EXHIBIT 10.1
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
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FLEET RETAIL FINANCE INC.
AGENT FOR
THE LENDERS REFERENCED HEREIN
THE SPORTS AUTHORITY, INC.
LEAD BORROWER
For
THE SPORTS AUTHORITY, INC.
THE SPORTS AUTHORITY FLORIDA, INC.
THE SPORTS AUTHORITY MICHIGAN, INC.
AUTHORITY INTERNATIONAL, INC.
THE BORROWERS
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August 3, 2000
TABLE OF CONTENTS
ARTICLE 1: - DEFINITIONS:
ARTICLE 2: - THE REVOLVING CREDIT:
2-1. Establishment of Revolving Credit......................................................... 25 ..
2-2. Initial Reserves. Changes to Reserves...................................................... 27 ..
2-3. Advances in Excess of Borrowing Base....................................................... 29 ..
2-4. Risks of Value of Collateral............................................................... 29 ..
2-5. Loan Requests.............................................................................. 29 ..
2-6. Making of Loans Under Revolving Credit..................................................... 31 ..
2-7. The Loan Account........................................................................... 32 ..
2-8. The Revolving Credit Notes................................................................. 33 ..
2-9. Payment of The Loan Account................................................................ 33 ..
2-10. Interest Rates. ........................................................................... 34 ..
2-11. Agent's Fee................................................................................ 35 ..
2-12. Line (Unused) Fee.......................................................................... 35 ..
2-13 Concerning Fees............................................................................ 35 ..
2-14. Agent's and Lenders' Discretion............................................................ 35 ..
2-15. Procedures For Issuance of L/C's........................................................... 36 ..
2-16. Fees For L/C's............................................................................. 37 ..
2-17. Concerning L/C's........................................................................... 37 ..
2-18. Changed Circumstances...................................................................... 39 ..
2-19. Increased Costs............................................................................ 40 ..
2-20 Lenders' Commitments....................................................................... 41 ..
2-21 Designation of Lead Borrower............................................................... 43 ..
ARTICLE 3: - CONDITIONS PRECEDENT:
3-1. Corporate Due Diligence.................................................................... 43 ..
3-2. Opinion.................................................................................... 44 ..
3-3. Additional Documents....................................................................... 44 ..
3-4. Officers' Certificates..................................................................... 44 ..
3-5. Representations and Warranties............................................................. 44 ..
3-6. All Fees and Expenses Paid................................................................. 44 ..
3-7. No Suspension Event........................................................................ 44 ..
3-8. No Adverse Change.......................................................................... 44 ..
3-9. Delivery of Notices........................................................................ 45 ..
ARTICLE 4: - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
4-1. Payment and Performance of Liabilities..................................................... 45 ..
4-2. Due Organization - Corporate Authorization - No Conflicts.................................. 45 ..
4-3. Trade Names................................................................................ 46 ..
4-4. Infrastructure............................................................................. 46 ..
4-5. Locations. Landlord Waivers................................................................ 47 ..
4-6. Title to Assets............................................................................ 49 ..
4-7. Indebtedness............................................................................... 49 ..
4-8. Subordinated Debt.......................................................................... 50 ..
4-9. Insurance Policies......................................................................... 50 ..
4-10. Licenses................................................................................... 51 ..
4-11. Leases..................................................................................... 51 ..
4-12. Requirements of Law........................................................................ 51 ..
.. ii ..
4-13. Maintain Collateral........................................................................ 51 ..
4-14. Pay Taxes.................................................................................. 51 ..
4-15. No Margin Stock............................................................................ 53 ..
4-16. ERISA...................................................................................... 53 ..
4-17. Hazardous Materials........................................................................ 53 ..
4-18. Litigation................................................................................. 54 ..
4-19. Dividends, Investments, Repurchases........................................................ 54 ..
4-20. Loans...................................................................................... 55 ..
4-21. Protection of Assets....................................................................... 55 ..
4-22. Line of Business........................................................................... 56 ..
4-23. Affiliate Transactions..................................................................... 56 ..
4-24. Additional Assurances...................................................................... 56 ..
4-25. Adequacy of Disclosure..................................................................... 57 ..
4-26. No Restrictions on Liabilities............................................................. 57 ..
ARTICLE 5: - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:
5-1. Maintain Records........................................................................... 57 ..
5-2. Access to Records.......................................................................... 58 ..
5-3. Immediate Notice to Agent ................................................................. 59 ..
5-4. Borrowing Base Certificates................................................................ 60 ..
5-5. Monthly Reports............................................................................ 60 ..
5-6. Quarterly Reports.......................................................................... 61 ..
5-7. Annual Reports............................................................................. 62 ..
5-8. Officers' Certificates..................................................................... 62 ..
5-9. Inventories, Appraisals, and Audits........................................................ 63 ..
5-10. Additional Financial Information........................................................... 64 ..
5-11. Financial Covenant based upon Collateral Availability; Minimum EBITDA...................... 64 ..
ARTICLE 6: - USE AND COLLECTION OF COLLATERAL:
6-1. Use of Inventory Collateral................................................................ 65 ..
6-2. Inventory Quality.......................................................................... 65 ..
6-3. Adjustments and Allowances................................................................. 65 ..
6-4. Validity of Accounts....................................................................... 65 ..
6-5. Notification to Account Debtors............................................................ 65 ..
ARTICLE 7: - CASH MANAGEMENT. PAYMENT OF LIABILITIES:
7-1 Depository Accounts........................................................................ 66 ..
7-2. Credit Card Receipts....................................................................... 66 ..
7-3. The Concentration, Blocked, and Operating Accounts......................................... 67 ..
7-4. Proceeds and Collections................................................................... 67 ..
7-5. Payment of Liabilities..................................................................... 68 ..
7-6. The Operating Account...................................................................... 69 ..
ARTICLE 8: - GRANT OF SECURITY INTEREST:
8-1. Grant of Security Interest................................................................. 69 ..
8-2. Extent and Duration of Security Interest................................................... 69 ..
8-3. Release of Real Estate Encumbrance......................................................... 70 ..
Article 9: - Agent As Borrowers' Attorney-In-Fact:
9-1. Appointment as Attorney-In-Fact............................................................ 70 ..
9-2. No Obligation to Act....................................................................... 70 ..
.. iii ..
ARTICLE 10: - EVENTS OF DEFAULT:
10-1. Failure to Pay Revolving Credit............................................................ 71 ..
10-2. Failure To Make Other Payments............................................................. 71 ..
10-3. Failure to Perform Covenant or Liability (No Grace Period)................................. 71 ..
10-4. Failure to Perform Covenant or Liability (Grace Periods)................................... 72 ..
10-5. Misrepresentation.......................................................................... 72 ..
10-6. Acceleration of Other Debt. Breach of Lease................................................ 72 ..
10-7. KMart Default. ............................................................................ 72 ..
10-8. Default Under Other Agreements............................................................. 72 ..
10-9. Uninsured Casualty Loss.................................................................... 73 ..
10-10. Judgment. Restraint of Business........................................................... 73 ..
10-11. Business Failure........................................................................... 73 ..
10-12. Bankruptcy................................................................................. 73 ..
10-13. Indictment - Forfeiture.................................................................... 74 ..
10-14. Foreign Proceeding. ................................................................. 74 ..
10-15. Challenge to Loan Documents................................................................ 74 ..
10-16. Change in Control.......................................................................... 74 ..
ARTICLE 11: - RIGHTS AND REMEDIES UPON DEFAULT:
11-1. Rights of Enforcement...................................................................... 75 ..
11-2. Sale of Collateral......................................................................... 75 ..
11-3. Occupation of Business Location............................................................ 76 ..
11-4. Grant of Nonexclusive License.............................................................. 76 ..
11-5. Assembly of Collateral..................................................................... 77 ..
11-6. Rights and Remedies........................................................................ 77 ..
ARTICLE 12: - NOTICES:
12-1. Notice Addresses........................................................................... 77 ..
12-2. Notice Given............................................................................... 78 ..
ARTICLE 13: - TERM:
13-1. Termination of Revolving Credit............................................................ 79 ..
13-2. Effect of Termination...................................................................... 79 ..
ARTICLE 14: - GENERAL:
14-1. Protection of Collateral................................................................... 79 ..
14-2. Successors and Assigns..................................................................... 79 ..
14-3. Severability............................................................................... 80 ..
14-4. Amendments. Course of Dealing............................................................. 80 ..
14-5. Power of Attorney.......................................................................... 80 ..
14-6. Application of Proceeds.................................................................... 81 ..
14-7. Costs and Expenses of Agent and Of Lenders................................................. 81 ..
14-8. Copies and Facsimiles...................................................................... 81 ..
14-9. Governing Law.............................................................................. 82 ..
14-10. Consent to Jurisdiction.................................................................... 82 ..
14-11. Indemnification............................................................................ 82 ..
14-12. Rules of Construction...................................................................... 83 ..
14-13. Intent..................................................................................... 84 ..
14-14. Right of Set-Off........................................................................... 84 ..
14-15. Maximum Interest Rate...................................................................... 85 ..
14-16. Waivers. .................................................................................. 85 ..
.. iv ..
EXHIBITS
1-1(A) : Permitted Real Estate Encumbrances
1-1(B) : Business Plan
1-1(C) : Local DDA
1-1(D) : Eligible Real Estate
2:2-5(b) : Written Confirmation of Borrowing Request
2:2-8 : Revolving Credit Note
3:3-3 : Additional Documents
4:4-2 : Related Entities
4:4-3 : Trade Names
4:4-5 : Locations, Leases, and Landlords
4:4-5(c)(1) : Form of Landlord Waiver
4:4-5(c)(2) : Landlord States
4:4-6 : Encumbrances
4:4-7 : Indebtedness
4:4-9 : Insurance Policies
4:4-11 : Capital Leases
4:4-14 : Taxes
4:4-18 : Litigation
5:5-4 : Borrowing Base Certificate
7:7-1 : DDA's.
7:7-2 : Credit Card Arrangements
.. v ..
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT Fleet Retail Finance Inc.
AGENT
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August 3, 2000
THIS AGREEMENT is made between
Fleet Retail Finance Inc., formerly known as BankBoston Retail Finance
Inc. (in such capacity, herein the "Agent"), a Delaware corporation with offices
at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, as agent for the benefit of the
"Lenders", on a pro rata basis, based upon each Lender's Commitment Percentage,
who are, at present, those financial institutions identified on the signature
pages of this Agreement and who in the future are those Persons (if any) who
become "Lenders" in accordance with the provisions of Section 2:2-20, below,
and
Each of the following corporations (collectively, and each
individually, the "Borrower"), each of which has its principal executive offices
at 0000 Xxxxx Xxxxx Xxxx 0, Xxxx Xxxxxxxxxx, Xxxxxxx 00000:
The Sports Authority, Inc. (A Delaware corporation)
The Sports Authority Florida, Inc. (A Florida corporation)
The Sports Authority Michigan, Inc. (A Michigan corporation)
Authority International, Inc. (A Delaware corporation)
and
The Sports Authority, Inc., a Delaware corporation with its principal
executive offices at 0000 Xxxxx Xxxxx Xxxx 0, Xxxx Xxxxxxxxxx, Xxxxxxx 00000 in
the additional capacity as the "Lead Borrower"
and
The Sports Authority, Inc., a Delaware corporation with its principal
.. 1 ..
executive offices at 0000 Xxxxx Xxxxx Xxxx 0, Xxxx Xxxxxxxxxx, Xxxxxxx
00000 in the additional capacity as the "Parent"
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
WITNESSETH:
WHEREAS, the Agent, the Lenders, the Borrower, the Lead Borrower, and
the Parent entered into a Loan and Security Agreement dated April 13, 1999,
which was amended by a First Amendment to Loan and Security Agreement dated
November 17, 1999, and by a Second Amendment to Loan and Security Agreement
dated December 14, 1999 (collectively, the "Existing Agreement"); and
WHEREAS, the Agent, the Lenders, the Borrower, the Lead Borrower, and
the Parent desire to amend and restate the Existing Agreement in its entirety.
NOW THEREFORE, it is hereby agreed that the Existing Agreement is
hereby amended and restated as follows:
WITNESSETH:
ARTICLE 1: - DEFINITIONS:
As herein used, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:
"5.25% Notes": The Parent's 5.25% Convertible Subordinated Notes Due
September 15, 2001.
"Accounts" and "Accounts Receivable" means "accounts" as defined in the
UCC, and also all: accounts, accounts receivable, credit card
receivables, and other forms of receivables and rights to
payment for or on account of goods sold or leased (including
payments due from credit card processors) or services
rendered, whether or not yet earned by performance, except
that "Accounts" does not include accounts receivable from
vendors in respect to the Borrower's advertising.
"ACH": Automated clearing house.
"Account Debtor": Has the meaning given that term in the UCC.
.. 2 ..
"Affiliate": With respect to any two Persons, a relationship in which
(a) one holds, directly or indirectly, not less than Twenty
Five Percent (25%) of the capital stock, beneficial interests,
partnership interests, or other equity interests of the other;
or (b) one has, directly or indirectly, the right, under
ordinary circumstances, to vote for the election of a majority
of the directors (or other body or Person who has those powers
customarily vested in a board of directors of a corporation);
or (c) not less than Twenty Five Percent (25%) of their
respective ownership is directly or indirectly held by the
same third Person.
"Agent": Is defined in the Preamble.
"Agent's Fee": Is defined in Section 2:2-11.
"Agent's Rights and Remedies": Is defined in Section 11:11-6.
"Availability": Is defined in Section 2:2-1(b)(i).
"Availability Reserves": Such reserves as the Agent from time to time
determines in the Agent's discretion as being appropriate to
reflect the impediments to the Agent's ability to realize upon
the Collateral. Without limiting the generality of the
foregoing, Availability Reserves may include (but are not
limited to) reserves based on the following:
(i) Rent for up to three (3) months for (x) any
location in a Landlord State for which a
Landlord's Waiver or subordination
(substantially in the form of EXHIBIT
4:4-5(c)(1)) has not been provided to the
Agent; (y) any location for which rent is
past due, any grace period has passed and a
notice of rent default has been received by
the Borrower; and (z) any location at any
time for which a Suspension Event is extant.
(ii) In store customer credits (not to exceed the
aggregate of this item, subject to
reasonable dilution, as reflected on and
calculatable from the Borrowers' books and
records).
(iii) Gift Certificates (not to exceed the
aggregate of this item, subject to
reasonable dilution, as reflected on and
calculatable from the Borrowers' books and
records).
(iv) Frequent Shopper Programs (not to exceed the
aggregate of this item, subject to
reasonable dilution, as reflected on and
calculatable from the Borrowers' books and
records).
.. 3 ..
(v) Layaways and Customer Deposits (not to
exceed the aggregate of this item, subject
to reasonable dilution, as reflected on and
calculatable from the Borrowers' books and
records).
(vi) Taxes and other governmental charges coming
due within the then next 3 months (which may
include taxes attributable for any period in
arrears or in advance), including, ad
valorem, personal property, and other taxes
which might have priority over the security
interests of the Agent in the Collateral.
(viii) L/C Landing Costs (not to exceed the
aggregate of this item, as reflected on the
Borrowers' books and records).
(Ix) Payables (based upon payables which are past
normal trade terms).
(x) Rent in the amount equal to three (3)
months' rent with respect to all leases
relating to the KMart Agreement for which
KMart has provided notice of a default
and/or notice that KMart has suffered
"Losses" (as defined in the KMart
Agreement), together with any amounts
asserted by KMart as being necessary to cure
such default or such Losses to the extent
applicable or capable of cure pursuant to
the terms of the KMart Agreement; provided,
however, that the foregoing shall in no
event be deemed or construed to limit the
rights and remedies of the Agent hereunder
upon the occurrence of an Event of Default
occasioned by a KMart Default.
"Bankruptcy Code": Title 11, U.S.C., as amended from time to time.
"Base": The Base Rate announced from time to time by Fleet National
Bank (or any successor in interest to Fleet National Bank). In
the event that said bank (or any such successor) ceases to
announce such a rate, "Base" shall refer to that rate or index
announced or published from time to time as the Agent, in good
faith, designates as the functional equivalent to said Base
Rate. Any change in "Base" shall be effective, for purposes of
the calculation of interest due hereunder, when such change is
made effective generally by the bank on whose rate or index
"Base" is being set. In all events, interest which is
determined by reference to Base (or any successor to Base)
shall be calculated on a 365/366 day year and actual days
elapsed.
.. 4 ..
"Base Margin Loan": Each Revolving Credit Loan while bearing
interest at the Base Margin Rate.
"Base Margin Rate": Base.
"Blocked Account": Is defined in Section 7:7-3.
"Borrower": Is defined in the Preamble.
"Borrowing Base": Is defined in Section 2:2-1(b)(ii).
"Business Day": Any day other than (a) a Saturday or Sunday; (b) any
day on which banks in Boston, Massachusetts or Miami, Florida,
generally are not open to the general public for the purpose
of conducting commercial banking business; or (c) a day on
which the Agent is not open to the general public to conduct
business.
"Business Plan": Borrowers' business plan annexed hereto as EXHIBIT
1-1(B) and any revision, amendment, or update of such business
plan, as long as such revision, amendment or update does not
reflect a material change in (a) the nature of the Borrowers'
business or (b) the assumptions upon which the business plan
annexed as EXHIBIT 1-1 was based.
"Capital Expenditures": The expenditure of funds or the incurrence of
liabilities which must be capitalized in accordance with GAAP.
"Capital Lease": Any lease which must be capitalized in accordance with
GAAP.
"Cash Management Conditions": Either (or both) of the following:
(a) A Suspension Event is extant.
(b) For a period of three (3) consecutive days within
the then most recent thirty (30) days, Collateral Availability
has been less than $35 Million or Availability has been less
than $25 Million.
.. 5 ..
"Change in Control": The acquisition, by any group of persons (within
the meaning of the Securities Exchange Act of 1934, as
amended) or by any Person, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange
Commission) of 20% or more of the issued and outstanding
capital stock of the Parent having the right, under ordinary
circumstances, to vote for the election of directors of the
Parent.
"Chattel Paper": Has the meaning given that term in the UCC.
"Collateral": Is defined in Section 8:8-1.
"Collateral Availability": Shall have the same meaning as Availability
as defined in Section 2-1(b)(i) except that for the purposes
of such calculation the definition of Borrowing Base shall be
based upon subsection 2-1(b)(ii)(B) only (i.e. the Loan
Ceiling shall be eliminated when making the calculation).
"Commitment" Subject to Section 2:2-20 and subject to adjustment based
upon any increase in the Loan Ceiling in accordance with Section 2-1(c) below,
as follows:
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LENDER DOLLAR COMMITMENT
COMMITMENT PERCENTAGE
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Fleet Retail Finance Inc. $29,000,000 8.6567
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Foothill Capital Corporation $30,000,000 8.9552
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Xxxxxx Financial, Inc. $25,000,000 7.4627
--------------------------------------------------------------------------------
Bank of America, N.A $35,000,000 10.4478
--------------------------------------------------------------------------------
Citizens Business Credit, a $15,000,000 4.4776
Division of Citizens Leasing
Corporation
--------------------------------------------------------------------------------
Fleet Capital Corporation $15,000,000 4.4776
--------------------------------------------------------------------------------
LaSalle Business Credit, Inc. $15,000,000 4.4776
--------------------------------------------------------------------------------
The CIT Group/Business Credit, $25,000,000 7.4627
Inc.
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.. 6 ..
--------------------------------------------------------------------------------
Congress Financial Corporation $25,000,000 7.4627
(Southwest)
--------------------------------------------------------------------------------
National City Commercial $25,000,000 7.4627
Finance, Inc.
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The Provident Bank $ 8,000,000 2.3881
--------------------------------------------------------------------------------
Senior Debt Portfolio $34,000,000 10.1493
--------------------------------------------------------------------------------
GMAC Business Credit, LLC $23,000,000 6.8657
--------------------------------------------------------------------------------
AmSouth Bank $18,000,000 5.3731
--------------------------------------------------------------------------------
IBJ Whitehall Business Credit $13,000,000 3.8806
Corporation
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"Concentration Account": Is defined in Section 7:7-3.
"Consolidated": When used to modify a financial term, test, statement,
or report, refers to the application or preparation of such
term, test, statement, or report (as appropriate) based upon
the consolidation, in accordance with GAAP, of the financial
condition or operating results of the corporations which
constitute the Parent and its Subsidiaries.
"Cost": The calculated cost of purchases, as determined from invoices
received by a Borrower and that Borrower's purchase journal or
stock ledger, based upon the Borrowers' accounting practices,
known to the Agent, which practices are in effect on the date
on which this Agreement was executed.
"Costs of Collection": Includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred
by the Agent's attorneys and all reasonable third party costs
incurred by the Agent or any Lender in the administration of
the Liabilities and/or the Loan Documents, including, without
limitation, reasonable costs and expenses associated with
travel on behalf of the Agent or any Lender, which costs and
expenses are directly or indirectly related to or in respect
of the Agent's and any Lender's: administration and management
of the Liabilities; negotiation, documentation, and amendment
of any Loan Document; or efforts to preserve, protect,
collect, or enforce the Collateral, the Liabilities, and/or
the Agent's Rights and Remedies and/or any of the Agent's
rights and remedies against or in respect of any guarantor or
other person liable in respect of the Liabilities (whether or
not suit is instituted in connection
.. 7 ..
with such efforts). Following the occurrence of any Event of
Default, "Costs of Collection" also includes all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred
by each Lender's attorneys (including, for such purpose, the
reasonably allocated cost of a Lender's in-house counsel), and
all reasonable costs incurred by each Lender in connection
with efforts to preserve, protect, collect, or enforce the
Collateral, the Liabilities, and/or the Agent's Rights and
Remedies. Notwithstanding the foregoing, the Agent's and each
Lender's ordinary overhead expenses do not constitute "Costs
of Collection". The Costs of Collection are Liabilities, and
at the Agent's option may bear interest as if such had been
lent, advanced, and credited by the Agent to, or for the
benefit of, the Borrowers.
"Credit Card Advance Rate": 80%
"DDA": Any checking or other demand daily depository account maintained
by any of the Borrowers.
"Deposit Account": Has the meaning given that term in the UCC.
"Documents": Has the meaning given that term in the UCC.
"Dollar Commitment": As provided in the Definition of "Commitment",
above.
"EBITDA": The Borrowers' consolidated earnings before interest, taxes,
depreciation, and amortization, exclusive of non-recurring
non-cash charges, each as determined in accordance with GAAP.
"Eligible Credit Card Receivables": Those amounts which from time to
time are due and owing to each Borrower by its credit card
processors.
"Eligible Inventory": Such of the Borrowers' Inventory, at such
locations, and of such types, character, qualities and
quantities, as the Agent in its discretion (reflecting the
Agent's customary practices) from time to time determines to
be acceptable for borrowing , as to which Inventory, the Agent
has a perfected security interest which is prior and superior
to all security interests, claims, and all Encumbrances other
than Permitted Encumbrances.
.. 8 ..
"Eligible Real Estate": Real Estate owned by a Borrower in fee simple
title or which is subject to a ground lease reasonably
acceptable to the Agent, as described on EXHIBIT 1-1(D),
annexed hereto, and which satisfies each of the following
conditions:
(a) the Agent has a perfected first-priority lien in such Real
Estate for the benefit of the Lenders (subject only to Permitted Real
Estate Encumbrances), and title insurance policies have been delivered
to the Agent for the benefit of the Lenders, which include such
endorsements, including zoning endorsements, as may be reasonably
required by the Agent; and
(b) such Real Estate has been appraised by a third party
appraiser reasonably acceptable to the Agent, at the cost of the
Borrower; and
(c) the Agent has received an environmental site assessment of
such Real Estate reasonably acceptable to the Agent; and
(d) such Real Estate is improved by fully constructed
buildings occupied by the Borrower (except as disclosed on EXHIBIT
1-1(D), or closed in accordance with the provisions of Section 4-5(d)),
and, unless otherwise provided in the Loan Documents, utilized for the
operation of a retail store and corporate offices.
To the extent that any Real Estate listed on EXHIBIT 1-1(D) does not
satisfy the above requirements as of the date of this Agreement, as indicated on
such Exhibit, the Agent shall agree to include such Real Estate as Eligible Real
Estate at such time as the Agent reasonably determines that each of the above
requirements has been satisfied.
"Employee Benefit Plan": As defined in ERISA.
"Encumbrance": Any security interest, mortgage, pledge, hypothecation,
lien, attachment, or charge of any kind (including any
agreement to give any of the foregoing); the interest of a
lessor under a Capital Lease; conditional sale or other title
retention agreement; sale of accounts receivable or chattel
paper; or other arrangement pursuant to which any Person is
entitled to any preference or priority with respect to the
property or assets of another Person or the income or profits
of such other Person or which constitutes an
.. 9 ..
interest in property to secure an obligation; each of the
foregoing whether consensual or non-consensual and whether
arising by way of agreement, operation of law, legal process
or otherwise.
"End Date": The date upon which both (a) all Liabilities have been paid
in full and (b) all obligations of any Lender to make loans
and advances and to provide other financial accommodations to
the Borrowers hereunder shall have been irrevocably
terminated.
"Environmental Laws": All of the following:
(a) Any and all federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or requirements which regulate or
relate to, or impose any standard of conduct or liability on
account of or in respect to environmental protection matters,
including, without limitation, Hazardous Materials, as are now
or hereafter in effect.
(b) The common law relating to
damage to Persons or property from Hazardous Materials.
"ERISA": The Employee Retirement Security Act of 1974, as amended.
"ERISA Affiliate": Any Person which is under common control with the
Borrowers within the meaning of Section 4001 of ERISA or is
part of a group which includes the Borrowers and which would
be treated as a single employer under Section 414 of the
Internal Revenue Code of 1986, as amended.
"Eurodollar Business Day": Any day which is both a Business Day and a
day on which the principal market in Eurodollars in which
Fleet National Bank participates is open for dealings in
United States Dollar deposits.
"Eurodollar Loan": Any Revolving Credit Loan which bears interest at a
Eurodollar Rate.
"Eurodollar Margin": (a) Through January 31, 2001: 225 basis
points.
(b) Commencing February 1, 2001 and on the
first day of each fiscal quarter thereafter, the
Eurodollar Margin shall be reset (commencing with the
Business Day after the Agent's receipt of the Pricing
Certificate (Section 5:5- 6(b)) for loans initiated
on or after the date when so set, that is to say
Eurodollar
.. 10 ..
contracts in effect at the time of
increases/decreases in margin will remain at the
margin originally utilized when the contract was
opened. The margin in effect at a given time will
apply to contracts opened at that time, and shall be
based upon the following pricing grid.
EURODOLLAR MARGIN PRICING GRID
----------------------------------------------------------
TIER AVERAGE QUARTERLY MARGIN
AVAILABILITY, FOR (BASIS
PRECEDING FISCAL POINTS)
QUARTER
----------------------------------------------------------
I average quarterly 175
Availability of greater than
or equal to $95 Million
----------------------------------------------------------
II average quarterly 200
Availability of greater than
or equal to $60 Million and
less than $95 Million
----------------------------------------------------------
III average quarterly 225
Availability of less than $60
Million
----------------------------------------------------------
The calculation of the average quarterly Availability, as set forth above, shall
be set forth in the Pricing Certificate and shall be confirmed by the Agent
based upon the following calculation:
Numerator: the sum of the dollar amounts of the actual
daily Availability for each calendar day of the
prior fiscal quarter of the Borrower
-------------------------------------------
Denominator: the actual number of calendar days in the
same prior fiscal quarter of the Borrower
"Eurodollar Offer Rate": That rate of interest (rounded upwards, if
necessary, to the next 1/100 of 1%) determined by the Agent to
be the prevailing rate per annum at which deposits in U.S.
Dollars are offered to Fleet National Bank, by first-class
banks in the Eurodollar market in which Fleet National Bank
participates at or about 10:00AM (Boston Time) Two (2)
Eurodollar Business Days before the first day of the Interest
Period for the subject Eurodollar Loan, for a deposit
approximately in the amount of the subject loan for a period
of time approximately equal to such Interest Period.
.. 11 ..
"Eurodollar Rate": That per annum rate (calculated on a 360 day year
and actual days elapsed) which is the aggregate of the
Eurodollar Offer Rate plus the Eurodollar Margin except that,
in the event that it is determined by the Agent that any
Lender may be subject to the Reserve Percentage, the
"Eurodollar Rate" shall mean, with respect to any Eurodollar
Loans then outstanding (from the date on which that Reserve
Percentage first became applicable to such loans), and with
respect to all Eurodollar Loans thereafter made, an interest
rate per annum equal to the sum of (a) plus (b), where:
(a) is the decimal equivalent of the following fraction:
Eurodollar Offer Rate
---------------------
1 minus Reserve Percentage
(b) the applicable Eurodollar Margin.
"Events of Default": Is defined in Article 10:. Each reference herein
to an "Event of Default" is to an Event of Default not then
duly waived by the Agent in the manner prescribed in Section
14:14-4(b). In the event of such due waiver, the so-waived
Event of Default shall be deemed never to have occurred (other
than with respect to any Costs of Collection incurred by any
Lender prior to such waiver).
"Existing Agreement": Is defined in the Recitals hereto.
"Fair Market Value": As to any Eligible Real Estate, the price at which
a willing seller would sell and a willing buyer would buy such
Eligible Real Estate in an arm's length transaction, without
time constraints, having reference to factors including but
not limited to prices paid for comparable properties, cash
flow, earnings, and prospects for future earnings and cash
flow. The fair market value of the Eligible Real Estate is set
forth in a separate letter between the Borrower and the Agent
as of the date hereof, and may hereafter be determined from
time to time in accordance with an independent appraisal
reasonably acceptable to the Agent obtained as set forth in
Section 5-9(d) hereof.
"Federal Funds Effective Rate": For any day, a fluctuating per annum
interest rate equal to the weighted average of the rates on
overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as
published on that date (or on the then next succeeding
Business Day, if not one) by the
.. 12 ..
Federal Reserve Bank of New York, provided that if such a rate
is not so published for a day which is a Business Day, Federal
Funds Effective Rate shall be the average of quotations for
such day on such transactions received by the Agent from three
federal funds brokers of recognized standing selected by the
Agent.
"Fiscal Year": The Borrowers' fiscal year ending in the January which
follows the year in question (e.g. "Fiscal Year 1999" refers
to the Borrowers' fiscal year ending in January, 2000).
"GAAP": Principles which are consistent with those promulgated or
adopted by the Financial Accounting Standards Board and its
predecessors (or successors) in effect and applicable to that
accounting period in respect of which reference to GAAP is
being made, provided, however, in the event of a Material
Accounting Change, then unless otherwise specifically agreed
to by the Agent, the Lead Borrower shall include, with its
monthly, quarterly, and annual financial statements a
schedule, certified by the Parent's chief financial officer,
on which the effect of such Material Accounting Change to the
statement with which provided shall be described.
"Hazardous Materials": Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances, petroleum products, which (as
to any of the foregoing) are defined or regulated as a
hazardous material in or under any Environmental Law and (b)
oil in any physical state.
"Indebtedness": All indebtedness and obligations of or assumed by any
Person on account of or in respect to any of the following:
(a) In respect of money borrowed (including any
indebtedness which is non-recourse to the credit of such
Person but which is secured by an Encumbrance on any asset of
such Person) whether or not evidenced by a promissory note,
bond, debenture or other written obligation to pay money.
(b) In connection with any letter of credit or
acceptance transaction (including, without limitation, the
face amount of all letters of credit and acceptances issued
for the account of such Person or reimbursement on account of
which such Person would be obligated).
(c) In connection with the sale or discount of
accounts receivable or chattel paper of such Person.
.. 13 ..
(d) On account of deposits or advances.
(e) As lessee under Capital Leases.
"Indebtedness" also includes:
(x) Indebtedness of others secured by an
Encumbrance on any asset of such Person, whether or
not such Indebtedness is assumed by such Person.
(y) Any guaranty, endorsement, suretyship or
other undertaking pursuant to which that Person may
be liable on account of any obligation of any third
party.
(z) The Indebtedness of a partnership or
joint venture in which such Person is a general
partner or joint venturer, for which indebtedness any
Borrower is liable.
"Indemnified Person": Is defined in Section 14:14-11.
"Interest Payment Date": With reference to:
(a) Each Eurodollar Loan: (i) Having an Interest
Period of one, two or three months, the last day of the
Interest Period relating thereto; the Termination Date, and
the End Date; (ii) Having an Interest Period of six months,
the last day of the third month of such Interest Period, the
last day of the Interest Period, the Termination Date and the
End Date.
(b) Each Base Margin Loan: the first day of each
month; the Termination Date; and the End Date.
"Interest Period": (a) With respect to each Eurodollar Loan: Subject to
Subsection (c), below, the period commencing on the date of
the making or continuation of, or conversion to, such
Eurodollar Loan and ending on the day which corresponds
numerically to such date, one, two, three or six months
thereafter, as the Lead Borrower may elect by notice to the
Agent.
(b) With respect to each Base Margin Loan: Subject to
Subsection (c), below, the period commencing on the date of
the making or continuation of or conversion to such Base
Margin Loan and ending on that date (i) as of which the
subject Base Margin Loan is converted to a Eurodollar Loan, as
the Lead Borrower may elect by notice to the Agent, or (ii) on
which the subject Base Margin Loan is paid by the Borrowers.
(c) The setting of Interest Periods is in all
instances subject to the following:
.. 14 ..
(i) Any Interest Period for a Base Margin
Loan which would otherwise end on a day which is not
a Business Day shall be extended to the next
succeeding Business Day.
(ii) Any Interest Period for a Eurodollar
Loan which would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding
Business Day, unless that succeeding Business Day is
in the next calendar month, in which event such
Interest Period shall end on the last Business Day of
the month during which the Interest Period ends.
(iii) Subject to Subsection (v), below, any
Interest Period applicable to a Eurodollar Loan,
which Interest Period begins on a day for which there
is no numerically corresponding day in the calendar
month during which such Interest Period ends, shall
end on the last Business Day of the month during
which that Interest Period ends.
(iv) Any Interest Period which would
otherwise end after the Termination Date shall end on
the Termination Date.
(v) No Interest Period applicable to a
Eurodollar Loan may be less than one (1) month.
(vi) The number of Interest Periods
applicable to Eurodollar Loans in effect at any one
time is subject to Section 2-9 hereof.
"Inventory": Means "inventory" as defined in the UCC and also all:
packaging, and shipping materials related to any of the
foregoing, and all names or marks affixed or to be affixed
thereto for identifying or selling the same; goods held for
sale or lease or furnished or to be furnished under a contract
or contracts of sale or service by the Borrowers; goods of
said description in transit: returned, repossessed and
rejected goods of said description; and all documents (whether
or not negotiable) which represent any of the foregoing.
"Inventory Advance Rate" : (a) 67.5% from the fiscal months January
through September, inclusive, of each fiscal year of the
Borrower.
(b) 70% from the fiscal months of October
through December, inclusive, of each fiscal year of the
Borrower.
"Inventory L/C" Any documentary L/C issued by the Issuer for the
account of a Borrower for the purchase of Inventory, the
expiry of which L/C is less than 61 days in the future, where
any documents which are issued with respect to the underlying
Inventory names the
.. 15 ..
Issuer as consignee or over which the Issuer has control.
Inventory Reserves": Such Reserves as may be established from time to
time by the Agent in the Agent's discretion (subject to
Section 2:2-2) with respect to the determination of a change
in the saleability, at retail, of the Eligible Inventory or a
change in such other factors as affect the market value of the
Eligible Inventory. Without limiting the generality of the
foregoing, Inventory Reserves may include (but are not limited
to) reserves based on changes in the following:
(i) Obsolescence (determined based upon
Inventory on hand beyond a given
number of days).
(ii) Seasonality.
(iii) Shrinkage (based upon the actual
amounts as reflected on the
Borrowers' stock ledger).
(iv) Imbalance.
(v) Inventory character.
(vi) Inventory composition
(vii) Inventory mix.
(viii) Markdowns (both permanent and point
of sale)
(ix) Retail markons and markups
inconsistent with prior period
practice and performance; industry
standards; current business plans;
or advertising calendar and planned
advertising events.
(x) Return to Vendors (based upon the
actual amounts reflected in the
Borrowers' stock ledger).
(xi) Damage (based upon the actual
amounts reflected in the Borrowers'
stock ledger).
"Issuer": The issuer of any L/C.
"KMart": Kmart Corporation, a Michigan corporation.
"KMart Agreement": The Lease Guaranty, Indemnification and
Reimbursement Agreement dated as of November 23, 1994 between
KMart and the Parent, as amended.
"KMart Condition Precedent": The execution and delivery of a written
agreement between KMart and the Agent (and the Borrowers, if
requested by Agent), in form and substance
.. 16 ..
satisfactory to Agent, which agreement must provide, among
other things, for the following:
(a) the provision of written notice by KMart to Agent
notifying the Agent of the occurrence of any event
which constitutes a breach of, or an "Event of
Default" within the meaning of, the KMart Agreement
at or prior to the time that any such notice is
furnished to any of the Borrowers.
(b) the opportunity (but not the obligation) for the
Agent, at its option, to cure any "Losses" or other
breaches of, or "Events of Default" within the
meaning of, the KMart Agreement.
(c) the unrestricted, commercially reasonable use by (x)
the Agent (including, without limitation, its
successors and assigns) in connection with its
exercise of its rights and remedies upon default or
(y) those to whom the Agent disposes of the
Collateral following the occurrence of an Event of
Default hereunder, or (z) any third party lender
which makes a loan or otherwise extends credit to the
Borrowers where the principal amount of same is used
to refinance the Liabilities hereunder, of those
"Premises" within the meaning of the KMart Agreement,
as the Agent or such person may determine to be
appropriate, including, without limitation, with
respect to the sale or other disposition of
Collateral thereupon.
The KMart Condition Precedent shall not be deemed satisfied
until such time as the Agent notifies the Lead Borrower in
writing that said written agreement between the Agent and
KMart (and the Borrowers if requested by Agent) has been duly
executed and delivered by all parties thereto to the
satisfaction of the Agent.
"KMart Default": The occurrence of any event which constitutes a
breach of, or an "Event of Default" within the meaning of, the
KMart Agreement or which, solely with the giving of any
requisite notice, would constitute an "Event of Default"
within the meaning of the KMart Agreement, or which, with the
passage of time and/or the incurrence of a loss by KMart on
account thereof would give KMart the right to exercise any
remedy to which KMart is or may become entitled under the
KMart Agreement. An occurrence may constitute a "KMart
Default" notwithstanding that KMart has not taken any action
on account of such occurrence. Upon the satisfaction of the
KMart Condition Precedent (but not otherwise) the definition
hereunder of a KMart Default shall be amended to read as
follows:
The occurrence of any event which constitutes a
breach of, or an "Event of
.. 17 ..
Default" within the meaning of, the KMart Agreement;
provided, however, that: (i) KMart has provided a
notice of such breach of, or "Event of Default"
within the meaning of, the KMart Agreement, and (ii)
the occurrence of any event which constitutes such
breach of, or "Event of Default" within the meaning
of, the KMart Agreement affords KMart with rights and
remedies under the KMart Agreement which, in the
aggregate, relate in any way to more than Five (5)
Premises (as defined in the KMart Agreement) during
any one (1) calendar year. The Lead Borrower in all
events shall make timely arrangements reasonably
satisfactory to the Agent for the relocation of
Collateral from any such Premises to a location
otherwise permitted under this Agreement.
"L/C": Any letter of credit, the issuance of which is procured by the
Agent for the account of any Borrower and any acceptance made
on account of such letter of credit.
"L/C Landing Costs": To the extent not included in the Stated Amount of
an L/C, customs, duty, freight, and other out-of-pocket costs
and expenses which will be expended to "land" the Inventory,
the purchase of which is supported by such L/C.
"Landlord State": Those States listed on EXHIBIT 4:4-5(c)(2), annexed
hereto.
"Lead Borrower": Is defined in the Preamble.
"Lease": Any lease or other agreement, no matter how styled or
structured, pursuant to which any of the Borrowers is entitled
to the use or occupancy of any space.
"Leasehold Interest": Any interest of the Borrowers as lessee under any
Lease.
"Lenders": Defined in the Preamble to this Agreement
"Liabilities" (in the singular, "Liability"):Means all and each of the
following which arises out of this or any of the other Loan
Documents, whether now existing or hereafter arising:
(a) Any and all direct and indirect liabilities,
debts, and obligations of the Borrowers to the Agent or any
Lender, each of every kind, nature, and description.
(b) Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or amount now or
hereafter owing by the Borrowers to the Agent or
.. 18 ..
any Lender (including all future advances whether or not made
pursuant to a commitment by the Agent or any Lender), whether
or not any of such are liquidated, unliquidated, primary,
secondary, secured, unsecured, direct, indirect, absolute,
contingent, or of any other type, nature, or description, or
by reason of any cause of action which the Agent or any Lender
may hold against the Borrowers.
(c) All notes and other obligations of the Borrowers
now or hereafter assigned to or held by the Agent or any
Lender, each of every kind, nature, and description.
(d) All interest, fees, and charges and other amounts
which may be charged by the Agent or any Lender to the
Borrowers and/or which may be due from the Borrowers to the
Agent or any Lender from time to time.
(e) All costs and expenses incurred or paid by the
Agent or any Lender in respect of any agreement between the
Borrowers and Agent or any the Lender or instrument furnished
by the Borrowers to the Agent or any Lender (including,
without limitation, Costs of Collection, attorneys' reasonable
fees, and all court and litigation costs and expenses).
(f) Any and all covenants of the Borrowers to or with
the Agent or any Lender and any and all obligations of the
Borrowers to act or to refrain from acting in accordance with
any agreement between the Borrowers and the Agent or any
Lender or instrument furnished by the Borrowers to the Agent
or any Lender.
(g) Each of the foregoing as if each reference to the
"Agent or any Lender" therein were also to each Affiliate of
the Agent or any Lender.
"Line (Unused) Fee": Is defined in Section 2:2-12.
"Loan Account": Is defined in Section 2:2-7.
"Loan Ceiling": $335,000,000.00.
"Loan Documents": This Agreement, each instrument and document executed
and/or delivered as contemplated by Article 3:, below, and
each other instrument or document from time to time executed
and/or delivered in connection with the arrangements
contemplated hereby, including, without limitation, any
transaction which arises out of any cash management,
depository, or letter of credit, provided by the Agent or any
Lender or any Affiliate of the Agent or any Lender on account
of or in respect to the
.. 19 ..
arrangements contemplated herein, as each may be amended from
time to time.
"Local DDA": Those local demand depository accounts maintained by one
or more of the Borrowers for specified purposes, all as
particularly detailed in EXHIBIT 1-1(C) annexed hereto, as
such exhibit may be amended from time to time by the
Borrowers.
"Material Accounting Change": Any change in GAAP applicable to
accounting periods subsequent to the Borrowers' Fiscal Year
most recently completed prior to the execution of this
Agreement, which change has a material effect on the
Borrowers' financial condition or operating results, as
reflected on financial statements and reports prepared by or
for the Borrowers, when compared with such condition or
results as if such change had not taken place.
"Material Adverse Change": Any event, fact, circumstance, change in, or
effect on, the business of, any Borrower which, individually
or in the aggregate or on a cumulative basis with any other
circumstances, changes in, or effects on, the Borrowers or the
Collateral, taken as a whole which:
(a) Is, or would reasonably be expected to be,
materially adverse to the business, operations, assets or
liabilities (including, without limitation, contingent
liabilities), results of operations or the financial condition
of any Borrower.
(b) Would reasonably be expected to materially
adversely affect the ability of the Borrowers taken as a whole
to operate or conduct business in all material respects in the
manner in which they are currently operated or conducted by
the Borrowers taken as a whole or to perform their obligations
under the Loan Documents .
(c) Would reasonably be expected to have a material
adverse effect or result in an adverse change in the value,
enforceability, collectability or the nature of the
Collateral.
"Material Adverse Effect": A result, consequence, or outcome which
constitutes a Material Adverse Change.
"Maturity Date": September 30, 2003.
"Net Proceeds" : The proceeds received by any Borrower on account of
any sale and leaseback transaction engaged in by that Borrower
or mortgaging of any of the real
.. 20 ..
estate of that Borrower, net, in each instance, of the costs
of such transaction.
"Operating Account": Is defined in Section 7:7-3.
"Parent": Defined in the Preamble.
"Participant": Is defined in Section 14:14-14, hereof.
"Payment Intangibles": All general intangibles (as defined in the UCC)
which consist of rights to payment from third parties on
account of the sale of Inventory, including, without
limitation, all rights to payment from any credit card issuer
or processor.
"Permitted Encumbrances": The following:
(a) Encumbrances in favor of the Agent.
(b) Those Encumbrances (if any) listed on EXHIBIT
4:4-6, annexed hereto.
(c) Liens securing the payment of taxes, either not
yet overdue or the validity of which are being contested as
permitted by Section 4:4-14(d); non-consensual statutory liens
(other than liens securing the payment of taxes) arising in
the ordinary course of Borrowers' business to the extent: such
liens secure indebtedness which is not overdue or such liens
secure indebtedness relating to claims or liabilities which
are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or are being
contested in good faith by appropriate proceedings diligently
pursued and available to Borrowers, in each instance prior to
the commencement of foreclosure or other similar proceedings
and with respect to which adequate reserves have been set
aside on the Borrowers' books (provided, however, the
inclusion of any of the foregoing as "Permitted Encumbrances"
shall not affect their respective relative priorities vis a
vis the security interests created herein), zoning
restrictions, easements, licenses, covenants and other
restrictions affecting the use of real property.
(d) Deposits under workmen's compensation,
unemployment insurance and social security laws, or to secure
the performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, or to secure
statutory obligations or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds arising in the
ordinary course of business.
(e) Landlord's liens by operation of law where
waivers have not been obtained.
.. 21 ..
"Permitted Investment": An investment which fulfills any of the
following numbered criteria:
(1) Debt entitled to the full faith and
credit of the United States with maturities not to
exceed ninety-one (91) days.
(2) Banker's Acceptances, savings accounts,
"Repo's", or Certificates of Deposit entitled to the
full faith and credit of the Agent or any bank whose
most senior debt has been assigned an investment
grade credit rating by a nationally recognized credit
rating service.
(3) Commercial Paper rated A-2/P-2 or
better.
(4) Money market funds (so-called) whose
investments are limited to those investments
described in (1) through and including (3) of this
Definition, or which otherwise comply with the risk
limiting conditions of Rule 2a-7 under the Investment
Company Act of 1940, as amended.
"Permitted Real Estate Encumbrances": Any of the following:
(a) Encumbrances for taxes not yet due and payable or
which are being contested in good faith by
appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the
books of the Borrowers in accordance with GAAP.
(b) Carrier's, warehousemen's, mechanics', material
men's, repairmen's or similar Encumbrances arising in
the ordinary course of business which are not overdue
for a period of more than thirty (30) days or that
are being contested in good faith by appropriate
proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the
Borrowers in accordance with GAAP.
(c) Deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like
nature in the ordinary course of business.
(d) Easements, rights of way, restrictions and other
similar encumbrances described on the Title Policies
furnished to the Agent on the date hereof, as listed
on EXHIBIT 1-1(A), annexed hereto, and such other
easements, rights of way, restrictions and other
similar encumbrances that do not adversely affect the
.. 22 ..
use or development of the Real Estate.
"Permitted Repurchases": Defined in Section 4:4-19(b).
"Person": Any natural person, and any corporation, limited liability
company, trust, partnership, joint venture, or other
enterprise or entity.
"Pricing Certificate": Defined in Section 5:5-6(b).
"Proceeds": Includes, without limitation, "Proceeds" as defined in the
UCC (defined below), and each type of property described in
Section 8:8-1 hereof.
"Real Estate": The land, together with the buildings, structures,
parking areas, and other improvements thereon, owned in fee by
the Borrower or subject to a ground lease in favor of the
Borrower (or guarantor acceptable to the Agent), as described
on EXHIBIT 1-1(D), annexed hereto, including all easements,
rights-of-way, and similar rights relating thereto and all
leases, tenancies, and occupancies thereof.
"Real Estate Advance Rate": Fifty percent (50%).
"Real Estate Cap": Twenty-five percent (25%) of the sum of the amounts
set forth in Subsections 2-1(b)(ii)(B)(I)(II) and (III),
below.
"Receipts": All Payment Intangibles, cash, cash equivalents, checks,
and credit card slips and receipts as arise out of the sale of
the Collateral.
"Receivables Collateral": That portion of the Collateral which consists
of the Borrowers' Accounts, Accounts Receivable, Chattel
Paper, and Payment Intangibles.
"Related Entity": (a) Any corporation, limited liability company,
trust, partnership, joint venture, or other enterprise which:
is a parent, brother-sister, Subsidiary or Affiliate of any
Borrowers; could have such enterprise's tax returns or
financial statements consolidated with the Borrowers'; could
be a member of the same controlled group of corporations
(within the meaning of Section 1563(a)(1), (2) and (3) of the
Internal Revenue Code of 1986, as amended from time to time)
of which any Borrower is a
.. 23 ..
member; controls or is controlled by any Borrower or by any
Affiliate of any Borrower.
(b) Any Affiliate.
"Requirement of Law": As to any Person:
(a)(i) All statutes, rules, regulations, orders, or
other requirements having the force of law and (ii) all court
orders and injunctions, arbitrator's decisions, and/or similar
rulings, in each instance ((i) and (ii)) of or by any federal,
state, municipal, and other governmental authority, or court,
tribunal, panel, or other body which has or claims
jurisdiction over such Person, or any property of such Person,
or of any other Person for whose conduct such Person would be
responsible.
(b) That Person's charter, certificate of
incorporation, articles of organization, and/or other
organizational documents, as applicable; and (c) that Person's
by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.
"Reserve Percentage": The decimal equivalent of that rate applicable to
a Lender under regulations issued from time to time by the
Board of Governors of the Federal Reserve System for
determining the maximum reserve requirement of that Lender
with respect to "Eurocurrency liabilities" as defined in such
regulations. The Reserve Percentage applicable to a particular
Eurodollar Loan shall be based upon that in effect during the
subject Interest Period, with changes in the Reserve
Percentage which take effect during such Interest Period to
take effect (and to consequently change any interest rate
determined with reference to the Reserve Percentage) if and
when such change is applicable to such loans.
"Reserves": All (if any) Availability Reserves and Inventory Reserves.
"Revolving Credit": Is defined in Section 2:2-1.
"Revolving Credit Note": Is defined in Section 2:2-8.
"Revolving Credit Loan": A term of convenience which refers to so much
of the unpaid principal balance of the Loan Account as bears
the same rate of interest for the same Interest Period. (See
Section 2:2-10(c)).
.. 24 ..
"SEC": The Securities and Exchange Commission.
"Stated Amount": The maximum amount for which an L/C may be honored.
"Subsidiary" or "Subsidiaries": (a) Any corporation or limited
liability company of which more than fifty percent (50%) of
the issued and outstanding securities having ordinary voting
power for the election of directors or membership interests is
owned or controlled, directly or indirectly, by a Person
and/or by one or more of its Subsidiaries, and (b) any
partnership in which a Person and/or one or more Subsidiaries
of such Person shall have a general partnership interest or
any other interest (whether in the form of voting or
participation in profits or capital contribution), in each
case, of more than fifty percent (50%).
"Suspension Event": Any occurrence, circumstance, or state of facts
which (a) is an Event of Default; or (b) would become an Event
of Default if any requisite notice were given and/or any
requisite period of time were to run and such occurrence,
circumstance, or state of facts were not absolutely cured
within any applicable grace period.
"Termination Date": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 10:10-12 hereof;
or (c) date set by notice by the Agent to the Lead Borrower,
which notice sets the Termination Date on account of the
occurrence of any Event of Default other than as described in
Section 10:10-12 hereof; or (d) that date (which shall be a
Business Day which is not less than Ten (10) Business Days
after the date when notice is given) set by irrevocable
written notice by the Lead Borrower to the Lender.
"UCC": The Uniform Commercial Code as presently in effect in New York.
ARTICLE 2: - THE REVOLVING CREDIT:
2-1. Establishment of Revolving Credit.
(a) The Lenders hereby establish a revolving line of credit
(the "Revolving Credit") in the Borrowers' favor pursuant to which each Lender,
subject to, and in accordance with, this Agreement, acting through the Agent,
shall make loans and advances and otherwise provide financial accommodations to
and for the account of the Borrowers as provided herein, in each instance equal
to that Lender's Commitment Percentage of Availability, up to the maximum amount
of that Lender's Dollar
.. 25 ..
Commitment. The amount available for borrowing under the Revolving Credit shall
be determined by the Agent by reference to Availability, as determined by the
Agent from time to time.
(b) As used herein, the following terms have the
following meanings:
(i) "Availability" refers at any time to the
result of the following:
(A) Borrowing Base.
Minus
(B) The then unpaid principal balance of
the Loan Account.
Minus
(C) The then Stated Amount of all then
outstanding L/C's.
Plus
(D) 35% of the then Stated Amount of
all then outstanding Inventory
L/C's.
(ii) "Borrowing Base" refers at any time to the
lesser of 2:2-1(b)(ii)(A) or
2:2-1(b)(ii)(B), as follows, provided that
in no event shall the amount advanced
pursuant to Section 2:2-1(b)(ii)(B)(IV)
exceed twenty percent (20%) of the total
Borrowing Base:
(A) is the Loan Ceiling.
(B) is the result of the following:
(I) The Credit Card Advance
Rate multiplied by the
aggregate face amount of
Eligible Credit Card
Receivables.
Plus
(II) The lesser of (i) the
Inventory Advance Rate
multiplied by the Cost of
Eligible Inventory (net of
Inventory Reserves), or
(ii) that percentage
determined by the Agent
which is 85% of the
appraised value of Eligible
Inventory, which appraised
value shall be determined
as a percentage of the
total Cost of Eligible
Inventory.
Minus
(III) The then aggregate of the
Availability Reserves.
Plus
(IV) the lesser of (i) the Fair
Market Value of Eligible
Real Estate multiplied by
the Real Estate Advance
Rate, or (ii) the Real
Estate Cap.
(c) Availability shall be based upon Borrowing Base
Certificates furnished as
.. 26 ..
provided in Section 5:5-4 hereof.
(d) The proceeds of borrowings under the Revolving Credit
shall be used solely for the following purposes:
(i) For on-going working capital requirements of
the Borrowers.
(ii) For Permitted Repurchases.
(iii) General corporate purposes.
2-2. Initial Reserves. Changes to Reserves.
(a) At the execution of this Agreement, the only Reserves
are as follows:
(i) Inventory Reserves: As reflected on the
initial Borrowing Base Certificate furnished to the Agent.
(ii) Availability Reserves: As reflected on the
initial Borrowing Base Certificate furnished to the Agent.
(b) Subject to Section 2:2-2(c), the Agent shall provide
not less than five Business Days prior notice to the Lead Borrower of the
establishment of any Reserve (other than those established at the execution of
this Agreement), or change to a then existing Reserve.
(i) The establishment or change to any
Availability Reserve shall be based on objectively determinable
criteria and data as set forth in the Definition of "Availability
Reserve".
(ii) The establishment or change to any Inventory
Reserve shall be based on those criteria which the Agent, acting in a
commercially reasonable manner, determines to be those which an
inventory appraiser would customarily apply to determine the
liquidation value of Inventory of types similar to those of the
Borrowers.
(c) In the event that the establishment or change to any
Reserve would impose an immediate payment obligation on the Borrowers pursuant
to Section 2:2-9(b) (which requires the Borrowers to pay the Agent that amount,
from time to time, which is necessary so that the unpaid balance of the Loan
Account does not exceed the Borrowing Base), such establishment or change shall
not take place until the earlier of (x) five (5) Business Days after such change
or establishment otherwise would take place or (y) that date on which such
change or establishment would not so impose an immediate payment obligation.
(d) In the event that the establishment or change to any
Inventory Reserve as and when provided in this Section 2-2 would impose an
immediate payment obligation on the Borrowers pursuant to Section 2:2-9(b)
(which requires the Borrowers to pay the Agent that amount, from time to time,
which is necessary so that the unpaid balance of the Loan Account does not
exceed the Borrowing Base), and the Borrowers: (x) are either unable or
unwilling to satisfy the immediate payment obligation imposed pursuant to
Section 2-9(b) and (y) have notified the Agent prior to the date required for
payment
.. 27 ..
(as set forth in Section 2-2(c) above), that the Borrowers reasonably and in
good faith have determined that the Agent's establishment or change to any
Inventory Reserve is unreasonable and/or unwarranted based on the Borrowers'
belief as to the appraised value of the Eligible Inventory ( which appraised
value shall be determined as a percentage of the total Cost of the Eligible
Inventory), then the determination of the applicability of any changes in such
Inventory Reserves shall be based upon the results of an appraisal of the
Eligible Inventory. If the Agent has obtained an appraisal within the thirty
(30) day period prior to the effective date of the establishment or change to
any Inventory Reserve and such appraisal supports the Inventory Reserves
required by the Agent no further appraisal shall be required hereunder and
Borrowers' failure to make any payment required pursuant to Section 2-2(c) shall
be an Event of Default. If no appraisal was performed during the prior thirty
(30) day period a new appraisal of the Eligible Inventory shall be performed (at
the sole cost and expense of the Borrowers and as otherwise provided in this
Agreement) as expeditiously as is reasonably practicable to enable the Agent to
determine and otherwise confirm whether the Agent's establishment or change to
any Inventory Reserve was reasonable and warranted. The Agent and the Borrowers
further acknowledge and agree as follows:
(i) Pending completion of an appraisal under this
Section 2-2(d) or payment by the Borrowers of any amount
required pursuant to Section 2-2(c) on account of the Agent's
establishment or change to the Inventory Reserve (either upon
completion of such appraisal or prior thereto), a Suspension
Event shall be deemed to have occurred and to be continuing.
(ii) In the event that the Agent reasonably
determines (based upon the results of an appraisal under this
Section 2-2(d)) that the establishment or change to any
Inventory Reserve should be removed or otherwise adjusted in
favor of the Borrowers (with the result that the provisions of
Section 2-9(b) would no longer require the Borrowers to make
any payment in order for the unpaid balance of the Loan
Account to not exceed the Borrowing Base, or if in the event
of a partial adjustment in favor of the Borrowers and the
Borrowers make any payment then required pursuant to Section
2- 2(c)), then the Agent shall so remove or adjust the
Inventory Reserve and the Suspension Event shall be deemed to
be cured.
(iii) In the event that the Agent reasonably
determines (based upon the results of an appraisal under this Section
2-2(d)) that the Agent's prior decision concerning the establishment or
changes to the Inventory Reserves was reasonable and warranted, and the
Borrowers (after notice by Agent to the Borrowers of such
determination) make immediate payment required pursuant to Section
2-9(b) on account of the Agent's establishment or change (or further
change, based upon the results of such appraisal) to the Inventory
Reserve, then the Suspension Event shall be deemed to be cured.
.. 28 ..
(iv) In the event that the Agent reasonably
determines (based upon the results of an appraisal under this Section
2-2(d)) that the Agent's prior decision concerning the establishment or
changes to the Inventory Reserves was reasonable and warranted, and the
Borrowers (after notice by Agent to the Borrowers of such
determination) fail to make immediate payment required pursuant to
Section 2-9(b) on account of the Agent's establishment or change (or
further change, based upon the results of such appraisal) to the
Inventory Reserve, then the occurrence of such event shall constitute
an Event of Default.
2-3. Advances in Excess of Borrowing Base. No Lender has any obligation
to make any loan or advance, or otherwise to provide any credit for the benefit
of the Borrowers such that aggregate of the balance of the Loan Account plus the
stated amount of all then outstanding L/C's exceeds the Borrowing Base. The
making of loans, advances, and credits and the providing of financial
accommodations in excess of the Borrowing Base is for the benefit of the
Borrowers and does not affect the obligations of the Borrowers hereunder; such
loans, advances, credits, and financial accommodations constitute Liabilities.
The making of any such loans, advances, and credits and the providing of
financial accommodations, on any one occasion such that the Borrowing Base is
exceeded shall not obligate any Lender to make any such loans, credits, or
advances or to provide any financial accommodation on any other occasion or to
permit such loans, credits, or advances to remain outstanding.
2-4. Risks of Value of Collateral. The Agent's reference to a given
asset in connection with the making of loans, credits, and advances and the
providing of financial accommodations under the Revolving Credit and/or the
monitoring of compliance with the provisions hereof shall not be deemed a
determination by the Agent or any Lender relative to the actual value of the
asset in question. All risks concerning the collectability of the Receivables
Collateral and the saleability of the Borrowers' Inventory are and remain upon
the Borrowers. All Collateral secures the prompt, punctual, and faithful
performance of the Liabilities whether or not relied upon by the Agent or by any
Lender in connection with the making of loans, credits, and advances and the
providing of financial accommodations under the Revolving Credit.
2-5. Loan Requests.
(a) Subject to the provisions of this Agreement, a loan or
advance under the Revolving Credit duly and timely requested by the Lead
Borrower shall be made pursuant hereto, provided that:
(i) Borrowing Base will not be exceeded; and
(ii) The Revolving Credit has not been suspended
as provided in Section 2:2-5(g).
.. 29 ..
(b) Subject to the provisions of this Agreement, the Lead
Borrower may request a Revolving Credit Loan and elect an interest rate and
Interest Period to be applicable to that Revolving Credit Loan by giving the
Agent written or telephone notice (confirmed in writing in the form of EXHIBIT
2:2-5(b)) no later than the following:
(i) If such Revolving Credit Loan is to be or is to
be converted to a Base Margin Loan: By Noon on the Business Day on
which the subject Revolving Credit Loan is to be made or is to be so
converted. Base Margin Loans requested by the Borrowers, other than
those resulting from the conversion of a Eurodollar Loan, shall not be
less than $10,000.00.
(ii) If such Revolving Credit Loan is to be, or is to
be continued as, or converted to, a Eurodollar Loan: By 1:00PM on the
third Eurodollar Business Day before the end of the then applicable
Interest Period. Eurodollar Loans and conversions to Eurodollar Loans
shall each be not less than $1,000,000.00 and in increments of
$500,000.00 in excess of such minimum.
(iii) Any Eurodollar Loan which matures while a
Suspension Event is extant shall be converted, at the option of the
Agent, to a Base Margin Loan notwithstanding any notice from the Lead
Borrower that such Loan is to be continued as a Eurodollar Loan.
(c) Any request for a Revolving Credit Loan or for the
conversion of a Revolving Credit Loan which is made after the applicable
deadline therefor, as set forth above, shall be deemed to have been made at the
opening of business on the then next Business Day or Eurodollar Business Day, as
applicable. Each request for a Revolving Credit Loan or for the conversion of a
Revolving Credit Loan shall be made in such manner as may from time to time be
acceptable to the Agent.
(d) The Lead Borrower may request that the Agent cause the
issuance of L/C's for the account of the Borrowers as provided in Section
2:2-15.
(e) The Agent may rely on any request for a loan or advance,
or other financial accommodation under the Revolving Credit which the Agent, in
good faith, believes to have been made by a Person duly authorized to act on
behalf of the Lead Borrower and may decline to make any such requested loan or
advance, or issuance, or to provide any such financial accommodation pending the
Agent's being furnished with such documentation concerning that Person's
authority to act as may be satisfactory to the Agent.
(f) A request by the Lead Borrower for a loan or advance, or
other financial accommodation under the Revolving Credit shall be irrevocable
and shall constitute certification by each Borrower that as of the date of such
request, each of the following is true and correct:
(i) There has been no material adverse change in the
Borrowers' Consolidated financial condition from the most recent
financial information furnished Agent or any Lender pursuant to this
Agreement.
(ii) Each Borrower is in compliance with, and has not
breached any of, its
.. 30 ..
covenants contained in this Agreement.
(iii) To the extent necessary, all or a portion of
any loan or advance so requested will be used by the Borrowers to cover
all of the Borrowers' obligations for sales tax on account of sales
since the then most recent borrowing pursuant to the Revolving Credit.
(iv) Each representation which is made herein or in
any of the Loan Documents (defined below) is then true and complete in
all material respects as of and as if made on the date of such request
(unless such representation relates to an earlier date, in which event,
such representation shall be true as of such earlier date).
(v) No Suspension Event is then extant.
(g) Upon the occurrence from time to time of any Suspension
Event:
(i) The Agent may suspend the Revolving Credit
immediately.
(ii) Neither the Agent nor any Lender shall be
obligated, during such suspension, to make any loans or advance, or to
provide any financial accommodation hereunder or to seek the issuance
of any L/C.
(iii) The Agent may suspend the right of the Lead
Borrower to request any Eurodollar Loan or to convert any Base Margin
Loan to a Eurodollar Loan.
2-6. Making of Loans Under Revolving Credit.
(a) A loan or advance under the Revolving Credit shall be made
by the transfer of the proceeds of such loan or advance to the Operating Account
or as otherwise instructed by the Lead Borrower.
(b) A loan or advance shall be deemed to have been made under
the Revolving Credit (and the Borrowers shall be indebted to the Agent for the
amount thereof immediately) at the following:
(i) The Agent's initiation of the transfer of the
proceeds of such loan or advance in accordance with the Lead Borrower's
instructions (if such loan or advance is of funds requested by the Lead
Borrower).
(ii) The charging of the amount of such loan to the
Loan Account (in all other circumstances).
(c) Except where there has been gross negligence or wilful
misconduct on the part of the Agent which directly results in any of the
following, there shall not be any recourse to or liability of the Agent or any
Lender, on account of:
(i) Any delay in the making of any loan or advance
requested under the Revolving Credit.
(ii) Any delay in the proceeds of any such loan or
advance constituting collected funds.
.. 31 ..
(iii) Any delay in the receipt, and/or any loss, of
funds which constitute a loan or advance under the Revolving Credit,
the wire transfer of which was properly initiated by the Agent in
accordance with wire instructions provided to the Agent by the
Borrowers.
2-7. The Loan Account.
(a) An account ("Loan Account") shall be opened on the books
of the Agent. A record shall be kept in the Loan Account of all loans made under
or pursuant to this Agreement and of all payments thereon.
(b) The Agent shall also keep a record (either in the Loan
Account or elsewhere, as the Agent may from time to time elect) of all interest,
fees, service charges, costs, expenses, and other debits owed the Agent and each
Lender on account of the Liabilities and of all credits against such amounts so
owed.
(c) All credits against the Liabilities shall be conditional
upon final payment to the Agent for the Account of each Lender of the items
giving rise to such credits. The amount of any item credited against the
Liabilities which is charged back against Agent or any Lender for any reason or
is not so paid shall be a Liability and shall be added to the Loan Account,
whether or not the item so charged back or not so paid is returned.
(d) Except as otherwise provided herein, all fees, service
charges, costs, and expenses for which the Borrowers are obligated hereunder are
payable on demand. In the determination of Availability, the Agent may deem
fees, service charges, accrued interest, and other payments which will be due
and payable between the date of such determination and the first day of the then
next succeeding month as having been advanced under the Revolving Credit whether
or not such amounts are then due and payable.
(e) The Agent, without the request of the Lead Borrower, may
advance under the Revolving Credit any interest, fee, service charge, or other
payment to which the Agent or any Lender is entitled from the Borrowers pursuant
hereto and may charge the same to the Loan Account notwithstanding that such
amount so advanced may result in Borrowing Base's being exceeded. Such action on
the part of the Agent shall not constitute a waiver of the Agent's rights and
Borrowers' obligations under Section 2:2-9(b). Any amount which is added to the
principal balance of the Loan Account as provided in this Section 2:2-7(e) shall
bear interest , subject to Section 2:2-10(f), at the Base Margin Rate.
(f) Any statement rendered by the Agent or any Lender to the
Borrowers concerning the Liabilities, in the absence of manifest error, shall be
considered correct and accepted by the Borrowers and shall be conclusively
binding upon the Borrowers unless the Lead Borrower provides the Agent with
written objection thereto within forty five (45) days from the mailing of such
statement, which written objection shall indicate, with particularity, the
reason for such objection. In the absence of
.. 32 ..
manifest error, the Loan Account and the Agent's books and records concerning
the loan arrangement contemplated herein and the Liabilities shall be prima
facie evidence and proof of the items described therein.
2-8. The Revolving Credit Notes. The obligation to repay loans and
advances under the Revolving Credit, with interest as provided herein, shall be
evidenced by Notes (each, a "Revolving Credit Note") in the form of EXHIBIT
2:2-8, annexed hereto, executed by the Borrowers, one payable to each Lender.
Neither the original nor a copy of any Revolving Credit Note shall be required,
however, to establish or prove any Liability. In the event that any Revolving
Credit Note is ever lost, mutilated, or destroyed, the Borrowers shall execute a
replacement thereof and deliver such replacement to the Agent.
2-9. Payment of The Loan Account.
(a) The Borrowers may repay all or any portion of the
principal balance of the Loan Account from time to time until the Termination
Date. Such payments shall be applied first to Base Margin Loans and only then to
Eurodollar Loans.
(b) The Borrowers, without notice or demand from the Agent or
any Lender, shall pay the Agent that amount, from time to time, which is
necessary so that the unpaid balance of the Loan Account does not exceed the
Borrowing Base. Such payments shall be applied first to Base Margin Loans and
only then to Eurodollar Loans.
(c) Unless otherwise instructed by the Lead Borrower, the
Agent shall endeavor to cause those application of payments (if any), pursuant
to Sections 2:2-9(a) and 2:2-9(b) against Eurodollar Loans then outstanding in
such manner as results in the least cost to the Borrowers, but shall not have
any affirmative obligation to do so nor liability on account of the Agent's
failure to have done so. In no event shall action or inaction taken by the Agent
excuse the Borrowers from any indemnification obligation under Section 2:2-9(e).
(d) The Borrowers shall repay the then entire unpaid balance
of the Loan Account and all other Liabilities on the Termination Date.
(e) Upon the written request of the Agent, the Borrowers shall
indemnify each Lender and hold each Lender harmless from and against any loss,
cost or expense (including loss of anticipated profits) which such Lender may
sustain or incur (including, without limitation, by virtue of acceleration after
the occurrence of any Event of Default) as a consequence of the following:
(i) Default by the Borrowers in payment of the
principal amount of or any interest on any Eurodollar Loan as and when
due and payable, including any such loss or expense arising from
interest or fees payable by such Lender to lenders of funds obtained by
it in order to maintain its Eurodollar Loans.
.. 33 ..
(ii) Default by the Borrowers in making a borrowing
or conversion after the Lead Borrower has given (or is deemed to have
given) a request for a Revolving Credit Loan or a request to convert a
Revolving Credit Loan from one applicable interest rate to another.
(iii) The making of any payment on a Eurodollar Loan
or the making of any conversion of any such Loan to a Base Margin Loan
on a day that is not the last day of the applicable Interest Period
with respect thereto, including interest or fees payable by such Lender
to lenders of funds obtained by it in order to maintain any such Loans
as "breakage fees" (so-called).
2-10. Interest Rates.
(a) Each Revolving Credit Loan shall bear interest at the Base
Margin Rate (determined based on a 365/366 day year) unless timely notice is
given (as provided in Section 2:2-5(a)) that the subject Revolving Credit Loan
(or a portion thereof) is, or is to be converted to, a Eurodollar Loan.
(b) Each Revolving Credit Loan which consists of a Eurodollar
Loan shall bear interest at the applicable Eurodollar Rate (determined based on
a 360 day year and actual days elapsed).
(c) Subject to the provisions hereof, the Lead Borrower, by
notice to the Agent, may cause all or a part of the unpaid principal balance of
the Loan Account to bear interest at the Base Margin Rate or the Eurodollar Rate
as specified from time to time by the Lead Borrower. For ease of reference and
administration, each part of the Loan Account which bears interest at the same
interest and for the same Interest Period is referred to herein as if it were a
separate "Revolving Credit Loan".
(d) The Lead Borrower shall not select, renew, or convert any
interest rate for a Revolving Credit Loan such that, in addition to interest at
the Base Margin Rate, there are more than six (6) Eurodollar Rates applicable to
the Revolving Credit Loans at any one time.
(e) The Borrowers shall pay accrued and unpaid interest on
each Revolving Credit Loan in arrears as follows:
(i) On the applicable Interest Payment Date for
that Revolving Credit Loan.
(ii) On the Termination Date and on the End Date.
(iii) Following the occurrence of any Event of
Default, with such frequency as may be determined by the Agent.
(f) Following the occurrence of any Event of Default (and
whether or not the Agent exercises the Agent's rights on account thereof), all
Revolving Credit Loans shall bear interest, at the option of the Agent, at the
rate which is the aggregate of the Base Margin Rate plus Two Percent (2%) per
annum.
.. 34 ..
2-11. Agent's Fee. In addition to any other fee or expense paid by
the Borrowers on account of the Revolving Credit, the Borrowers shall pay the
Agent an Agent's Fee (so referred to herein) as provided in a separate letter
of even date provided by the Borrowers to the Agent.
2-12. Line (Unused) Fee. In addition to any other fee by the
Borrowers on account of the Revolving Credit, the Borrowers shall pay the Agent
for the ratable benefit of the Lenders a Line (Unused) Fee (so referred to
herein) in arrears, on the first day of each quarter commencing three months
from the date of this Agreement and on the same date quarterly thereafter (and
on the Termination Date). The Line (Unused) Fee shall be equal to 0.30% per
annum of the following, determined on a daily basis for the quarter just ended
(or relevant period with respect to the first such payment and with respect to
the payment being made on the Termination Date):
(a) the Loan Ceiling
Minus
(b) the aggregate of
(i) the unpaid principal balance of the Loan
Account; Plus
(ii) the Stated Amount of all then outstanding
L/C's.
2-13 Concerning Fees. The Borrowers shall not be entitled to any
credit, rebate or repayment of the Agent's Fee, Line (Unused) Fee, or other fee
previously earned by the Agent or any Lender pursuant to this Agreement
notwithstanding any termination of this Agreement or suspension or termination
of the Agent's and any Lender's respective obligation to make loans and advances
hereunder.
2-14. Agent's and Lenders' Discretion.
(a) Each reference in the Loan Documents to the exercise of
discretion or the like by the Agent or any Lender shall be to that Person's
reasonable exercise of its judgment, in good faith, based upon that Person's
consideration of any such factor as the Agent or that Lender, taking into
account information of which that Person then has actual knowledge, believes:
(i) Would reasonably be expected to affect the value
of the Collateral, the enforceability of the Agent's security and
collateral interests therein, or the amount which the Agent would
likely realize therefrom (taking into account delays which may possibly
be encountered in the Agent's realizing upon the Collateral and likely
Costs of Collection).
(ii) Indicates that any report or financial
information delivered to the Agent or any Lender by or on behalf of the
Borrowers are incomplete, inaccurate, or misleading in any material
manner or was not prepared in all material respects in accordance with
the
.. 35 ..
requirements of this Agreement.
(iii) Reasonably suggests an increase in the
likelihood that the Borrowers will become the subject of a bankruptcy
or insolvency proceeding.
(iv) Constitutes a Suspension Event.
(b) In the exercise of such judgment, the Agent and each
Lender also may take into account any of the following factors:
(i) Those included in, or tested by, the definitions
of "Eligible Inventory," and "Cost".
(ii) Changes to the current financial and business
climate of the industry in which the Borrowers compete (having regard
for the Borrowers' position in that industry).
(iii) Changes to general macroeconomic conditions
which have a material effect on the Borrowers' cost structure.
(iv) Material changes in or to the mix of the
Borrowers' Inventory.
(v) Changes reflecting seasonality with respect to
the Borrowers' Inventory and patterns of retail sales.
(vi) Changes in such other factors as the Agent and
each Lender determines as having a material bearing on credit risks
associated with the providing of loans and financial accommodations to
the Borrowers.
(c) The burden of establishing the failure of the Agent or
any Lender to have acted in a reasonable manner in such Person's exercise of
discretion shall be the Borrowers'.
2-15. Procedures For Issuance of L/C's.
(a) The Lead Borrower may request that the Agent cause the
issuance of L/C's for the account of the Borrowers. Each such request shall be
in such manner as may from time to time be acceptable to the Agent.
(b) The Agent shall cause the issuance of any L/C so requested
by the Lead Borrower, provided that , at the time that the request is made, the
Revolving Credit has not been suspended as provided in Section 2:2-5(g) and if
so issued:
(i) The aggregate Stated Amount of all L/C's then
outstanding, does not exceed Fifty Million Dollars ($50,000,000.00).
(ii) The expiry of the L/C is not later than the
earlier of Thirty (30) days prior to the Maturity Date or the
following:
(A) Standby's: One (1) year from
initial issuance.
(B) Documentary's: One Hundred Eighty
(180) days from issuance.
(iii) The Borrowing Base would not be exceeded.
(c) The Borrower on whose account the L/C is being issued
shall execute such
.. 36 ..
documentation to apply for and support the issuance of an L/C as may be required
by the Issuer.
(d) There shall not be any recourse to, nor liability of, the
Agent or any Lender on account of
(i) Any delay or refusal by an Issuer to issue
an L/C;
(ii) Any action or inaction of an Issuer on
account of or in respect to, any L/C.
(e) The Borrowers shall reimburse the Issuer for the amount of
any honoring of a drawing under an L/C on the same day on which such honoring
takes place. The Agent, without the request of the Borrowers, may advance under
the Revolving Credit (and charge to the Loan Account) the amount of any honoring
of any L/C and other amount for which the Borrowers, the Issuer, or the Lenders
become obligated on account of, or in respect to, any L/C. Such advance shall be
made whether or not a Suspension Event is then extant or such advance would
result in Borrowing Base's being exceeded. Such action shall not constitute a
waiver of the Agent's rights under Section 2:2-9(b) hereof.
2-16. Fees For L/C's.
(a) The Borrowers shall pay to the Agent a fee, on account of
L/C's, the issuance of which had been procured by the Agent, as follows:
(i) Standby's: The Eurodollar Margin, per annum, of
the Stated Amount of each such standby L/C, payable quarterly in
advance, on the first day of each of the Lead Borrower' fiscal
quarters.
(ii) Documentary's: 1.25% per annum of the weighted
average of the Stated Amount of all documentary L/C's outstanding at
any time during the period since the then most recent payment of such
fee, payable quarterly in arrears, on the first day of each of the Lead
Borrower' fiscal quarters, and on the End Date.
(b) In addition to the fee to be paid as provided in
Subsection 2:2-16(a), above, the Borrowers shall pay to the Agent (or to the
Issuer, if so requested by Agent), on demand, all customary issuance,
processing, negotiation, amendment, and administrative fees and other amounts
charged by the Issuer on account of, or in respect to, any L/C.
2-17. Concerning L/C's.
(a) None of the Issuer, the Issuer's correspondents, or any
advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:
(i) The performance by any beneficiary under any
L/C of that beneficiary's obligations to the Borrowers.
(ii) The form, sufficiency, correctness,
genuineness, authority of any person
.. 37 ..
signing; falsification; or the legal effect of; any documents called
for under any L/C if (with respect to the foregoing) such documents on
their face appear to be in order.
(b) The Issuer may honor, as complying with the terms of any
L/C and of any drawing thereunder, any drafts or other documents otherwise in
order, but signed or issued by an administrator, executor, conservator, trustee
in bankruptcy, debtor in possession, assignee for the benefit of creditors,
liquidator, receiver, or other legal representative of the party authorized
under such L/C to draw or issue such drafts or other documents.
(c) Unless otherwise agreed to, in the particular instance,
the Borrowers hereby authorize any Issuer to:
(i) Select an advising bank, if any.
(ii) Select a paying bank, if any.
(iii) Select a negotiating bank.
(d) All directions, correspondence, and funds transfers
relating to any L/C are at the risk of the Borrowers. The Issuer shall have
discharged the Issuer's obligations under any L/C which, or the drawing under
which, includes payment instructions, by the initiation of the method of payment
called for in, and in accordance with, such instructions (or by any other
commercially reasonable and comparable method). None of the Agent, any Lender,
nor the Issuer shall have any responsibility for any inaccuracy, interruption,
error, or delay in transmission or delivery by post, telegraph or cable, or for
any inaccuracy of translation.
(e) The Agent's, each Lender's, and the Issuer's rights,
powers, privileges and immunities specified in or arising under this Agreement
are in addition to any heretofore or at any time hereafter otherwise created or
arising, whether by statute or rule of law or contract.
(f) Except to the extent otherwise expressly provided
hereunder or agreed to in writing by the Issuer and the Borrowers, the L/C will
be governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and any subsequent
revisions thereof.
(g) If any change in any law, executive order or regulation,
or any directive of any administrative or governmental authority (whether or not
having the force of law), or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, shall either:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirements against letters of credit
heretofore or hereafter issued by any Issuer or with respect to which
the Agent, any or any Issuer has an obligation to lend to fund drawings
under any L/C; or
(ii) impose on any Issuer any other condition or
requirements relating to any such letters of credit;
.. 38 ..
and the result of any event referred to in Section 2:2-17(g)(i) or
2:2-17(g)(ii), above, shall be to increase the cost to any Issuer of issuing or
maintaining any L/C (which increase in cost shall be the result of such Issuer's
reasonable allocation among that Issuer's letter of credit customers of the
aggregate of such cost increases resulting from such events), then, upon demand
by the Agent and delivery by the Agent to the Borrowers of a certificate of an
officer of the subject Issuer describing such change in law, executive order,
regulation, directive, or interpretation thereof, its effect on such Issuer, and
the basis for determining such increased costs and their allocation, the
Borrowers shall immediately pay to the Agent, from time to time as specified by
the Agent, such amounts as shall be sufficient to compensate such Issuer for
such increased cost. In the absence of manifest error, any Issuer's
determination of costs incurred under Section 2:2-17(g)(i) or 2:2-17(g)(ii),
above, and the allocation, if any, of such costs among the Borrowers and other
letter of credit customers of such Issuer, if done in good faith and made on an
equitable basis and in accordance with such officer's certificate, shall be
conclusive and binding on the Borrowers.
(h) The obligations of the Borrowers under this Agreement with
respect to L/C's are absolute, unconditional, and irrevocable and shall be
performed strictly in accordance with the terms hereof under all circumstances,
whatsoever including, without limitation, the following:
(i) Any lack of validity or enforceability or
restriction, restraint, or stay in the enforcement of this Agreement,
any L/C, or any other agreement or instrument relating thereto.
(ii) Any amendment or waiver of, or consent to the
departure from, any L/C.
(iii) The existence of any claim, set-off, defense,
or other right which the Borrowers may have at any time against the
beneficiary of any L/C.
(iv) Any good faith honoring of a drawing under any
L/C, which drawing possibly could have been dishonored based upon a
strict construction of the terms of the L/C.
2-18. Changed Circumstances.
(a) The Agent may give the Lead Borrower notice of the
occurrence of the following:
(i) The Agent shall have determined in good faith
(which determination shall be final and conclusive) on any day on which
the rate for a Eurodollar Loan would otherwise be set, that, by reason
of changes arising after the date of this Agreement affecting the
principal market in Eurodollars in which Fleet National Bank
participates, adequate and fair means do not exist for ascertaining
such rate on the basis provided for in the definition of the
"Eurodollar Offer Rate".
(ii). The Agent shall have determined in good faith
(which determination shall be final and conclusive) that:
(A) The continuation of or conversion of any
Revolving Credit Loan to a Eurodollar Loan has been
made impracticable or unlawful by the occurrence of a
.. 39 ..
change in law occurring after the date of this
Agreement which materially and adversely affects the
applicable market or compliance by the Agent or any
Lender in good faith with any applicable law or
governmental regulation, guideline or order or
interpretation or change thereof by any governmental
authority charged with the interpretation or
administration thereof or with any request or
directive of any such governmental authority (whether
or not having the force of law).
(B) The indices on which the interest rates
for Eurodollar Loans are determined shall no longer
represent the effective cost to the Agent or any
Lender for U.S. dollar deposits in the interbank
market for deposits in which it regularly
participates.
(b) In the event that the Agent gives the Lead Borrower notice
of an occurrence described in Section 2:2-18(a), then, until the Agent notifies
the Lead Borrower that the circumstances giving rise to such notice no longer
apply:
(i) The obligation of the Agent and of each Lender to
make Eurodollar Loans of the type affected by such changed
circumstances or to permit the Lead Borrower to select the affected
interest rate as otherwise applicable to any Revolving Credit Loans
shall be suspended.
(ii) Any notice which the Lead Borrower had given the
Agent with respect to any Eurodollar Loan, the time for action with
respect to which has not occurred prior to the Agent's having given
notice pursuant to Section 2:2-18(a), shall be deemed at the option of
the Agent to not having been given.
(iii) Subject to the provisions of Section 2:2-9(e),
the Lead Borrower may (and, with respect to any event described in
Section 2:2-18(a)(ii), shall)
(A) cancel the relevant borrowing or
conversion notice on the same date the Lead Borrower
was notified of such event; and
(B) prepay or cause to be prepaid any then
affected Eurodollar Loans.
2-19. Increased Costs. If, as a result of any changes, arising after
the date of this Agreement, in any requirement of law, or of the interpretation
or application thereof by any court or by any governmental or other authority or
entity charged with the administration thereof, whether or not having the force
of law, which:
(a) subjects any Lender to any taxes or changes the basis of
taxation, or increases any existing taxes, on payments of principal, interest or
other amounts payable by the Borrowers to the Agent or any Lender under this
Agreement (except for taxes on the Agent or any Lender's overall net income or
capital;
(b) imposes, modifies or deems applicable any reserve, cash
margin, special
.. 40 ..
deposit or similar requirements against assets held by, or deposits in or for
the account of or loans by or any other acquisition of funds by the relevant
funding office of any Lender;
(c) imposes on any Lender any other condition with respect to
any Loan Document;
or
(d) imposes on any Lender a requirement to maintain or
allocate capital in relation to the Liabilities; and the result of any of the
foregoing, in the such Lender's reasonable opinion, is to increase the cost to
that Lender of making or maintaining any loan, advance or financial
accommodation or to reduce the income receivable by such Lender in respect of
any loan, advance or financial accommodation by an amount which the such Lender
deems to be material, then upon the Agent's giving written notice thereof, from
time to time, to the Lead Borrower (such notice to set out in reasonable detail
the facts giving rise to and a summary calculation of such increased cost or
reduced income), the Borrowers shall forthwith pay to the Agent, for the benefit
of the subject Lender, upon receipt of such notice, that amount which shall
compensate the subject Lender for such additional cost or reduction in income.
2-20 Lenders' Commitments.
(a) The obligations of each Lender are several and not joint.
No Lender shall have any obligation to make any loan or advance under the
Revolving Credit in excess of the lesser of
(i) that Lender's Commitment Percentage of the
subject loan or advance or of Availability; or
(ii) that Lender's Dollar Commitment,
(b) No Lender shall have any liability to the Borrowers on
account of the failure of any other Lender to provide any loan or advance under
the Revolving Credit nor any obligation to make up any shortfall which may be
created by such failure.
(c) The Dollar Commitments, Commitment Percentages, and
identities of the Lenders (but not the overall Commitment) may be changed, from
time to time by the reallocation or assignment of Dollar Commitments and
Commitment Percentages amongst the Lenders or with other Persons who determine
to become "Lenders", provided, however,
(i) Unless an Event of Default has occurred (in which
event, no consent of the Lead Borrower is required) any assignment to a
Person not then a Lender, an Affiliate of a Lender, or an assignment or
transfer, by a Lender, of its rights and obligations under this
agreement as part of a programmed assignment and transfer of such
Lender's rights of a material portion of such Lender's portfolio of
asset based credit facilities, shall be subject to the prior consent of
the Lead Borrower (not to be unreasonably withheld), which consent will
be deemed given unless the Lead Borrower provides the Agent with
written objection, not more than Five (5) Business Days after the Agent
shall have given the Lead Borrower written notice of a proposed
assignment).
.. 41 ..
(ii) Any such assignment or reallocation shall be on
a pro-rata basis such that each reallocated or assigned Dollar
Commitment to any Person remains the same percentage of the overall
Commitment (in terms of dollars) as the reallocated Commitment
Percentage is to such Person.
(d) Upon written notice given the Lead Borrower from time to
time by the Agent, of any assignment or allocation referenced in Section
2:2-20(c):
(i) The Borrowers shall execute one or more
replacement Revolving Credit Notes to reflect such changed Dollar
Commitments, Commitment Percentages, and identities and shall deliver
such replacement Revolving Credit Notes to the Agent (which promptly
thereafter shall deliver to the Lead Borrower the Revolving Credit
Notes so replaced) provided however, in the event that a Revolving
Credit Note is to be exchanged following its acceleration or the entry
of an order for relief under the Bankruptcy Code with respect to the
Borrowers, the Agent, in lieu of causing the Borrowers to execute one
or more new Revolving Credit Notes, may issue the Agent's Certificate
confirming the resulting Commitments and Commitment Percentages.
(ii) Such change shall be effective from the
effective date specified in such written notice and any Person added as
a Lender shall have all rights and privileges of a Lender hereunder
thereafter as if such Person had been a signatory to this Agreement and
any other Loan Document to which a Lender is a signatory and any person
removed as a Lender shall be relieved of any obligations or
responsibilities of a Lender hereunder thereafter.
(e) The Borrowers recognize that the Agent's exercise of any
discretion accorded to the Agent herein and of its rights, remedies, powers,
privileges, and discretions with respect to the Borrowers are subject to a
certain Agency Agreement amongst the Agent and the Lenders. The "voting rights"
which are included in the Agency Agreement shall include the following:
(i) Except for those matters as to which Section
2:2-20(e)(ii), applies, the consent of 51% of the Dollar Commitments of
nondelinquent Lenders for amendment of or waiver of compliance with,
provisions of the Loan Documents or the Agency Agreement.
(ii) The following provisions of the Loan Documents
and the Agency Agreement shall require the consent of 100% of the
Dollar Commitment of nondelinquent Lenders:
(A) Increase in any Lender's Commitment.
(B) Decrease in any interest rate or fee
payable hereunder (other than the Agent's Fee (for
which the consent of the Agent shall also be
required).
(C) Extension of the Maturity Date.
(D) Release of a substantial portion of the
Collateral, exclusive of the release of Real Estate
in accordance with Section 8.3 of this Agreement.
(E) Change to the "voting rights" included
in the Agency Agreement or in this Section.
(F) Increase in the Credit Card Advance
Rate, the Inventory Advance
.. 42 ..
Rate, or the Real Estate Advance Rate.
(G) Reduction or forgiveness in the
principal amount of the Loans made.
(H) Extension, postponement, or waiver of
the date interest or fees are payable.
(I) Increase the Loan Ceiling.
2-21 Designation of Lead Borrower.
(a) Each Borrower hereby designates the Lead Borrower as that
Borrower's agent to request loans and advances under the Revolving Credit, the
proceeds of which shall be available to each Borrower for those uses set forth
in Section 2:2-1(d), and to request the issuance of L/C's for the account of
that Borrower.
(b) As the disclosed principal for its agent, each Borrower
shall be obligated to the Agent and the Lenders on account of loans and advances
made under the Revolving Credit as if made directly by the Lenders to that
Borrower, notwithstanding the manner by which such loans and advances are
recorded on the books and records of the Lead Borrower or any Borrower.
(c) Subject to the provisions of this Agreement, the proceeds
of each such loan and advance shall be deposited in the Operating Account or as
otherwise indicated by the Lead Borrower. Neither the Agent nor any Lender shall
have any obligation to see to the application of such proceeds.
ARTICLE 3: - CONDITIONS PRECEDENT:
As a condition to the effectiveness of this Agreement, the
establishment of the Revolving Credit, the procurement of any L/C hereunder, and
the making of the first loan under the Revolving Credit, each of the documents
respectively described in Sections 3:3-1 through and including 3:3-4, (each in
form and substance satisfactory to the Agent and the Lenders) shall have been
delivered to the Agent, and the conditions respectively described in Sections
3:3-5 through and including 3:3-9, shall have been satisfied:
3-1. Corporate Due Diligence.
(a) A Certificate of corporate good standing, with respect to
each Borrower, issued by the Secretary of State of the State in which that
Borrower was organized.
(b) Certificates of due qualification, in good standing,
issued by the Secretary(ies) of State of each State in which the nature of each
Borrower's business conducted or assets owned could require such qualification.
(c) A Certificate of the Borrowers' respective Secretaries of
the due adoption, continued
.. 43 ..
effectiveness, and setting forth the texts of, each corporate resolution adopted
in connection with the establishment of the loan arrangement contemplated by the
Loan Documents and attesting to the true signatures of each Person authorized as
a signatory to any of the Loan Documents.
3-2. Opinion. An opinion of counsel to the Borrowers addressed to
the Agent and Lenders and in form and substance satisfactory to the Agent .
3-3. Additional Documents. Such additional instruments and
documents as the Agent or its counsel reasonably may require or request,
including, without limitation, those listed on EXHIBIT 3:3-3.
3-4. Officers' Certificates. Certificates executed on behalf of the
Borrowers by the Chief Executive Officer and the Chief Financial Officer of the
Parent and stating that the representations and warranties made by the Borrowers
to the Agent and the Lenders in the Loan Documents are true and complete in all
material respects as of the date of such Certificate, and that no event has
occurred which is or which, solely with the giving of notice or passage of time
(or both) would be an Event of Default.
3-5. Representations and Warranties. Each of the representations
made by or on behalf of the Borrowers in this Agreement or in any of the other
Loan Documents or in any other report, statement, document, or paper provided by
or on behalf of the Borrowers shall be true and complete in all material
respects as of the date as of which such representation or warranty was made.
3-6. All Fees and Expenses Paid. All fees due at or immediately
after the first funding under the Revolving Credit and all costs and expenses
incurred by the Agent in connection with the establishment of the credit
facility contemplated hereby (including the fees and expenses of counsel to the
Agent) shall have been paid.
3-7. No Suspension Event. No Suspension Event shall then exist.
3-8. No Adverse Change. No event shall have occurred or failed to
occur, which occurrence or failure is or could have a materially adverse effect
upon the Borrowers' financial condition when compared with such financial
condition at April 29, 2000.
No document shall be deemed delivered to the Agent or any Lender until received
and accepted by the Agent at its head offices in Boston, Massachusetts. Under no
circumstances will this Agreement take effect until executed and accepted by the
Agent at said head office.
.. 44 ..
3-9. Delivery of Notices. The Borrowers shall have complied with
the provisions of Sections 7-1(b) and 7-2(b), below.
ARTICLE 4: - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
To induce each Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
under the Revolving Credit and to procure any L/Cs as provided herein (each of
which loans shall be deemed to have been made and L/Cs procured in reliance
thereupon) the Borrowers, in addition to all other representations, warranties,
and covenants made by the Borrowers in any other Loan Document, make those
representations, warranties, and covenants included in this Agreement.
4-1. Payment and Performance of Liabilities. The Borrowers shall
pay each Liability when due (or when demanded if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.
4-2. Due Organization - Corporate Authorization - No Conflicts.
(a) Each Borrower presently is and shall hereafter remain in
good standing as a corporation organized under the laws of the State of its
incorporation indicated in the Preamble to this Agreement and is and shall
hereafter remain duly qualified and in good standing in every other State in
which, by reason of the nature or location of that Borrower's assets or
operation of that Borrower's business, such qualification is necessary.
(b) Each Related Entity is listed on EXHIBIT 4:4-2, annexed
hereto. Each Related Entity is and shall hereafter remain in good standing in
the State in which incorporated and is and shall hereafter remain duly qualified
in each other State in which, by reason of that entity's assets or the operation
of such entity's business, such qualification is necessary. The Lead Borrower
shall provide the Agent with prior written notice of any entity's becoming or
ceasing to be a Related Entity.
(c) No Borrower shall change its State of incorporation
without the Agent's prior consent.
(d) Each Borrower has all requisite corporate power and
authority to execute and deliver all Loan Documents to which the Borrowers are a
party and has and will hereafter retain all requisite corporate power to perform
all Liabilities.
(e) The execution and delivery by each Borrower of each Loan
Document to which it is a party; that Borrower's consummation of the
transactions contemplated by such Loan Documents (including, without limitation,
the creation of security interests by the Borrowers as contemplated hereby);
that Borrower's performance under those of the Loan Documents to which it is a
party; the borrowings
.. 45 ..
hereunder; and the use of the proceeds thereof:
(i) Have been duly authorized by all necessary
corporate action.
(ii) Do not, and will not, contravene in any material
respect any provision of any Requirement of Law or obligation of the
Borrowers.
(iii) Will not result in the creation or imposition
of, or the obligation to create or impose, any Encumbrance upon any
assets of the Borrowers pursuant to any Requirement of Law or
obligation, except pursuant to the Loan Documents.
(f) The Loan Documents have been duly executed and delivered
by Borrowers and are the legal, valid and binding obligations of the Borrowers,
enforceable against the Borrowers in accordance with their respective terms,
except as enforceability is limited by bankruptcy, insolvency, or other laws
relating to or affecting generally the enforcement of creditors' rights and
except to the extent that the availability of the remedy of specific performance
or injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
4-3. Trade Names.
(a) EXHIBIT 4:4-3, annexed hereto, is a listing, as of the
date hereof, of:
(i) All names under which each Borrower ever
conducted its business.
(ii) All entities and/or persons with whom any
Borrower ever consolidated or merged, or from whom any Borrower ever
acquired in a single transaction or in a series of related transactions
substantially all of such entity's or person's assets.
(b) No Borrower will change its name or conduct its business
under any name not listed on EXHIBIT 4:4-3 or conduct its business in a state in
which that Borrower does not presently conduct its business except
(i) upon not less than twenty-one (21) days prior
written notice (with reasonable particularity) to the Agent; and
(ii) in compliance with all other provisions of this
Agreement (in particular, in compliance with Section 4:4-24 hereof).
4-4. Infrastructure.
(a) Each Borrower owns and possesses, or has the right to use
(and will hereafter own, possess, or have such right to use) all patents,
industrial designs, trademarks, trade names, trade styles, brand names, service
marks, logos, copyrights, trade secrets, know-how, confidential information, and
other intellectual or proprietary property of any third Person necessary for the
Borrowers' conduct of the Borrowers' business, except where the failure to
possess such intellectual or proprietary information will not have a Material
Adverse Effect.
(b) The conduct by the Borrowers of the Borrowers' business
does not presently infringe
.. 46 ..
(nor will the Borrowers conduct its business in the future so as to infringe)
the patents, industrial designs, trademarks, trade names, trade styles, brand
names, service marks, logos, copyrights, trade secrets, know- how, confidential
information, or other intellectual or proprietary property of any third Person,
except where such infringement does not have a Material Adverse Effect.
4-5. Locations. Landlord Waivers.
(a) The Collateral, and the books, records, and papers of
Borrowers pertaining thereto, are kept and maintained solely at:
(i) the Borrowers' chief executive offices at 0000
Xxxxx Xxxxx Xxxx 0, Xxxx Xxxxxxxxxx, Xxxxxxx 00000; and
(ii) those locations which are listed on EXHIBIT
4:4-5, annexed hereto, which EXHIBIT includes, with respect to each
such location, the name and address of the landlord on the Lease which
covers such location (or an indication that a Borrower owns the subject
location) and of all service bureaus with which any such records are
maintained and the names and addresses of each of the Borrowers'
landlords.
(b) The Borrowers shall not remove any of the Collateral from
said chief executive office or those locations listed on EXHIBIT 4:4-5 except
(unless otherwise expressly prohibited by the Loan Documents) to effect any of
the following
(i) accomplish sales , returns, and transfers of
Inventory in the ordinary course of business consistent with those
practices in effect on March 1, 1999; or
(ii) move Inventory from one such location to another
such location; or (iii) utilize such of the Collateral as is removed
from such locations in the ordinary course of business .
(c) The Borrowers shall use their reasonable efforts to
provide the Agent with Landlord's Waivers or subordinations, each substantially
in the form of EXHIBIT 4:4-5(c)(1), annexed hereto for each of the Borrower's
locations in any of the States listed on EXHIBIT4:4-5(c)(2), annexed hereto, and
any other State in which landlord liens are created by statute, added by the
Agent to such list hereafter, provided that no Borrower shall be obligated to
pay any amount or to grant any concession to a landlord in order to obtain such
Waiver or subordination. The Agent may establish an Availability Reserve for
each of such locations as to which such a waiver is not so delivered, which
Availability Reserve shall be reduced or eliminated (but only if no Suspension
Event is then extant) upon delivery of a Waiver for such a location.
(d) No Borrower will:
(i) Alter, modify, or amend any Lease in any material
respect in any manner which would have a material adverse effect to the
liquidation of Inventory at the location which is the subject of such
Lease.
.. 47 ..
(ii) Close, any location at which any Borrowers
maintains, offers for sales, or stores any of the Collateral, except
for closures contemplated by the Business Plan, plus up to five (5)
additional closures per fiscal year, at the Lead Borrower's reasonable
discretion.
(iii) Commit to open or open any new location except
(A) in connection with the relocation of a
retail location of that Borrower; or
(B) the opening of new retail locations
unless each of the following requirements is
satisfied:
(I) The Agent shall be provided not
less than thirty (30) days prior written
notice (with reasonable detail) of the
proposed opening.
(II) Immediately prior to the
earliest day on which the subject Borrowers
becomes legally obligated on account of its
leasing of the subject new location, no
Event of Default exists and none will occur
by reason of that Borrowers' so becoming
obligated.
(III) Either:
(1) Such opening is
contemplated by the Business Plan or
consented to by the Agent, which consent
shall not be unreasonably withheld,
provided, however, up to five (5) additional
store openings not contemplated by the
Business Plan shall be permitted without the
Agent's consent in any fiscal year provided
that the Borrowers' total expenditure with
respect to such store openings does not
exceed $10,000,000.00 in the aggregate; or
(2) Availability for the
ninety (90) days prior to such opening was
not and immediately after such opening is
not less than $30,000,000.00 and on a
pro-forma going forward basis following such
opening, as reflected on a projection
provided to the Agent no later than seven
(7) days prior to the subject opening (and
prepared based on the same methodology and
with the same assumptions as those used in
the preparation of the Business Plan) will
not be less than $30,000,000.00.
(IV) If the location is in a State
listed on EXHIBIT 4:4-5(c)(2), the Lead
Borrower shall used its best efforts to
provide the Agent with a Landlord's Waiver
or subordination (substantially in the form
of EXHIBIT 4:4-5(c)(1)) for such location.
(iv) Modify or amend the KMart Agreement without the
prior written consent of the Agent.
.. 48 ..
(e) Except as otherwise disclosed pursuant to, or permitted
by, this Section 4:4-5, no tangible personal property of the Borrowers having a
cost in excess of $10,000,000.00 in the aggregate is in the care or custody of
any third party or stored or entrusted with a bailee or other third party and
none having a cost in excess of $10,000,000.00 shall hereafter at any one time
be placed under such care, custody, storage, or entrustment.
4-6. Title to Assets.
(a) The Borrowers are, and shall hereafter remain, the owners
of the Collateral free and clear of all Encumbrances other than Permitted
Encumbrances.
(b) The Borrowers do not and shall not have possession of any
property on consignment to the Borrowers having a value in excess of
$5,000,000.00 in the aggregate, at any one time, other than pursuant to a
consignment in respect of which either
(i) no financing statement has been filed by
consignor or other action taken by consignor under the UCC to perfect
or protect its interest in the consigned goods against the claims of
third party secured creditors;' or
(ii) an intercreditor agreement (in form reasonably
satisfactory to the Agent) between the consignor and the Agent has been
executed.
4-7. Indebtedness.
(a) The Borrowers do not and shall not hereafter have any
Indebtedness with the exceptions of:
(i) Any Indebtedness to the Lenders .
(ii) The Indebtedness (if any) listed on EXHIBIT
4:4-7, annexed hereto.
(iii) Indebtedness on account of the sale and
leaseback of the Borrowers' real property or equipment or fixtures,
purchase money liens on equipment or fixtures, and its mortgage
financing of its real estate, respectively on terms which are
reasonably satisfactory to the Lenders.
(iv) The refinancing of the 5.25% Notes as required
by Section 4:4-8.
(v) Indebtedness, not to exceed $10,000,000.00 at any
one time outstanding, which Indebtedness is not otherwise described in
this Section 4:4-7(a) and is not otherwise prohibited by this Agreement
or would result in a KMart Default.
(vi) Letters of Credit from Persons other than the
Lenders secured by Inventory purchased with such Letters of Credit
(which Inventory shall not be Eligible Inventory and which may result
in the establishment of additional Inventory Reserves, in the Agent's
discretion).
(b) Neither the execution of any Loan Document, nor any
Borrowers' performance of any of the Liabilities is prohibited or limited by or
under the KMart Agreement or constitutes a KMart Default.
.. 49 ..
(c) No Borrower shall suffer or permit any act or failure to
act, which act or which failure, constitutes a KMart Default.
4-8. Subordinated Debt. No later than sixty (60) days prior to the
maturity date for the 5.25% Notes, the Parent shall furnish the Agent with
either a commitment or a plan to repay such Notes by refinancing as of the
maturity date thereof pursuant to terms which are satisfactory to the Lenders in
their sole discretion, as evidenced by their written consent thereto.
4-9. Insurance Policies.
(a) EXHIBIT 4:4-9, annexed hereto, is a schedule of all
insurance policies owned by the Borrowers or under which the Borrowers are the
named insured. Each of such policies is in full force and effect. Neither the
issuer of any such policy nor the Borrowers are in default or violation of any
such policy.
(b) The Borrowers shall have and maintain at all times
insurance covering such risks, in such amounts, containing such terms, in such
form, for such periods, and written by such companies as may be satisfactory to
the Agent . The coverage reflected on EXHIBIT 4:4-9 presently satisfies the
foregoing requirements, it being recognized by the Borrowers, however, that such
requirements may change hereafter to reflect changing circumstances. All
insurance carried by the Borrowers which covers any Collateral shall provide for
a minimum of Sixty (60) days' written notice of cancellation to the Agent and
all such insurance which covers the Collateral shall include an endorsement in
favor of the Agent, which endorsement shall provide that the insurance, to the
extent of the Agent's interest therein, shall not be impaired or invalidated, in
whole or in part, by reason of any act or neglect of the Borrowers or by the
failure of the Borrowers to comply with any warranty or condition of the policy.
In the event of the failure by the Borrowers to maintain insurance as required
herein, the Agent , at its option, may obtain such insurance, provided, however,
the Agent's obtaining of such insurance shall not constitute a cure or waiver of
any Event of Default occasioned by the Borrowers' failure to have maintained
such insurance. The Lead Borrower shall furnish to the Agent certificates or
other evidence satisfactory to the Agent regarding compliance by the Borrowers
with the foregoing insurance provisions.
(c) The Lead Borrower shall advise the Agent of each claim in
excess of $100,000.00 made by any Borrower under any policy of insurance which
covers the Collateral and following the occurrence of an Event of Default will
permit the Agent, at the Agent's option in each instance, to the exclusion of
the Borrowers, to conduct the adjustment of each such claim. The Borrowers
hereby appoint the Agent, effective following the occurrence of an Event of
Default, as the Borrowers' attorney in fact to obtain, adjust, settle, and
cancel any insurance described in this section and to endorse in favor of the
Agent any and all drafts and other instruments with respect to such insurance.
The within appointment, being coupled with an interest, is irrevocable until
this Agreement is terminated by a written instrument executed
.. 50 ..
by a duly authorized officer of the Agent . The Agent shall not be liable on
account of any exercise pursuant to said power except for any exercise in a
grossly negligent manner or in willful misconduct. Prior to the occurrence of an
Event of Default the Borrowers may use the proceeds of such insurance to
purchase Inventory. Following the occurrence of an Event of Default or in the
event that the Borrowers do not use the proceeds for the above purposes, the
Agent may apply any proceeds of such insurance against the Liabilities, whether
or not such have matured, in such order of application as the Agent may
determine.
4-10. Licenses. Each license, distributorship, franchise, and
similar agreement issued to, or to which the Borrowers are a party and which is
material to the business of the Borrowers, taken as a whole, is in full force
and effect. Neither any Borrowers nor, to the Parent's knowledge, any other
party to any such license or agreement is in default or violation thereof, where
such violation would have a Material Adverse Effect. No Borrower has received
any notice or threat of cancellation of any such license or agreement.
4-11. Leases. EXHIBIT 4:4-11, annexed hereto, is a schedule of all
presently effective Capital Leases. Exhibit 4:4-5 includes a list of all other
presently effective Leases. Each of such Leases and Capital Leases is in full
force and effect. Neither any Borrower nor, to the Parent's knowledge, any other
party to any such Lease or Capital Lease is in default or violation of any such
Lease or Capital Lease where such default or violation would have a Material
Adverse Effect and no Borrower has received any notice or threat of cancellation
of any such Lease or Capital Lease. The Borrowers hereby authorize the Agent at
any time to contact any of the Borrowers' landlords in order to confirm the
Borrowers' continued compliance with the terms and conditions of the Lease(s)
between the Borrowers and that landlord and to discuss such issues, concerning
the Borrowers' occupancy under such Lease(s), as the Agent may determine.
4-12. Requirements of Law. The Borrowers are in compliance in all
material respects with, and shall hereafter comply with and use its assets in
all material respects in compliance with, all Requirements of Law. No Borrower
has received any notice of any material violation of any Requirement of Law,
which violation has not been cured or otherwise remedied.
4-13. Maintain Collateral. Each Borrower shall:
(a) Keep the Collateral in good order and repair (ordinary
reasonable wear and tear and insured casualty excepted).
(b) Not suffer or cause the waste or destruction of any
material part of the Collateral.
(c) Not use any of the Collateral in violation of any policy
of insurance thereon.
4-14. Pay Taxes.
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(a) As of the date of this Agreement, the Borrowers have
received written notice from the Internal Revenue Service that the Internal
Revenue Service has completed its examination of the Borrowers' federal income
tax returns for all tax years through and including the Borrowers' taxable year
referenced on EXHIBIT 4:4-14, annexed hereto, and that all deficiencies,
assessments, and other amounts asserted as a result of such examinations have
been fully paid or settled. No agreement is extant which waives or extends any
statute of limitations applicable to the right of the Internal Revenue Service
to assert a deficiency or make any other claim for or in respect to federal
income taxes. Except as set forth on EXHIBIT 4:4-14, no issue has been raised in
any such examination which, by application of similar principles, reasonably
could be expected to result in the assertion of a deficiency for any Fiscal Year
open for examination, assessment, or claim by the Internal Revenue Service.
(b) As of the date of this Agreement, the Borrowers have paid
all state and local income, excise, sales, and other taxes for which the
Borrowers are liable, as referenced on EXHIBIT 4:4-14, annexed hereto, and have
filed all returns for such taxes required to have been so filed.
(c) Except as disclosed on said EXHIBIT 4:4-14, there are no
examinations of or with respect to the Borrowers presently being conducted by
the Internal Revenue Service or any other taxing authority.
(d) The Borrowers have, and hereafter shall: pay, as they
become due and payable, all taxes and unemployment contributions and other
charges of any kind or nature levied, assessed or claimed against any Borrower
or the Collateral by any person or entity whose claim could result in an
Encumbrance upon any asset of any Borrower or by any governmental authority;
properly exercise any trust responsibilities imposed upon the Borrowers by
reason of withholding from employees' pay or by reason of the Borrowers' receipt
of sales tax or other funds for the account of any third party; timely make all
contributions and other payments as may be required pursuant to any Employee
Benefit Plan now or hereafter established by the Borrowers; and timely file all
tax and other returns and other reports with each governmental authority to whom
the Borrowers are obligated to so file, provided, however, the Borrowers may
timely contest in good faith and by appropriate proceedings, any amount which it
is obligated to pay as provided in this Section 4:4-14(d), but only if and for
so long as no lien is filed on any of the Collateral with respect to such taxes.
(e) At its option, the Agent may, but shall not be obligated
to, pay any taxes, unemployment contributions, and any and all other charges
levied or assessed upon the Borrowers or the Collateral by any person or entity
or governmental authority, and make any contributions or other payments on
account of the Borrowers' Employee Benefit Plan as the Agent , in the Agent's
discretion, may deem necessary or desirable, to protect, maintain, preserve,
collect, or realize upon any or all of the Collateral or the value thereof or
any right or remedy pertaining thereto, provided, however, the Agent's making of
any such payment shall not constitute a cure or waiver of any Event of Default
occasioned by the Borrowers' failure to have made such payment.
.. 52 ..
4-15. No Margin Stock. The Borrowers are not engaged in the business
of extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations U, T, and X of the Board of Governors of the
Federal Reserve System of the United States). No part of the proceeds of any
borrowing hereunder will be used at any time to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.
4-16. ERISA. Neither the Borrowers nor any ERISA Affiliate ever has
or hereafter shall:
(a) Violate or fail to be in full compliance with the
Borrowers' Employee Benefit Plan where the failure of such compliance would have
a Material Adverse Effect
(b) Fail timely to file all reports and filings required by
ERISA to be filed by the Borrowers.
(c) Engage in any "prohibited transactions" or "reportable
events" (respectively as described in ERISA).
(d) Engage in, or commit, any act such that a tax or penalty
could be imposed upon the Borrowers on account thereof pursuant to ERISA.
(e) Accumulate any material funding deficiency within the
meaning of ERISA.
(f) Terminate any Employee Benefit Plan such that a lien could
be asserted against any assets of the Borrowers on account thereof pursuant to
ERISA.
(g) Be a member of, contribute to, or have any obligation
under any Employee Benefit Plan which is a multiemployer plan within the meaning
of Section 4001(a) of ERISA.
4-17. Hazardous Materials.
(a) The Borrowers have never:
(i) Been legally responsible for any release or
threat of release of any Hazardous Material where the result of such
legal responsibility would have a Material Adverse Effect.
(ii) Received notification of any release or threat
of release of any Hazardous Material from any site or vessel occupied
or operated by the Borrowers and/or of the incurrence of any expense or
loss in connection with the assessment, containment, or removal of any
release or threat of release of any Hazardous Material from any such
site or vessel which would have a Material Adverse Effect.
(b) If failure to do so would result in a Material Adverse
Effect, the Borrowers shall:
(i) Dispose of any Hazardous Material only in
compliance with all Environmental Laws.
(ii) Not store on any site or vessel occupied or
operated by the Borrowers and not transport or arrange for the
transport of any Hazardous Material, except if such storage or
.. 53 ..
transport is in the ordinary course of the Borrowers' business and is
in compliance with all Environmental Laws.
(c) The Lead Borrower shall provide the Agent with written
notice upon any Borrower's obtaining knowledge of any incurrence of any expense
or loss by any governmental authority or other Person in connection with the
assessment, containment, or removal of any Hazardous Material, for which expense
or loss the Borrowers may be liable and which would result in a Material Adverse
Effect.
4-18. Litigation. Except as described in EXHIBIT 4:4-18, annexed
hereto, there is not presently pending or threatened by or against any Borrower
any suit, action, proceeding, or investigation which, if determined adversely to
the Borrowers, would have a Material Adverse Effect.
4-19. Dividends, Investments, Repurchases.
(a) The Borrowers shall not:
(i) Pay any cash dividend or make any other
distribution in respect of any class of the Borrowers' capital stock.
(ii) Except for Permitted Repurchases (as to which,
see Section 4:4-19(b)) own, redeem, retire, purchase, or acquire any of
the Borrowers' capital stock, or any of the Borrowers' securities.
(iii) Invest in or purchase any stock or securities
or rights to purchase any such stock or securities, of any corporation
or other entity other than catalog sales or "e//commerce" or other
internet related business which involves the sale, at retail, via
digital media, of substantially the same lines of Inventory as are
offered for sale at the Borrowers' retail stores provided that the such
investments do not exceed $20,000,000.00 in the aggregate in any fiscal
year. The Agent and the Lenders shall have no obligation to include any
Inventory acquired (or Inventory of a similar type and nature acquired
thereafter) as "Eligible Inventory".
(iv) Merge or consolidate or be merged or
consolidated with or into any other corporation or other entity (other
than with any other Borrower).
(v) Consolidate any of the Borrowers' operations with
those of any other corporation or other entity (other than with any
other Borrower)
(vi) Organize or create any Related Entity, without
the prior written consent of the Agent, which consent shall not be
unreasonably withheld.
(b) Subject to the satisfaction of each of the conditions
included in this Section 4:4- 19(b), the Parent may repurchase its capital stock
and the 5.25% Notes (each of which repurchases is referred to herein as a
"Permitted Repurchase"):
(i) On the date on which the subject repurchase is to
be effected:
(A) No Event of Default shall have occurred
and none will occur by
.. 54 ..
reason of the subject repurchase.
(B) (i) Collateral Availability for the
period immediately prior to the subject repurchase
was not, and immediately after such repurchase shall
not be, less than $45 Million.
(C) Collateral Availability, on a pro forma
going forward basis following such repurchase, as
reflected on a projection provided to the Agent
immediately prior to the subject repurchase (and
prepared based on the same methodology and with the
same assumptions as those used in the preparation of
the Business Plan) is not less than $45 Million.
(ii) The cumulative amount of funds expended by
Borrower for all such repurchases of capital stock shall not in the
aggregate exceed $20Million.
(iii) The cumulative amount of funds expended by
Borrower for all such repurchases of capital stock and the 5.25% Notes,
collectively, shall not in the aggregate exceed $100Million, commencing
as of December 14, 1999, which includes $59,833,028.34 which has been
expended as of the date hereof, and an additional $40,166,971.66 which
may be so expended.
(c) Subordinate any debts or obligations owed to the Borrowers
by any third party to any other debts owed by such third party to any other
Person.
(d) Acquire any assets other than in the ordinary course and
conduct of the Borrowers' business as conducted at the execution of this
Agreement other than as specifically provided in Section 4- 23, or dispose of
any assets other than in the ordinary course and conduct of the Borrowers'
business as conducted at the execution of this Agreement except as contemplated
by this Agreement. Notwithstanding the foregoing the Borrowers shall be
permitted to dispose of the stock of The Sports Authority Canada, Inc. or Mega
Sports Co., Ltd., or any financial asset held by any Borrower.
4-20. Loans. The Borrowers shall not make any loans or advances to,
nor acquire the Indebtedness of, any Person, provided, however, the foregoing
does not prohibit any of the following:
(a) Advance payments made to the Borrowers' suppliers in the
ordinary course.
(b) Advances to the Borrowers' officers, employees, and
salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of the Borrowers, which
expenses are properly substantiated by the person seeking such advance and
properly reimbursable by the Borrowers.
(c) Loans to any Related Entity or Affiliate which is not a
Borrower, not to exceed $20,000,000.00 in the aggregate outstanding at any one
time, not otherwise expressly prohibited herein, provided that no Event of
Default shall have occurred and none will occur by reason of such loan.
4-21. Protection of Assets. The Agent, in the Agent's discretion, at
any time after the occurrence
.. 55 ..
of any Event of Default, may discharge any tax or Encumbrance on any of the
Collateral, or take any other action that the Agent may deem necessary or
desirable to repair, insure, maintain, preserve, collect, or realize upon any of
the Collateral. The Agent shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken
except where there is a specific finding in a judicial proceeding (in which the
Agent has had an opportunity to be heard), from which finding no further appeal
is available, that the Agent had acted in actual bad faith or in a grossly
negligent manner. The Borrowers shall pay to the Agent, on demand, or the Agent,
in its discretion, may add to the Loan Account, all amounts paid or incurred by
the Agent pursuant to this section. The obligation of the Borrowers to pay such
amounts is a Liability.
4-22. Line of Business. The Borrowers shall not engage in any business
other than the business in which it is currently engaged or a business
reasonably related thereto or catalog sales or "e//commerce" or other internet
related business which involves the sale, at retail, via digital media, of
substantially the same lines of Inventory as are offered for sale at the
Borrowers' retail stores.
4-23. Affiliate Transactions. The Borrowers shall not make any payment,
nor give any value to any Related Entity except in the ordinary course of
business, consistent with practices in effect on March 1, 1999 and not otherwise
prohibited under the Loan Documents, provided that no Event of Default shall
have occurred and none will occur by reason of thereof.
4-24. Additional Assurances.
(a) The Borrowers are not the owner of, nor has it any
interest in, any Collateral which, immediately upon the satisfaction of the
conditions precedent to the effectiveness of the credit facility contemplated
hereby (Article 3:) will not be subject to a perfected security interest in
favor of the Agent (subject only to Permitted Encumbrances) to secure the
Liabilities.
(b) The Borrowers will not hereafter acquire any Collateral
which is not, immediately upon such acquisition, subject to such a perfected
security interest in favor of the Agent to secure the Liabilities (subject only
to Permitted Encumbrances).
(c) The Borrowers shall execute and deliver to the Agent such
instruments, documents, and papers, and shall do all such things from time to
time hereafter as the Agent reasonably may request to carry into effect the
provisions and intent of this Agreement; to protect and perfect the Agent's
security interests in the Collateral; and to comply with all applicable statutes
and laws, and facilitate the collection of the Receivables Collateral. The
Borrowers shall execute all such instruments as reasonably may be required by
the Agent with respect to the recordation and/or perfection of the security and
mortgage interests created herein or contemplated hereby.
(d) The Borrowers hereby designate the Agent as and for the
Borrowers' true and lawful
.. 56 ..
attorney, with full power of substitution, to sign and file any financing
statements in order to perfect or protect the Agent's security and other
collateral interests in the Collateral.
(e) A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant to
this Section 4:4-24 shall be sufficient for filing to perfect the security
interests granted herein.
4-25. Adequacy of Disclosure.
(a) All financial statements furnished to the Agent and each
Lender by the Borrowers have been prepared in accordance with GAAP consistently
applied and present fairly in all material respects the Consolidated condition
of the Parent and its Subsidiaries at the date(s) thereof and the Consolidated
results of operations and cash flows of the Parent and its Subsidiaries for the
period(s) covered. There has been no change in the financial condition, results
of operations, or cash flows of the Borrowers since the date(s) of such
financial statements, other than changes in the ordinary course of business,
which changes have not been materially adverse, either singularly or in the
aggregate.
(b) The Borrowers do not have any material contingent
obligations or obligation under any Lease or Capital Lease which is not noted in
the Parent's Consolidated financial statements furnished to the Agent and each
Lender prior to the execution of this Agreement.
(c) No document, instrument, agreement, or paper now or
hereafter given the Agent or any Lender by or on behalf of the Borrowers or any
guarantor of the Liabilities in connection with the execution of this Agreement
by the Agent and each Lender, taken as a whole, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements therein not misleading. There is
no fact known to the Borrowers which has, or which, in the foreseeable future
would reasonably be expected to have a Material Adverse Effect.
4-26. No Restrictions on Liabilities. No Borrower shall enter into
or become subject to, directly or indirectly, any agreement prohibiting or
restricting in any manner (including, without limitation, by way of covenant,
representation or event of default) any of the following:
(a) The incurrence, creation or assumption of the Liabilities
or any Encumbrances in favor of the Agent on any property of any Borrower.
(b) The granting of a security interest, pledge, or
Encumbrance in favor of the Agent and the Lenders on any asset of any Borrower.
ARTICLE 5: - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:
5-1. Maintain Records. The Borrowers shall:
(a) At all times, keep proper books of account, in which full,
true, and accurate entries
.. 57 ..
shall be made of all of the Borrowers' transactions, all in accordance with GAAP
applied consistently with prior periods to fairly reflect the financial
condition of the Borrowers at the close of, and their results of operations for,
the periods in question.
(b) Timely provide the Agent with those financial reports,
statements, and schedules required by this Article 5: or otherwise, each of
which reports, statements and schedules shall be prepared, to the extent
applicable, in accordance with GAAP applied consistently with prior periods to
fairly reflect the financial condition of the Borrowers at the close of, and
their results of operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the
Collateral including, without limitation, accurate current stock, cost, and
sales records of its Inventory, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.
(d) At all times, retain independent certified public
accountants of nationally recognized standing and instruct such accountants to
fully cooperate with, and be available to, the Agent and each Lender to discuss
the Borrowers' financial performance, financial condition, operating results,
controls, and such other matters, within the scope of the retention of such
accountants, as may be raised by the Agent or that Lender.
(e) Not change their respective Fiscal Year or taxpayer
identification number.
5-2. Access to Records.
(a) The Borrowers shall accord the Agent and the Agent's
representatives with reasonable access from time to time as the Agent and such
representatives may require to all properties owned by or over which any
Borrower has control. The Agent and the Agent's representatives shall have the
right, and the Borrowers will permit the Agent and such representatives from
time to time as the Agent and such representatives reasonably may request, upon
reasonable notice and during normal business hours, to examine, inspect, copy,
and make extracts from any and all of the Borrowers' books, records,
electronically stored data, papers, and files. The Borrowers shall make all of
the Borrowers' copying facilities available to the Agent.
(b) The Borrowers hereby authorize the Agent and the Agent's
representatives to:
(i) Inspect, copy, duplicate, review, cause to be
reduced to hard copy, run off, draw off, and otherwise use any and all
computer or electronically stored information or data which relates to
the Borrowers' financial condition or to the Collateral, or any service
bureau, contractor, accountant, or other person, and directs any such
service bureau, contractor, accountant, or other person fully to
cooperate with the Agent and the Agent's representatives with respect
thereto.
(ii) Verify at any time the Collateral or any portion
thereof, including verification with Account Debtors, and/or with the
Borrowers' computer billing companies, collection agencies, and
accountants and, after and during the continuance of an Event of
Default, to sign the name of
.. 58 ..
the Borrowers on any notice to the Borrowers' Account Debtors or
verification of the Collateral.
5-3. Immediate Notice to Agent .
(a) The Lead Borrower shall provide the Agent with written
notice promptly after the occurrence of any of the following events, which
written notice shall be with reasonable particularity as to the facts and
circumstances in respect of which such notice is being given:
(i) Any change in the Parent's Chief Executive
Officer or Chief Financial Officer.
(ii) The completion of any physical count of all or a
material portion of the Borrowers' Inventory (together with a copy of
the certified results thereof).
(iii) Any ceasing of the Borrowers' making of payment
to its creditors generally as the Borrowers' debts become due.
(iv) Any failure by the Borrowers to pay rent at any
of the Borrowers' locations, which failure continues for more than
Three (3) days after the expiration of any grace period and notice of
rent default, to the extent applicable under any subject lease, has
been received by Borrower, except for any non-material withholding of
rent based upon any good faith disputes by the Borrower.
(v) Any Material Adverse Change in the business,
operations, or financial affairs of the Borrowers.
(vi) The receipt of any notice by or on behalf of
KMart under the KMart Agreement (together with a copy of such notice).
(vii) The occurrence of any KMart Default (with
reasonable detail as to the facts and circumstances of such
occurrence).
(viii) The occurrence of any Suspension Event.
(ix) Any intention on the part of the Parent to
discharge the Parent's present independent accountants or any
withdrawal or resignation by such independent accountants from their
acting in such capacity (as to which, see Subsection 5:5-1(d)).
(x) Any litigation which, if determined adversely to
the Borrowers, would reasonably be expected to have a Material Adverse
Effect.
(xi) The occurrence of an event or circumstance with
respect to any Employee Benefit Plan which would reasonably be expected
to have Material Adverse Effect.
(b) The Lead Borrower shall:
(i) Provide the Agent, when so distributed, with
copies of any materials distributed to the shareholders of the Parent
(qua such shareholders).
(ii) Provide the Agent:
(A) When filed, copies of all filings by the
Parent with the SEC.
.. 59 ..
(B) When received, copies of all
correspondence from the SEC, other than routine
non-substantive general communications from the SEC.
(iii) Add the Agent as an addressee on all mailing
lists maintained by or for the Borrowers which Agent may request.
(iv) At the reasonable request of the Agent, from
time to time, provide the Agent with copies of all advertising
(including copies of all print advertising and duplicate tapes of all
video and radio advertising).
(v) Provide the Agent, when received by the
Borrowers, with a copy of any management letter or similar
communications from any accountant of the Borrowers.
5-4. Borrowing Base Certificates. The Lead Borrower shall provide
the Agent with Borrowing Base Certificates, each reflecting the Borrowers'
condition for the period indicated below immediately prior to the date when
furnished, as follows:
(a) On each Thursday (or the next Business Day, if that
Thursday is not a Business Day) of every fiscal week, the Lead Borrower
shall provide the Agent with a Borrowing Base Certificate (in the form
of EXHIBIT 5:5-4(a) annexed hereto, as such form may be revised from
time to time by the Agent), each reflecting the Borrowers' condition on
the last day of the fiscal week immediately prior to the date when
furnished. Such Borrowing Base Certificate may be sent to the Agent by
facsimile transmission, provided that the original thereof is forwarded
to the Agent on the date of such transmission.
(b) On the third Thursday (or the next Business Day, if that
Thursday is not a Business Day) following the end of the Borrower's
fiscal month, the Lead Borrower shall, in addition to the weekly
Borrowing Base Certificate required pursuant to subsection (a) above,
provide the Agent with a Borrowing Base Certificate (in the form of
EXHIBIT 5:5-4(b) annexed hereto, as such form may be revised from time
to time by the Agent), each reflecting the Borrowers' condition on the
last day of the fiscal month immediately prior to the date when
furnished, with each such Borrowing Base Certificate being reconciled
(with respect to the weekly Borrowing Base Certificates delivered to
the Agent during said prior fiscal month) to reflect all actual
customary and normal month end adjustments. Such Borrowing Base
Certificate may be sent to the Agent by facsimile transmission,
provided that the original thereof is forwarded to the Agent on the
date of such transmission.
5-5. Monthly Reports.
(a) Monthly, the Lead Borrower shall provide the Agent with
original counterparts of the following (each in such form as the Agent from time
to time may specify):
(i) Within twenty (20) days of the end of the
previous fiscal month with respect to the first eleven (11) months of
the fiscal year, and within thirty (30) days of the end of the last
.. 60 ..
month of the fiscal year:
(A) Month End Inventory Margin Chart
Package, as required by Agent.
(B) A copy of each Borrower's monthly rental
ledger, which copy shall be annotated to indicate
those leases thereon which are subject to the KMart
Agreement.
(ii) Within Thirty (30) days of the end of the
previous fiscal month:
(A) A Gross Margin Reconciliation.
(B) A schedule of purchases from the
Borrowers' ten largest vendors (in terms of year to
date purchases), which schedule shall be in such form
as may be satisfactory to the Agent and shall include
year to date cumulative purchases and an aging of
payables to each such vendor.
(C) An aging of the Borrowers' accounts
payable.
(D) A Store Activity Report.
(E) An internally prepared financial
statement of the Borrowers' financial condition, and
the results of their respective operations for, the
period ending with the end of the subject month,
which financial statement shall include, at a
minimum, a balance sheet, income statement (on a
"consolidated" basis for all operations in the United
States and, if requested by the Agent, on a store
specific basis), cash flow and comparison of same
store sales for the corresponding month of the then
immediately previous year, as well as to the Business
Plan.
(b) For purposes of Section 5:5-5(a)(i), above, the first
"previous fiscal month" in respect of which the items required by that Section
shall be provided shall be June, 2000 and for purposes of Section 5:5-5(a)(ii),
above, the first "previous fiscal month" in respect of which the items required
by that Section shall be provided shall be June, 2000.
5-6. Quarterly Reports.
(a) Quarterly, within Forty Five (45) days following the end
of each of the Parent's fiscal quarters, the Lead Borrower shall provide the
Agent with an original counterpart of a management prepared Consolidated
financial statement of the Borrowers for the period from the beginning of the
Borrowers' then current Fiscal Year through the end of the subject quarter, with
comparative information for the same period of the previous Fiscal Year, which
statement shall include, at a minimum, a balance sheet, income statement (on a
"consolidated" basis for all operations in the United States and, if requested
by the Agent, on a store specific basis), statement of changes in shareholders'
equity, and cash flows and comparisons for the corresponding quarter of the then
immediately previous year, as well as to the Business Plan.
(b) For each of the Borrower's fiscal quarters, commencing
with the fourth fiscal quarter, 2000, the Borrowers shall provide the Agent
with an original counterpart of a Certificate (signed by the Borrowers'
President, Chief Financial Officer, Controller, or Treasurer) on which shall be
indicated (with
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supporting calculations) the Borrowers' average quarterly Availability during
such fiscal quarter with respect to those criteria included in the Definition of
Eurodollar Margin ( "Pricing Certificate"). Unless otherwise agreed by the
Agent, the Pricing Certificate shall be delivered to the Agent together with the
Borrowing Base Certificate required pursuant to Section 5-4(b) for such fiscal
quarter and shall incorporate, for all calculations made for such fiscal
quarter, the reconciliation of all actual customary and normal adjustments.
5-7. Annual Reports.
(a) Annually, within ninety (90) days following the end of the
Parent's Fiscal Year, the Lead Borrower shall furnish the Agent with an original
signed counterpart of the Borrowers' Consolidated annual financial statement,
which statement shall have been prepared by, and bear the unqualified opinion
of, the Borrowers' independent certified public accountants (i.e. said statement
shall be "certified" by such accountants). Such annual statement shall include,
at a minimum (with comparative information for the then prior Fiscal Year) a
balance sheet, income statement, statement of changes in shareholders' equity,
and cash flows and a schedule of consolidation.
(b) No later than the earlier of Fifteen (15) days prior to
the end of each of the Borrowers' Fiscal Years or the date on which such
accountants commence their work on the preparation of the Borrowers'
Consolidated annual financial statement, the Borrowers shall give written notice
to such accountants (with a copy of such notice, when sent, to the Agent) that:
(i) Such annual financial statement will be delivered
by the Borrowers to the Agent (for subsequent distribution to each
Lender).
(ii) It is the primary intention of the Borrowers, in
its engagement of such accountants, to satisfy the financial reporting
requirements set forth in this Article 5:.
(iii) The Borrowers has been advised that the Agent
(and each Lender) will rely thereon with respect to the administration
of, and transactions under, the credit facility contemplated by this
Agreement.
5-8. Officers' Certificates. The Lead Borrower shall cause the
Parent's Chief Executive Officer or Chief Financial Officer, Controller, or
Treasurer respectively to provide such Person's Certificate with those monthly,
quarterly, and annual statements to be furnished pursuant to this Agreement,
which Certificate shall:
(a) Indicate that the subject statement was prepared in
accordance with GAAP consistently applied and presents fairly the financial
condition of the Borrowers at the close of, and the results of the Borrowers'
operations and cash flows for, the period(s) covered , subject, however to the
following:
(i) usual year end adjustments (this exception shall
not be included in the Certificate which accompanies such annual
statement).
(ii) Material Accounting Changes.
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(b) Indicate either that (i) no Suspension Event has occurred
or (ii) if such an event has occurred, its nature (in reasonable detail) and the
steps (if any) being taken or contemplated by the Borrowers to be taken on
account thereof.
5-9. Inventories, Appraisals, and Audits.
(a) The Agent and each Lender, at the expense of the
Borrowers, may observe, at the Parent's distribution facility, each physical
count and/or inventory of so much of the Collateral as consists of Inventory
which is undertaken on behalf of the Borrowers.
(b) The Borrower, at its own expense, shall cause at least one
(1) full physical inventory (which physical inventory shall, on a cumulative
basis, cover all of Borrower's store locations in the United States) to be
undertaken in each twelve (12) month period during which this Agreement is in
effect (the spacing of the scheduling of which inventories shall be satisfactory
to the Agent in all respects) conducted by such inventory takers as are
reasonably satisfactory to the Agent and following such methodology as may
reasonably be satisfactory to the Agent.
(i) The Lead Borrower shall provide the Agent with a
reconciliation of the results of each such inventory (as well as of any
other physical inventory undertaken by the Borrowers) to the Borrowers'
books and records within thirty (30) days following the end of the
calendar month during which such inventory was completed.
(ii) The Agent, in its discretion, following the
occurrence of an Event of Default, may cause such additional
inventories to be taken as the Agent determines (each, at the expense
of the Borrowers).
(c) Upon the Agent's reasonable request from time to time, the
Borrowers shall permit the Agent to obtain Inventory appraisals (in all events,
at the Borrowers' expense) conducted by such appraisers as are satisfactory to
the Agent. Prior to the occurrence of any Event of Default the Agent shall
obtain two (2)appraisals in each twelve (12) month period during which this
Agreement is in effect (the spacing of the scheduling of which appraisals shall
be subject to the Agent's discretion). The Agent, in its discretion, following
the occurrence of an Event of Default, may cause such additional appraisals to
be taken as the Agent determines (each, at the expense of the Borrowers).
(d) Upon the Agent's reasonable request from time to time, the
Borrowers shall permit the Agent to obtain Real Estate appraisals on the
Eligible Real Estate conducted by such appraisers as are reasonably satisfactory
to the Agent. Prior to the occurrence of any Event of Default the Borrower shall
not be required to pay for more than (1)appraisal in each eighteen (18) month
period during which this Agreement is in effect (the spacing of the scheduling
of which appraisals shall be subject to the Agent's discretion), provided,
however the Agent may require additional appraisals at any time at the expense
of the Agent and the Lenders. The Agent, in its discretion, may cause such
additional appraisals to be taken as the Agent determines (each, at the expense
of the Borrowers), at any time (i) if Collateral Availability falls
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below Thirty Million Dollars ($30,000,000.00) for five (5) consecutive days, or
(ii) following the occurrence of an Event of Default.
(e) The Agent contemplates conducting two (2) commercial
finance audits (in each event, at the Borrowers' expense) of the Borrowers'
books and records during any Twelve (12) month period during which this
Agreement is in effect, but in its discretion following the occurrence of any
Suspension Event, may undertake additional such audits during such period.
(f) The Agent from time to time (in all events, at the
Borrowers' expense) may undertake "mystery shopping" (so-called) visits to all
or any of the Borrowers' business premises. The Agent shall provide the
Borrowers with a copy of any non-company confidential results of such mystery
shopping.
5-10. Additional Financial Information.
(a) In addition to all other information required to be
provided pursuant to this Article 5:, the Lead Borrower promptly shall provide
the Agent, with such other and additional information concerning the Borrowers,
the Collateral, the operation of the Borrowers' business, and the Borrowers'
financial condition, including original counterparts of financial reports and
statements, as the Agent may from time to time reasonably request from the Lead
Borrower.
(b) The Lead Borrower may provide the Agent, from time to time
hereafter, with updated projections of the Borrowers' anticipated performance
and operating results.
(c) In all events, the Lead Borrower, no sooner than Ninety
(90) nor later than Forty-Five (45) days prior to the end of each of the
Borrowers' Fiscal Years, shall furnish the Agent with an updated and extended
projection which shall go out at least through the end of the then next Fiscal
Year; provided, however, that the Lead Borrower, within Forty-Five days
following the end of each of the Borrowers' Fiscal Years, may, in its
discretion, furnish the Agent with a further updated and extended projection
taking into account the Borrowers' actual year end financial performance.
(d) Such updated and extended projections shall be prepared
pursuant to a methodology and shall include such assumptions as are reasonably
satisfactory to the Agent.
(e) The Borrowers recognize that all appraisals, inventories,
analysis, financial information, and other materials which the Agent or any
Lender may obtain, develop, or receive with respect to the Borrowers are
confidential to the Agent and the Lenders and that, except as otherwise provided
herein, the Borrowers are not entitled to receipt of any of such appraisals,
inventories, analysis, financial information, and other materials, nor copies or
extracts thereof or therefrom.
5-11. Financial Covenant based upon Collateral Availability;
Minimum EBITDA. If at any time Collateral Availability is less than $40 Million,
then thereafter the Borrower shall not suffer or permit its EBITDA for the
previous four (4) fiscal quarters (on a rolling four quarter basis) to be less
than $30 Million, tested quarterly as soon as the information is publicly
available each fiscal quarter.
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ARTICLE 6: - USE AND COLLECTION OF COLLATERAL:
6-1. Use of Inventory Collateral.
(a) The Borrowers shall not engage in any sale of the
Inventory other than for fair consideration in the conduct of the Borrowers'
business in the ordinary course and shall not engage in
(i) sales or other dispositions to creditors; or
(ii) sales or other dispositions in bulk.
(b) No sale of Inventory shall be on consignment, approval, or
under any other circumstances such that, with the exception of the Borrowers'
customary return policy applicable to the return of inventory purchased by the
Borrowers' retail customers in the ordinary course, such Inventory may be
returned to the Borrowers without the consent of the Agent .
6-2. Inventory Quality. All Inventory now owned or hereafter
acquired by the Borrowers are and will be of good and merchantable quality and
free from defects (other than defects within customary trade tolerances).
6-3. Adjustments and Allowances. The Borrowers may grant such
allowances or other adjustments to the Borrowers' Account Debtors (exclusive of
extending the time for payment of any Account or Account Receivable, which shall
not be done without first obtaining the Agent's prior written consent in each
instance) as the Borrowers may reasonably deem to accord with sound business
practice, provided, however, following the occurrence of an Event of Default,
the authority granted the Borrowers pursuant to this Section 6:6-3 may be
limited or terminated by the Agent at any time in the Agent's discretion.
6-4. Validity of Accounts.
(a) The amount of each Account shown on the books, records,
and invoices of the Borrowers represented as owing by each Account Debtor is and
will be the correct amount actually owing by such Account Debtor and shall have
been fully earned by performance by the Borrowers.
(b) The Borrowers have no knowledge of any material impairment
of the validity or collectibility of any of the Accounts and shall cause the
Lead Borrower to notify the Agent of any such fact immediately after any
Borrower becomes aware of any such impairment.
6-5. Notification to Account Debtors. The Agent shall have the
right at any time after an Event of Default has occurred to notify any of the
Borrowers' Account Debtors to make payment directly to the
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Agent and to collect all amounts due on account of the Collateral.
ARTICLE 7: - CASH MANAGEMENT. PAYMENT OF LIABILITIES:
7-1 Depository Accounts.
(a) Annexed hereto as EXHIBIT 7:7-1 is a Schedule of all
present DDA's, which Schedule includes, with respect to each depository (i) the
name and address of that depository; (ii) the account number(s) of the
account(s) maintained with such depository; and (iii) a contact person at such
depository.
(b) The Borrowers shall deliver to the Agent, as a condition
to the effectiveness of this Agreement:
(i) Notification, executed on behalf of the
Borrowers, to each depository institution with which any DDA is
maintained (other than the Operating Account or any Local DDA), in form
satisfactory to the Agent, of the Agent's interest in such DDA.
(ii) An agreement (generally referred to as a
"Blocked Account Agreement"), in form satisfactory to the Agent with
any depository institution at which both any DDA (other than the
Operating Account) and the Operating Account is maintained.
(iii) An agreement (generally referred to as a
"Blocked Account Agreement"), in form satisfactory to the Agent, with
any depository institution at which a Blocked Account is maintained
(c) No Borrower will establish any DDA hereafter (other than a
Local DDA) unless, contemporaneous with such establishment, such Borrower
delivers to the Agent an agreement (in form satisfactory to the Agent) executed
on behalf of the depository with which such DDA is being established.
7-2. Credit Card Receipts.
(a) Annexed hereto as EXHIBIT 7:7-2, is a Schedule which
describes all arrangements to which the Borrowers are a party with respect to
the payment to the Borrowers of the proceeds of all credit card charges for
sales by the Borrowers.
(b) The Borrowers shall deliver to the Agent, as a condition
to the effectiveness of this Agreement, notification, executed on behalf of the
Borrowers, to each of the Borrowers' credit card clearinghouses and processors
of notice (in form satisfactory to the Agent ), which notice provides that
payment of all credit card charges submitted by the Borrowers to that
clearinghouse or other processor and any other amount payable to the Borrowers
by such clearinghouse or other processor shall be directed to the Concentration
Account or as otherwise designated from time to time by the Agent. The Borrowers
shall not change such direction or designation except upon and with the prior
written consent of the Agent .
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7-3. The Concentration, Blocked, and Operating Accounts.
(a) The following checking accounts have been or will be
established (and are so referred to herein):
(i) The Concentration Account: Established by the
Agent with Fleet National Bank
(ii) The Blocked Account: Established by the
Borrowers with Fleet National Bank.
(iii) The Operating Account: Established by the
Borrowers with Fleet National Bank. To the extent that the Blocked
Account and the Operating Account are not separate accounts, within 45
days from the date of this Agreement the Borrower shall establish
separate accounts for such purposes.
(b) The contents of each DDA (other than the Operating
Account) and of the Blocked Account constitutes Collateral and Proceeds of
Collateral. The contents of the Concentration Account constitutes the Agent's
property.
(c) The Borrowers:
(i) Contemporaneous with the execution of this
Agreement, shall provide the Agent with such agreement (generally
referred to as a "Blocked Account Agreement") of the depository with
which the Blocked Account is maintained as may be satisfactory to the
Agent; and
(ii) Shall not establish any Blocked Account
hereafter except upon not less than Thirty (30) days prior written
notice to the Agent and the delivery to the Agent of a similar such
agreement.
(d) The Borrowers shall pay all fees and charges of, and
maintain such impressed balances as may be required by the Agent or by any bank
in which any account is opened as required hereby (even if such account is
opened by and/or is the property of the Agent).
7-4. Proceeds and Collections.
(a) All Receipts constitute Collateral and proceeds of
Collateral and shall be held in trust by the Borrowers for the Agent; shall not
be commingled with any of the Borrowers' other funds; and shall be deposited
and/or transferred only to the Blocked Account.
(b) The Borrowers shall cause the ACH or wire transfer to the
Blocked Account, no less frequently than daily (and whether or not there is then
an outstanding balance in the Loan Account) of
(i) the then contents of each DDA (other than (A) any
Local DDA and (B) the Operating Account), each such transfer to be net
of any minimum balance, not to exceed $750.00, as may be required to be
maintained in the subject DDA by the bank at which such DDA is
maintained); and
(ii) the proceeds of all credit card charges not
otherwise provided for pursuant
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hereto.
Telephone advice (confirmed by written notice) shall be provided to the Agent on
each Business Day on which any such transfer is made.
(c) At any time that any Cash Management Condition is extant,
and whether or not any Liabilities are then outstanding, the Borrowers shall
undertake the following (and the Agent may give notice to the bank at which the
Blocked Account is maintained to undertake the following):
(i) Cause the ACH or wire transfer to the
Concentration Account, no less frequently than daily, of then entire
ledger balance of the Blocked Account, net of such minimum balance, not
to exceed $750.00, as may be required to be maintained in the Blocked
Account by the bank at which the Blocked Account is maintained.
(ii) Cause the ACH or wire transfer to the
Concentration Account, of all Net Proceeds at the earliest moment that
such Net Proceeds are paid over to any Borrower.
In the event that, notwithstanding the provisions of this Section 7:7-4(c), any
of the Borrowers receives or otherwise has dominion and control of any Receipts,
or any proceeds or collections of any Collateral, or Net Proceeds, such
Receipts, proceeds, collections, and Net Proceeds shall be held in trust by the
Borrowers for the Agent and shall not be commingled with any of the Borrowers'
other funds or deposited in any account of the Borrowers other than as
instructed by the Agent.
7-5. Payment of Liabilities.
(a) On each Business Day, the Agent shall apply, towards the
unpaid balance of the Loan Account, the then collected balance of the
Concentration Account (net of fees charged, and of such impressed balances as
may be required by the bank at which the Concentration Account is maintained).
(b) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:
(i) Funds shall be deemed to have been deposited to
the Concentration Account on the Business Day on which deposited,
provided that notice of such deposit is available to the Agent by
2:00PM on that Business Day.
(ii) Funds paid to the Agent, other than by deposit
to the Concentration Account, shall be deemed to have been received on
the Business Day when they are good and collected funds, provided that
notice of such payment is available to the Agent by 2:00PM on that
Business Day.
(iii) If notice of a deposit to the Concentration
Account (Section 7:7-5(b)(i)) or payment (Section 7:7-5(b)(ii)) is not
available to the Agent until after 2:00PM on a Business Day, such
deposit or payment shall be deemed to have been made at 9:00AM on the
then next Business Day.
(iv) All deposits to the Concentration Account and
other payments to the Agent
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are subject to clearance and collection.
(c) The Agent shall transfer to the Operating Account any
surplus in the Concentration Account remaining after the application towards the
Liabilities referred to in Section 7:7-5(a), above (less those amount which are
to be netted out, as provided therein) provided, however, in the event that both
(i) a Suspension Event has occurred and (ii) one or more L/C's are then
outstanding, the Agent may establish a funded reserve of up to 110% of the
aggregate Stated Amounts of such L/C's.
7-6. The Operating Account. Except as otherwise specifically
provided in, or permitted by, this Agreement, all checks shall be drawn by the
Borrowers upon, and other disbursements shall be made by the Borrowers solely
from, the Operating Account.
ARTICLE 8: - GRANT OF SECURITY INTEREST:
8-1. Grant of Security Interest. To secure the Borrowers' prompt,
punctual, and faithful performance of all and each of the Liabilities, each
Borrower hereby grant to the Agent, for the ratable benefit of the Lenders, a
continuing security interest in and to, and assigns to the Agent, for the
ratable benefit of the Lenders, the following, and each item thereof, whether
now owned or now due, or in which that Borrower has an interest, or hereafter
acquired, arising, or to become due, or in which that Borrower obtains an
interest, and all products, Proceeds, substitutions, and accessions of or to any
of the following (all of which, together with any other property in which the
Agent may in the future be granted a security interest, is referred to herein as
the "Collateral"):
(a) All Accounts and accounts receivable.
(b) All Inventory.
(c) All Documents.
(d) All Payment Intangibles.
(e) All Chattel Paper.
(f) All books, records, and information relating to the Collateral
and all rights of access to such books, records, and
information, and all property in which such books, records,
and information are stored, recorded, and maintained.
8-2. Extent and Duration of Security Interest. The security
interest created and granted herein is in addition to, and supplemental of, any
security interest previously granted by the Borrowers to the Agent and shall
continue in full force and effect applicable to all Liabilities until all
Liabilities have been paid and/or satisfied in full and the security interest
granted herein is specifically terminated in writing by a duly authorized
officer of the Agent .
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8-3. Release of Real Estate Encumbrance. The Agent shall promptly
release, in whole or in part, its Encumbrance on all or any portion of any Real
Estate upon the request of the Borrower without any further consent of, or
direction from, the Lenders, provided that no Event of Default is then occurring
or would be occurring after such release.
ARTICLE 9: - AGENT AS BORROWERS' ATTORNEY-IN-FACT:
9-1. Appointment as Attorney-In-Fact. The Borrowers hereby
irrevocably constitute and appoint the Agent as the Borrowers' true and lawful
attorney, with full power of substitution, effective following the occurrence of
an Event of Default, to convert the Collateral into cash at the sole risk, cost,
and expense of the Borrowers, but for the sole benefit of the Agent and the
Lenders. The rights and powers granted the Agent by the within appointment
include but are not limited to the right and power to:
(a) Prosecute, defend, compromise, or release any action
relating to the Collateral.
(b) Sign change of address forms to change the address to
which the Borrowers' mail is to be sent to such address as the Agent shall
designate; receive and open the Borrowers' mail; remove any Receivables
Collateral and Proceeds of Collateral therefrom and turn over the balance of
such mail either to the Borrowers or to any trustee in bankruptcy, receiver,
assignee for the benefit of creditors of the Borrowers, or other legal
representative of the Borrowers whom the Agent determines to be the appropriate
person to whom to so turn over such mail.
(c) Endorse the name of the Borrowers in favor of the Agent
upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the name of the Borrowers on, and receive as
secured party, any of the Collateral, any invoices, schedules of Collateral,
freight or express receipts, or bills of lading, storage receipts, warehouse
receipts, or other documents of title respectively relating to the Collateral.
(d) Sign the name of the Borrowers on any notice to the
Borrowers' Account Debtors or verification of the Receivables Collateral; sign
the Borrowers' name on any Proof of Claim in Bankruptcy against Account Debtors,
and on notices of lien, claims of mechanic's liens, or assignments or releases
of mechanic's liens securing the Accounts.
(e) Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which the
Borrowers are a beneficiary.
(f) Repair, manufacture, assemble, complete, package, deliver,
alter or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of the Borrowers.
9-2. No Obligation to Act. The Agent shall not be obligated to do
any of the acts or to exercise any of the powers authorized by Section 9:9-1
herein, but if the Agent elects to do any such act or to exercise any of such
powers, it shall not be accountable for more than it actually receives as a
result of such
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exercise of power, and shall not be responsible to the Borrowers for any act or
omission to act except for any act or omission to act as to which there is a
final determination made in a judicial proceeding (in which proceeding the Agent
has had an opportunity to be heard) which determination includes a specific
finding that the subject act or omission to act had been grossly negligent or in
actual bad faith.
ARTICLE 10: - EVENTS OF DEFAULT:
The occurrence of any event described in this Article 10: respectively
shall constitute an "Event of Default" herein, except that notwithstanding
anything herein to the contrary, the occurrence of any event under the Mortgage
and Security Agreements/Deeds of Trust and Assignment of Leases and Rents now or
hereafter executed by any of the Borrowers in favor of the Agent on behalf of
the Lenders, in the Paragraph captioned "Removal as Eligible Real Estate;
Discharge", which give rise to the exclusion of any Real Estate as Eligible Real
Estate shall not constitute an Event of Default hereunder. Upon the occurrence
of any Event of Default described in Section 10:10-12, any and all Liabilities
shall become due and payable without any further act on the part of the Agent or
any Lender. Upon the occurrence of any other Event of Default, any and all
Liabilities shall become immediately due and payable, at the option of the Agent
and without notice or demand to the Lead Borrower or any Borrower. The
occurrence of any Event of Default shall also constitute, without notice or
demand, a default under all other agreements between the Agent or any Lender and
the Borrowers and instruments and papers given the Agent or any Lender by the
Borrowers, whether such agreements, instruments, or papers now exist or
hereafter arise.
10-1. Failure to Pay Revolving Credit. The failure by the Borrowers
to pay any amount when due under the Revolving Credit.
10-2. Failure To Make Other Payments. The failure by the Borrowers
to pay when due (or upon demand, if payable on demand) any payment Liability
other than under the Revolving Credit.
10-3. Failure to Perform Covenant or Liability (No Grace Period).
The failure by the Borrowers to promptly, punctually, faithfully and timely
perform, discharge, or comply with any covenant or Liability not otherwise
described in Section 10:10-1 or Section 10:10-2 hereof, and included in any of
the following provisions hereof:
Section Relates to :
------------------------------------------
4:4-5 Location of Collateral
4:4-6 Title to Assets
4:4-7 Indebtedness
4-9 Subordinated Debt
4:4-9 Insurance Policies
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4:4-14 Pay taxes
4:4-23 Affiliate Transactions
5:5-4 ` Borrowing Base Certificate
6:6-1 Use of Collateral
Article 7: Cash Management
10-4. Failure to Perform Covenant or Liability (Grace Periods). The
failure by the Borrowers, upon the following number of days written notice by
the Agent to the Lead Borrower , to cure the Borrowers' failure to promptly,
punctually and faithfully perform, discharge, or comply with the following
covenants and Liabilities:
(a) Five Days: Article 5: (Other than Section 5:5-4,
(Borrowing Base Certificate))
(b) Ten Days: Any Liability not described in any of
Sections 10:10-1, 10:10-2, 10:10-3, or 10:10-4(a)
hereof.
Notwithstanding the provisions of Section 12-2(b)(i), in the limited event that
Agent provides notice of a default under this Section 10-4 by mail, then such
notice shall be deemed made and correspondence received upon actual receipt
(unless Lead Borrower fails to accept receipt of any such notice sent by
certified mail, in which case such notice shall be deemed made and
correspondence received upon actual attempted delivery by The United States
Postal Service).
10-5. Misrepresentation. Any representation or warranty at any time
made by the Borrowers to the Agent or any Lender, was not true or complete in
all material respects when given.
10-6. Acceleration of Other Debt. Breach of Lease. The occurrence of
any event such that any Indebtedness of the Borrowers in excess of
$10,000,000.00 to any creditor other than the Agent or any Lender could be
accelerated or, without the consent of such Borrowers, Leases representing, in
the aggregate, more than fifteen percent (15%) of the Borrower's total Leases in
the United States could be terminated (whether or not the subject creditor or
lessor takes any action on account of such occurrence).
10-7. KMart Default. The occurrence of any KMart Default.
10-8. Default Under Other Agreements. The occurrence of any breach
or default (and the expiration of any applicable notice and grace period) under
any agreement between the Agent or any Lender and the Borrowers or instrument or
paper given the Agent or any Lender by the Borrowers (and which does not
constitute a Loan Document), whether such agreement, instrument, or paper now
exists or hereafter arises (notwithstanding that the Agent or the subject Lender
may not have exercised its rights upon default under any such other agreement,
instrument or paper).
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10-9. Uninsured Casualty Loss. The occurrence of any uninsured loss,
theft, damage, or destruction of or to any material portion of the Collateral.
10-10. Judgment. Restraint of Business.
(a) The service of process upon the Agent or any Lender or any
Participant seeking to attach, by trustee or other process, any of a Borrower's
funds on deposit with, or assets of such Borrower in the possession of, the
Agent or any Lender or such Participant, which is not timely contested in good
faith by such Borrower by appropriate proceedings, or if so contested, is not
dismissed within thirty (30) days.
(b) The entry of any judgment or judgments against any
Borrower in excess of $10,000,000.00 in the aggregate, which judgment(s) are not
satisfied (if a money judgment) or appealed from (with execution or similar
process stayed) within thirty (30) days of its entry.
(c) The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material way the conduct by any Borrower of its business in the ordinary course
which would result in a Material Adverse Effect.
10-11. Business Failure. Any act by, against, or relating to any
Borrower, or its property or assets, which act constitutes the application for,
consent to, or sufferance of the appointment of a receiver, trustee, or other
person, pursuant to court action or otherwise, over all, or any part of, if
commenced against that Borrower, is not timely contested in good faith by such
Borrower by appropriate proceedings, or if so contested, is not dismissed within
sixty (60) days of when filed; the granting of any trust mortgage or execution
of an assignment for the benefit of the creditors of any Borrower, or the
occurrence of any other voluntary or involuntary liquidation or extension of
debt agreement for any Borrower; the offering by or entering into by any
Borrower of any composition, extension, or any other arrangement seeking relief
from or extension of the debts of any Borrower; or the initiation of any
judicial or non-judicial proceeding or agreement by, against, or including any
Borrower which seeks or intends to accomplish a reorganization or arrangement
with creditors; and/or the initiation by or on behalf of any Borrower of the
liquidation or winding up of all or any part of that Borrower's' business or
operations.
10-12. Bankruptcy. The failure by any Borrower to generally pay the
debts of that Borrower as they mature; adjudication of bankruptcy or insolvency
relative to any Borrower; the entry of an order for relief or similar order with
respect to any Borrower in any proceeding pursuant to the Bankruptcy Code or any
other federal bankruptcy law; the filing of any complaint, application, or
petition by any Borrower initiating any matter in which that Borrower is or may
be granted any relief from the debts of that Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure; the filing of any complaint,
application, or petition against any Borrower initiating any matter in which
that Borrower is or may be granted any relief from the debts of that Borrower
pursuant to the Bankruptcy Code or any other insolvency statute or
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procedure, which complaint, application, or petition is not timely contested in
good faith by that Borrower by appropriate proceedings or, if so contested, is
not dismissed within sixty (60) days of when filed.
10-13. Indictment - Forfeiture. The indictment of, or institution of
any legal process or proceeding against, any Borrower, under any federal, state,
municipal, and other civil or criminal statute, rule, regulation, order, or
other requirement having the force of law where the relief, penalties, or
remedies sought or available include the forfeiture of any property of any
Borrower and/or the imposition of any stay or other order, would reasonably be
expected to have a Material Adverse Effect.
10-14. Foreign Proceeding. There occurs in relation to any Borrower
in any country or territory in which it carries on business or, to the
jurisdiction of whose courts any of its assets is subject, any event which, in
the reasonable opinion of the Agent, appears to correspond to or to have an
effect equivalent or substantially similar to any of those referenced in
Sections 10:10-10 through and including 10:10-13 or any Borrower becomes subject
(other than as a creditor or claimant) in any such country or territory to the
operation of any law relating to bankruptcy, insolvency, or liquidation which
would result in a Material Adverse Effect on the Borrowers, taken as a whole.
10-15. Challenge to Loan Documents.
(a) Any challenge by or on behalf of any Borrower or any
guarantor of the Liabilities to the validity of any Loan Document or the
applicability (other than based on a good faith interpretation of the Loan
Documents) or enforceability of any Loan Document in accordance with the subject
Loan Document's terms or which seeks to void, avoid, limit, or otherwise
adversely affect any security interest created by or in any Loan Document or any
payment made pursuant thereto.
(b) Any determination by any court or any other judicial or
government authority that any Loan Document is not enforceable in accordance
with the subject Loan Document's terms to the extent required by the Agent to
obtain the practical realization of the benefits intended to be provided by the
Loan Documents, or which voids, avoids, limits, or otherwise adversely affects
any security interest created by any Loan Document or any payment made pursuant
thereto.
10-16. Change in Control. Any Change in Control.
ARTICLE 11: - RIGHTS AND REMEDIES UPON DEFAULT:
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Agent is
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provided prior to the occurrence of an Event of Default, the Agent shall have
the following rights and remedies after and during the occurrence of any Event
of Default. Notwithstanding anything contained herein or in any of the Loan
Documents,the Agent shall have no right to foreclose on or exercise any power of
sale with respect to any Real Estate or to exercise any other right, remedy,
power, privilege or discretion hereunder or under any Loan Documents unless an
Event of Default as defined herein has occurred. Without limiting the generality
of the foregoing, unless an Event of Default has occurred under this Agreement,
the sole and exclusive remedy of the Agent upon the failure of the Borrower to
comply with any provision of any Encumbrance in favor of the Agent (a "Security
Instrument"), after taking into account all applicable cure periods, will be to
notify Borrower that any individual location constituting a portion of the Real
Estate is no longer Eligible Real Estate as provided in the paragraph captioned
"Removal of Eligible Real Estate; Discharge" in the Security Instrument and to
exclude such Real Estate as Eligible Real Estate. No stay which otherwise might
be imposed pursuant to Section 362 of the Bankruptcy Code or otherwise shall
stay, limit, prevent, hinder, delay, restrict, or otherwise prevent the Agent's
exercise of any of such rights and remedies.
11-1. Rights of Enforcement. The Agent shall have all of the rights
and remedies of a secured party upon default under the UCC, in addition to which
the Agent shall have all and each of the following rights and remedies:
(a) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral.
(b) To take possession of all or any portion of the
Collateral.
(c) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or processing as
the Agent deems advisable and with or without the taking of possession of any of
the Collateral.
(d) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral.
(e) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
11-2. Sale of Collateral.
(a) Any sale or other disposition of the Collateral may be at
public or private sale upon such terms and in such manner as the Agent deems
advisable, having due regard to compliance with any statute or regulation which
might affect, limit, or apply to the Agent's disposition of the Collateral.
(b) The Agent, in the exercise of the Agent's rights and
remedies upon default, may
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conduct one or more going out of business sales, in the Agent's own right or by
one or more agents and contractors. Such sale(s) may be conducted upon any
premises owned, leased, or occupied by any Borrower. The Agent and any such
agent or contractor, in conjunction with any such sale, may augment the
Inventory with other goods (all of which other goods shall remain the sole
property of the Agent or such agent or contractor). Any amounts realized from
the sale of such goods which constitute augmentations to the Inventory (net of
an allocable share of the costs and expenses incurred in their disposition)
shall be the sole property of the Agent for the benefit of the Lenders or such
agent or contractor and neither the Borrowers nor any Person claiming under or
in right of the Borrowers shall have any interest therein.
(c) Unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Agent shall provide the Lead Borrower with such
notice as may be practicable under the circumstances), the Agent shall give the
Lead Borrower at least seven (7) days prior written notice of the date, time,
and place of any proposed public sale, and of the date after which any private
sale or other disposition of the Collateral may be made. The Borrowers agree
that such written notice shall satisfy all requirements for notice to the
Borrowers which are imposed under the UCC or other applicable law with respect
to the exercise of the Agent's rights and remedies upon default.
(d) The Agent and any Lender, acting in accordance with the
UCC, may purchase the Collateral, or any portion of it at any sale held under
this Article.
(e) The Agent shall apply the proceeds of any exercise of the
Agent's Rights and Remedies under this Article 11: towards the Liabilities in
such manner, and with such frequency, as the Agent determines in a commercially
reasonable manner.
11-3. Occupation of Business Location. In connection with the
Agent's exercise of the Agent's rights under this Article 11:, the Agent may
enter upon, occupy, and use any premises owned or occupied by any Borrower, and
may exclude the Borrowers from such premises or portion thereof as may have been
so entered upon, occupied, or used by the Agent. The Agent shall not be required
to remove any of the Collateral from any such premises upon the Agent's taking
possession thereof, and may render any Collateral unusable to the Borrowers. In
no event shall the Agent be liable to the Borrowers for use or occupancy by the
Agent of any premises pursuant to this Article 11:, nor for any charge (such as
wages for the Borrowers' employees and utilities) incurred in connection with
the Agent's exercise of the Agent's Rights and Remedies.
11-4. Grant of Nonexclusive License. Each Borrower hereby grants to
the Agent a royalty free nonexclusive irrevocable license to use, apply, and
affix any trademark, trade name, logo, or the like in which that Borrower now or
hereafter has rights, such license being solely applicable with respect to the
Agent's exercise of the rights under Articles 9:9-1 and 11: hereof, including,
without limitation, in connection
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with any disposition of Inventory.
11-5. Assembly of Collateral. The Agent may require the Borrowers to
assemble the Collateral and make it available to the Agent at the Borrowers'
sole risk and expense at a place or places which are reasonably convenient to
both the Agent and Borrowers.
11-6. Rights and Remedies. The rights, remedies, powers, privileges,
and discretions of the Agent hereunder (herein, the " Agent's Rights and
Remedies") shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. No delay or omission by the Agent in exercising or
enforcing any of the Agent's Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by the Agent of any Event of Default or
of any default under any other agreement shall operate as a waiver of any other
default hereunder or under any other agreement. No single or partial exercise of
any of the Agent's Rights or Remedies, and no express or implied agreement or
transaction of whatever nature entered into between the Agent and any person, at
any time, shall preclude the other or further exercise of the Agent's Rights and
Remedies. No waiver by the Agent of any of the Agent's Rights and Remedies on
any one occasion shall be deemed a waiver on any subsequent occasion, nor shall
it be deemed a continuing waiver. All of the Agent's Rights and Remedies and all
of the Agent's rights, remedies, powers, privileges, and discretions under any
other agreement or transaction are cumulative, and not alternative or exclusive,
and may be exercised by the Agent at such time or times and in such order of
preference as the Agent in its sole discretion may determine. The Agent's Rights
and Remedies may be exercised without resort or regard to any other source of
satisfaction of the Liabilities.
ARTICLE 12: - NOTICES:
12-1. Notice Addresses. All notices, demands, and other
communications made in respect of this Agreement (other than a request for a
loan or advance or other financial accommodation under the Revolving Credit)
shall be made to the following addresses, each of which may be changed upon
seven (7) days written notice to all others given by certified mail, return
receipt requested:
If to the Agent:
Fleet Retail Finance Inc.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention : Xx. Xxxx X. Xxxxx
Director
Fax : 000 000-0000
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With a copy to:
Xxxxxx & Xxxxxxxxxx LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention : Xxxxxx X. Xxxx, Esquire
Fax : 000 000-0000
If to the Borrowers:
The Sports Authority, Inc.
0000 Xxxxx Xxxxx Xxxx 0
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention : Chief Financial Officer
Fax : 000 000-0000
With copies to:
The Sports Authority, Inc.
0000 Xxxxx Xxxxx Xxxx 0
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention : General Counsel
Fax : 000 000-0000
Xxxxxx, Xxxxx & Xxxxxxx LLP
5300 First Union Financial Center
000 Xxxxx Xxxxxxxx Xxxx
Xxxxx, Xxxxxxx 00000
Attention : Xxxx Xxxxxxxx, Esquire
Fax: : 000 000-0000
12-2. Notice Given.
(a) Except as otherwise specifically provided herein, notices
shall be deemed made and correspondence received, as follows (all times being
local to the place of delivery or receipt):
(i) By mail: the sooner of when actually received or
Three (3) days following deposit in the United States mail, postage
prepaid.
(ii) By recognized overnight express delivery: the
Business Day following the day when sent.
(iii) By Hand: If delivered on a Business Day after
9:00 AM and no later than Three (3) hours prior to the close of
customary business hours of the recipient, when delivered. Otherwise,
at the opening of the then next Business Day.
(iv) By Facsimile transmission (which must include a
header on which the party sending such transmission is indicated): If
sent on a Business Day after 9:00 AM and no later than Three (3) hours
prior to the close of customary business hours of the recipient, one
(1) hour after being sent. Otherwise, at the opening of the then next
Business Day.
(b) Rejection or refusal to accept delivery and inability to
deliver because of a changed address or Facsimile Number for which no due notice
was given shall each be deemed receipt of the notice
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sent.
ARTICLE 13: - TERM:
13-1. Termination of Revolving Credit. The Revolving Credit shall
remain in effect (subject to suspension as provided in Section 2:2-5(g) hereof)
until the Termination Date.
13-2. Effect of Termination. On the Termination Date, the Borrowers
shall pay the Agent (whether or not then due), in immediately available funds,
all then Liabilities including, without limitation: the entire balance of the
Loan Account; any accrued and unpaid Line (Unused) Fee; any payments due on
account of the indemnification obligations included in Section 2:2-9(e); and all
unreimbursed costs and expenses of the Agent and of each Lender for which the
Borrowers are responsible; and shall make such arrangements concerning any L/C's
then outstanding as are reasonably satisfactory to the Agent . Until such
payment, all provisions of this Agreement, other than those contained in Article
2: which place an obligation on the Agent and any Lender to make any loans or
advances or to provide financial accommodations under the Revolving Credit or
otherwise, shall remain in full force and effect until all Liabilities shall
have been paid in full. The release by the Agent of the security, Encumbrances,
and other collateral interests granted the Agent by the Borrowers hereunder may
be upon such reasonable conditions and indemnifications as the Agent may
require.
ARTICLE 14: - GENERAL:
14-1. Protection of Collateral. The Agent has no duty as to the
collection or protection of the Collateral beyond the safe custody of such of
the Collateral as may come into the possession of the Agent and shall have no
duty as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent may include reference to the Borrowers (and may
utilize any logo or other distinctive symbol associated with the Borrowers) in
connection with any advertising, promotion, or marketing undertaken by the Agent
with the Lead Borrower's approval, which approval shall not be unreasonably
withheld or delayed.
14-2. Successors and Assigns. This Agreement shall be binding upon
the Borrowers and the Borrowers' representatives, successors, and assigns and
shall enure to the benefit of the Agent and each Lender and the respective
successors and assigns of each provided, however, no trustee or other fiduciary
appointed with respect to the Borrowers shall have any rights hereunder. In the
event that the
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Agent or any Lender assigns or transfers its rights under this Agreement, the
assignee shall thereupon succeed to and become vested with all rights, powers,
privileges, and duties of such assignor hereunder and such assignor shall
thereupon be discharged and relieved from its duties and obligations hereunder.
14-3. Severability. Any determination that any provision of this
Agreement or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.
14-4. Amendments. Course of Dealing.
(a) This Agreement and the other Loan Documents incorporate
all discussions and negotiations between the Borrowers and the Agent and each
Lender, either express or implied, concerning the matters included herein and in
such other instruments, any custom, usage, or course of dealings to the contrary
notwithstanding. No such discussions, negotiations, custom, usage, or course of
dealings shall limit, modify, or otherwise affect the provisions thereof. No
failure by the Agent or any Lender to give notice to any Borrowers of such
Borrowers' having failed to observe and comply with any warranty or covenant
included in any Loan Document shall constitute a waiver of such warranty or
covenant or the amendment of the subject Loan Document. No change made by the
Agent in the manner by which Availability is determined shall obligate the Agent
to continue to determine Availability in that manner.
(b) The Borrowers may undertake any action otherwise
prohibited hereby, and may omit to take any action otherwise required hereby,
upon and with the express prior written consent of the Agent. No consent,
modification, amendment, or waiver of any provision of any Loan Document shall
be effective unless executed in writing by or on behalf of the party to be
charged with such modification, amendment, or waiver (and if such party is the
Agent, then by a duly authorized officer thereof). Any modification, amendment,
or waiver provided by the Agent shall be in reliance upon all representations
and warranties theretofore made to the Agent by or on behalf of the Borrowers
(and any guarantor, endorser, or surety of the Liabilities) and consequently may
be rescinded in the event that any of such representations or warranties was not
true and complete in all material respects when given.
14-5. Power of Attorney. In connection with all powers of attorney
included in this Agreement, the Borrowers hereby grant unto the Agent full power
(exercisable after and during the occurrence of an Event of Default) to do any
and all things necessary or appropriate in connection with the exercise of such
powers as fully and effectually as the Borrowers might or could do, hereby
ratifying all that said attorney shall do or cause to be done by virtue of this
Agreement. No power of attorney set forth in this Agreement shall be affected by
any disability or incapacity suffered by the Borrowers and each shall survive
the same. All
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powers conferred upon the Agent by this Agreement, being coupled with an
interest, shall be irrevocable until this Agreement is terminated by a written
instrument executed by a duly authorized officer of the Agent.
14-6. Application of Proceeds. The proceeds of any collection, sale,
or disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the Agent
determines in its sole discretion. The Borrowers shall remain liable for any
deficiency remaining following such application.
14-7. Costs and Expenses of Agent and Of Lenders.
(a) The Borrowers shall pay on demand all Costs of Collection
and all reasonable expenses of the Agent in connection with the preparation,
execution, and delivery of this Agreement and of any other Loan Documents,
whether now existing or hereafter arising, and all other reasonable expenses
which may be incurred by the Agent in preparing or amending this Agreement and
all other agreements, instruments, and documents related thereto, or otherwise
incurred with respect to the Liabilities, and all costs and expenses of the
Agent which relate to the credit facility contemplated hereby.
(b) The Borrowers shall pay on demand all costs and expenses
(including attorneys' reasonable fees) incurred, following the occurrence of any
Event of Default, by each Lender in connection with the enforcement, attempted
enforcement, or preservation of any rights and remedies under this, or any other
Loan Document, as well as any such costs and expenses in connection with any
"workout", forbearance, or restructuring of the credit facility contemplated
hereby.
(c) The Borrowers authorize the Agent to pay all such fees and
expenses and in the Agent's discretion, to add such fees and expenses to the
Loan Account.
(d) The undertaking on the part of the Borrowers in this
Section 14:14-7 shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by the Agent in favor of the Borrowers, other
than a termination, release, or discharge which makes specific reference to this
Section 14:14-7.
14-8. Copies and Facsimiles. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished the Agent or any
Lender may be reproduced by that Person or by the Agent by any photographic,
microfilm, xerographic, digital imaging, or other process, and that Person may
destroy any document so reproduced. Any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business). Any facsimile which
bears proof of transmission shall be binding on the party which or on whose
behalf such transmission was initiated and likewise shall be so admissible in
evidence as if the original of such facsimile had been delivered to the party
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which or on whose behalf such transmission was received.
14-9. Governing Law. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the laws of the State of New York.
14-10. Consent to Jurisdiction.
(a) The Borrowers agree that any legal action, proceeding,
case, or controversy against any Borrower with respect to any Loan Document may
be brought in the Superior Court of Suffolk County Massachusetts or in the
United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Agent may elect in the Agent's sole discretion. By
execution and delivery of this Agreement, each Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.
(b) To the extent permitted by applicable law, each Borrower
WAIVES personal service of any and all process upon it, and irrevocably consents
to the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by certified mail, postage
prepaid, to the Lead Borrower at the Lead Borrower's address for notices as
specified herein, such service to become effective five (5) Business Days after
such mailing.
(c) Each Borrower WAIVES any objection based on forum non
conveniens and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
(d) Nothing herein shall affect the right of the Agent to
bring legal actions or proceedings in any other competent jurisdiction.
(e) Each Borrower agrees that any action commenced by that
Borrower asserting any claim or counterclaim arising under or in connection with
this Agreement or any other Loan Document shall be brought solely in the
Superior Court of Suffolk County Massachusetts or in the United States District
Court, District of Massachusetts, sitting in Boston, Massachusetts, and that
such Courts shall have exclusive jurisdiction with respect to any such action.
14-11. Indemnification. The Borrowers shall indemnify, defend, and
hold the Agent and each Lender and any employee, officer, or agent of any of the
foregoing (each, an "Indemnified Person") harmless of and from any claim brought
or threatened against any Indemnified Person by any Person other than any
Borrower, (as well as from attorneys' reasonable fees and expenses in connection
therewith) on account of the relationship of the Borrowers with the Agent or any
Lender (each of claims which may be defended, compromised, settled, or pursued
by the Indemnified Person with counsel of the Lender's selection, but at the
expense of the Borrowers) other than any claim as to which a final determination
is made in a judicial proceeding (in which the Agent and any other Indemnified
Person has had an opportunity to be heard),
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which determination includes a specific finding that the Indemnified Person
seeking indemnification had acted in a grossly negligent manner or in actual bad
faith. This indemnification shall survive payment of the Liabilities and/or any
termination, release, or discharge executed by the Agent in favor of the
Borrowers, other than a termination, release, or discharge which makes specific
reference to this Section 14:14-11.
14-12. Rules of Construction. The following rules of construction
shall be applied in theinterpretation, construction, and enforcement of this
Agreement and of the other Loan Documents:
(a) Words in the singular include the plural and words in the
plural include the singular.
(b) Each representation, warranty, covenant, and undertaking
of the Borrowers in any Loan Document is the joint and several representation,
warranty, covenant, and undertaking of all of the Borrowers.
(c) Titles, headings (indicated by being underlined or shown
in SMALL CAPITALS) and any Table of Contents are solely for convenience of
reference; do not constitute a part of the instrument in which included; and do
not affect such instrument's meaning, construction, or effect.
(d) The words "includes" and "including" are not limiting.
(e) Text which follows the words "including, without
limitation" (or similar words) is illustrative and not limitational.
(f) Except where the context otherwise requires or where the
relevant subsections are joined by "or", compliance with any Section or
provision of any Loan Document which constitutes a warranty or covenant requires
compliance with all subsections (if any) of that Section or provision. Except
where the context otherwise requires, compliance with any warranty or covenant
of any Loan Document which includes subsections which are joined by "or" may be
accomplished by compliance with any of such subsections.
(g) Text which is shown in italics, shown in bold, shown IN
ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to
be conspicuous.
(h) The words "may not" are prohibitive and not permissive.
(i) The word "or" is not exclusive.
(j) Any reference to a Person's "knowledge" (or words of
similar import) are to such Person's knowledge assuming that such Person has
undertaken reasonable and diligent investigation with respect to the subject of
such "knowledge" (whether or not such investigation has actually been
undertaken).
(k) Terms which are defined in one section of any Loan
Document are used with such definition throughout the instrument in which so
defined.
(l) The symbol "$" refers to United States Dollars.
(m) Unless limited by reference to a particular Section or
provision, any reference to "herein", "hereof", or "within" is to the entire
Loan Document in which such reference is made.
(n) References to "this Agreement" or to any other Loan
Document is to the subject
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instrument as amended to the date on which application of such reference is
being made.
(o) Except as otherwise specifically provided, all references
to time are to Boston time.
(p) In the determination of any notice, grace, or other period
of time prescribed or allowed hereunder:
(i) Unless otherwise provided (I) the day of the act,
event, or default from which the designated period of time begins to
run shall not be included and the last day of the period so computed
shall be included unless such last day is not a Business Day, in which
event the last day of the relevant period shall be the then next
Business Day and (II) the period so computed shall end at 5:00 PM on
the relevant Business Day.
(ii) The word "from" means "from and including".
(iii) The words "to" and "until" each mean "to, but
excluding".
(iv) The word "through" means "to and including".
(q) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section
14:14-13 hereof, provided, however, in the event of any inconsistency between
the provisions of this Agreement and any other Loan Document, the provisions of
this Agreement shall govern and control.
14-13. Intent. It is intended that:
(a) This Agreement take effect as a sealed instrument.
(b) The scope of the security interests created by this
Agreement be broadly construed in favor of the Agent.
(c) The security interests created by this Agreement secure
all Liabilities, whether now existing or hereafter arising.
(d) All reasonable costs and expenses incurred by the Agent
and, to the extent provide in Section 14:14-7 each Lender in connection with
such Person's relationship(s) with the Borrowers shall be borne by the
Borrowers.
(e) Unless otherwise explicitly provided herein, the Agent's
consent to any action of the Borrowers which is prohibited unless such consent
is given may be given or refused by the Agent in its sole discretion and without
reference to Section 2:2-14 hereof.
14-14. Right of Set-Off. Any and all deposits or other sums at any
time credited by or due to any Borrower from the Agent, any Lender, or any
participant (a "Participant") in the credit facility contemplated hereby or any
from any Affiliate of the Agent, any Lender, or any Participant and any cash,
securities, instruments or other property of the Borrowers in the possession of
the Agent, any Lender, any Participant or any such Affiliate, whether for
safekeeping or otherwise (regardless of the reason such Person had received the
same) shall at all times constitute security for all Liabilities and for any and
all obligations
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of the Borrowers to the Agent and each Lender or any Participant or any such
Affiliate and may be applied or set off against the Liabilities and against such
obligations at any time after and during the occurrence of an Event of Default,
whether or not such are then due and whether or not other collateral is then
available to the Agent, any Lender, or any Participant or any such Affiliate.
14-15. Maximum Interest Rate. Regardless of any provision of any Loan
Document, none of the Agent or any Lender shall be entitled to contract for,
charge, receive, collect, or apply as interest on any Liability, any amount in
excess of the maximum rate imposed by applicable law. Any payment which is made
which, if treated as interest on a Liability would result in such interest's
exceeding such maximum rate shall be held, to the extent of such excess, as
additional collateral for the Liabilities as if such excess were "Collateral."
14-16. Waivers.
(a) The Borrowers (and all guarantors, endorsers, and sureties
of the Liabilities) make each of the waivers included in Section 14:14-16(b),
below, knowingly, voluntarily, and intentionally, and understands that the Agent
and each Lender, in entering into the financial arrangements contemplated hereby
and in providing loans and other financial accommodations to or for the account
of the Borrowers as provided herein, whether not or in the future, is relying on
such waivers.
(b) EACH BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND
SURETY RESPECTIVELY WAIVES THE FOLLOWING:
(i) Except as otherwise specifically required hereby,
notice of non-payment, demand, presentment, protest and all forms of
demand and notice, both with respect to the Liabilities and the
Collateral.
(ii) Except as otherwise specifically required
hereby, the right to notice and/or hearing prior to the Agent's
exercising of the Agent's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE AGENT OR ANY LENDER IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT
OR ANY LENDER OR IN WHICH THE AGENT OR ANY LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF,
ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWERS OR ANY OTHER PERSON
AND THE AGENT OR ANY LENDER (AND THE AGENT AND EACH LENDER LIKEWISE
WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR
CONTROVERSY).
.. 85 ..
(iv) The benefits or availability of any stay, limitation,
hindrance, delay, or restriction (including, without limitation, any automatic
stay which otherwise might be imposed pursuant to Section 362 of the Bankruptcy
Code) with respect to any action which the Agent may or may become entitled to
take hereunder.
(v) Any claim to consequential, special, or punitive damages.
Remainder of page intentionally left blank
.. 86 ..
The "Borrowers":
The "Lead Borrower":
The "Parent":
THE SPORTS AUTHORITY, INC.
By:
--------------------------------
Print Name: Xxxxxxxx X. Xxxxxxxxx
Title: Vice President and Treasurer
THE SPORTS AUTHORITY FLORIDA, INC.
By:
--------------------------------
Print Name: Xxxxxxxx X. Xxxxxxxxx
Title: Vice President and Treasurer
THE SPORTS AUTHORITY MICHIGAN, INC.
By:
--------------------------------
Print Name: Xxxxxxxx X. Xxxxxxxxx
Title: Vice President and Treasurer
AUTHORITY INTERNATIONAL, INC.
By:
--------------------------------
Print Name: Xxxxxxxx X. Xxxxxxxxx
Title: Vice President and Treasurer
.. 87 ..
The "Agent":
FLEET RETAIL FINANCE INC.
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
The "Lenders":
FLEET RETAIL FINANCE INC.
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
FOOTHILL CAPITAL CORPORATION
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
XXXXXX FINANCIAL, INC.
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
BANK OF AMERICA, N.A.
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
.. 88 ..
CITIZENS BUSINESS CREDIT, A DIVISION OF
CITIZENS LEASING CORPORATION
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
FLEET CAPITAL CORPORATION
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
LASALLE BUSINESS CREDIT, INC.
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
THE CIT GROUP/BUSINESS CREDIT, INC.
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
CONGRESS FINANCIAL CORPORATION (SOUTHWEST)
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
.. 89 ..
NATIONAL CITY COMMERCIAL FINANCE, INC.
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
THE PROVIDENT BANK
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
SENIOR DEBT PORTFOLIO
By: Boston Management and
Research, as Investment Advisor
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
GMAC BUSINESS CREDIT, LLC
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
.. 90 ..
AMSOUTH BANK
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
IBJ WHITEHALL BUSINESS CREDIT CORPORATION
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
.. 91 ..
