing Agreement or any other instrument,
document or agreement executed in conjunction therewith (collectively the
"Ancillary Documents") or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Financing Agreement, any Collateral
thereunder or any of the Ancillary Documents furnished pursuant thereto, other
than that it is the legal and beneficial owner of the interest being assigned
by it hereunder and that such interest is free and clear of any adverse claim
and (ii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company or any guarantor or the
performance or observance by the Company or any guarantor of any of its
respective obligations under the Financing Agreement or any of the Ancillary
Documents furnished pursuant thereto.
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Transfer Agreement; (ii) confirms
that it has received a copy of the Financing Agreement, together with the
copies of the most recent financial statements of the Company, and such other
documents and information as it has deemed appropriate to make its own credit
analysis; (iii) agrees that it will, independently and without reliance upon
the Agent, the Assignor or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the
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Financing Agreement; (iv) appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under the Financing Agreement
as are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto; (v) agrees that it will be bound by the
provisions of the Financing Agreement and will perform in accordance with its
terms all the obligations which by the terms of the Financing Agreement are
required to be performed by it as Lender; and (vi) if the Assignee is organized
under the laws of a jurisdiction outside the United States, attaches the forms
prescribed by the Internal Revenue Service of the United States certifying as to
the Assignee's exemption from United States withholding taxes with respect to
all payments to be made to the Assignee under the Financing Agreement or such
other documents as are necessary to indicate that all such payments are subject
to such tax at a rate reduced by an applicable tax treaty.
4. Following the execution of this Assignment and Transfer Agreement,
such agreement will be delivered to the Agent for acceptance by it and the
Company, effective as of the Effective Date.
5. Upon such acceptance, from and after the Effective Date, the Agent
shall make all payments in respect of the Assigned Interest (including payments
of principal, interest, fees and other amounts) to the Assignee, whether such
amounts have accrued prior to the Effective Date or accrue subsequent to the
Effective Date. The Assignor and Assignee shall make all appropriate
adjustments in payments for periods prior to the Effective Date made by the
Agent or with respect to the making of this assignment directly between
themselves.
6. From and after the Effective Date, (i) the Assignee shall be a
party to the Financing Agreement and, to the extent provided in this Assignment
and Transfer Agreement, have the rights and obligations of a Lender thereunder,
and (ii) the Assignor shall, to the extent provided in this Assignment and
Transfer Agreement, relinquish its rights and be released from its obligations
under the Financing Agreement.
7. THIS ASSIGNMENT AND TRANSFER AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective duly authorized officers on
Schedule 1 hereto.
Accepted:
THE CIT GROUP/BUSINESS
CREDIT, INC., AS THE AGENT
-----------------------------------
as Assignor
By: By:
------------------------------- -------------------------------
Title: Title:
--------------------------- ----------------------------
Gart Bros. Sporting Goods Company
-----------------------------------
as Assignee
By: By:
------------------------------ -------------------------------
Title: Title:
-------------------------- ----------------------------
Sportmart, Inc.
By:
-------------------------------
Title:
---------------------------
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SCHEDULE 1 TO ASSIGNMENT AND TRANSFER AGREEMENT
Name of Assignor:
------------------------------------
Name of Assignee:
------------------------------------
Effective Date of Assignment: 199
-----------------, ----
Percentage Assigned of
Each Facility (Shown
as a percentage of
Principal aggregate original
Amount (or, principal amount
with respect to (or, with respect to
Letters of Credit Letters of Credit,
Assigned face amount) face amount)
Facilities Assigned of all Lenders)
---------- -------- --------------
Revolving Loans $ %
---------- --------------------
Letter of Credit
participation
interest $ %
---------- -------------------
Total $
----------
Fees:
Rates:
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EXHIBIT S - SURETYSHIP AGREEMENT
SURETYSHIP AGREEMENT
THIS SURETYSHIP AGREEMENT (THIS "AGREEMENT"), is entered into as of
January 9, 1998, between (a) THE CIT GROUP/BUSINESS CREDIT, INC., a New York
corporation (hereinafter "CITBC") with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, as Agent for the Lenders under that certain
Financing Agreement of even date herewith (as from time to time amended,
modified, supplemented, renewed, or restated, the "Financing Agreement"), which
Financing Agreement is between CITBC, the "Debtors" defined below, and the
"Lenders" referred to therein, (b) GART BROS. SPORTING GOODS COMPANY, a
Colorado corporation (hereinafter referred to as "Gart") having a principal
place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, and (c) SPORTMART, INC.,
a Delaware corporation (hereinafter referred to as "Sportmart") having a
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (Gart and
Sportmart herein being referred to, jointly and severally, individually and
collectively, as "Debtors"). As used herein, "Lender" means CITBC as the Agent
for the "Lenders" under the Financing Agreement, and the "Lenders" under the
Financing Agreement (as therein defined), and each of them, and any one or more
of them; and "Loan Documents" means, individually and collectively, the
Financing Agreement, and any other documents, agreements, or instruments
executed or delivered by the Debtors pursuant thereto or in accordance
therewith, in each case as they may from time to time be amended, modified,
supplemented, renewed, or restated. This Agreement is made with reference to
the following facts:
A. Lender and Debtors are entering into the Financing Agreement;
B. In order to induce Lender to enter into the Financing
Agreement, and in consideration thereof, and in consideration
of any loan or other financial accommodations hereinafter
extended by Lender to Debtors, whether pursuant to the
Financing Agreement or otherwise, Debtors have agreed to enter
into this Agreement; and
C. Any and all initially capitalized terms used herein and not
defined herein shall have the meaning ascribed thereto in the
Financing Agreement as amended, restated, supplemented,
renewed, extended or modified from time to time.
NOW THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, Lender and Debtors hereby agree as follows:
1. SURETYSHIP WAIVERS AND CONSENTS.
1.1 The Debtors each are, and at all times shall be, jointly and
severally liable for each
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and every one of the Obligations under the Financing Agreement and under the
Loan Documents (as defined in the Financing Agreement), regardless of which
Debtor or Debtors requested, received, used, or directly enjoyed the benefit
of, the extensions of credit hereunder. Unless otherwise expressly set forth
to the contrary in any of the Loan Documents, all of the Collateral shall
secure all of the Obligations. Each Debtor's Obligations under the Financing
Agreement are independent Obligations and are absolute and unconditional. Each
Debtor, to the extent permitted by law, hereby waives any defense to such
Obligations that may arise by reason of the disability or other defense or
cessation of liability of any other Debtor for any reason other than payment in
full. Each Debtor also waives any defense to such Obligations that it may have
as a result of Lender's election of or failure to exercise any right, power, or
remedy, including the failure to proceed first against another Debtor or any
security it holds from such other Debtor. Without limiting the generality of
the foregoing, each Debtor expressly waives all demands and notices whatsoever
(except for any demands or notices, if any, that such Debtor expressly is
entitled to receive pursuant to the terms of any Loan Document), and agrees
that Lender may, without notice (except for such notice, if any, as such Debtor
expressly is entitled to receive pursuant to the terms of any Loan Document)
and without releasing the liability of such Debtor, extend for the benefit of
any other Debtor the time for making any payment, waive or extend the
performance of any agreement or make any settlement of any agreement for the
benefit of any other Debtor, and may proceed against each Debtor, directly and
independently of any other Debtor, as Lender may elect in accordance with the
Financing Agreement.
1.2 Each Debtor acknowledges that the Obligations undertaken
herein or in the other Loan Documents, and the grants of security interests and
liens by such Debtor to secure Obligations of the other Debtor, could be
construed to consist, at least in part, of the guaranty of Obligations of the
other Debtor and, in full recognition of that fact, each Debtor consents and
agrees as hereinafter set forth in the balance of this Section 1. The
consents, waivers, and agreements of the Debtors that are contained in the
balance of this Section 1 are intended to deal with the suretyship aspects of
the transactions evidenced by the Loan Documents (to the extent that a Debtor
may be deemed a guarantor or surety for the Obligations of another Debtor) and
thus are intended to be effective and applicable only to the extent that any
Debtor has agreed to answer for the Obligation of another Debtor or has granted
a lien or security interest in Collateral to secure the Obligation of another
Debtor; conversely, the consents, waivers, and agreements of the Debtors that
are contained in the balance of this Section 1 shall not be applicable to the
direct Obligation of a Debtor with respect to credit extended directly to such
Debtor, and shall not be applicable to security interests or liens on
Collateral of a Debtor given to directly secure direct Obligations of such
Debtor where no aspect of guaranty or suretyship is involved. Each Debtor
consents and agrees that Lender may, at any time and from time to time, without
notice or demand, whether before or after any actual or purported termination,
repudiation or revocation of the Financing Agreement by any one or more
Debtors, and without affecting the enforceability or continuing effectiveness
hereof as to such Debtor, in accordance with the terms of the Loan Documents:
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(a) with respect to any other Debtor, supplement,
restate, modify, amend, increase, decrease, extend, renew, accelerate or
otherwise change the time for payment or the terms of the Obligations of such
other Debtor or any part thereof, including any increase or decrease of the
rate(s) of interest thereon with the agreement of such other Debtor;
(b) supplement, restate, modify, amend, increase,
decrease or waive, or enter into or give any agreement, approval or consent
with respect to, the Obligations or any part thereof, or any of the Loan
Documents or any security or guarantees granted or entered into by any
Person(s) other than such Debtor, or any condition, covenant, default, remedy,
right, representation or term thereof or thereunder;
(c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan Documents or the
Obligations or any part thereof;
(d) accept partial payments on the Obligations;
(e) receive and hold additional security or guarantees
for the Obligations or any part thereof;
(f) release, reconvey, terminate, waive, abandon, fail to
perfect, subordinate, exchange, substitute, transfer or enforce any security or
guarantees, and apply any security and direct the order or manner of sale
thereof as Lender in its sole and absolute discretion may determine;
(g) release any other Person (including, without
limitation, any other Debtor) from any personal liability with respect to the
Obligations or any part thereof;
(h) with respect to any Person other than such Debtor
(including, without limitation, any other Debtor), settle, release on terms
satisfactory to Lender or by operation of applicable laws or otherwise
liquidate or enforce any Obligations and any security therefor or guaranty
thereof in any manner, consent to the transfer of any security and bid and
purchase at any sale; or
(i) consent to the merger or any other restructuring or
termination of the corporate or partnership existence of any other Debtor or
any other Person, and correspondingly agree, in accordance with all applicable
provisions of the Loan Documents, to the restructure of the Obligations, and
any such merger, restructuring or termination shall not affect the liability of
any Debtor or the continuing effectiveness hereof, or the enforceability hereof
with respect to all or any part of the Obligations.
1.3 Upon the occurrence and during the continuance of any Event of
Default, Lender may enforce the Loan Documents independently as to each Debtor
and independently of any other remedy or security Lender at any time may have
or hold in connection with the Obligations, and it shall not be necessary for
Lender to marshal assets in favor of any Debtor or any other Person
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or to proceed upon or against or exhaust any security or remedy before
proceeding to enforce the Financing Agreement. Each Debtor expressly waives
any right to require Lender to marshal assets in favor of any Debtor or any
other Person or to proceed against any other Debtor, any other Person, or any
collateral provided by any Person, and agrees that Lender may proceed against
any Debtor, any other Person, or any collateral in such order as it shall
determine in its sole and absolute discretion.
1.4 Lender may file a separate action or actions against any
Debtor, whether such action is brought or prosecuted with respect to any
security or against any other Person, or whether any other Person is joined in
any such action or actions. Each Debtor agrees, for itself, that Lender and
any other Debtor, or any Affiliate of any other Debtor (other than such Debtor
itself), may deal with each other in connection with the Obligations or
otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way altering
or affecting the continuing efficacy as to such Debtor of the Loan Documents.
1.5 The rights of Lender created or granted herein with respect to
any Debtor and the enforceability of the Loan Documents as to any Debtor at all
times shall remain effective to cover the full amount of all the Obligations
even though the Obligations, including any part thereof or any other security
or guaranty therefor, may be or hereafter may become invalid or otherwise
unenforceable as against any other Debtor and whether or not any other Debtor
shall have any personal liability with respect thereto.
1.6 To the maximum extent permitted by applicable law, each
Debtor, for itself, expressly waives any and all defenses now or hereafter
arising or that otherwise might be asserted by reason of
(a) any disability or other defense of any other Debtor
with respect to the Obligations, or with respect to the enforceability of
Lender's security interest in or lien on any collateral securing any of the
Obligations (including, without limitation, the Collateral),
(b) the unenforceability or invalidity of any security or
guaranty for the Obligations or the lack of perfection or continuing perfection
or failure of priority of any security for the Obligations,
(c) the cessation for any cause whatsoever of the
liability of any other Debtor (other than by reason of the full payment and
performance of all Obligations),
(d) any failure of Lender to marshal assets in favor of
any Debtor or any other Person,
(e) any failure of Lender to give notice of sale or other
disposition of collateral to any other Debtor or any other Person other than
such waiving Debtor, or any defect in any
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notice that may be given to any other Debtor or any other Person other than
such waiving Debtor, in connection with any sale or disposition of any
collateral securing the Obligations or any of them (including, without
limitation, the Collateral),
(f) any failure of Lender to comply with applicable law
in connection with the sale or other disposition of any collateral or other
security for any Obligation that is owned by another Debtor or by any other
Person other than such waiving Debtor, including any failure of Lender to
conduct a commercially reasonable sale or other disposition of any such
collateral or other security for any Obligation,
(g) any act or omission of Lender or others that directly
or indirectly results in or aids the discharge or release of any other Debtor,
or the Obligations of any other Debtor, or any security or guaranty therefor,
by operation of law or otherwise,
(h) any law which provides that the obligation of a
surety or guarantor must neither be larger in amount nor in other respects more
burdensome than that of the principal or which reduces a surety's or
guarantor's obligation in proportion to the principal obligation,
(i) any failure of Lender to file or enforce a claim in
any bankruptcy or other proceeding with respect to any Person other than such
waiving Debtor,
(j) the election by Lender of the application or
non-application of Section 1111(b)(2) of the Bankruptcy Code,
(k) any extension of credit or the grant of any lien
under Section 364 of the Bankruptcy Code,
(l) any use of cash collateral under Section 363 of the
Bankruptcy Code,
(m) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any Person,
(n) the avoidance of any lien in favor of Lender for any
reason, or
(o) any action taken by Lender that is authorized by this
section or any other provision of any Loan Document. Until such time, if any,
as all of the Obligations have been paid and performed in full and no portion
of any commitment of Lender to any Debtor under any Loan Document remains in
effect, no Debtor shall have any right of subrogation, contribution,
reimbursement or indemnity, and each Debtor expressly waives any right to
enforce any remedy that Lender now has or hereafter may have against any other
Person and waives the benefit of, or any right to participate in, any
collateral now or hereafter held by Lender. Except to the extent expressly
provided for in any Loan Document, each Debtor expressly waives, to the maximum
extent permitted by applicable law, all rights or entitlements to presentments,
demands for
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payment or performance, notices of nonpayment or nonperformance, protests,
notices of protest, notices of dishonor and all other notices or demands of any
kind or nature whatsoever with respect to the Obligations, and all notices of
acceptance of the Loan Documents or of the existence, creation or incurring of
new or additional Obligations.
1.7 In the event that all or any part of the Obligations at any
time should be or become secured by any one or more deeds of trust or mortgages
or other instruments creating or granting liens on any interests in real
property, each Debtor authorizes Lender, upon the occurrence of and during the
continuance of any Event of Default, at its sole option, without notice or
demand except as is or may be expressly required by the terms of any Loan
Document or by the provisions of any applicable law, to foreclose any or all of
such deeds of trust or mortgages or other instruments by judicial or
nonjudicial sale, without affecting or diminishing, except to the extent of the
effect of the application of the proceeds realized therefrom, and except to the
extent mandated by any non-waivable provision of applicable law, the
Obligations of any Debtor (other than the Obligations of a grantor of a
foreclosed deed of trust, mortgage, or other instrument, to the extent, if any,
that applicable law affects or diminishes the Obligations of such grantor), the
enforceability of the Financing Agreement or any other Loan Document, or the
validity or enforceability of any remaining security interests or liens of, or
for the benefit of, Lender on any collateral.
1.8 To the fullest extent permitted by applicable law, each Debtor
expressly waives any defenses to the enforcement of the Financing Agreement, or
to the enforcement of any other Loan Document, or to any rights of Lender
created or granted hereby or thereby, or to the recovery by Lender against any
Debtor or any other Person liable therefor of any deficiency after a judicial
or nonjudicial foreclosure or sale of any collateral, whether real or personal,
from time to time securing any of the Obligations, even though such a
foreclosure or sale may impair the subrogation rights of one or more of the
Debtors and may preclude one or more of the Debtors from obtaining
reimbursement or contribution from other Debtors. To the fullest extent
permitted by applicable law, each Debtor expressly waives any defenses or
benefits that may be derived from all suretyship defenses it otherwise might or
would have under New York law or any other applicable law. To the fullest
extent permitted by applicable law, each Debtor, for itself, expressly waives
any right to receive notice of any judicial or nonjudicial foreclosure or sale
of any real property or interest therein of another Debtor that is subject to
any such deeds of trust or mortgages or other instruments, and any Debtor's
failure to receive any such notice shall not impair or affect such Debtor's
obligations or the enforceability of the Loan Documents or any rights of Lender
created or granted hereby or thereby.
1.9 Each Debtor hereby agrees to keep each other Debtor fully
apprised at all times as to the status of its business, affairs, finances, and
financial condition, and its ability to perform its Obligations under the Loan
Documents, and in particular as to any adverse developments with respect
thereto. Each Debtor hereby agrees to undertake to keep itself apprised at all
times as to the status of the business, affairs, finances, and financial
condition of each other Debtor, and of the ability of each other Debtor to
perform its Obligations under the Loan Documents, and in
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particular as to any adverse developments with respect to any thereof. Each
Debtor hereby agrees, in light of the foregoing mutual covenants to inform each
other, and to keep themselves and each other informed as to such matters, that
Lender shall have no duty to inform any Debtor of any information pertaining to
the business, affairs, finances, or financial condition of any other Debtor, or
pertaining to the ability of any other Debtor to perform its Obligations under
the Loan Documents, even if such information is adverse, and even if such
information might influence the decision of one or more of the Debtors to
continue to be jointly and severally liable for, or to provide Collateral for,
Obligations of the other Debtor. To the fullest extent permitted by applicable
law, each Debtor hereby expressly waives any duty of Lender to inform any
Debtor of any such information.
1.10 Debtors and each of them warrant and agree that each of the
waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with
the understanding that events giving rise to any defense or right waived may
diminish, destroy, or otherwise adversely affect rights that Debtors otherwise
may have against other Debtors, Lender, or others, or against Collateral, and
that, under the circumstances, the waivers and consents herein given are
reasonable and not contrary to public policy or law. If any of the waivers or
consents herein are determined to be contrary to any applicable law or public
policy, such waivers and consents shall be effective to the maximum extent
permitted by law.
1.11 Anything to the contrary in this Agreement notwithstanding,
nothing in this Agreement shall constitute a waiver or relinquishment by any
Debtor (a) of any right to notice from Lender expressly provided for in favor
of such Debtor in any Loan Document, or (b) of any duty or obligation of Lender
expressly provided for in favor of such Debtor in any Loan Document.
2. MISCELLANEOUS.
2.1 Section headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above, and agree that
it shall be governed by the laws of the State of New York.
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Read and Agreed to: Executed and Accepted at
Chicago, Illinois
GART BROS. SPORTING
GOODS COMPANY
THE CIT GROUP/BUSINESS
CREDIT, INC.
By
----------------------------
Title: By
-------------------------
Vice President
SPORTMART, INC.
By
----------------------------
Title:
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