EXHIBIT 4.1
AMENDED AND RESTATED FINANCING AGREEMENT
AMONG
THE CIT GROUP/BUSINESS CREDIT, INC.,
AND
X.X. XXXXXX AND CO., INC.
XXXXXX SPORTING GOODS CO., ALABAMA
XXXXXX SPORTING GOODS CO., ARIZONA
XXXXXX SPORTING GOODS CO., ARKANSAS
XXXXXX SPORTING GOODS CO., CALIFORNIA
XXXXXX SPORTING GOODS CO., COLORADO
XXXXXX SPORTING GOODS CO., FLORIDA
XXXXXX SPORTING GOODS CO., XXXXXXX
XXXXXX SPORTING GOODS CO., HAWAII
XXXXXX SPORTING GOODS CO., KANSAS
XXXXXX SPORTING GOODS CO., LOUISIANA
XXXXXX SPORTING GOODS CO., MICHIGAN
XXXXXX SPORTING GOODS CO., MINNESOTA
XXXXXX SPORTING GOODS CO., MISSOURI
XXXXXX SPORTING GOODS CO., NEVADA
XXXXXX SPORTING GOODS CO., NEW JERSEY
XXXXXX SPORTING GOODS CO., NEW MEXICO
XXXXXX SPORTING GOODS CO., NEW YORK
XXXXXX SPORTING GOODS CO., OHIO
XXXXXX SPORTING GOODS CO., OKLAHOMA
XXXXXX SPORTING GOODS CO., OREGON
XXXXXX SPORTING GOODS CO., SOUTH CAROLINA
OSHMAN SPORTING GOODS CO., TENNESSEE
XXXXXX SPORTING GOODS CO., TEXAS
XXXXXX SPORTING GOODS CO., UTAH
XXXXXX SPORTING GOODS CO., WASHINGTON
XXXXXX'X SKI SKOOL, INC.
AND
XXXXXX'X SPORTING GOODS, INC.-SERVICES
DATED AS OF DECEMBER 15, 1997
TABLE OF CONTENTS
Page
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SECTION 1. Definitions...............................................
SECTION 2. Conditions Precedent......................................
SECTION 3. Revolving Loans...........................................
SECTION 4. Letters of Credit.........................................
SECTION 5. Collateral................................................
SECTION 6. Representations, Warranties and Covenants.................
SECTION 7. Interest, Fees and Expenses...............................
SECTION 8. Powers....................................................
SECTION 9. Events of Default and Remedies............................
SECTION 10. Termination...............................................
SECTION 11. Real Estate--Best Efforts.................................
SECTION 12. Miscellaneous.............................................
EXHIBIT A - Inventory Confirmation Statement
EXHIBIT B - Form of Original Bank Account Letter Agreement
EXHIBIT C - Form of CITBC Verification Request Pursuant to Section 8
AMENDED AND RESTATED FINANCING AGREEMENT
THIS AMENDED AND RESTATED FINANCING AGREEMENT (hereinafter, this
"Financing Agreement") is dated as of December 15, 1997, and is by and among THE
CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, (hereinafter "CITBC")
with offices located at Two Lincoln Centre, Suite 200, 0000 XXX Xxxxxxx, Xxxxxx,
Xxxxx 00000, and X. X. XXXXXX AND CO., INC.; XXXXXX SPORTING GOODS CO., ALABAMA;
XXXXXX SPORTING GOODS CO., ARIZONA; XXXXXX SPORTING GOODS CO., ARKANSAS; XXXXXX
SPORTING GOODS CO., CALIFORNIA (herein "Xxxxxx California"); XXXXXX SPORTING
GOODS CO., COLORADO; XXXXXX SPORTING GOODS CO., FLORIDA (herein "Xxxxxx
Florida"); XXXXXX SPORTING GOODS CO., GEORGIA; XXXXXX SPORTING GOODS CO., HAWAII
(herein "Xxxxxx Hawaii"); XXXXXX SPORTING GOODS CO., KANSAS; XXXXXX SPORTING
GOODS CO., LOUISIANA; XXXXXX SPORTING GOODS CO., MICHIGAN; XXXXXX SPORTING GOODS
CO., MINNESOTA; XXXXXX SPORTING GOODS CO., MISSOURI; XXXXXX SPORTING GOODS CO.,
NEVADA; XXXXXX SPORTING GOODS CO., NEW JERSEY; XXXXXX SPORTING GOODS CO., NEW
MEXICO; XXXXXX SPORTING GOODS CO., NEW YORK; XXXXXX SPORTING GOODS CO., OHIO;
XXXXXX SPORTING GOODS CO., OKLAHOMA; XXXXXX SPORTING GOODS CO., OREGON; XXXXXX
SPORTING GOODS CO., SOUTH CAROLINA; XXXXXX SPORTING GOODS CO., TENNESSEE; XXXXXX
SPORTING GOODS CO., UTAH; XXXXXX SPORTING GOODS CO., WASHINGTON; and XXXXXX'X
SKI SKOOL, INC., each a Texas corporation; XXXXXX SPORTING GOODS CO., TEXAS
(herein "Xxxxxx Texas") and XXXXXX'X SPORTING GOODS, INC. - SERVICES (herein
"Xxxxxx'x Services"), each a Delaware corporation (hereinafter all of the
foregoing named corporations may be collectively referred to as the "Companies"
and each of the foregoing may be referred to individually as a "Company"), each
having a principal place of business at 0000 Xxxxxxx Xxxx, Xxxxxxx, Xxxxx 00000.
RECITALS:
WHEREAS, the Companies and CITBC are parties to that certain Financing
Agreement dated August 31, 1992, as amended an otherwise modified prior to the
date hereof (the "Original Financing Agreement"); and
WHEREAS, the Companies and CITBC now desire to amend, restate and modify
the Original Financing Agreement as hereinafter set forth to, among other
things, confirm the terms and conditions under which CITBC will make revolving
loans, advances an other financial accommodations available to the Companies;
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt an sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound agree as
follows:
1
SECTION 1. DEFINITIONS
As used herein, the following terms shall have the following meanings:
ACCOUNTS shall mean all of each Company's now existing and future: (a) accounts
receivable, including any Trade Accounts Receivable, all rights to payment under
bank of non-bank credit cards, (whether or not specifically listed on schedules
furnished to CITBC), and any and all instruments, documents, contract rights,
chattel paper, general intangibles and investment property, including, without
limitation, all accounts created by or arising from each 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 a
Company, or through any divisions of a 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 in the Collective Account hereunder; (e) guarantees
or collateral for any of the foregoing; (f) credit or property insurance
policies or rights relating to any of the foregoing; and (g) cash and non-cash
proceeds of any and all the foregoing.
AFFILIATE shall mean, as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person and the term "control" shall have
the meaning set forth in respect thereof in Rule 105 promulgated under the
Securities Act of 1933, as amended.
ANNIVERSARY DATE shall mean August 31, 1999, and the same date in every year
thereafter; provided, however, that if the Companies give notice, in accordance
with Section 10 of this Financing Agreement, to terminate on an Anniversary Date
and such date is not a business day, then the Anniversary Date shall be the next
succeeding business day.
AVAILABILITY shall mean at any time of determination the amount by which I) the
lesser of a) the sum of i) the Current Revolving Line of Credit, plus ii) during
any Seasonal Overline Period, $15,000,000.00, or b) the Borrowing Base exceeds
II) the sum of x) the outstanding aggregate amount of all Obligations (excluding
all obligations in respect of the undrawn amounts of outstanding Letters of
Credit) plus y) the Availability Reserve.
AVAILABILITY RESERVE shall mean at any time of determination an amount equal to
the sum of (i) the then undrawn amount of all outstanding Letters of Credit,
plus (ii) a thirty-two and one-half percent (32.5%) reserve against the cost of
inventory located in the traditional stores (i.e., stores other than those
having a tradename of "Xxxxxx'x Supersports" or "Supersports U.S.A.") scheduled
to be closed during the fiscal year 1997, such reserve to remain in place until
the liquidation process is complete, plus (iii) the amount of all sales taxes
collected by the Companies and not yet remitted to the authority to which such
taxes are owed, the amount of which shall be determined by CITBC in its sole
discretion.
BORROWING BASE shall have the meaning assigned to it in Section 3, Paragraph 1
hereof.
2
CAPITAL EXPENDITURES for any period shall mean the aggregate of all expenditures
of the Companies during such period that in conformity with GAAP are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the balance sheet of the Companies or of any one of
them and such expenditures shall be reduced by any amounts received as landlord
construction rebates not included or reflected by the property, plant or
equipment or similar asset account reflected on the balance sheet of the
Companies or any one of them.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheets of the Companies or of any one of them.
CITBC shall have the meaning assigned to it in the introductory paragraph of
this Financing Agreement.
COLLATERAL shall mean all present and future Accounts, Inventory, Documents of
Title, General Intangibles and Real Estate of each of the Companies but shall
not include the Excluded Assets.
COLLATERAL MANAGEMENT FEE shall mean the sum of $90,000.00 per annum which shall
be paid to CITBC in accordance with Section 7, Paragraph 6 of this Financing
Agreement hereof to offset the expenses and costs of CITBC in connection with
record keeping, periodic examinations, analyzing and evaluating the Collateral.
COLLECTIVE ACCOUNT shall have the meaning assigned to it in Section 3, Paragraph
5 hereof.
COMPANIES and COMPANY shall have the meaning assigned to them in the preamble of
this Financing Agreement.
CONCENTRATION ACCOUNT shall have the meaning assigned to it in Section 3,
Paragraph 4 hereof.
CONFIDENTIAL INFORMATION shall have the meaning assigned to it in Section 12,
Paragraph 6 of this Financing Agreement.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for the
Parent 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.
CONTRACT RATE shall mean the rate of interest computed as set forth in Section
7, Paragraph 1(A) of this Financing Agreement.
CURRENT REVOLVING LINE OF CREDIT shall have the meaning assigned to it in
Section 3, Paragraph 1 hereof.
3
CUSTOMARILY PERMITTED LIENS shall mean
(a) liens of local or state authorities for franchise or other like
taxes provided such liens are permitted by Section 6, Paragraph 5 hereof;
(b) statutory liens of landlords and liens of carriers, wharehousemen,
mechanics, materialmen and other like liens imposed by law, created in the
ordinary course of business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(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 arising as a result of
progress payments under government contracts; and
(d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), rights of way, encroachments, minor defects
or irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate which do not
materially detract from the value or materially adversely affect the intended
use of the Real Estate or which are listed in Schedule B of the title insurance
policies delivered to CITBC in accordance with Section 11 hereof.
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
lesser of: i) four percent (4%) and ii) The Chase Manhattan Bank Rate, or b) the
Maximum Legal Rate, which CITBC shall be entitled to charge the Companies on all
Obligations due CITBC by each of the Companies to the extent provided in Section
9, Paragraph 2 of this Financing Agreement.
DEPOSITORY ACCOUNT shall have the meaning assigned to it in Section 3, Paragraph
4 hereof.
DOCUMENTATION FEE shall mean i) a sum not to exceed $7,500 intended to
compensate CITBC for the use of outside counsel and CITBC'S in-house Legal
Department and facilities in documenting, in whole or in part, this Financing
Agreement solely on behalf of CITBC, exclusive of Out-of-Pocket Expenses, and
ii) CITBC'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 but excluding any fees arising
in connection with any mortgage, deed of trust or other documents relating to
the Real Estate.
4
DOCUMENTS OF TITLE shall mean all present an future warehouse receipts, bills of
lading, shipping documents, instruments and similar documents, all whether
negotiable or not, and all Inventory relating thereto and all cash and non-cash
proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Companies terminate this
Financing Agreement or the Revolving Line of Credit, if such date is prior to
(but not on) an Anniversary Date.
EARLY TERMINATION FEE shall i) mean the fee CITBC is entitled to charge the
Companies in the event the Companies or any one of them terminate the Revolving
Line of Credit or this Financing Agreement on a date prior to (but not on) the
initial or any subsequent Anniversary Date; and ii) be determined by calculating
the sum of a) the average daily balance of the Revolving Loans for the period
from August 31, 1992 to the Early Termination Date plus b) the average daily
undrawn face amount of the Letters of Credit outstanding for the period from
August 31, 1992 to the Early Termination Date, and multiplying that sum by x)
three percent (3%) per annum for the number of days form the Early Termination
Date to August 31, 1999 if the Early Termination Date is on or prior to August
31, 1997, or y) two percent (2%) per annum for the number of days from the Early
Termination Date to the Next Anniversary Date if the Early Termination Date is
subsequent to August 31, 1997 and on or prior to August 31, 1998; or z) one
percent (1%) per annum for the number of days from the Early Termination Date to
the Next Anniversary Date if the Early Termination Date is subsequent to August
31, 1998 but on a date which is prior to the Next Anniversary Date.
EBITDA shall mean all earnings of the Parent and its Subsidiaries, on a
consolidated basis, before all Interest Expense, income tax obligations (paid or
accrued), miscellaneous income, depreciation expense and amortization expense,
determined in accordance with GAAP consistently applied.
ELIGIBLE INVENTORY shall mean the gross amount of each Company's Inventory that
conforms to the warranties herein less any i) (omitted intentionally), ii)
supplies, iii) Inventory not present in the United States of America, iv)
Inventory returned or rejected by any Company's customers other than Inventory
that is undamaged and resalable in the normal course of business, v) Inventory
to be returned to a Company's suppliers, vi) Inventory in transit to third
parties, and vii) reserves required by CITBC in its reasonable judgment and
without duplication but only for the following: (a) special order Inventory; (b)
market value declines; (c) xxxx an hold (deferred shipment or consignment
sales); (d) markdowns; (e) shrinkage; (f) Inventory which is not located at a
Company's retail store location or warehouse, but any Inventory within the
United States of America and in transit to a Company's retail store location or
warehouse shall not be reserved for; (g) pack-a-ways; (h) demonstration items;
(i) damaged or defective Inventory; (j) slow moving and obsolete Inventory; (k)
out-of-season merchandise; (l) Inventory at outlet locations; (m) Inventory held
for lease; (n) items of Inventory not sold by any Company as of the date of
execution of this Financing Agreement and not otherwise determined by CITBC to
be "Eligible Inventory"; and (o) a reserve in the amount of (i) $4,166,667.00
when the Inventory advance rate is sixty percent (60%) an (ii) $3,846,154.00
when the Inventory advance rate is sixty-five
5
percent (65%), on a continuing basis in lieu of landlord waivers in favor of
CITBC for leased retail stores. The amount of such reserves shall be determined
solely by CITBC in its reasonable business judgment using standards consistently
applied. Such standards shall take into consideration amounts representing,
historically, a Company's reserves, discounts, returns, claims, credits and
allowances.
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.
EXCLUDED ASSETS shall mean the following assets, whether now or hereafter
acquired: all fixtures that do not relate to any of the Real Estate, all trade
fixtures whether relating to the Real Estate or not, all resale estate (fee
owned or leased) that does not constitute Real Estate, all equipment, all leases
relating to any of the foregoing, all life insurance policies, all cash or non-
cash proceeds of any such real estate, equipment, fixture, trade fixtures, lease
or policy ,including, without limitation, proceeds in the form of accounts,
chattel paper, documents, general intangibles, instruments, insurance proceeds,
or any of the other types of Collateral referred to in this Financing Agreement
which constitutes proceeds of any such real estate, equipment, fixture, trade
fixture, lease or policy provided, however, that if any such proceeds are
converted to, or are used, in whole or in part, to acquire Inventory, then such
Inventory shall not be an Excluded Asset.
FIFO shall have the meaning assigned to it in Section 3, Paragraph 1 hereof.
FINANCING AGREEMENT shall have the meaning assigned to it in the introductory
paragraph hereof.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply. Except as otherwise provided in this
Financing Agreement, all computations and determinations as to accounting or
financial matters and all quarterly and annual 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.
GENERAL INTANGIBLES shall have the meaning set forth in the Uniform Commercial
Code as in effect in the State of Texas 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.
6
GUARANTEES shall have the meaning assigned to it in Section 3, Paragraph 5
hereof.
GUARANTORS shall mean i) the Parent, and ii) the Companies.
INCREMENT shall have the meaning assigned to it in Section 3, Paragraph 1.
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, and (b) lease obligations which, in accordance
with GAAP, have been, or which should be capitalized.
INTEREST EXPENSE shall mean total interest obligations (paid or accrued) of the
Companies, determined in accordance with GAAP on a basis consistent with the
latest audited statements of each of the Companies.
INVENTORY shall mean all of each Company's present an hereafter acquired
merchandise an inventory and all additions, substitutions and replacements
thereof, wherever located, together with all packaging or shipping materials and
all proceeds thereof of whatever sort.
INVENTORY TURNOVER RATIO shall mean, as of any date of determination, the ratio
determined by dividing a) the aggregate cost of sales (as reflected in the
Parent's Annual Reports and Quarterly Reports filed with the Securities and
Exchange Commission on Forms 10K and 10Q, respectively) for the immediately
preceding four (4) fiscal quarters, by b) the average of the inventory (as
reflected in the Parent's Annual Reports and Quarterly Reports filed with the
Securities and Exchange Commission on Forms 10K and 10Q, respectively) for such
four (4) quarters.
ISSUING BANK shall mean any bank issuing Letters of Credit for any of the
Companies.
LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
CITBC by the Issuing Banks for or on behalf of any of the Companies.
LETTER OF CREDIT GUARANTY shall mean any guaranty delivered by CITBC to the
Issuing Bank of any 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 CITBC may charge under Section
7, Paragraph 2 of this Financing Agreement for: i) issuing the Letter of Credit
Guaranty or ii) otherwise aiding the Companies or any one of them in obtaining
Letters of Credit pursuant to Section 4 hereof.
LIBOR shall mean, at any time of determination, and subject to availability, the
London Interbank Offered Rate paid in London on one month, two month or three
month dollar deposits quoted by The Chase Manhattan Bank or if there is no
quotation as to Libor, then in any publication used in the New York City
financial community.
7
LIBOR LOAN shall mean the loans for which the Companies have elected to use
Libor for interest rate computations.
LIBOR PERIOD shall mean the Libor for one month , two month, or three month
dollar deposits, as selected by Companies.
LIBOR PROCESSING FEE shall mean the sum of $500.00 which CITBC shall be entitled
to charge the Companies in accordance with, but subject to, the provisions of
Section 7 of this Financing Agreement upon the election of a Libor Loan.
LINE OF CREDIT FEE shall: i) mean the fee due CITBC at the end of each month for
the Revolving Line of Credit and ii) be determined by multiplying x) the
Revolving Line of Credit less the sum of a) the average daily Revolving Loans
outstanding during such month plus b) the average daily undrawn face amount of
all outstanding Letters of Credit for said month, by y) the percentage equal to
three-eighths of one-percent (.375%) per annum, for the number of days in said
month during which this Financing Agreement was in effect.
LOAN DOCUMENTS shall mean this Financing Agreement, the Original Financing
Agreement and the ancillary documents and agreements executed in conjunction
herewith or therewith on or about the date of execution hereof or thereof,
including without limitation the Guaranties, the Trademark Assignment and
Security Agreement, the Pledge Agreements, the Original Bank Account Letter
Agreement, mortgages and deeds of trust and the documents executed by any of the
Companies or the Parent and set forth on the closing checklists relating to this
Financing Agreement and the Original 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).
MAXIMUM LEGAL RATE shall mean the maximum lawful interest rate which may be
contracted for, charged, taken, received or reserved under this Financing
Agreement by CITBC in accordance with applicable state or federal law, taking
into account all items contracted for, charged or received in connection with
the Obligations evidenced hereby which are treated as interest under the
applicable state or federal law, as such rate may change from time to time. For
purposes of determining the Maximum Legal Rate under the applicable law of the
State of Texas, to the extent that any of the optional interest rate ceilings
provided in Chapter 303 of the Texas Finance Code (Vernon's Texas Code
Annotated), as amended from time to time (as amended, the "Texas Finance Code"),
may be available for application to any loan(s), advances(s) or extension(s) of
credit made hereunder or otherwise for the purpose of determining the maximum
allowable interest hereunder pursuant to the Texas Finance Code, the applicable
"weekly ceiling" (as such term is defined in Chapter 303 of the Texas Finance
Code) from time to time in effect shall be used to the extent that it is so
available.
MINIMUM AVAILABILITY for any month shall mean Availability in excess of the
quotient of a) the sum of i) fifty percent (50%) of the month end availability
as set forth in the Companies' cash
8
flow projections for the Companies' fiscal year in which such month occurs
("PROJECTIONS") for such month plus ii) fifty percent (50%) of such month end
availability for the next succeeding month thereafter, divided by (b) two (2).
All Projections shall be satisfactory to CITBC and shall be delivered to CITBC
within a reasonable time following its request as provided in Section 6,
Paragraph 7 of this Financing Agreement but in no event later than seventy-five
(75) days after the commencement of each fiscal year. In the event Projections
are not timely received by CITBC or are not satisfactory to CITBC, the Companies
shall be deemed to have failed to maintain Minimum Availability.
NET WORTH shall mean total assets of the Parent 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
Parent and its Subsidiaries.
NEXT ANNIVERSARY DATE shall mean, with respect to any particular date occurring
prior to August 31, 1999, August 31, 1999, and with respect to any date
occurring after August 31, 1999, the Anniversary Date next succeeding such date.
OBLIGATIONS shall mean all obligations of each of the Companies 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 the Loan Documents, including, without
limitation, all loans and advances made or to be made by CITBC to the Companies,
or any one of them, or to others for any Company's account under the Financing
Agreement or any Loan Document; any and all indebtedness and obligations which
may at any time be owing by any of the Companies jointly or severally to CITBC
under the Financing Agreement or any other Loan Document whether now in
existence or incurred by the Companies or any one of them from time to time
hereafter; whether secured by pledge, lien upon or security interest in any of
the Companies, assets or property or the assets or property of any other person,
firm, entity or corporation; whether such indebtedness is absolute or
contingent, joint or several, matured or unmatured, direct or indirect and
whether the Companies are jointly or severally liable to CITBC for such
indebtedness as principal, surety, endorser, guarantor or otherwise. Obligations
shall also include all indebtedness owing to CITBC by the guarantor or
otherwise. obligations shall also include all indebtedness owing to CITBC by the
Companies, jointly or severally, under this Financing Agreement or under any
other agreement or arrangement hereafter entered into between any of the
Companies and CITBC, including, but not limited to, obligations to CITBC in
respect of Letters of Credit issued with the assistance of the Letter of Credit
Guaranty, indebtedness or obligations incurred by, or imposed on, CITBC as a
result of environmental claims (other than as a result of CITBC's actions in all
circumstances, or, to the extent of CITBC's gross negligence or willful
misconduct or, if CITBC is deemed to be a "person in control" under any state or
federal statute or regulation, CITBC's omissions) arising out of any of the
Companies' operations, premises or waste disposal practices or sites, all to the
extent that such claims and expenses relate to the Companies' actions or
omissions which actions or omissions were prior to, or concurrent with, the
termination of a Company's title or leasehold interest in such real property or
the cessation of business; the Companies' liability to CITBC under any
instrument of guaranty or indemnity, or arising under any guaranty, endorsement
or undertaking which CITBC may make or issue to others for the Companies'
accounts, all at a Company's request hereafter, but in no event shall
Obligations include any obligations due any affiliate of CITBC.
9
OPERATING LEASES shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.
ORIGINAL BANK ACCOUNT LETTER AGREEMENT shall mean the letter agreement between
the parties hereto and in the form of Exhibit B attached hereto.
ORIGINAL FINANCING AGREEMENT shall have the meaning assigned to it in the
Recitals to this Financing Agreement.
XXXXXX CALIFORNIA shall have the meaning assigned to it in the preamble of this
Financing Agreement.
XXXXXX FLORIDA shall have the meaning assigned to it in the preamble of this
Financing Agreement.
XXXXXX HAWAII shall have the meaning assigned to it in the preamble of this
Financing Agreement.
XXXXXX TEXAS shall have the meaning assigned to it in the preamble of this
Financing Agreement.
XXXXXX SERVICES shall have the meaning assigned to it in the preamble of this
Financing Agreement.
OUT-OF-POCKET EXPENSES shall mean all of CITBC's reasonable past, present and
future expenses incurred relative to the Commitment letter dated July 22, 1992,
issued by CITBC to, and accepted by, the Parent, or the closing of the Original
Financing Agreement, this Financing Agreement and any amendment, modification or
waiver thereof, whether incurred heretofore or hereafter, which expenses shall
include, without being limited to, attorneys' fees and expenses, the cost of
record searches unrelated to any of the Real Estate, all costs and expenses
incurred by CITBC in opening bank accounts, depositing checks, receiving and
transferring funds, and any charges imposed on CITBC due to "insufficient funds"
of deposited checks and CITBC's standard fee relating thereto, any amounts paid
by CITBC to an Issuing Bank or, incurred by or charged to CITBC by the Issuing
Bank under the Letter of Credit Guaranty or the Companies' reimbursement
agreement, application for letter of credit or other like document which pertain
either directly or indirectly to such Letter of Credit, and CITBC's standard
fees relating to the Letters of Credit and any drafts thereunder, local counsel
fees, if any, fees and taxes relative to the filing of financing statements
(other than fixture financing statements), and all expenses, costs and fees set
forth in Section 9, Paragraph 3 of this Financing Agreement with the exception
of costs in connection with preparing, recording and administering
mortgages/deeds of trust against the Real Estate, local counsel fees incurred
for the preparation of such mortgages/deeds of trust, mortgage recording
conveyance or similar fees or taxes or other costs associated with the
perfection of liens on the Real Estate in favor of CITBC, title insurance
premiums and real estate survey costs, environmental audits, if any, and costs
incurred for inventory reporting and
10
valuation pursuant to Xxxxxxx 0, Xxxxxxxxx (x) of the Original Financing
Agreement. Out-of-Pocket Expenses include any and all fees, costs and expenses
related to any foreclosure of, or deed in lieu of foreclosure, or forced sale
of, any Real Estate.
OVERADVANCES shall have the meaning assigned to it in Section 3, Paragraph 1
hereof.
PARENT shall mean Xxxxxx'x Sporting Goods, Inc., a Delaware corporation.
PARTICIPANTS shall have the meaning assigned to it in Section 12, Paragraph 5
hereof.
PERMITTED ENCUMBRANCES shall mean: i) liens expressly permitted, or consented
to, by CITBC; ii) Customarily Permitted Liens; iii) liens granted CITBC by any
of the Companies; iv) liens of judgement creditors provided such liens do not
exceed, in the aggregate, at any time, $250,000.00 (other than liens bonded or
insured to the reasonable satisfaction of CITBC); v) liens for taxes not yet due
and payable or which are being diligently contested in good faith by the
Companies by appropriate proceedings and which liens, if filed, other than with
respect to taxes on Real Estate, are for less than $250,000.00; 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; and ix) liens, if any, given to any issuing bank in connection
with any standby letter of credit obtained without the assistance of CITBC
provided such liens are secured exclusively by cash, cash equivalents or the
Permitted Investments.
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 the Letters of Credit, this Financing Agreement and
the Loan Documents; 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 CITBC or otherwise disclosed to CITBC in writing; v)
Indebtedness arising in connection with or secured by, the Permitted
Encumbrances; vi) indebtedness arising in connection with standby letters of
credit issued without the assistance of CITBC provided such letters of credit
are secured solely by cash, cash equivalents or the Permitted Investments; and
vii) indebtedness in the form of a ten-year promissory note secured by the real
estate located at FM 1960 at Xxxxx Road in Houston, Texas, in the approximate
principal sum of $4,000,000.00
PERMITTED INVESTMENTS shall mean (i) commercial paper maturing not more than two
hundred seventy (270) days after the date of issue, and municipal bonds, and in
each case issued by a Person rated P-1 by Xxxxx'x Investors Service, Inc. or A-1
or MIG-1 by Standard & Poor's Corporation, (ii) certificates of deposit and
bankers' acceptances maturing not more than ninety (90) days 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 ninety (90) days from the date of acquisition which
are entered into with any major money center banks included in the commercial
banking institution described in clause (ii) above and which are secured by
readily marketable direct obligations of the Government of the United
11
States of America or any agency thereof, (iv) readily marketable obligations of
the government of the United States of America or any agency thereof; and (v)
mutual funds regularly traded in the United States of America whose investments
are limited to those described in clauses (i) through (iv) 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.
PROJECTIONS shall have the meaning assigned to it in the definition of "Minimum
Availability" set forth herein.
PURCHASE MONEY OBLIGATIONS shall mean the Indebtedness i) incurred to acquire an
Excluded Asset and ii) secured solely by a lien on the Excluded Assets provided
that the amount so secured does not exceed ninety percent (90%) of the purchase
price of the Excluded Asset.
REAL ESTATE shall mean each of the Companies' fee interests in the real
property, which will be, encumbered, mortgaged, pledged or assigned to CITBC or
its designee, located in Wynnwood Distribution Center, Houston, Texas; and West
Los Angeles, California.
RETAINED CASH shall mean an amount of cash sufficient to provide the Companies
with xxxxx cash, consistent with the respective business practices of the
Companies.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to
or for the account of each of the Companies by CITBC pursuant to Section 3 of
this Financing Agreement.
SEASONAL INVENTORY ADVANCE RATE PERIOD shall mean a period (a) commencing on
June 15 of each year during the term of this Financing Agreement and ending on
the earlier of (i) August 15 of such year and (ii) the occurrence or continued
existence of a Default or an Event of Default which has not been waived or (b)
commencing on September 15 of each year during the term of this Financing
Agreement and ending on the earlier of (i) of December 15 of such year and (ii0
the occurrence or continued existence of Default or an Event of Default which
has not been waived.
SEASONAL OVERLINE PERIOD shall mean a period commencing on September 15 of each
year during the term of this Financing Agreement and ending on the earlier of
(i) December 15 of such year and (ii) the occurrence or continued existence of a
Default or an Event of Default which has not been waived.
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 manager of such corporation,
12
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 Agreements shall refer to a
Subsidiary or Subsidiaries of the Companies or the Parent.
TAX TREATMENT AGREEMENT shall mean the agreement amongst the Parent and the
Companies providing for an equitable distribution amongst the parties thereto of
the income tax obligations and tax refunds, all based on such party's income
and/or loss.
THE 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).
TRADE ACCOUNTS PAYABLE shall mean the amounts due any supplier for Inventory
sold to a Company.
TRADE ACCOUNTS RECEIVABLE shall mean the amounts due any 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 by a Company.
As used in this Financing Agreement, unless the context clearly requires
otherwise, (i) the words "herein", "hereof", "hereunder", "hereinafter" and
"hereto" and words of similar import shall be deemed to refer to this Financing
Agreement as a whole and not to any particular Section, subsection, paragraph,
subparagraph or Exhibit, and (ii) the words "include" and "including" shall be
deemed to be followed by the words "but not limited to".
SECTION 2. CONDITIONS PRECEDENT
The obligation of CITBC to make loans hereunder is subject to the
satisfaction of, or waiver of, immediately prior to or concurrently with the
making of such loans, the following conditions precedent:
a) LIEN SEARCHES - CITBC shall have received tax, judgement and Uniform
Commercial Code searches satisfactory to CITBC for all locations presently
occupied or used by the Companies.
b) CAUSALTY INSURANCE - The Companies shall have delivered to CITBC
evidence satisfactory to CITBC that casualty insurance policies listing CITBC as
loss payee or mortgagee, as the case may be, 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 CITBC, subject
to the Permitted Encumbrances, a first and exclusive perfected security interest
in the Collateral with respect to
13
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 CITBC a perfected lien on
the Collateral. CITBC shall have received acknowledgment copies of all such
filings (or, in lieu thereof, CITBC shall have received other evidence
satisfactory to CITBC that all such filings have been made); and CITBC 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 - CITBC shall have completed to the
satisfaction of CITBC an examination and verification of the Accounts,
Inventory, books and records of the Companies.
E) GUARANTIES - The Guarantors shall have executed and delivered to
CITBC guaranties, in form and substance acceptable to CITBC, guaranteeing all
present and future Obligations of the Companies to CITBC.
F) OPINIONS - Counsel and special counsel for the Companies, as
applicable, shall have delivered to CITBC opinions satisfactory to CITBC
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 CITBC: a) the
Guaranty of the Guarantors is valid, binding and enforceable according to its
terms; b) the Loan Documents of the COmpanies are x) valid, binding and
enforceable according to their terms, y) are duly authorized and z) do not
violate any terms, provisions, representations or covenants in the charter or
by-laws of the Companies, as applicable, 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 to which the Companies are a signatory
or by which the COmpanies or their assets are bound.
G) PLEDGE AGREEMENTS - The Parent and the Companies shall have a)
executed and delivered to CITBC pledge and security agreements and undated stock
powers pledging to CITBC as additional collateral for the Obligations all of the
issued and outstanding stock of the COmpanies and their subsidiaries, and b)
delivered to CITBC the stock certificates of the Companies and their
subsidiaries.
H) ADDITIONAL DOCUMENTS - The Companies shall have executed and
delivered to CITBC all loan documents necessary to consummate the lending
arrangement contemplated between the Companies and CITBC.
I) (omitted intentionally)
J) BOARD RESOLUTION - CITBC shall have received a copy of the
resolutions of the Board of Directors of each of the Companies, the Parent and
without duplication, the Guarantors, authorizing the execution, delivery and
performance of (i) this Financing Agreement, and (ii) any related agreements, in
each case certified by the Secretary or Assistant Secretary of each of the
Companies or the Parent, as applicable, as of the date hereof, together with a
certificate of the
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Secretary or Assistant Secretary of each of the Companies as to the incumbency
and signature of the officers of each of the Companies 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.
K) CORPORATE ORGANIZATION - CITBC shall have received (i) a copy of the
Certificate of Incorporation of the Parent and each of the Companies 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 Parent and each of the Companies and
certified by the Secretary or Assistant Secretary of such Company.
L) OFFICER'S CERTIFICATE - CITBC shall have received an executed
Officer's Certificate of each of the Companies, satisfactory in form and
substance to CITBC, including certification that: (i) the representations and
warranties contained herein are true and correct in all material respects on and
as of the date hereof; (ii) each of the Companies is in compliance with all of
the terms and provisions set forth herein; and (iii) no Event of Default or
Default has occurred.
M) ABSENCE OF DEFAULT - Since February 1, 1997, no material adverse
change in the financial condition, business, prospects, profits, operations or
assets of the Companies (exclusive of store closings) and the Parent, taken as
whole, shall have occurred. No Default or Event of Default shall exist as of the
date of this Financing Agreement.
N) LEGAL RESTRAINTS/LITIGATION - At the date of execution of this
Financing Agreement, there shall be no x) litigation, investigation or
proceeding (judicial or administrative) pending or threatened against any of the
Companies or, the Parent, or their assets, by any agency, division or department
of any county, city, state, province or federal government arising out of this
Financing Agreement, y) injunction, writ or restraining order restraining or
prohibiting the consummation of the financing arrangements contemplated under
this Financing Agreement or s) to the best knowledge of the Companies, suit,
action, investigation or proceeding (judicial or administrative) pending or
threatened against the Companies, or the Parent, or their assets, which, if
adversely determined could have a material adverse effect on the business,
operation, assets, financial condition or Collateral of the Parent and the
Companies, taken as a whole.
O) DISBURSEMENT AUTHORIZATION - The Companies shall have delivered to
CITBC all information necessary for CITBC to issue wire transfer instructions on
behalf of each of the Companies for the initial and subsequent loans and/or
advances to be made under this Financing Agreement including, but not limited
to, disbursement authorizations in form acceptable to CITBC.
P) ORIGINAL BANK ACCOUNT LETTER AGREEMENT - As of the date of execution
of this Financing Agreement each of the Companies shall have transferred to
CITBC legal title to the depository and concentration accounts (other than
operating accounts) and will have required the credit card companies to remit
balances, when due, to a concentration account owned by CITBC, all in accordance
with the Original Bank Account Letter Agreement.
15
Q) LANDLORDS' AGREEMENTS-CITBC shall have received from each landlord of
any warehouse premises occupied by any of the Companies, a landlord waiver
waiving any such landlord's lien on any of the Companies' Inventory pursuant to
an agreement as shall be reasonably satisfactory in form and substance to CITBC
and its counsel.
R) INVENTORY REPORTING-CITBC shall have received a satisfactory inventory
valuation and/or a satisfactory review of Inventory controls and reporting
procedures conducted by an independent third party acceptable to CITBC.
S) WAREHOUSE DOCUMENTS-CITBC shall have received from each public warehouse
in which Inventory, other than Inventory in such warehouses while such Inventory
is clearing customs, of any Company is stored, an acknowledgement, in form and
substance reasonably satisfactory to CITBC, concerning CITBC's security interest
in such Inventory.
T) TAX TREATMENT AGREEMENT-CITBC shall have received from the Parent a Tax
Treatment Agreement which shall be reasonably satisfactory, in form and
substance, to CITBC.
Upon the execution of this Financing Agreement, all of the above Conditions
Precedent shall have been deemed satisfied for purposes of this Section 2 of
this Financing Agreement, except as the Companies and CITBC shall otherwise
agree herein in this paragraph or in a separate writing.
SECTION 3. REVOLVING LOANS
1. CITBC agrees, subject to the terms and conditions of this Financing
Agreement from time to time, and within x) the Availability and y) the Revolving
Line of Credit, but subject to CITBC's right to make Overadvances, to make loans
and advances to the respective Companies on a revolving basis, and subject to
the limitations set forth herein, the Companies may borrow, repay and re-borrow
Revolving Loans. Such loans and advances shall be in amounts up to the lesser of
(such lesser amount, the "Borrowing Base"): (a) (i) during any Seasonal
Inventory Advance Rate Period, sixty-five percent (65%), and (ii) at all other
times, sixty percent (60%) of the aggregate value of each of the Companies
respective Eligible Inventory determined at cost, by the retail inventory
method, using a valuation on a first in, first out basis in accordance with GAAP
(herein "FIFO") excluding freight and capitalized buying, handling and
distribution costs, as reflected on the Companies' books and records or (b)
thirty-five percent (35%) of the aggregate value of each Company's respective
Eligible Inventory determined at retail by the retail inventory method, using a
FIFO valuation, excluding freight and capitalized buying, handling and
distribution costs, as reflected on the Companies' books and records. All
requests for loans and advances must be received by an officer of CITBC no later
than 2:00 p.m. New York time on the date on which such loans and advances are
required. Should CITBC 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 CITBC's sole discretion, subject to any
additional terms CITBC deems necessary. As used in this Financing Agreement,
"Revolving Line of Credit" shall mean the commitment of CITBC to make loans and
16
advances and issue Letter of Credit Guaranties, all pursuant to and in
accordance with Sections 3 and 4 of this Financing Agreement, to each of the
Companies in the aggregate amount equal to the sum of the Current Revolving Line
of Credit plus, during any Seasonal Overline Period, $15,000,000.00; but subject
to CITBC's discretion to make Overadvances. As used in this Financing Agreement,
"Current Revolving Line of Credit" shall mean, as of any date of determination,
the sum of i) $65,000,000.00 plus ii) the aggregate amount of all Increments
elected by the Companies. The Companies may at their election increase the
initial $65,000,000.00 amount of the Current Revolving Line of Credit by one (1)
increment of $5,000,000.00 (the "Increment"); provided, however, that in any
instance that the Companies so elect the Increment, the effectiveness of the
Increment is conditioned upon the following: A) there is no Default then in
existence and no Event of Default has occurred which has not been waived; B) the
Companies shall have given CITBC fifteen (15) days prior written notice of their
request to increase the initial amount of the Current Revolving Line of Credit
by the amount of the Increment; and C) in no event shall the Current Revolving
Line of Credit exceed the amount of $70,000,000.00 in the aggregate. It is
understood and agreed by the Companies that if the aggregate amount of such
loans and advances shall at any time exceed the lease of x) the Availability, y)
the Revolving Line of Credit or z) the Borrowing Base, then the existence at any
time of such excess shall be deemed an Event of Default and, without limiting
any of CITBC's other rights and remedies under this Financing Agreement or
otherwise, the amount of such excess shall be due and payable immediately upon
demand.
2. In furtherance of the continuing collateral assignment and security
interest in the Companies' Accounts and Inventory, the Companies collectively
shall deliver to CITBC not later than: 1) forty-five (45) days after the end of
each month other than February and March (as to which ninety (90) and sixty (60)
days shall apply, respectively), an aging of the Companies' Trade Accounts
Receivable in such form and manner as CITBC may reasonably require but
consistent with the current practices of the Companies; 2) fourteen (14) days
after the end of each week, a Weekly Inventory Confirmation Statement,
consolidated for the Companies, substantially in the form of Exhibit A hereto,
listing (x) the aggregate amount of Inventory of the Companies supported by an
inventory report produced from the merchandising system and (y) as to Xxxxxx
Hawaii, the most recent prior Inventory month end balances; and 3) froth-five
(45) days after the end of each quarter, other than the fourth quarter and then
within ninety (90) days after the end of such fourth quarter, a Quarterly
Inventory Confirmation Statement for each of the Companies substantially in the
form of Exhibit A hereto, listing the amount of Inventory of each Company and
the location of such Inventory, supported by an inventory report produced from
the financial reporting system consistent with the current practices of the
Companies. With respect to all such reports, the Companies will provide to CITBC
such additional information and material as CITBC 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 CITBC may
reasonably require to evaluate each 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
CITBC with the following information will no way affect, diminish, modify, or
limit the security interest granted herein. Such reports are to be executed by a
responsible officer of each Company.
17
3. Each of the Companies hereby represents and warrants that, except for
minor irregularities or as permitted by Section 6, Paragraph 18 of this
Financing Agreement, sales of Inventory are based upon actual and bona fide
sales and deliveries of Inventory in the ordinary course of a Company's
business. Each of the Companies hereby further represent and warrant that the
Inventory being sold and the proceeds thereof are the exclusive property of the
respective Company and are not and shall not be subject to any lien, charge,
consignment, arrangement, encumbrance, security interest, or financing statement
whatsoever other than the Permitted Encumbrances. The invoices representing
Trade Accounts Receivable or credit card receipts evidencing credit card sales
are in the names or tradenames of the Companies and except for disputes,
offsets, defenses, counterclaims, contras, returns or credits, all arising in
the normal course of each Company's business or except as may be promptly
disclosed to CITBC, the purchasers of such Inventory owe and are obligated to
pay the amount stated in the invoices or credit card receipts. Each of the
Companies confirm to CITBC that, except for the Permitted Encumbrances, any and
all taxes and fees relating to its business are the Companies' sole
responsibility and that same will be paid when due (except as otherwise provided
in this Financing Agreement), and that (except as otherwise permitted by this
Financing Agreement) none of said taxes or fees represent a lien on or claim
against the proceeds of any sale of Inventory. The Companies agree to issue
credit memoranda promptly. Each of the Companies 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 respective Company or the ability of such
Company to enforce collection of Accounts due from customers residing in that
state. Each of the Companies agrees to maintain accurate books and records
regarding Accounts and the sale of Inventory. All of the books and records of
the Companies will be available to CITBC upon reasonable request at normal
business hours at the respective premises of the Companies, including any
records handled or maintained for a Company by any other company or entity.
4. Until CITBC has advised the Companies to the contrary after the
occurrence of an Event of Default, the Companies may and will, consistent with
the Companies' existing business practices, enforce, collect and receive all
amounts owing on the Accounts for CITBC's benefit as secured party and on
CITBC's behalf, as secured party but at the Companies' expense; such privilege
shall terminate automatically upon the institution by or against any of the
Companies of any proceeding under any bankruptcy or insolvency law or, at the
election of CITBC, upon the occurrence of any Event of Default and until such
Event of Default is waived by CITBC. Except for the Retained Cash and except for
normal cash shortages, all checks or cash, from the sale of Inventory will be
deposited promptly to the applicable Company's depository account ("Depository
Account"), which is owned by CITBC. Pursuant to separate arrangements between
CITBC and each institution at which a Depository Account is located, each such
institution has agreed, or will agree, to remit in accordance with the Original
Bank Account Letter Agreement to a concentration account owned by CITBC (the
"Concentration Account"). The Companies shall require that all amounts due them
under credit card sales be remitted by the credit card companies to the
Concentration Account. The institution holding such Concentration Account will
be instructed that when it is satisfied that such funds on deposit are "good
funds", such institution will remit such "good funds" to CITBC's bank account in
New York. All amounts received by CITBC will be credited to the Obligations upon
CITBC's receipt of "good funds" at
18
its bank account in 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
CITBC will constitute final payment unless and until such instruments have
actually been collected. If the Collective Account reflects a zero Revolving
Loan balance and there is then no Event of Default, then CITBC shall promptly
remit to the operating account of Xxxxxx'x Services or to such other account,
all in the United States of America, of Xxxxxx'x Services (other than any
payroll account) as Xxxxxx'x Services may designate, any credit balances in the
Collective Account.
5. In order to utilize the collective borrowing powers of the Companies in
the most efficient and economical manner, and in order to facilitate the
handling of the accounts of the Companies on CITBC's books, the Companies have
requested, and CITBC has agreed to handle the accounts of all Companies on
CITBC's books on a combined basis, in accordance with the following provisions:
i) in lieu of maintaining separate accounts on CITBC's books in the name of each
of the Companies, CITBC shall maintain a single account under the name: Xxxxxx'x
Services (or, for purposes of CITBC's system and records, "Xxxxxx'x Sporting
Goods, Inc.") (herein the "Collective Account"); ii) loans and advances made by
CITBC to any of the Companies will be charged to the Collective Account, along
with all charges and expenses under this Financing Agreement; iii) the
Collective Account will be credited with all amounts received by CITBC from any
of the Companies or from others for the account of any of the Companies
including all amounts received by CITBC in accordance with the terms of Section
3, Paragraph 4 hereof and as provided in this Financing Agreement; iv) each
month CITBC will render to the Companies one extract of the combined Collective
Account, which shall be deemed to be an account stated as to each of the
Companies and which will be deemed correct and accepted by all of the Companies
and CITBC unless an objecting party has forwarded to the other parties a written
statement of exceptions within ninety (90) days after such extract, or any
corrected extract, has been rendered by CITBC; v) it is expressly understood and
agreed by each of the Companies that CITBC shall have no obligation to account
separately to any of the Companies; vi) requests for loans and advances may be
made by any of the Companies and CITBC is hereby authorized and directed to
accept, honor and rely on such instructions and requests, subject to the
limitation and provisions set forth in this Financing Agreement; vii) it is
expressly understood and agreed by each of the Companies that CITBC shall have
no responsibility to inquire into the correctness of the apportionment,
allocation, or disposition of (A) any loans and advances made to any of the
Companies or (B) any of CITBC's expenses and charges relating thereto; viii) all
loans and advances are made for the collective benefit of the Companies; ix) the
Companies jointly and severally unconditionally guarantee to CITBC the prompt
payment in full of (A) all loans and advances made and to be made by CITBC to
any of them under this Financing Agreement, as well as (B) all other
Obligations, of the Companies to CITBC and hereby expressly confirm in all
respects the guarantees executed by each of the Companies in CITBC's favor of
even date herewith (the "Guarantees"), as more fully set therein; x) all
Collateral collaterally assigned to CITBC by any of the Companies and any other
collateral security now or hereafter given to CITBC by any of the Companies (be
it Accounts or otherwise), shall secure all loans and advances made by CITBC to
any of the Companies, and shall be deemed to be pledged to CITBC as security for
any and all other Obligations, of the Companies to CITBC as set forth under this
Financing Agreement, the Guarantees, the other Loan Documents or any other
19
agreements between CITBC and any of the Companies; and xi) it is understood that
the handling of the account of the Companies in a combined fashion, as more
fully set forth herein, is done solely as an accommodation to the Companies and
at their request, and that CITBC shall incur no liability to the Companies as a
result of such combination. TO INDUCE CITBC TO DO SO, AND IN CONSIDERATION
THEREOF, EACH OF THE COMPANIES HEREBY AGREES TO INDEMNIFY CITBC AND HOLD CITBC
HARMLESS AGAINST ANY AND ALL LIABILITY, EXPENSE, LOSS OR CLAIM OF DAMAGE OR
INJURY, INCLUDING ANY LIABILITY, INJURY, EXPENSE, LOSS OR CLAIM OF DAMAGES
ARISING BY REASON OF CITBC'S ORDINARY NEGLIGENCE BUT EXCLUDING ANY LIABILITY,
INJURY, EXPENSE, LOSS OR CLAIM OF DAMAGES ARISING BY REASON OF CITBC'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, MADE AGAINST CITBC BY ANY OF THE COMPANIES OR
BY ANY THIRD PARTY WHOSOEVER, ARISING FROM OR INCURRED BY REASON OF (A) CITBC
HANDLING THE ACCOUNTS OF THE COMPANIES AS HEREIN PROVIDED, (B) CITBC RELYING ON
ANY INSTRUCTIONS OF ANY OF THE COMPANIES, OR (C) ANY OTHER ACTION TAKEN BY CITBC
IN ACCORDANCE WITH THIS SECTION 3, PARAGRAPH 5 OF THIS FINANCING AGREEMENT,
provided, however that nothing herein shall be interpreted to absolve CITBC of
any of its obligations under this Financing Agreement or any of the other Loan
Documents. The foregoing request was made because the Companies are engaged in
an integrated operation that requires financing on a basis permitting the
availability of credit from time to time to each of the Companies as required
for the continued successful operation of each of the Companies and the
integrated operation. Each of the Companies expects to derive benefit, directly
or indirectly, from such availability since the successful operation of each of
the Companies is dependent on the continued successful performance of the
functions of the integrated group.
6. The Companies also agree that CITBC may enter upon the Companies'
premises for the purpose of conducting, at the Companies' sole expense, one or
more complete physical inventories and/or reappraisals of the Companies'
Inventory x) once a year, and y) upon the occurrence of a Default or Event of
Default at any time and from time to time, at CITBC's sole discretion.
SECTION 4. LETTERS OF CREDIT
In order to assist the Companies in establishing or opening documentary
Letters of Credit with an Issuing Bank to cover i) the purchase and importation
of inventory or ii) the purchase of imported inventory from agents and brokers,
and the standby Letters of Credit with an Issuing Bank to cover such other
matters as the Companies may so decide, other than for the purchase of
Inventory, the Companies have requested CITBC 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 CITBC's credit to the Companies and
CITBC has agreed to do so. These arrangements shall be handled by CITBC subject
to the terms and conditions set forth below.
20
1. Within the Revolving Line of Credit, CITBC shall assist the Companies in
obtaining (a) standby Letters of Credit in an amount not to exceed $3,000,000.00
in the aggregate outstanding at any one time and to be used for any purpose
other than the purchase of inventory and (b) documentary Letters of Credit in an
amount not to exceed $12,000,000.00 in the aggregate outstanding at any one time
and to be used solely for i) the purchase and importation of inventory or ii)
the purchase of imported inventory from agents and brokers. CITBC'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 CITBC's sole
discretion. It is understood that the form and purpose of each Letter of Credit
must be consistent with the current business practices of the Companies.
Notwithstanding anything herein to the contrary, upon the occurrence of a
Default and/or an Event of Default as defined in this Financing Agreement,
CITBC's assistance with respect to any Letters of Credit shall be in CITBC's
sole discretion unless such Default or Event of Default is waived by CITBC in
writing, or such Default in cured to CITBC's satisfaction in the exercise of its
reasonable business judgment during any applicable grace period.
2. CITBC shall have the right, without notice to any of the Companies, to
charge the Collective Account with the amount of any and all indebtedness,
liability or obligation of any kind paid or incurred by CITBC under the Letters
of Credit Guaranty at the earlier of a) payment by CITBC under the Letters of
Credit Guaranty, or b) termination of this Financing Agreement but only in
accordance with Section 10 of this Financing Agreement. Any amount so charged to
the Collective Account shall be charged against any credit balances when in the
Collective Account, and if there are then insufficient credit balances then to
the extent of such insufficiency such amount shall be deemed a Revolving Loan
hereunder and shall incur interest at the rate provided for in Section 7,
Paragraph 1 of this Financing Agreement.
3. EACH OF THE COMPANIES UNCONDITIONALLY INDEMNIFIES CITBC AND HOLDS CITBC
HARMLESS FROM ANY AND ALL LOSS, CLAIM OR LIABILITY INCURRED BY CITBC ARISING
FROM ANY TRANSACTIONS OR OCCURRENCES RELATING TO LETTERS OF CREDIT ESTABLISHED
OR OPENED FOR ANY OF THE COMPANIES' ACCOUNT, THE COLLATERAL RELATING THERETO AND
ANY DRAFTS OR ACCEPTANCES THEREUNDER, AND ALL OBLIGATIONS THEREUNDER, INCLUDING
ANY SUCH LOSS OR CLAIM DUE TO ANY ACTION TAKEN BY ANY ISSUING BANK, AND
INCLUDING ANY SUCH LOSS, CLAIM OR LIABILITY ARISING OUT OF THE ORDINARY
NEGLIGENCE OF CITBC BUT EXCLUDING ANY SUCH LOSS, CLAIM OR LIABILITY ARISING OUT
OF THE ORDINARY NEGLIGENCE OF CITBC BUT EXCLUDING ANY LOSS, CLAIM OR LIABILITY
ARISING OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF CITBC. The
Companies' unconditional obligation to CITBC hereunder shall not be modified or
diminished for any reason or in any manner whatsoever, other than as a result of
CITBC's gross negligence or willful misconduct. The Companies agree that
21
any charges of the Issuing Bank incurred by CITBC for each of the Companies
accounts shall be conclusive on CITBC (until such time as the Issuing Bank has
advised CITBC that a credit has been issued as to such Letter of Credit) and
shall be charged to the Collective Account.
4. In connection with any Letter of Credit, CITBC, other than for its gross
negligence or willful misconduct, shall not 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; 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 Companies. Furthermore, without being limited by the
foregoing, CITBC shall not 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 other than as a result of the gross negligence or willful misconduct of
CITBC.
5. In connection with any Letter of Credit Guaranty: Each of the Companies
agrees that any action taken by CITBC, 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 Companies and CITBC, be binding on the Companies and shall not put CITBC in
any resulting liability to the Companies other than as a result of the gross
negligence or willful misconduct of CITBC. After the occurrence of an Event of
Default which is not waived, CITBC shall have the full right and authority to
clear and resolve any questions of non-compliance of documents; to give any
instructions as to acceptance or rejection of any documents or goods; to
execute any and all steamship or airways guaranties (and applications therefor),
indemnities or delivery orders; to grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances, or
documents; and to agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letters of Credit, drafts or acceptances; all in CITBC'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 CITBC, all
without any notice to or any consent from each of the Companies.
6. In connection with any Letter of Credit Guaranty, without CITBC's
express consent and, where applicable, endorsement in writing each of the
Companies agrees: a) not to i) execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders; ii) grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or iii) agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Letters of Credit, applications, drafts or acceptances; and b) after the
occurrence of an Event of Default which is not cured within any applicable grace
period, if any, or waived by CITBC, not to i) clear
22
and resolve any questions of non-compliance of documents, or ii) give any
instructions as to acceptances or rejection of any documents or goods.
7. In connection with any Letter of Credit Guaranty: Each of the Companies
agrees that any necessary import, export or other licenses or certificates for
the import or handling of the Collateral will have been promptly procured, and
all foreign and domestic governmental laws and regulations in regard to the
shipment and importation of the Collateral, or the financing thereof will have
been promptly and fully complied with, except to the extent that any such
non-procurement or non-compliance will not have a material adverse effect on
such Collateral; and any certificates in that regard that CITBC may at any time
reasonably request will be promptly furnished. In this connection, each of the
Companies warrant and represent 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 Companies assume all
risk, liability and responsibility for, and agree 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 Collateral is or may
be located, or wherein payments are to be made, or wherein drafts may be drawn,
negotiated, accepted, or paid, shall be solely the Companies' risk, liability
and responsibility.
8. Upon any payments made to the Issuing Bank under the Letter of Credit
Guaranty, CITBC shall acquire by subrogation, any rights, remedies, duties or
obligations granted or undertaken by any of the Companies 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 CITBC and apply in all respects to CITBC and shall be in addition to
any rights, remedies, duties or obligations contained herein; provided, however,
that if any such application or agreement is inconsistent with this Financing
Agreement, this Financing Agreement shall govern and control and such
application or agreement shall not give CITBC any greater rights than CITBC
would otherwise have under this Financing Agreement.
9. Notwithstanding anything in this Financing Agreement to the contrary,
the Companies, or any one of them, may obtain standby letters of credit without
the benefit of a Letter of Credit Guaranty provided: a) the obligations of the
Company to such letter of credit bank, if secured, are secured exclusively by
cash, cash equivalents or the Permitted Investments; b) such letters of credit
are used for purposes other than for the purchase of Inventory or for securing
Trade Accounts Payable; and c) such letters of credit together with the standby
Letters of Credit obtained with the assistance of CITBC do not exceed
$3,000,000.00 in the aggregate outstanding at any one time.
10. Nothing in this Section 4 of the Financing Agreement is intended to
relieve any Issuing Bank from any liability to any Person.
23
SECTION 5. COLLATERAL
1. Subject to the last sentence of this Paragraph 1, as security for
the prompt payment in full of all loans and advances made and to be made to each
of the Companies from time to time by CITBC pursuant hereto, as well as to
secure the payment in full of the other Obligations, each of the Companies
hereby pledges and grants to CITBC 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; and
(e) Real Estate.
Nothing in this Paragraph 1 is intended to give, or gives, CITBC a security
interest in, or lien on, any of the Excluded Assets.
2. The security interests granted hereunder shall extend and attach
to:
(a) All Collateral which is presently in existence and which is owned
by any of the Companies or in which any of the Companies have any interest,
whether held by any of the Companies or others for its respective account;
(b) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either CITBC or any of the Companies
from any of such Company's customers.
3. Each of the Companies agrees to take reasonable steps, consistent
with current business practices, to safeguard, protect and hold all Inventory
and make no disposition thereof except as otherwise provided in Section 6,
Paragraph 18 of this Financing Agreement or in the regular course of the
business of such Company as herein provided. Until CITBC has given the Companies
notice to the contrary, as provided for below after an Event of Default, any
Inventory may be sold and shipped by the Companies to their business practices
in existence on the date of execution of this Financing Agreement, provided
that all proceeds of all sales (including cash, checks and instruments for the
payment of money), other than the Retained Cash and normal cash shortages, are
promptly deposited, in accordance with Section 3, Paragraph 4 of this Financing
Agreement. Upon the sale, exchange, or other disposition of Inventory, as herein
provided, the security interest in the Companies' 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,
24
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 of other disposition, CITBC shall have a security interest in all of
the rights of any of the Companies as an unpaid seller, including stoppage in
transit, replevin, rescission and reclamation.
4. The rights and security interests granted to CITBC hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the Collective Account on the books of
CITBC 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 in accordance with Section 10 of this Financing Agreement. Any delay,
or omission by CITBC to exercise any right hereunder, shall not be deemed a
waiver thereof, or be deemed a waiver of any other right, unless such waiver be
in writing and signed by CITBC. 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.
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 CITBC shall have the
right in its sole discretion to determine which rights, security, liens,
security interests or remedies CITBC 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 CITBC's rights
hereunder.
6. Any reserves or credit balances in the Collective Account and any
other property or assets of any of the Companies in the possession of CITBC may
be held by CITBC 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 CITBC may have in any
other assets of any of the Companies, shall secure payment and performance of
all now existing and future Obligations. Subject to the provisions of Section 7,
Paragraph 7 of this Financing Agreement, CITBC will charge any or all of the
Obligations to the accounts of the Companies when due.
7. This Financing Agreement and the obligation of each of the Companies
to perform all of its covenants and obligations hereunder will be further
secured by a mortgage, deed of trust or assignment on the Real Estate, all in
accordance with Section 11 of this Financing Agreement.
8. Each of the Companies shall give to CITBC, and/or shall cause the
appropriate party to give to CITBC, from time to time such pledge or security
agreements in form and substance substantially similar to the Loan Documents in
existence on the date hereof, with respect to General Intangibles (now or
hereafter acquired), and capital stock (as now or hereafter issued) of each of
the Companies as CITBC shall reasonably require to obtain valid first liens
thereon, subject to the Permitted Encumbrances.
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SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
1. The Companies hereby warrant and represent and/or covenant that: i)
the fair value of their assets exceed the book value of their liabilities, in
each case taken as a whole; ii) the Companies, taken as a whole, are generally
able to pay their debts as they become due and payable; and iii) the Companies,
taken as a whole, do not have unreasonably small capital to carry on their
business as it is currently conducted absent extraordinary and unforeseen
circumstances. Each of the Companies further warrants, represents and/or
covenants that: a) except for the Permitted Encumbrances, each of the security
interests granted herein constitute and shall at all times constitute the first
and only liens on the Collateral, b) except for the Permitted Encumbrances, the
Companies are or will be at the time additional Collateral is acquired by it,
the absolute owner of the Collateral with full right to pledge, sell, consign,
transfer and create a security interest therein, free and clear of any and all
claims, consignments, or liens in favor of others, and c) each of the Companies
will at its expense defend the same from any and all claims and demands of any
other person other than the Permitted Encumbrances.
2. The Companies agree to maintain accurate books and records
pertaining to the Collateral. Each of the Companies agrees that CITBC or its
agents may, from time to time upon reasonable notice, enter upon the Companies'
premises at any time during normal business hours, or at such other times as
CITBC and the Companies may agree upon, for the purpose of inspecting the
Collateral and any and all records pertaining thereto. Each of the Companies
agrees to afford CITBC prior written notice of any change in the location of any
Collateral, other than to locations that are known to CITBC and at which CITBC
has filed financing statements and otherwise fully perfected its liens thereon.
The Companies also agree to advise CITBC promptly, in sufficient detail, of any
material adverse change relating to the type, quantity or quality of the
Collateral or on the security interests granted to CITBC therein.
3. Each of the Companies agrees, upon reasonable request by CITBC, to
comply with the requirements of all state, and federal laws in order to grant to
CITBC valid and perfected first security interests in the Collateral, subject
only to the Permitted Encumbrances. CITBC is hereby authorized by each of the
Companies to the extent permitted by applicable law to file any financing
statements covering the Collateral whether or not any of the Company's signature
appears thereon. Each of the Companies agree to do whatever CITBC may reasonably
request, from time to time, by way of: filing notices of liens, financing
statements, amendments, renewals and continuations thereof; cooperating with
CITBC's employees and agents; keeping stock records; transferring proceeds of
Collateral to CITBC's possession in accordance with the terms of this Financing
Agreement; and performing such further acts as CITBC may reasonably require in
order to effect the purposes of this Financing Agreement and, to the extent
applicable to the Real Estate, subject to the provisions of Section 11 of this
Financing Agreement, and, in all events CITBC will prepare all of the foregoing
to the extent they relate to the Real Estate.
4 (a) Each of the Companies agrees to maintain insurance on the Real
Estate, Inventory and the portion of the Excluded Assets that are tangible
assets under such policies of insurance, with such insurance companies, in such
reasonable amounts and covering such insurable risks as are consistent with the
amounts and covered perils that the Companies have in
26
effect on the date of execution hereof. All policies covering the Real Estate
and Inventory are, subject to the rights of any holders of Permitted
Encumbrances holding claims senior to CITBC, to be made payable to CITBC, in
case of loss to the Inventory and Real Estate, under a standard non-contributory
"mortgagee", "lender" or "secured party" clause and are to contain such other
provisions as CITBC may reasonably require to fully protect by insurance CITBC's
interest in the Real Estate and Inventory and to any payments to be made under
such policies with respect to the Inventory and Real Estate. All original
policies or true copies thereof are to be delivered to CITBC, with all premium
installments current with the loss payable endorsement in CITBC's favor, and
shall provide for not less than thirty (30) days prior written notice to CITBC
of the exercise of any right of cancellation. If the Companies fail to maintain
such insurance, CITBC may arrange for such insurance, but at the Companies'
expense and without any responsibility on CITBC'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, CITBC shall, subject to the rights of any holders
of Permitted Encumbrances holding claims senior to CITBC, have the sole right,
in the name of CITBC or any of the Companies, to file claims under any insurance
policies with respect to the Inventory and Real Estate, to receive, receipt and
give acquittance for any payments that may be payable thereunder with respect to
the Inventory and Real Estate, 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 and Real Estate under any such insurance policies; and
(b) In the event of any loss or damage by fire or other casualty, insurance
proceeds relating to Collateral shall be applied to the payment of the
Obligations.
5. Each of the Companies 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 Companies 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
Companies in good faith and by appropriate proceedings; ii) the Companies or any
one of them, if applicable, establish such reserves as may be required by GAAP;
and iii) such taxes, if secured by a filed lien, other than with respect to
taxes on the Real Estate, are for less than $250,000.00. To prevent the imminent
foreclosure of any tax liens (whether such liens are senior or junior to the
liens of CITBC) or in the event CITBC is exercising its remedies as a mortgagee,
or beneficiary under a deed of trust as to the Real Estate or as a secured
creditor on Collateral other than the Real Estate, then CITBC may, on the
Companies' 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 Section 6, Paragraph 5 above each of the
Companies: (a) agrees to comply with all acts, rules, regulations and orders of
any legislative, administrative or judicial body or official, including, but not
limited to, the Fair Labor Standards Act, as set forth in Section 201 through
Section 219 of Title 29 of the United States Code, which the failure to comply
with would have a material adverse impact on the Collateral, taken as whole, or
any material part thereof, or on the operation of the businesses of the
Companies taken as a whole;
27
provided that the Companies may contest any acts, rules, regulations, orders and
directions of such bodies or officials in any reasonable manner which will not
materially adversely effect CITBC's lien or priority in the Collateral, taken as
whole; (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 property and
operation of its business, which the failure to comply with would have a
material and adverse impact on any material part of the Collateral, or on the
operation of the business of the Companies, taken as a whole and EACH COMPANY
HEREBY INDEMNIFIES CITBC AND AGREES TO DEFEND AND HOLD CITBC HARMLESS FROM AND
AGAINST ANY AND ALL LOSS, DAMAGE, CLAIM, LIABILITY, INJURY OR EXPENSE WHICH
CITBC MAY SUSTAIN OR INCUR (OTHER THAN FOR ANY SUCH LOSS, DAMAGE, CLAIM,
LIABILITY, INJURY OR EXPENSE ARISING OUT OF CITBC'S ACTIONS IN ALL CIRCUMSTANCES
OR, TO THE EXTENT OF CITBC'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR IN THE
EVENT CITBC IS DEEMED TO BE A "PERSON IN CONTROL" UNDER ANY FEDERAL OR STATE
STATUTE OR REGULATION, FOR CITBC'S OMISSIONS) IN CONNECTION WITH: ANY CLAIM OR
EXPENSE ASSERTED AGAINST CITBC AS A RESULT OF ANY ENVIRONMENTAL POLLUTION,
HAZARDOUS MATERIAL OR ENVIRONMENTAL CLEAN-UP OF THE COMPANIES' OR ANY COMPANY'S
REAL PROPERTY, OR ANY CLAIM OR EXPENSE WHICH RESULTS FROM ANY OF THE COMPANIES'
OPERATIONS (INCLUDING, BUT NOT LIMITED TO, THE COMPANIES' OR ANY COMPANY'S OFF-
SITE DISPOSAL PRACTICES), ALL TO THE EXTENT THAT SUCH CLAIMS AND EXPENSES RELATE
TO THE COMPANIES' ACTIONS OR OMISSIONS WHICH ACTIONS OR OMISSIONS WERE PRIOR TO,
OR CONCURRENT WITH, THE TERMINATION OF A COMPANY'S TITLE OR LEASEHOLD INTEREST
IN SUCH REAL PROPERTY OR THE CESSATION OF BUSINESS, and each of the Companies
further agrees that this indemnification shall survive termination of this
Financing Agreement as well as the payment of all Obligations or amounts payable
hereunder; and (c) 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, and (ii) the Companies
promptly commence and diligently pursue 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
material adverse effect on any material portion of the Collateral or the
businesses, financial condition or operations of the Companies, taken as a
whole.
7. Until termination of this Financing Agreement and satisfaction in
full of all Obligations due hereunder, each of the Companies agrees that, unless
CITBC shall have otherwise consented in writing, the Companies will furnish, or
cause to be furnished, to CITBC, not later than: (a) at the earlier of one
hundred and six (106) days after x) the end of each fiscal year of the Companies
or y) the day following the date of the filing of the Parent's Annual Report
with the Securities and Exchange Commission on Form 10K, 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 and its Subsidiaries for such year,
28
audited by Xxxxx Xxxxxxxx or other independent public accountants selected by
the Companies and satisfactory to CITBC, and not later than thirty (30) days
after the delivery of the audited Consolidated Balance Sheet, the accountant's
management practice letter (the "blue-back"); (b) at the earlier of x) forth-
five (45) days after the end of each fiscal quarter or y) the day following the
date of the filing of the Parent's Quarterly Report with the Securities and
Exchange Commission on Form 10Q, a Consolidated Balance Sheet as at the end of
such period and consolidated statements of operations and cash flows of the
Parent and its Subsidiaries, certified by an authorized financial or accounting
officer of the Parent; (c) i) forty-five (45) days after the end of each month
other than February and March, ii) ninety (90) days after the end of February
and iii) sixty (60) days after the end of March, a Consolidated Balance Sheet as
at the end of such period and consolidated statements of operations of the
Parent and its Subsidiaries for such period, certified by an authorized
financial or accounting officer of the Parent; and (d) 75 days after the
commencement of each fiscal year of the Companies, monthly projections for the
succeeding fiscal year including a Consolidated Balance Sheet, consolidated
statement of operations and cash flows of the Parent and Subsidiaries including
the CITBC twelve month cash budget; and (e) a reasonable time after request,
such further information regarding the business affairs and financial condition
of the Companies as CITBC may reasonably request. Each financial statement
required to be submitted hereunder must be accompanied by an Officer's
Certificate, signed by the President, Vice President, Controller, or Treasurer,
of the Parent pursuant to which any one such officer must certify that: (i) the
financial statement(s) fairly and accurately represent(s) the financial
condition of the Parent and its Subsidiaries, at the end of the particular
accounting period, as well as the operating results of the Parent and its
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) the Companies
have not received any notice of cancellation with respect to its property
insurance policies or certifying as to replacement policies therefor; and (iii)
the exhibits attached to such quarterly and annual financial statement(s)
constitute detailed calculations showing compliance with all financial covenants
contained in this Financing Agreement.
8. (omitted intentionally)
9. The Parent and its Subsidiaries shall maintain, on a consolidated
basis and as of the end of each fiscal year set forth below, a Net Worth of not
less than the corresponding amount set forth below:
Fiscal Year Ending Amount
------------------ ------
January 31, 1998 The sum of $37,500,000 plus the 1995
Tax Benefit (as defined below)
January 30, 1999 The sum of $40,500,000 plus the 1995
Tax Benefit
29
January 29, 2000 and each The sum of $43,500,000 plus the 1995
fiscal year ending after Tax Benefit
such date
As used herein, "1995 Tax Benefit" means any increase to Net Worth of the Parent
and its Subsidiaries which is related to the recognition of the net benefit, as
determined under generally accepted accounting principles, of the Federal Income
tax refund described in Note E - Income Taxes of the Parent's 1995 Annual
Report. However, in the event that the net operating loss benefit can only be
realized through the carry forward of the benefit to future years, the amount of
the 1995 Tax Benefit as described herein will be zero.
10. Until termination of this Financing Agreement in accordance with
Section 10 hereof and satisfaction of all Obligations due hereunder, each of the
Companies agrees that, without the prior written consent of CITBC, except as
otherwise herein provided, the Companies, or any one of them, will not:
A. Mortgage, assign, pledge, transfer or otherwise permit any lien,
charge, security interest, encumbrance or judgment, (whether as a
result of a purchase money or title retention transaction, or
other security interest, or otherwise) to exist on any of its
assets 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 any of the Companies from mortgaging, assigning,
pledging, transferring or otherwise permitting any lien to exist
on any of the Margin Securities;
B. Incur or create any indebtedness other than the Permitted
Indebtedness;
C. Except for Permitted Indebtedness, borrow any money on the
security of any of the Companies' Collateral from sources other
than CITBC;
D. Sell, lease, assign, transfer or otherwise dispose of i)
Collateral, except as otherwise specifically permitted by this
Financing Agreement, or ii) either all or substantially all of the
Excluded Assets of any Company, provided, however, that CITBC
agrees 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 Companies 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 Companies,
provided that a Company may 1) merge or consolidate with or into
any other Company, provided further that in any instance under
this subparagraph (E), x) CITBC is notified of such merger at
least fifteen (15) business days prior to the date such is to
occur, and y) that a Company is the
30
survivor of such merger, and 2) change its name or principal place of
business provided CITBC is notified of such change of name or principal
place of business at least thirty (30) days prior to such change;
F. Assume, guarantee, endorse, or otherwise become liable upon the obligations
of any person, firm, entity or corporation, except i) by the endorsement of
negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business, and ii) for an amount not greater than
$375,000.00 less the then outstanding amount of loans, advances and
investments referred to in subparagraph H(iv) below;
G. Declare or pay any dividend of any kind on, or purchase, acquire, redeem or
retire, any of the capital stock or equity interest, of any class
whatsoever, whether now or hereafter outstanding, except that the Companies
may declare and pay dividends on their capital stock: a) in an amount
sufficient to enable the Parent to redeem its capital stock, provided that
in no event shall the aggregate amount of such dividends under this clause
(a) exceed $375,000.00 in the aggregate during the term of this Financing
Agreement; plus b) an amount not to exceed $300,000.00 in any fiscal year;
and provided further that, in any instance under either clause (a) or
clause (b) i) no Default is then in existence, and ii) after giving effect
to such payment, no Default or Event of Default has occurred hereunder;
plus c) an amount necessary to enable the Parent to pay income or franchise
taxes of the Parent and its Subsidiaries due as a result of the filing of a
consolidated, combined or unitary tax return in which the operations of the
Companies are included, provided that (x) such taxes are not also paid by
any of the Companies, (y) payments of any such dividend under this clause
(iii) may only be made substantially simultaneously with the payment by the
Parent of any such taxes, (z) the Parent or the Companies furnishes to
CITBC such evidence as CITBC may reasonably require to evidence that such
payment of taxes by the Parent has been made, and (aa) the amount of such
dividends has been computed in accordance with the Tax Treatment Agreement;
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) the Permitted Investments; iii) loans and
advances to employees in the ordinary course of business for travel,
entertainment and home relocation; and iv) other loans, advances and
investments provided same do not exceed in the aggregate outstanding at any
one time $375,000.00 less the amount in subparagraph F(ii) above;
1. Permit EBITDA, on a consolidated and cumulative fiscal year to date basis,
for the Parent and its Subsidiaries, at the end of each fiscal quarter
below, to be:
31
Fiscal Quarter Ending EBITDA
--------------------- ------
August 2, 1997 $0.00
November 1, 1997 More negative than negative $2,000,000
January 31, 1998 Less than $5,250,000
On the last day in the first fiscal quarter of Less than $950,000
each fiscal year thereafter
On the last day in the second fiscal quarter of Less than $2,900,000
each fiscal year thereafter
On the last day in the third fiscal quarter of Less than $3,000,000
each fiscal year thereafter
On the last day in the fourth fiscal quarter of Less than $9,250,000
each fiscal year thereafter
11. Without the prior written consent of CITBC, the Companies, on a
consolidated basis, will not contract for, purchase, make expenditures for,
lease pursuant to a Capital Lease or otherwise incur obligations with respect to
Capital Expenditures (whether subject to a security interest or otherwise)
during any fiscal year in the aggregate amount in excess of $8,400,000.00.
12. (omitted intentionally)
13. (omitted intentionally)
14. After any failure by the Companies to maintain Minimum Availability for
more than fifteen (15) consecutive business days, the Parent and its
Subsidiaries shall maintain, as of the end of each subsequent fiscal quarter, on
a consolidated basis, a ratio of Trade Accounts Payable plus the amount of any
"book overdraft" of the Parent and its Subsidiaries to Inventory, using a FIFO
valuation of not less than:
Fiscal Quarter Ending Ratio
--------------------- -----
On the last day in the first fiscal quarter of each fiscal year 25%
On the last day in the second fiscal quarter of each fiscal year 30%
On the last day in the third fiscal quarter of each fiscal year 35%
On the last day in the fourth fiscal quarter of each fiscal year 30%
32
For example and for purposes of illustration only: if the Companies' Projections
provide for $16,000,000.00 in month-end Availability at the end of February and
$18,000,000.00 in month-end Availability at the end of March, the Minimum
Availability would equal $8,500,000.00; therefore, as long as the Companies'
Availability did not fall below $8,500,000.00 for fifteen (15) consecutive
business days in February, the Companies would not be required to meet the above
Trade Accounts Payable to Inventory Ratio covenant. In March, the Minimum
Availability would be calculated as fifty percent (50%) of the Companies'
projected month-end availability for March and April.
15. (omitted intentionally)
16. (omitted intentionally)
17. Each of the Companies agrees to advise CITBC, promptly, in writing of:
a) all quantifiable expenditures (actual or anticipated) in excess of
$500,000.00 pertaining to the Companies' 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 the Companies' working
capital (that is, the Companies' current assets in excess of their current
liabilities, determined in accordance with GAAP on consolidated basis); and b)
any notices any officer of a Company receives from any local, state or federal
authority advising such Company of any environmental liability (real or
potential) stemming from any of the Companies' operations, premises, their waste
disposal practices, or waste disposal sites used by any of the Companies and to
provide CITBC with copies of all such notices if so required.
18. Without the prior written consent of CITBC, each of the Companies
agrees that it will not: a) enter into any transaction, including, without
limitation, any purchase, sale, lease, loan or exchange of property with the
Parent or any Subsidiary or any Affiliate of either the Companies or the Parent,
provided, however, that i) Xxxxxx'x Services may continue to purchase Inventory
for the benefit of the Companies, to sell such Inventory to the Companies, to
receive from the Companies payments for such Inventory, and to provide to the
Parent and its Subsidiaries corporate management, cash management, accounts
payable disbursement service, and back office services, ii) any Company may
transfer its Inventory to another Company; and iii) any Company may transfer
Excluded Assets to the Parent or any of the Parent's Subsidiaries; or b) engage
in policies or procedures with respect to xxxx-ups and xxxx-xxxxx of Inventory
which policies or procedures are inconsistent with the policies or procedures of
any Company in effect on the date of this Financing Agreement.
19. The Companies own or possess their trademarks, permits, service marks,
the tradenames "Xxxxxx'x", "Supersports" and "Supersports U.S.A.", and licenses
necessary for their businesses, free from and without any known conflict with
any title, interest, lien, restriction or encumbrance, other than the Permitted
Encumbrances, and without any known conflict with rights of others other than
where the failure to have such rights would not have a material adverse effect
on any of the Companies, or the Collateral; none of the foregoing is subject to
any outstanding order, decree, judgment or stipulation, and no proceedings have
been
33
instituted or are pending or, to the best knowledge of the Companies, threatened
charging that any of the foregoing was misappropriated or infringes on the
rights of any third party.
20. Each Company shall conduct or cause to be conducted an actual physical
count of its Inventory as follows:
(a) not less than twice in any calendar year for all warehouses and
"megastores" (i.e., all stores having a tradename of "Xxxxxx'x
Supersports" or "Supersports U.S.A."); and
(b) not less than once in any calendar year for all traditional stores
(i.e., all stores other than the stores described in the foregoing
subparagraph (a)).
Such physical inventory count shall be conducted by an entity that is not an
Affiliate of any Company or the Parent and which entity shall be experienced in
conducting such a physical inventory. Each Company shall, within forty-five (45)
days after the completion of such physical count, deliver or cause to be
delivered, to CITBC a copy of the Preliminary Inventory Reconciliation Report,
prepared by the Companies but based on the findings of such physical count.
21. The Companies shall advise CITBC of any decision by a Company to open
or close any of their stores or to create a new corporation. The Companies shall
so advise CITBC, to the extent practicable, of such decision not less than
thirty (30) days prior to the earlier of x) an actual closing and/or opening of
any store or y) any public announcement of a Company's decision to open or close
any store. Xxxxxx'x Services shall advise CITBC, upon not less than thirty (30)
days prior notice, of any decision to create a new corporation.
22. The Companies 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 Companies in good
faith and by appropriate proceedings; ii) the Companies, or any one of them, as
applicable, establish 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 CITBC any obligation to segregate proceeds. If
any Company fails to promptly pay any portion of such taxes when due, CITBC may,
at its option, but shall not be required to, pay the same and charge the
Companies therefor.
23. The Parent and its Subsidiaries shall maintain, as of the end of each
fiscal quarter, on a consolidated basis, an Inventory Turnover Ratio of not less
than 1.7 to 1.0.
24. The Companies shall, for the fiscal month beginning January 4, 1998 and
ending January 31, 1998, maintain, on a consolidated basis, Availability of not
less than $8,000,000.00, which shall exclude any amount imposed by CITBC under
subclause (iii) of the Availability Reserve, and which Availability, for
purposes of this Paragraph 24 of Section 6, shall be reduced by the aggregate
amount of all debts, obligations and accounts payable of any Company that
34
have not been paid when due in accordance with the Companies' customary business
practices with respect thereto.
SECTION 7. INTEREST, FEES AND EXPENSES
1. (A) Interest on the Revolving Loans shall be payable monthly as of
the end of each month and shall be an amount equal to (a) the sum of
three-eighths of one percent (.375%) plus The Chase Manhattan Bank Rate, on a
per annum basis, on the average of the net balances owing by all of the
Companies to CITBC in the Collective Account at the close of each day during
such month on balances other than Libor Loans and (b) two and seven-eighths
percent (2.875%) plus Libor on any Libor Loan as to any then outstanding
Revolving Loans which are Libor Loans, on a per annum basis, on the average of
the net balances of such Libor Loans owing by the Companies to CITBC in the
Collective Account at the close of each day during such month for the Libor
period; but, in no event shall the interest charged hereunder exceed the Maximum
Legal Rate. The Companies may elect to use Libor as to any then outstanding
Revolving Loans provided (i) there is then no Event of Default, (ii) the
Companies have so advised CITBC of their election to use Libor and the Libor
Period is selected no later than two (2) business days preceding the first day
of a Libor period and (iii) the election and Libor shall be effective, provided,
there is then no Event of Default, on the third business day following said
notice. The Libor elections must be for integral multiples of $1,000,000.00 and
the Companies shall pay CITBC a non-refundable Libor Processing Fee upon the
effective date of each Libor Loan, provided, however, that there shall be no
Libor Processing Fee for the first four (4) Libor Loans in any calendar year
which have a three (3) month Libor Period. If no such election is timely made or
can be made or Libor cannot be determined, then CITBC shall use The Chase
Manhattan Bank Rate to compute interest. In the event of any change in said The
Chase Manhattan Bank Rate, the rate under clause (a) above shall change, as of
the first of the month following any change, so as to remain equal to the sum of
three-eighths of one percent (.375%) plus The Chase Manhattan Bank Rate. The
rates hereunder shall be calculated based on a three hundred sixty (360) day
year for actual days elapsed. CITBC shall be entitled to charge the Collective
Account at the rate provided for herein when due until all Obligations have been
paid in full.
(B) Subject to compliance with the conditions set forth in this
subparagraph (B), the Companies shall be entitled to interest rate reductions
(each an "Interest Rate Reduction") as outlined below:
If the ratio of all of the Companies' Average Loan Balances to EBITDA meets or
exceeds the Companies' financial projections dated March 27, 1997, for the
fiscal year ending January 31, 1998 and for future years as indicated in such
projections delivered to CITBC as required under subsection (d) of Paragraph 7
of Section 6 (the "Financial Projections") then the spread over the (a) The
Chase Manhattan Bank Rate shall be reduced by three-eighths of one percent
(.375%) and (b) Libor rate shall be reduced by three-eighths of one percent
(.375%). If the ratio of all of the Companies' Average Loan Balances to EBITDA
fails to meet the Financial Projections for a fiscal year then the spread over
the (a) The Chase Manhattan Bank Rate shall be increased by three-eighths of one
percent (.375%) and (b) Libor rate shall be increased by three-eighths of one
35
percent (.375%) (each an "Interest Rate Increase"). "Average Loan Balances" as
used herein shall mean the average of the net balances owing by all the
Companies to CITBC in the Collective Account as of the last day of each month
for the twelve (12) months in the fiscal year then ended.
In addition to the foregoing requirements, each Interest Rate Reduction is
subject to the Companies compliance with each of the following conditions (i)
through (v) below and the effective date of each Interest Rate Increase is
governed by (iii) and (iv) below:
(i) Timely receipt by CITBC of the Companies' audited Consolidated
Balance Sheet and income statement (the "Financial Statements")
for the Companies' fiscal year ending January 31, 1998 and each
subsequent fiscal year in accordance with the provisions of
Paragraph 7 of Section 6;
(ii) The absence of any Default or Event of Default;
(iii) As to the spread over The Chase Manhattan Bank Rate, and any
Interest Rate Reduction or the Interest Rate Increase, as the case
may be, any such decreases or increases will be effective on the
first day of the month following CITBC's receipt of the Financial
Statements with respect to the fiscal year which the Companies are
determined to be eligible for such Interest Rate Reduction or such
Interest Rate Increase;
(iv) As to the spread over the Libor rate, and any Interest Rate
Reduction or Interest Rate Increase with respect thereto, as the
case may be, any such decreases or increases will be effective on
the first day of a Libor Period and shall only be applicable to a
Libor Period commencing on or after CITBC's receipt of the
applicable Financial Statements; and
(v) In no event shall the total of all Interest Rate Reductions or
Interest Rate Increases hereunder on the Revolving Loan reduce or
increase the applicable rates by more than three-eighths of one
percent (.375%) from those rates in effect on the date hereof.
(Notwithstanding the foregoing nothing contained in this
subparagraph (v) is intended to modify the provisions of paragraph
2 of Section 9 providing for the right of CITBC to charge the
Default Rate of Interest as set forth therein).
2. In consideration of the Letter of Credit Guaranty of CITBC, the
Companies shall pay CITBC 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 CITBC
for any of the Companies' 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 Collective Account
in full when charged to or paid by CITBC and when made by any such Issuing Bank
shall be conclusive on CITBC (until such time as the Issuing Bank has advised
CITBC that a credit has been issued as to such Letter of Credit).
36
4. Each of the Companies shall reimburse or pay CITBC, as the case may
be, for: a) all Out-of-Pocket Expenses of CITBC and b) any applicable
Documentation Fees and Libor Processing Fees.
5. Upon the last business day of each month, commencing with December
31, 1997, the Companies shall pay CITBC the Line of Credit Fee.
6. Upon the date of execution of the Original Financing Agreement, and
yearly thereafter on August 31 of each year so long as this Financing Agreement
is in effect, the Companies shall pay to CITBC 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.
7. Each Company hereby confirms and authorizes CITBC, and CITBC hereby
agrees, to charge the Collective Account with the amount of all Obligations due
by the Companies hereunder as such payment becomes due. In the unlikely event
CITBC is unable or unwilling to charge any such Obligation to the Collective
Account, then CITBC shall so notify the Companies in writing and the amount so
requested shall be due and payable thirty (30) days after such demand.
8. In no event shall the Contract Rate exceed the Maximum Legal Rate and
the rate of interest under the Financing Agreement shall be limited to the
Maximum Legal Rate, but to the maximum extent not prohibited under applicable
law subsequent reductions in the Contract Rate shall not reduce the rates of
interest under the Financing Agreement below the Maximum Legal Rate until the
total amount of interest charged hereunder equals the amount of interest that
would have been charged had the Contract Rate been charged at all times. In no
event shall CITBC ever be entitled to contract for, charge, take, reserve,
receive, or apply as interest on the Obligations, or any part thereof, any
amount in excess of the Maximum Legal Rate, and in the event CITBC shall ever
contract for, charge, take, reserve, receive, or apply as interest any such
excess, it shall be deemed a partial prepayment of principal and treated
hereunder as such; and, if the Obligations are paid in full, any remaining
excess shall forthwith be paid to the Companies. Solely in determining whether
or not the interest paid or payable, under any specific contingency, exceeds the
Maximum Legal Rate, CITBC shall, to the maximum extent permitted under
applicable law, (a) treat all Obligations as but a single extension of credit,
(b) characterize any nonprincipal payment as an expense, fee, or premium rather
than as interest, (c) exclude voluntary prepayments and the effects thereof, and
(d) "spread" the total amount of interest throughout the entire contemplated
term of the Obligations; provided that if the Obligations are paid and performed
in full prior to the end of the full contemplated term thereof, and if the
interest received for the actual period of existence thereof exceeds the Maximum
Legal Rate, CITBC shall refund such excess, and in such event, CITBC shall, to
the maximum extent not prohibited under applicable law, be not subject to any
penalties provided by any laws for contracting for, charging, taking, reserving,
or receiving interest in excess of the Maximum Legal Rate.
37
9. The Companies shall pay to CITBC, upon the request of CITBC, such
amount or amounts as shall compensate CITBC for any loss, costs or expenses
incurred by CITBC (as reasonably determined by CITBC) as a result of: (a) any
payment or prepayment on a date other than the last day of a Libor Period for
such Libor Loan, or (b) any failure of the Companies 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 CITBC during the period from the date of receipt of such payment or
prepayment or the date of such failure to borrow is less than the rate of
interest applicable to such Libor Loan for such Libor Period. The determination
by CITBC of the amount of any such loss or expense, when set forth in a written
notice to the Companies, containing CITBC's calculations hereon in reasonable
detail, shall be conclusive on the Companies, in the absence of manifest error.
SECTION 8. POWERS
Subject to the last paragraph in this Section 8, each Company hereby
constitutes CITBC or any person or agent CITBC may reasonably designate as its
attorney-in-fact, at such 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 CITBC have been satisfied and this Agreement terminated
in accordance with Section 10 of this Financing Agreement:
(a) To receive, take, endorse, sign, assign and deliver, all in the
name of CITBC or the Companies, or anyone of them, any and all
checks, notes, drafts, and other documents or instruments relating
to the Collateral;
(b) To request, not more frequently than three (3) times a fiscal
year, and on concurrent notice to the applicable Company, from
customers indebted on Trade Accounts Receivable in the name of
CITBC's designee, by a letter in the form attached hereto as
Exhibit C, information concerning the amounts owing on the Trade
Accounts Receivable;
(c) To request from customers indebted on Trade Accounts Receivable at
any time, in the name of CITBC, information concerning the amounts
owing on the Trade Accounts Receivable;
(d) To transmit to customers indebted on Trade Accounts Receivable
notice of CITBC's interest therein and to notify customers
indebted on Trade Accounts Receivable to make payment directly to
CITBC for any of the Companies' accounts; and
(e) To take or bring, in the name of CITBC or the Companies, or any
one of them, all steps, actions, suits or proceedings reasonably
deemed by CITBC necessary or desirable to enforce or effect
collection of the Accounts.
38
Notwithstanding anything hereinabove contained to the contrary, the powers set
forth in subparagraphs (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, CITBC may
terminate this Financing Agreement immediately upon the occurrence of any of the
following (herein "Events of Default"):
a) cessation of the business of any one of i) Xxxxxx California, ii)
Xxxxxx Florida, iii) Xxxxxx Texas or iv) Xxxxxx'x Services or the calling of a
general meeting of the creditors of any of the Companies for purposes of
compromising the debts and obligations of that Company;
b) the failure of any Company to generally meet its debts as they
mature;
c) the commencement of the Companies, or any one of them, of any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law;
d) the commencement against the Companies, or any one of them, of any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law provided, however, that such Default
shall not be deemed an Event of Default if the proceeding, petition, case or
arrangement is dismissed within sixty (60) days of the filing of, or the
commencement of, such petition, case, proceeding or arrangement;
e) material breach by any Company of any warranty, representation
or covenant contained herein (other than those referred to in subparagraphs (f)
and (g) below) or in any Loan Document between the Companies, or any one of
them, and CITBC, provided that such Default by the Companies, or any one of
them, 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
breach shall remain unremedied to CITBC's reasonable satisfaction for a period
of thirty (30) days from the date of CITBC's notice to the Companies of such
breach;
f) breach by the Companies, or any one of them, of any warranty,
representation or covenant of: i) the second sentence of Paragraph 3 of Section
3, hereof; or ii) Section 6, Paragraph 1 (other than the first sentence of said
Paragraph 1) hereof; or iii) Section 6, Paragraph 5 hereof; iv) subparagraph (a)
of the first sentence of Paragraph 7 of Section 6 hereof; or v) subparagraph A
of Paragraph 10 of Section 6 hereof; provided, however, that in any such
instance, such Default by the Companies or any one of them, shall not be deemed
an Event of Default unless and until such Default shall remain unremedied to
CITBC's reasonable satisfaction for a period of five (5) business days from the
date of CITBC's notice to Companies of such breach;
39
g) breach by the Companies, or any one of them, of any warranty,
representation or covenant of : i) the first sentence of Paragraph 3 of Section
3 hereof; or ii) the second, third and fourth sentences of Paragraph 4 of
Section 3 hereof; or iii) Paragraph 3 of Section 5 hereof; or iv) Paragraph 4 of
Section 6 hereof; or v) Paragraph 9 of Section 6 hereof; or vi) Paragraph 10
(other than subparagraph A) of Section 6 hereof; or vii) Paragraph 11 of
Section 6 hereof; or viii) Paragraph 12 of Section 6 hereof; or ix) Paragraph 13
of Section 6 hereof; or x) Paragraph 14 of Section 6 hereof; or xi) Paragraph 23
of Section 6 hereof; or xii) Paragraph 24 of Section 6 hereof;
h) except as otherwise provided in Section 7, Paragraph 7 of this
Financing Agreement, failure of the Companies, or any one of them, to pay any of
the Obligations within ten (10) days of the date due thereof;
i) any 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 subparagraph (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 Companies taken as a
whole;
j) without the prior written consent of CITBC, the Parent or the
Companies, or any one of them, shall fail to deliver to CITBC certificates
evidencing any now or hereafter issued common stock of any of the Companies, in
conjunction with stock powers therefor, all in form and substance reasonably
satisfactory to CITBC;
k) the holder, trustee or beneficiary of any instrument referred to in
this subparagraph (k) shall have a then current right to accelerate (whether or
not such right is actually exercised) pursuant to (i) any instrument evidencing
industrial development revenue bond indebtedness of any Company, or (ii) any
instrument evidencing outstanding Indebtedness of the Companies, or any one of
them, in excess of $75,000.00;
l) Xxxxx X. Kubetkin ceases for any reason whatsoever (other than as a
result of death) to be actively engaged in the management of the Companies and
the person or persons assuming his duties and responsibilities are not of
comparable competence, or any of the stock of the Companies presently held by
the Parent is transferred by the Parent;
m) the Companies, or any one of them, pay any management fees or other
like fees to the Parent unless the payment of such fees has been approved, in
writing, by CITBC; or
n) the Tax Treatment Agreement has been amended, canceled, rescinded
or terminated without the prior written consent of CITBC which consent will not
be unreasonably withheld.
40
2. Upon the occurrence of a Default and/or an Event of Default, at the
option of CITBC, all loans and advances provided for in Section 3, Paragraph 1
of this Financing Agreement shall be made thereafter in CITBC's sole discretion
and the obligation of CITBC to make Revolving Loans and/or assist the Companies
in obtaining Letters of Credit shall cease until such time as the Default is
cured to CITBC's reasonable satisfaction or the Event of Default is waived and
at the option of CITBC 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 listed in Paragraph 1(c)
or 1(d) of this Section 9) become immediately due and payable; ii) CITBC may
charge the Companies 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) CITBC has given
the Companies written notice of the Event of Default, provided, however, that no
notice is required if the Event of Default is the Event listed in paragraph 1(c)
or 1(d) of this Section 9 and b) the Companies have failed to cure the Event of
Default within fifteen (15) days x) CITBC deposited such notice in the United
States mail or y) the occurrence of the Event of Default listed in paragraph
1(c) or 1(d) of this Section 9; and iii) CITBC may immediately terminate this
Financing Agreement upon notice to the Companies, provided, however, that no
notice of termination is required if the Event of Default is the Event listed in
paragraph 1(c) or 1(d) of this Section 9. The exercise of any option is not
exclusive of any other option which may be exercised at any time by CITBC.
3. Immediately upon the occurrence of any Event of Default, CITBC 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 CITBC may use, but only with the Companies'
permission, in their sole discretion, such of the Companies' personnel, supplies
or space at the Companies' 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 Companies, or any
one of them, of CITBC, 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 each of the Companies or
CITBC; (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, or credit or otherwise, at CITBC's sole option and discretion,
and, to the extent permitted by applicable law, CITBC may bid or become a
purchaser at any such sale, free from any right of redemption, which right is
hereby expressly waived by each of the Companies; (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. CITBC 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 Companies, or any one of
then, or CITBC, or in the name of such other party as CITBC may designate,
either at public or private sale or at any broker's board, in lots or in bulk,
for cash or
41
for credit, with or without warranties or representations, and upon such other
terms and conditions as CITBC in its sole discretion may deem advisable, and, to
the extent permitted by applicable law, CITBC shall have the right to purchase
at any such sale. If any Inventory shall require repairing, maintenance or
preparation, CITBC 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 CITBC shall reasonably deem appropriate. Each of the Companies
agrees, at the request of CITBC, to assemble the Inventory and to make it
available to CITBC at premises of the Companies or such other location
reasonably designated by CITBC for the purpose of CITBC'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 CITBC's exercise of any of
the foregoing rights (after deducting all reasonable charges, costs and
expenses, including reasonable attorneys' fees) shall be applied by CITBC to the
payment of the Obligations, whether due or to become due, and each of the
Companies shall remain liable to CITBC for any deficiencies, and CITBC in turn
agrees to remit to the Companies or their successors or assigns, any surplus
resulting therefrom. The enumeration of the foregoing rights is not intended to
be exhaustive and the exercise of any right shall not preclude the exercise of
any other rights, all of which shall be cumulative. The mortgage, deed of trust
or assignment on the Real Estate shall govern the rights and remedies of CITBC
thereto.
SECTION 10. Termination
Except as otherwise permitted herein, the Companies or CITBC may
terminate this Financing Agreement and the Revolving Line of Credit only as of
an Anniversary Date and then only by giving the other at least sixty (60) days
prior written notice of termination. Notwithstanding the foregoing CITBC may
terminate the Financing Agreement immediately upon the occurrence of an Event of
Default upon notice to the Companies, 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, CITBC may regard the Financing Agreement as terminated and
notice to that effect is not required. This Financing Agreement, unless
terminated as herein provided, shall automatically continue from Anniversary
Date to Anniversary Date. Notwithstanding the foregoing, the Companies or any
one of them (provided that such termination shall be effective as to all of the
Companies) may, at any time, terminate this Financing Agreement and the
Revolving Line of Credit prior to any applicable Anniversary Date upon at least
sixty (60) days' prior written notice to CITBC, provided that the Companies pay
to CITBC immediately on demand, an Early Termination Fee. All Obligations shall
become due and payable as of any termination hereunder or under Section 9
hereof. All of CITBC'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, CITBC may withhold any credit balances in
the Collective Account (unless supplied with an indemnity satisfactory to CITBC)
to cover all of the Obligations, whether absolute or contingent, provided,
however, that if the remaining unpaid Obligations arises solely out of the
outstanding amounts of Letters of Credit, CITBC will, at the Companies' request,
retain, solely as collateral, credit balances in an amount equal to one hundred
and five percent (105%) of the then outstanding amounts of Letters of Credit.
When the outstanding amount of Letters of Credit have been so secured by cash in
an amount equal to one
42
hundred and five percent (105%) of the then outstanding amounts of Letters of
Credit pursuant to a fully executed agreement between CITBC and the Companies
and pursuant to which the Companies agree to reimburse CITBC for any Letters of
Credit claims (on terms substantially similar to the terms as to fees and
charges of this Financing Agreement) that exceed the cash collateral, then for
all purposes of this Financing Agreement and the Loan Documents, this Financing
Agreement shall be treated by the thereto as terminated and the Obligations as
satisfied in full.
SECTION 11. BEST EFFORTS - REAL ESTATE
The Companies shall use their best efforts, using the Companies'
personnel (such personnel costs to be at the Companies' expense), to assist
CITBC in obtaining:
a) first mortgage/deed of trust liens, pursuant to documentation
mutually satisfactory to the Companies and CITBC, on all other Real Estate;
b) second mortgage/deed of trust liens, pursuant to documentation
mutually satisfactory to the Companies and CITBC, on all other Real Estate;
c) to the extent available, mortgagee's title policies or marked-up or
unconditional binders for such insurance relating to the Real Estate in
amounts, reasonably satisfactory to CITBC, insuring that the mortgages or deeds
of trust filed by CITBC relating to the Real Estate create valid liens on the
property covered thereby, naming CITBC as the insured thereunder and, containing
such endorsements and coverage as CITBC may reasonably request; and
d) maps or plats of the perimeter or boundary of the site of each of
the properties covered by the mortgages or deeds of trust, prepared by an
independent professional licensed land surveyor reasonably satisfactory to
CITBC, which maps or plats and the surveys on which they are based shall be made
in accordance with the Minimum Standard Detail Requirements for Land Title
Surveys jointly established and adopted by the American Land Title Association
and the American Congress on Surveying and Mapping, to the extent applicable in
the state in which each such property is located.
It is understood and agreed that the liens to be given CITBC shall be
subject and subordinate to any and all liens (other than, in the case of liens
to be given pursuant to the documentation referred to in clause (a) above,
purchase money liens incurred in obtaining title to premises or liens for
borrowed money), encumbrances, easements, covenants and restrictions (herein the
"Title Exceptions") unless CITBC is able, using its own funds, and not at the
Companies' expense, to remove of record, or insure over, any Title Exceptions.
In the event the Companies retain outside counsel in any state(s) to assist
CITBC in obtaining items (a) through (d) above or in removing of record, or
insuring over, the Title Exceptions, CITBC shall pay the reasonable fees and
expenses of such outside counsel.
43
SECTION 12. MISCELLANEOUS
1. Except as otherwise expressly provided, each of the Companies
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 CITBC or the
Companies 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 CITBC of any right or remedy precludes and other
or further exercise thereof, or precludes any other right or remedy.
2. THIS WRITTEN AGREEMENT AND THE OTHER DOCUMENTS REFERENCED HEREIN OR
CONTEMPLATED HEREBY REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.
3. It is the intent of the Companies and CITBC to conform strictly to
all applicable state and federal usury laws. All agreements between the
Companies and CITBC 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 CITBC for the
use, forbearance, or detention of the money loaned hereunder or otherwise, or
for the payment of 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, forebearance or
detention of money, exceed the maximum amount which the CITBC is legally
entitled to contract for, charge or collect under applicable state or federal
law. If from any circumstance whatsoever fulfillment of any provisions hereof or
of such other documents, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by law, then the
obligations to be fulfilled shall be automatically reduced to the limit of such
validity, and if from any such circumstance CITBC 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 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 Companies. In determining
whether or not all sums paid or agreed to be paid by the Companies for the use,
forbearance or detention of the Obligations of the Companies to CITBC, under any
specific contingency, exceeds the maximum extent permitted under applicable law,
(a) characterize any nonprincipal payment as an expense, fee or premium rather
than as sums paid or agreed to be paid by the Companies for the use,
forebearance or detention of the Obligations of the Companies to CITBC, (b)
exclude voluntary prepayments and the effect thereof, and (c) to the extent not
44
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 Companies
for the use, forebearance or detention of the Obligations of the Companies to
CITBC throughout the entire contemplated terms 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 Companies and CITBC.
4. If any provision hereby 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.
5. The Companies acknowledge that: i) CITBC may syndicate a portion of
the loans hereunder, ii) pursuant to any such co-lending or participation
agreements CITBC may be required to obtain the consent of such co-lender or
participants (herein the "Participants") to any amendments or waivers hereunder,
and iii) portions of the Obligations may be nominally held by CITBC on behalf of
the Participants. CITBC is hereby permitted to sell co-lending or participation
interests in the loans and advances hereunder to lending institutions, solely in
CITBC's discretion, provided that the Companies shall not be responsible for any
fees, charges or costs arising out of such syndication, co-lending,
participation or similar arrangement and further provided that CITBC will always
retain for its own account not less than forty-one percent (41%) of the
Obligations. Further, CITBC will be sole agent (there will be no other agent
in any capacity) or lead lender, as the case may be, in any such syndication,
co-lending or participation. In the event CITBC should sell off a portion of the
loans hereunder, whether by participation or otherwise, CITBC will advise the
Companies of the form of the sale, the identity of the purchaser and,generally,
of the rights of the purchaser to approve amendments, consents or waivers. The
failure of CITBC to so advise the Companies will not give the Companies any
rights or claims against CITBC or create any liability of CITBC to the Companies
for such failure. It is understood and agreed that the foregoing agreement of
CITBC to so advise the Companies is merely an accomodation to the Companies.
6. The Parent and its Subsidiaries, including the Companies, have made
and will, from time to time, make available to CITBC certain financial and other
business information (the "Confidential Information:) relating to their
business. CITBC agrees to maintain the confidentially of all Confidential
Information provided to CITBC by or on behalf of the Parent or any of its
Subsidiaries, and to disclose such information only (a) to officers, directors
or employees of CITBC or to CITBC's legal or financial advisors, in each case to
extent necessary to carry out this Financing Agreement and the other Loan
documents, and to The CIT Group Holdings, Inc., The CIT Group, Inc., The Chase
Manhattan Bank Corporation or Dai-Ichi Kanygo Bank, but only, in the case of all
of the foregoing Persons referred to in this clause (a), after CITBC has advised
each such Person to maintain the confidentially 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 CITBC's record by
appropriate
45
authorities, pursuant to court order, subpoena or other legal process or
otherwise as required by law or regulation, and (c) to Participants or potential
Participants but only after such Participants or potential Participants have
executed a written confidentiality agreement substantially in the form of this
paragraph 6, provided, however, that such Participants or potential Participants
shall agree not to disclose Confidential Information to any Affiliate of such
Participants or potential Participants. CITBC shall not be required to maintain
the confidentiality of any portion of the Confidential Information which (a)
becomes generally available to the public other than by CITBC's unauthorized
disclosure, (b) is known by CITBC or its agents, advisors or representatives
prior to disclosure by the Parent and its Subsidiaries, or (c) becomes available
to CITBC from a source other than the Parent and its Subsidiaries, provided that
the disclosure of Confidential Information to CITBC by such source does not
violate a confidentiality agreement or duty imposed on such source of which
CITBC has actual knowledge.
7. TO THE EXTENT PERMITTED BY LAW, EACH OF THE COMPANIES AND CITBC
HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING
OUT OF THIS FINANCING AGREEMENT. EACH OF THE COMPANIES HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OR PROCESS BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED. ANY JUDICIAL PROCEEDING BROUGHT BY OR
AGAINST THE COMPANIES 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 TEXAS, UNITED STATES OF AMERICA, AND, BY EXECUTION
AND DELIVERY OF THIS FINANCING AGREEMENT, EACH OF THE COMPANIES 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 CITBC TO BRING
PROCEEDINGS AGAINST THE COMPANIES IN THE COURTS OF ANY OTHER JURISDICTION. EACH
OF THE COMPANIES 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. (omitted intentionally)
9. 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 (including Federal Express), or sent by
telegram or 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:
46
(A) if to CITBC, at:
The CIT Group/Business Credit, Inc.
Two Lincoln Centre
Suite 200
5420 LBJ Freeway
Xxxxxx, Xxxxx 00000
Attn: Regional Manager
Facsimile Number: (000) 000-0000
(B) if to a Company or the Companies at:
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attn: Chief Financial Officer
Facsimile Number: (000) 000-0000
with CITBC using good faith efforts to send a copy to:
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attn: Vice President, Chief Accounting Officer
Facsimile Number: (000) 000-0000
with CITBC using good faith efforts to send a copy to:
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attn: Legal Department
Facsimile Number: (000) 000-0000
or to such other address as any party may designate for itself by like notice;
provided, however, that the failure of CITBC to send a copy of such notice to
the Company's Legal Department shall not invalidate in any way the effect of the
notice to a Company.
10. Any obligation of one or more of the Companies to deliver notices and
other documents hereunder may be satisfied by delivery thereof by any one of the
Companies.
11. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT THE
PROVISIONS OF CHAPTER 346 (OTHER THAN SECTION 346.004 THEREOF) OF THE TEXAS
FINANCE CODE (VERNON'S TEXAS CODE ANNOTATED), AS AMENDED FROM TIME TO TIME,
SHALL NOT BE APPLICABLE TO ANY LOAN(S), ADVANCE(S), OR EXTENSION(S) OF CREDIT
MADE HEREUNDER OR OTHERWISE, THIS FINANCING
47
AGREEMENT AND ALL OTHER AGREEMENTS BETWEEN THE COMPANIES AND CITBC.
12. EACH OF THE COMPANIES' HEREBY WAIVES ITS RIGHTS UNDER THE DECEPTIVE
TRADE PRACTICES--CONSUMER PROTECTION ACT, SECTION (S)17.41 ET SEQ. OF THE TEXAS
BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF EACH OF THE COMPANIES' OWN
SELECTION, EACH OF THE COMPANIES' VOLUNTARILY CONSENTS TO THIS WAIVER. EACH OF
THE COMPANIES' EXPRESSLY WARRANTS AND REPRESENTS THAT IT (A) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO CITBC, AND (B) HAS BEEN
REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS FINANCING AGREEMENT.
13. EACH OF THE COMPANIES ACKNOWLEDGES AND AGREES THAT (A) IT HAS NO CLAIMS,
COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES TO THE ORIGINAL FINANCING AGREEMENT
OR ANY DOCUMENTS, INSTRUMENTS OR AGREEMENTS EXECUTED IN CONNECTION THEREWITH,
AND THE PERFORMANCE OF ITS OBLIGATIONS THEREUNDER, OR (B) IF IT HAS ANY SUCH
CLAIMS, COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES TO THE ORIGINAL FINANCING
AGREEMENT OR ANY DOCUMENTS, INSTRUMENTS OR AGREEMENTS EXECUTED IN CONNECTION
THEREWITH, AND/OR ANY TRANSACTION RELATED TO THE ORIGINAL FINANCING AGREEMENT OR
ANY DOCUMENTS, INSTRUMENTS OR AGREEMENTS EXECUTED IN CONNECTION THEREWITH, SAME
ARE HEREBY WAIVED, RELINQUISHED AND RELEASED IN CONSIDERATION OF CITBC'S
EXECUTION AND DELIVERY OF THIS FINANCING AGREEMENT.
14. This Financing Agreement is given in amendment, restatement, renewal and
extension (but not in novation, extinguishment or satisfaction) of the Original
Financing Agreement. All liens and security interests securing payment of the
obligations under the Original Financing Agreement are hereby collectively
renewed, extended, rearranged, ratified and brought forward as security for the
payment and performance of the Obligations. With respect to matters relating to
the period prior to the date hereof, all of the provisions of the Original
Financing Agreement and the security agreements and other documents, instruments
or agreements executed in connection therewith are hereby ratified and confirmed
and shall remain in force and effect.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
48
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. This Financing Agreement shall take
effect as of the date set forth above after being accepted below by an officer
of CITBC after which, CITBC shall forward to the Companies a fully executed
original for its files.
Very truly yours,
THE CIT GROUP / BUSINESS CREDIT, INC.
By /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Assistant Vice President
Read and Agreed to:
XXXXXX'X SPORTING GOODS, INC.--SERVICES
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
------------------------------- ------------------------------
TITLE: VICE PRESIDENT SECRETARY
X.X. XXXXXX AND CO., INC.
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
------------------------------- ------------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., ALABAMA
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
------------------------------- ------------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., ARIZONA
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
------------------------------- ------------------------------
TITLE: VICE PRESIDENT SECRETARY
49
XXXXXX SPORTING GOODS CO., ARKANSAS
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., CALIFORNIA
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., COLORADO
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., FLORIDA
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., GEORGIA
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., HAWAII
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., KANSAS
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
50
XXXXXX SPORTING GOODS CO., LOUISIANA
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., MICHIGAN
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., MINNESOTA
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., MISSOURI
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., NEVADA
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., NEW JERSEY
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., NEW MEXICO
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
51
XXXXXX SPORTING GOODS CO., NEW YORK
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., OHIO
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., OKLAHOMA
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., OREGON
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., SOUTH CAROLINA
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., TENNESSEE
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., TEXAS
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
52
XXXXXX SPORTING GOODS CO., UTAH
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX SPORTING GOODS CO., WASHINGTON
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
XXXXXX'X SKI SKOOL, INC.
BY /s/ A. Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxx (SEAL)
---------------------------- -----------------------------
TITLE: VICE PRESIDENT SECRETARY
Executed and Accepted at
Dallas, Texas
THE CIT GROUP/BUSINESS
CREDIT, INC.
By /s/ Xxx X. Xxxxxxxxxx
----------------------------------
Senior Vice President
53
EXHIBIT A
__ WEEKLY INVENTORY CONFIRMATION
__ QUARTERLY INVENTORY CONFIRMATION
From: XXXXXX'X SPORTING GOODS, INC.--SERVICES
X.X. XXXXXX AND CO., INC.
XXXXXX SPORTING GOODS CO., ALABAMA
XXXXXX SPORTING GOODS CO., ARIZONA
XXXXXX SPORTING GOODS CO., ARKANSAS
XXXXXX SPORTING GOODS CO., CALIFORNIA
XXXXXX SPORTING GOODS CO., COLORADO
XXXXXX SPORTING GOODS CO., FLORIDA
XXXXXX SPORTING GOODS CO., XXXXXXX
XXXXXX SPORTING GOODS CO., HAWAII
XXXXXX SPORTING GOODS CO., KANSAS
XXXXXX SPORTING GOODS CO., LOUISIANA
XXXXXX SPORTING GOODS CO., MICHIGAN
XXXXXX SPORTING GOODS CO., MINNESOTA
XXXXXX SPORTING GOODS CO., MISSOURI
XXXXXX SPORTING GOODS CO., NEVADA
XXXXXX SPORTING GOODS CO., NEW JERSEY
XXXXXX SPORTING GOODS CO., NEW MEXICO
XXXXXX SPORTING GOODS CO., NEW YORK
XXXXXX SPORTING GOODS CO., OHIO
XXXXXX SPORTING GOODS CO., OKLAHOMA
XXXXXX SPORTING GOODS CO., OREGON
XXXXXX SPORTING GOODS CO., SOUTH CAROLINA
OSHMAN SPORTING GOODS CO., TENNESSEE
XXXXXX SPORTING GOODS CO., TEXAS
XXXXXX SPORTING GOODS CO., UTAH
XXXXXX SPORTING GOODS CO., WASHINGTON
XXXXXX'X SKI SKOOL, INC.
Date: _____________ , 199 __
Address: 0000 Xxxxxxx Xxxx Confirmation No.:
Xxxxxxx, XX 00000
To: THE CIT GROUP/BUSINESS CREDIT, INC.
Two Lincoln Centre
Suite 200
0000 XXX Xxxxxxx
Xxxxxx, Xxxxx 00000
Attention: Regional Manager
Reference is made to that certain Amended and Restated Financing Agreement
between each of the undersigned and you, dated as of December 15, 1997, as may
be amended from time to time (herein the "Agreement"). Capitalized terms used
herein and not defined herein shall have the meanings ascribed to such terms in
the Agreement.
54
Pursuant to the Agreement, we have created in your favor a security interest in,
inter alia, all Inventory and Accounts as defined in the Agreement and all
proceeds resulting from the sale or other disposition thereof, as security for
the Obligations to you, however arising, all as more fully provided in the
Agreement.
We confirm that the said Inventory had, as of the date of the attached
schedule(s), in our judgment, substantially the dollar values, determined at
FIFO cost, by the retail inventory method, listed on the attached schedule(s),
and is owned by us free and clear of all claims and encumbrances (except for
Permitted Encumbrances). We agree that said Inventory will not be removed from
its existing locations except as permitted under the Agreement.
In the event that the box for quarterly report is checked on the first page, we
also hereby confirm our warranty and representation that all of said Inventory
(exclusive of all packaging and shipping materials) subject to normal shrinkage
adjustments was at the location(s) listed on the attached schedule(s) as of the
date of such schedule(s), (herein the "Inventory Locations") except for
Inventory in transit to and from any of such locations.
Your security interest attaches to (i) the Inventory, including any Inventory
returned to us, and to all other Inventory however acquired by us from time to
time in the future, which when acquired, shall, without further act, become
subject to your security interest and (ii) proceeds of the Inventory, all as
more fully provided in the Agreeement.
XXXXXX'X SPORTING GOODS, INC.--SERVICES
X.X. XXXXXX AND CO., INC.
XXXXXX SPORTING GOODS CO., ALABAMA
XXXXXX SPORTING GOODS CO., ARIZONA
XXXXXX SPORTING GOODS CO., ARKANSAS
XXXXXX SPORTING GOODS CO., CALIFORNIA
XXXXXX SPORTING GOODS CO., COLORADO
XXXXXX SPORTING GOODS CO., FLORIDA
XXXXXX SPORTING GOODS CO., XXXXXXX
XXXXXX SPORTING GOODS CO., HAWAII
XXXXXX SPORTING GOODS CO., KANSAS
XXXXXX SPORTING GOODS CO., LOUISIANA
XXXXXX SPORTING GOODS CO., MICHIGAN
XXXXXX SPORTING GOODS CO., MINNESOTA
XXXXXX SPORTING GOODS CO., MISSOURI
XXXXXX SPORTING GOODS CO., NEVADA
XXXXXX SPORTING GOODS CO., NEW JERSEY
XXXXXX SPORTING GOODS CO., NEW MEXICO
XXXXXX SPORTING GOODS CO., NEW YORK
XXXXXX SPORTING GOODS CO., OHIO
XXXXXX SPORTING GOODS CO., OKLAHOMA
XXXXXX SPORTING GOODS CO., OREGON
XXXXXX SPORTING GOODS CO., SOUTH CAROLINA
OSHMAN SPORTING GOODS CO., TENNESSEE
XXXXXX SPORTING GOODS CO., TEXAS
XXXXXX SPORTING GOODS CO., UTAH
XXXXXX SPORTING GOODS CO., WASHINGTON
XXXXXX'X SKI SKOOL, INC.
By ____________________________________________
Title:
Schedule to Inventory Confirmation
with
XXXXXX'X SPORTING GOODS, INC.--SERVICES
X.X. XXXXXX AND CO., INC.
XXXXXX SPORTING GOODS CO., ALABAMA
XXXXXX SPORTING GOODS CO., ARIZONA
XXXXXX SPORTING GOODS CO., ARKANSAS
XXXXXX SPORTING GOODS CO., CALIFORNIA
XXXXXX SPORTING GOODS CO., COLORADO
XXXXXX SPORTING GOODS CO., FLORIDA
XXXXXX SPORTING GOODS CO., XXXXXXX
XXXXXX SPORTING GOODS CO., HAWAII
XXXXXX SPORTING GOODS CO., KANSAS
XXXXXX SPORTING GOODS CO., LOUISIANA
XXXXXX SPORTING GOODS CO., MICHIGAN
XXXXXX SPORTING GOODS CO., MINNESOTA
XXXXXX SPORTING GOODS CO., MISSOURI
XXXXXX SPORTING GOODS CO., NEVADA
XXXXXX SPORTING GOODS CO., NEW JERSEY
XXXXXX SPORTING GOODS CO., NEW MEXICO
XXXXXX SPORTING GOODS CO., NEW YORK
XXXXXX SPORTING GOODS CO., OHIO
XXXXXX SPORTING GOODS CO., OKLAHOMA
XXXXXX SPORTING GOODS CO., OREGON
XXXXXX SPORTING GOODS CO., SOUTH CAROLINA
OSHMAN SPORTING GOODS CO., TENNESSEE
XXXXXX SPORTING GOODS CO., TEXAS
XXXXXX SPORTING GOODS CO., UTAH
XXXXXX SPORTING GOODS CO., WASHINGTON
XXXXXX'X SKI SKOOL, INC.
Inventory Locations and Dollar Values.
STREET ADDRESS CITY, COUNTY & STATE AMOUNT
----------------------- ---------------------------------- ------------------
----------------------- ---------------------------------- ------------------
----------------------- ---------------------------------- ------------------
----------------------- ---------------------------------- ------------------
----------------------- ---------------------------------- ------------------
----------------------- ---------------------------------- ------------------
Total:
------------------
THIS CONFIRMATION IS ONE OF A SERIES AND FOLLOWING CONFIRMATION NO.
____________________ DATED ________________________ , 199 __
AVAILABILITY REPORT # ____________
Date ___________
To: The CIT Group/Business Credit, Inc.
Two Lincoln Centre, Suite 200
0000 XXX Xxxxxxx
Xxxxxx, Xxxxx 00000
000-000-0000
1. ELIGIBLE INVENTORY
A. COST INVENTORY
Per Schedule Attached Dated __________ $__________
Per Confirmation No. ___ Dated _________
Less Reserves:
POS Markdown Reserve $__________
Seasonal Reserve--Hard Markdowns $__________
Slow Moving/Obsolete Reserve $__________
Outlet Inventory $__________
Accrued Shrinkage $__________
Highly Seasonal Goods $__________
Landlord Waivers $__________
Other (Off-site ski sales and demo racquets) $__________
Return to Vendor Merchandise $__________
Total Reserves $__________
Net Eligible Cost Inventory $__________
Rate of Advance: [60%] [65%, if Seasonal $__________
Inventory Advance Rate Period]
B. RETAIL INVENTORY
Per Schedule Attached Dated _________ $__________
Per Confirmation No. ___ Dated _________
Less Reserves:
Total Cost Ineligibles divided $__________
by (1-IMU%)
Net Eligible Retail Inventory $__________
Rate of Advance: 35% $__________
2. INVENTORY COLLATERAL VALUE
A. The Lesser of [60%] [65%, if Seasonal $__________
Inventory Advance Rate Period] of cost
or 35% of Retail
B. The Lesser of (A) or [$65,000,000 plus the $__________
Increment, if elected] [plus $15,000,000, if
Seasonal Overline Period] Line Cap
Total Inventory Collateral Value $__________
3. LOAN PLUS LETTER OF CREDIT EXPOSURE AND
AVAILABILITY RESERVE
Standby Letters of Credit $__________
Documentary Letters of Credit $__________
Availability Reserve for store closings,
if applicable $__________
Availability Reserve for sales tax
liabilities, if applicable $__________
Loan Balance Brought Forward $__________
Less: Cash Received $__________
Sub Total $__________
Plus: Other Additions $__________
Advances Since Last Report $__________
New Loan Balance $__________
NET AVAILABLE PER OUR BOOKS $__________
For the purpose of inducing The CIT Group/Business Credit, Inc. to grant loans
to us under the Financing Agreement, we hereby certify that in our judgment the
above stated cost and retail Inventory amounts are substantially true and
correct as of this report.
----------------------------------------------
(Client's Name)
By:
-------------------------------------------
(Authorized Signature)
EXHIBIT B
Original Bank Account
Letter Agreement
[See Attached]
EXHIBIT C
THIS IS NOT A XXXX OR A REQUEST FOR PAYMENT. IT IS A REQUEST
FOR CONFIRMATION OF YOUR ACCOUNT WITH US AS FOLLOWS:
-----------------------------------------------------
BALANCE AS OF: DUE FROM YOU
$
-----------------------------------------------------
This balance due from you as it appears on our books as of the date
indicated is shown above. If this amount is correct, please sign this letter in
the space provided below and return it DIRECTLY to Xxxx X. Xxxxxxx, Certified
Public Accountant. If not correct, please write DIRECTLY to XXXX X. XXXXXXX (not
to us) giving full details of the difference and mail in this envelope.
PLEASE NOTE THE DATE as of which we request confirmation. Purchases from
us and payments to us between that date and the date you received this letter
are not to be considered.
If you have any questions, please call: (000) 000-0000
Yours very truly,
THE INFORMATION SHOWN ABOVE IS CORRECT:
Signature:________________________________________________________________
TO:
Date December 15, 1997
To: THE CIT GROUP/BUSINESS CREDIT, INC.
TWO LINCOLN CENTRE
SUITE 200
0000 XXX XXXXXXX
XXXXXX, XXXXX 00000
AMENDED AND RESTATED GUARANTY OF BORROWERS
Gentlemen:
Reference is made to that certain Amended and Restated Financing Agreement
of even date herewith (herein the "Financing Agreement") and the Loan Documents
(as defined therein) (herein the "Agreements") between you and the undersigned
(sometimes referred to herein as the "Borrowers"). Each of the undersigned
hereby unconditionally jointly and severally guarantees and agrees to be liable
for the full and indefeasible payment and performance when due of all the
Obligations (as defined in the Financing Agreement) of the other Borrowers to
you, howsoever arising, whether direct or indirect, absolute or contingent,
secured or unsecured, whether arising under any of the Agreements as now written
or as amended or supplemented hereafter, or by operation of law or otherwise.
Further each of the undersigned agrees to pay to you on demand as part of the
Obligations the amount of all reasonable expenses (including reasonable
attorney's fees) incurred by you in collecting or attempting to collect any of
the other Borrowers' Obligations to you, whether from any of the other
Borrowers, or from any other obligor, or from the undersigned, or in realizing
upon any Collateral (as defined in the Financing Agreement); and agrees to pay
the Contract Rate of interest (as defined in the Financing Agreement) on all
amounts payable to you hereunder, even if such amount cannot be collected from
the other Borrowers. To the extent you receive payment on account of Obligations
guaranteed hereby, which payment is thereafter set aside or required to be
repaid by you in whole or in part, then, to the extent of any sum not finally
retained by you (regardless of whether such sum is recovered from you by a
trustee, or any other party acting for, on behalf of or through the other
Borrowers or a representative of any of the other Borrowers), the undersigned's
obligation to you under this Guaranty, as amended, modified or supplemented,
shall remain in full force and effect (or be reinstated) until the undersigned
have made payment to you therefor, which payment shall be due upon demand.
This Guaranty is executed as an inducement to you to make loans or advances
to the undersigned or otherwise to extend credit or financial accommodations to
the undersigned, or to enter into or continue a financing arrangement with the
undersigned, and is executed in consideration of your doing or having done any
of the foregoing. Each of the undersigned agrees that any of the foregoing shall
be deemed to have been done or extended by you in consideration of and in
reliance upon the execution of this Guaranty.
1
In connection with your rights and remedies hereunder, (x) each of the
undersigned waives all of the following as to itself: notice of acceptance of
this Guaranty, the making of loans or advances, or the extension of credit to
the undersigned, the amendment, execution or termination of any of the
Agreements or any other agreements between you and the undersigned,
and presentment, demand, protest, notice, as to its co-Borrowers, of protest,
notice of non-payment and all other notices to which the undersigned may be
entitled hereunder, and your reliance on this Guaranty; and each of the
undersigned also waives notice of, as to its co-Borrowers: changes in terms or
extensions of the time of payment, the taking and releasing of collateral or
guarantees (including the release of any of the undersigned) and the settlement,
compromise or release of any Obligations, and agrees that, as to each of the
undersigned, unless otherwise released by you under the Agreements or otherwise,
the amount of the Obligations shall not be diminished by any of the foregoing;
provided, however, that nothing herein is intended to absolve CITBC of any of
its obligations under any of the Agreements. Each of the undersigned also agrees
that you need not attempt to collect any Obligation from the other Borrowers or
other obligors or to realize upon any collateral, but may require the
undersigned to make immediate payment of Obligations to you when due or at any
time thereafter.
This Guaranty is absolute, unconditional and continuing, regardless of the
validity, regularity or enforceability of any of the Obligations or the fact
that a security interest or lien in any collateral or security therefor may not
be enforceable by you or may otherwise be subject to equities or defenses or
prior claims in favor of others or may be invalid or defective in any way and
for any reason, including any action, or failure to act, on your part, including
any failure to collect Obligations or to realize upon any collateral or security
therefor, or any part thereof, or for any delay in so doing, nor shall you be
under any obligation to take any action whatsoever with regard thereto. The
undersigned hereby waives the performance of each and every condition precedent
to your demand on the undersigned for performance under this Guaranty. Payment
by the undersigned shall be made to you at your office from time to time on
demand as Obligations become due, and one or more successive or concurrent
actions may be brought hereon against the undersigned either in the same action
in which any of the Clients are sued or in separate actions. In the event any
claim or action, or action on any judgment, based on this Guaranty, is made or
brought against the undersigned, the undersigned agree in any such claim or
action not to assert against you any set-off or counterclaim for, and, further,
the undersigned agrees not to deduct, set-off, or seek to counterclaim for, any
loss of contribution from any other guarantor. Further, if the undersigned seeks
to assert against you any set-off or counterclaim, or any set-off or
counterclaim derivative of any right of any Borrower, in each case relating to
the Agreement, nothing herein gives the undersigned any greater rights with
respect thereto than the undersigned or such Borrower would otherwise have under
the Agreements. Furthermore, in any litigation based on this Guaranty in which
you and the undersigned shall be adverse parties, the undersigned hereby waive
trial by jury. The undersigned hereby consent to the in personam jurisdiction
of the courts of the State of Texas. In the event that you bring any action or
suit in any court of record of the State of Texas or the Federal Government to
enforce any or all liabilities of the undersigned hereunder, service of process
may be made on the undersigned by mailing a copy of the summons to the
undersigned at the address below set forth.
2
All sums at anv time to the credit of the undersigned and any property of
the undersigned on which you at any time have a lien or security interest, of
which you at any time have possession, shall secure payment and performance of
all Obligations.
Subject to the last sentence of this paragraph, this Guaranty may be
terminated as to any one of the undersigned only as of any Anniversary Date (as
defined in the Financing Agreement) and then only upon actual receipt by one of
your officers of at least ninety (90) days prior written notice of termination
sent by registered or certified mail, return receipt requested; provided
however, that the undersigned if so terminating this Guaranty shall remain bound
hereunder, and this Guaranty shall continue in full force and effect, with
respect to any and all Obligations created or arising prior to the effective
date of such termination and with respect to any and all Obligations created or
arising prior to the effective date of such termination and with respect to any
and all extensions, renewals or modifications of said pre-existing Obligations.
Termination as to any one of the undersigned shall not affect the obligations of
any of the other undersigned, nor relieve the one giving such notice from
liability for any post termination collection expenses or interest. This is a
continuing agreement and written notice as above provided shall be the only
means of termination, absent your written consent, notwithstanding the fact that
for certain periods of time there may be no Obligations owing to you by the
undersigned. Notwithstanding anything to the contrary contained herein, the
liability of the undersigned hereunder shall automatically terminate upon
termination of the Financing Agreement and satisfaction in full of the
Obligations in accordance with Section 10 thereof.
Your books and records showing the account between you and the undersigned
shall be admissible in evidence in any action or proceeding as prima facie proof
of the items therein set forth. Your monthly statements rendered to the
undersigned shall be binding upon the undersigned to the extent set forth in the
Financing Agreement.
Each of the undersigned expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which it
may now or hereafter have against the other Borrower, or any other person
directly or contingently liable for the Obligations guaranteed hereunder, or
against or with respect to any of such other person's property (including,
without limitation, property collateralizing its Obligations to you) arising
from the existence or performance of this Guaranty.
THIS GUARANTY, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS AMONG THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. This Guaranty may not be modified
except in writing, and no course of dealing between you and any of the
undersigned shall be effective to change or modify this Guaranty. Your failure
to exercise any right hereunder shall not be construed as a waiver of the right
to exercise the same or any other right at any other time and from time to time
thereafter, and such rights shall be considered as cumulative rather than
alternative. No knowledge of any breach or other nonobservance by any of the
undersigned of
3
the terms and provisions of this Guaranty shall constitute a waiver thereof, nor
a waiver of any obligations to be performed by the undersigned hereunder.
This Guaranty may be assigned by you in accordance with the Financing
Agreement and shall be for your benefit and for the benefit of any of your
assignees or transferees in accordance with the Financing Agreement, and shall
cover any Obligations owed to you at the time of assignment or transfer as well
as any and all future Obligations owed by the undersigned to such assignee or
transferee.
This instrument is executed and given in addition to, and not in
substitution, reduction, replacement, or satisfaction of, any other endorsements
or guarantees of the Obligations, now existing or hereafter executed by any or
all of the undersigned or others in your favor.
When used in this agreement, all pronouns shall, wherever applicable, be
deemed to include the singular and plural as well as the masculine, feminine,
and neuter genders. This agreement shall inure to the benefit of you, your
successors and assigns in accordance with the Financing Agreement; shall be
binding jointly and severally upon the undersigned and upon the respective
successors and assigns of each of the undersigned; and shall pertain to the
undersigned and their respective successors and assigns.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of Texas.
This Guaranty is given in renewal, extension, modification and amendment
(and not in extinguishment or novation) of that certain Guaranty of Borrowers
dated August 31, 1992, executed by certain of the undersigned in favor of you
(the "Prior Guaranty"). The rights granted to you hereunder are given in
renewal, extension and modification of the rights previously granted to you in
the Prior Guaranty. Such prior rights are not extinguished hereby, and the
making and priority of such prior rights shall continue in full force and
effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4
IN WITNESS WHEREOF the undersigned have executed and delivered this
Guaranty effective as of the date first above set forth.
XXXXXX'X SPORTING GOODS, INC. - SERVICES
X.X. XXXXXX AND CO., INC.
XXXXXX SPORTING GOODS CO., ALABAMA
XXXXXX SPORTING GOODS CO., ARIZONA
XXXXXX SPORTING GOODS CO., ARKANSAS
XXXXXX SPORTING GOODS CO., CALIFORNIA
XXXXXX SPORTING GOODS CO., COLORADO
XXXXXX SPORTING GOODS CO., FLORIDA
XXXXXX SPORTING GOODS CO., XXXXXXX
XXXXXX SPORTING GOODS CO., HAWAII
XXXXXX SPORTING GOODS CO., KANSAS
XXXXXX SPORTING GOODS CO., LOUISIANA
XXXXXX SPORTING GOODS CO., MICHIGAN
XXXXXX SPORTING GOODS CO., MINNESOTA
XXXXXX SPORTING GOODS CO., MISSOURI
XXXXXX SPORTING GOODS CO., NEVADA
XXXXXX SPORTING GOODS CO., NEW JERSEY
XXXXXX SPORTING GOODS CO., NEW MEXICO
XXXXXX SPORTING GOODS CO., NEW YORK
XXXXXX SPORTING GOODS CO., OHIO
XXXXXX SPORTING GOODS CO., OKLAHOMA
XXXXXX SPORTING GOODS CO., OREGON
XXXXXX SPORTING GOODS CO., SOUTH CAROLINA
OSHMAN SPORTING GOODS CO., TENNESSEE
XXXXXX SPORTING GOODS CO., TEXAS
XXXXXX SPORTING GOODS CO., UTAH
XXXXXX SPORTING GOODS CO., WASHINGTON
XXXXXX'X SKI SKOOL, INC.
By: /s/ A. Xxxx Xxxxxxx
---------------------------
Title: VP-CAO
of each of the above Companies
Address: 0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attn: Chief Financial Officer
5
