EXHIBIT 10.1
FIRST AMENDMENT
THIS FIRST AMENDMENT to the Amended and Restated Credit Agreement dated
as of December 22, 1997 (as amended, restated or otherwise modified, the "Credit
Agreement") by and among THE SPORTS AUTHORITY, INC., a corporation organized
under the laws of Delaware (the "Borrower"), the Subsidiaries of the Borrower
identified on the signature pages thereto, the lenders party thereto (the
"Lenders"), First Union National Bank, as Administrative Agent ("First Union" or
the "Agent"), and Fleet National Bank, as Co-Agent (the "Co-Agent") is made and
entered into as of this 23rd day of October, 1998 by and among the Borrower, the
Subsidiaries of the Borrower identified on the signature pages hereto, the
Lenders, the Agent for the Lenders and the Co-Agent. This First Amendment shall
have an effective date (the "First Amendment Effective Date") determined in
accordance with the provisions of Section 3.2 below.
STATEMENT OF PURPOSE
Because of certain changes in its financial condition, the Borrower has
requested that the Agent and Lenders agree to certain amendments to the Credit
Agreement. Pursuant to the terms hereof, the Agent and Lender are willing to
agree to such amendments.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized undefined terms used in this
First Amendment and shall have the meanings assigned thereto in the Credit
Agreement.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT.
SECTION 2.1. SECTION 1.1 of the Credit Agreement is hereby
amended by deleting the defined terms referenced below and replacing such
deleted defined terms with the corresponding defined terms set forth below:
"'APPLICABLE MARGIN' means (a) with regard to Base Rate Loans,
0.50% and (b) with regard to LIBO Rate Loans, 1.50%."
"'APPLICABLE PERCENTAGE' means 0.375%."
"'EBITDA' means, for any period, the consolidated net income
of the Borrower and its Subsidiaries during such period before
provisions for tax expense, net interest expense, depreciation
expense, amortization, other non-cash charges, and all charges
attributable (without duplication) to the One-Time Charge
included in the determination of such net income, each as
determined in accordance with GAAP."
"'LOAN DOCUMENT' means the Amended and Restated Credit
Agreement, the First Amendment, the Notes, the Guaranty, each
Intercompany Note, the Pledge Agreement, the Security
Agreement, each Rate Protection Agreement and each other
agreement, supplement, letter, document or instrument
delivered in connection with any of the foregoing."
SECTION 2.2. SECTION 1.1 of the Credit Agreement is hereby
amended by inserting the following defined terms in the correct alphabetical
order:
"'BORROWING BASE' shall mean an amount equal to the product of
(a) fifty percent (50%) TIMES (b) Eligible Inventory."
"'BORROWING BASE CERTIFICATE' means the monthly Borrowing Base
Certificate in form and substance satisfactory to the Agent,
substantially in the form of EXHIBIT A to the First
Amendment."
"'ELIGIBLE INVENTORY' means net inventory of the Borrower and
its Domestic Subsidiaries as determined in accordance with
GAAP LESS (i) any such inventory deemed to be ineligible by
the Agent, acting reasonably in accordance with standards
applicable to the retail industry pursuant to written notice
to the Borrower and (ii) any such inventory in aggregate value
in excess of $10,000,000 kept, stored or maintained with any
single bailee, warehouseman, carrier or similar party."
"'FIRST AMENDMENT' means the First Amendment, dated as of
October 23, 1998, to the Amended and Restated Credit
Agreement."
"'FIRST AMENDMENT EFFECTIVE DATE' shall have the meaning
assigned thereto in the First Amendment."
"'ONE-TIME CHARGE' means all charges more fully described in
the Borrower's October 6, 1998 press release regarding certain
store closings and charges."
"'PERFECTION CERTIFICATE' means the Perfection Certificate
substantially in the form of EXHIBIT B to the Security
Agreement, as amended, restated or otherwise modified from
time to time."
"'SECURITY AGREEMENT' means the Security Agreement executed
and delivered pursuant to the First Amendment substantially in
the form of EXHIBIT B to the First Amendment, as amended,
restated or otherwise modified from time to time."
SECTION 2.3. SECTION 2.1.2. of the Credit Agreement
is hereby amended by deleting CLAUSES (A) and (B) of such SECTION 2.1.2. and
substituting the following CLAUSES (A) and (B) in lieu thereof:
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"(a) of all Lenders would exceed the lesser of (i)
the Committed Amount or (ii) the Borrowing Base,
or
(b) of such Lender would exceed such Lender's
percentage of the lesser of (i) the Committed Amount
or (ii) the Borrowing Base."
SECTION 2.4. SECTION 3.1. of the Credit Agreement is
hereby amended by deleting such CLAUSE (B) of SECTION 3.1. and substituting the
following new CLAUSE (B) in lieu thereof:
"(b) shall, on each date when any reduction in the
Committed Amount or Borrowing Base, as applicable,
shall become effective (changes in the Borrowing Base
shall become effective on the day of receipt by the
Agent of any Borrowing Base Certificate), make a
mandatory prepayment of all Loans equal to the
excess, if any, of the aggregate, outstanding
principal amount of all loans over the Committed
Amount or Borrowing Base, as applicable, as so
reduced;"
SECTION 2.5. CLAUSE (A) of SECTION 3.2.1. of the
Credit Agreement is hereby amended by inserting the phrase "plus the Applicable
Margin" immediately following the phrase "Alternate Base Rate" and immediately
prior to the phrase "from time to time".
SECTION 2.6. SECTION 6.6. of the Credit Agreement is
hereby amended by inserting the phrase "other than as announced in the
Borrower's October 6, 1998 press release regarding certain store closings and
charges" immediately prior to the period at the end of such SECTION 6.6.
SECTION 2.7. SECTION 7.1.1. of the Credit Agreement
is hereby amended by (a) deleting the word "and" at the end of CLAUSE (G) of
such SECTION 7.1.1. and (b) by deleting the period at the end of CLAUSE (h) of
such SECTION 7.1.1. and inserting the following in lieu thereof:
"(i) as soon as generally available and in any event
within fifteen (15) days after the end of any fiscal
month a Borrowing Base Certificate."
SECTION 2.8. SECTION 7.1.7. of the Credit Agreement
is hereby amended by deleting CLAUSE (a) of such SECTION 7.1.7. and inserting
the following new CLAUSE (A) in lieu thereof:
"(a) in the event such Person is a Domestic
Subsidiary, such Person, if not theretofore a party
to the Guaranty or Security Agreement, shall execute
and deliver to the Agent a supplement to the Guaranty
or Security Agreement (including without limitation,
such certificates, documents, instruments, opinions
and financing statements as are reasonably requested
by the Agent), as applicable, for the purposes of
becoming a guarantor or Grantor thereunder, as
applicable, which such supplement shall be in form
and substance reasonably satisfactory to the Agent."
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SECTION 2.9. ARTICLE VII of the Credit Agreement is
hereby amended by inserting the following new SECTION 7.1.8. in correct
numerical order in such ARTICLE VII:
"Section 7.1.8. POST-CLOSING COVENANTS REGARDING THE
FIRST AMENDMENT.
(a) As soon as practicable, and in any event within
thirty (30) days after the First Amendment Effective
Date, the Borrower shall have delivered (to the
extent not previously delivered) to the Agent the
results of the Lien search required pursuant to
Section 3.2(c)(ii) of the First Amendment; and
(b) The Borrower shall use its reasonable best
efforts to deliver to the Agent, within ninety (90)
days of the First Amendment Effective Date, landlord
agreements, in form and substance satisfactory to the
Agent with respect to each parcel of real property
leased by the Borrower or any Domestic Subsidiary
where Collateral (as defined in the Security
Agreement) is located. Borrower shall not be
obligated to pay any such landlord any amount or post
any bond or letter of credit in connection with
obtaining any such agreements. The failure to obtain
any such landlord agreement after such reasonable
best efforts shall not result in a Default or Event
of Default under the Credit Agreement.
SECTION 2.10. SECTION 7.2.2. of the Credit Agreement
is hereby amended by deleting the percentage amount "50%" in the ninth line
thereof and substituting the percentage amount "60%" in lieu thereof.
SECTION 2.11. CLAUSE (A) of SECTION 7.2.4. of the
Credit Agreement is hereby amended by deleting such CLAUSE (A) and substituting
the following new CLAUSE (A) in lieu thereof:
"(a) its Tangible Net Worth to be at any time less
than $215,000,000."
SECTION 2.12. CLAUSE (B) of SECTION 7.2.4. of the
Credit Agreement is hereby amended by deleting the numeral "1.70" therein and
substituting the numeral "1.25" in lieu thereof.
SECTION 3. CLOSING; CONDITIONS TO EFFECTIVENESS.
SECTION 3.1. CLOSING. The closing of the First
Amendment shall take place at the offices of Kennedy, Covington, Xxxxxxx &
Xxxxxxx, L.L.P. at 10:00 a.m. on October 23, 1998, or on such other date as the
parties hereto shall mutually agree.
SECTION 3.2. CONDITIONS TO CLOSING AND INITIAL
EXTENSIONS OF CREDIT. The First Amendment shall become effective on the date on
which each of the following conditions shall have been satisfied as determined
by the Agent:
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(a) EXECUTED DOCUMENTS. The Agent shall have received (i) this
First Amendment duly executed by the Agent, the Co-Agent, the Borrower,
the Subsidiaries of the Borrower identified on the signature pages
hereto and Lenders constituting Required Lenders and (ii) the Security
Agreement (and Perfection Certificate attached thereto) duly executed
by the Agent, the Borrower and the Subsidiaries of the Borrower
identified on the signature pages thereto, as applicable.
(b) CLOSING CERTIFICATES; ETC.
(i) BORROWING BASE CERTIFICATE. The Agent shall have
received a duly executed Borrowing Base Certificate, in form and
substance satisfactory to the Agent, setting forth the calculation of
the Borrowing Base as of the fiscal month of September 1998.
(ii) SECRETARY'S CERTIFICATES. The Agent shall have
received from each Obligor (other than The Sports Authority Puerto
Rico, Inc.) a certificate dated as of the First Amendment Effective
Date, of its Secretary or Assistant Secretary certifying that included
therein, or attached thereto is each of the following:
(A) resolutions duly adopted by its Board of
Directors then in full force and effect authorizing
the execution, delivery and performance of the First
Amendment and each Loan Document executed pursuant
thereto, to be executed by such Obligor;
(B) a certification of the incumbency and
signatures of those of its officers authorized to act
with respect to the First Amendment and each Loan
Document executed pursuant thereto, executed by such
Obligor, upon which certificate each Lender may
conclusively rely until it shall have received a
further certificate of the Secretary of such Obligor
canceling or amending such prior certificate; and
(C) a true and complete copy of such
Obligor's articles of incorporation and all
amendments thereto, certified as of a recent date by
the Secretary of the corporation, with regard to the
articles of incorporation of the Borrower and its
Domestic Subsidiaries only and a true and complete
copy of such Obligor's bylaws in effect as on the
date of such certification.
(iii) OPINIONS OF COUNSEL. The Agent shall have
received opinions, dated as of the First Amendment Effective Date and addressed
to the Agent and all Lenders, from Xxxxxx, Xxxxx & Bockius, LLP counsel to the
Borrower and its Domestic Subsidiaries, each in form and substance satisfactory
to the Agent.
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(iv) HAZARD AND LIABILITY INSURANCE. The Agent shall
have received certificates of insurance, evidence of payment of all insurance
premiums for the current policy year of each, and, if requested by the
Administrative Agent, copies (certified by a responsible officer of the
Borrower) of insurance policies in the form required under the Security
Agreement and otherwise in form and substance reasonably satisfactory to the
Administrative Agent.
(c) COLLATERAL.
(i) FILINGS AND RECORDINGS. All financing statements,
duly executed by the respective Obligors, that are necessary to perfect
the security interests of the Lenders in the Collateral (as defined in
the Security Agreement) shall have been received by the Agent.
(ii) LIEN SEARCH. The Borrower shall have delivered to
the Agent the results of a Lien search made against the Borrowers and
its Domestic Subsidiaries under the UCC with respect to central filings
as in effect in any state in which any of its assets are located,
indicating among other things that assets of the Borrower and its
Domestic Subsidiaries are free and clear of any Lien except for
Permitted Liens; PROVIDED that, so long as such central filing Lien
search has been initiated in all applicable jurisdictions prior to the
date hereof, this closing condition shall be deemed satisfied with
regard to any jurisdiction for which the results of such Lien search
are unavailable (unless such unavailability is caused by the Borrower
or its Subsidiaries) so long as the Borrower identifies to the Agent,
in writing, (A) each such jurisdiction for which Lien search results
are unavailable and (B) the reasons for such unavailability.
(d) CONSENTS; DEFAULTS.
(i) GOVERNMENTAL AND THIRD PARTY APPROVALS. The Borrower
shall have obtained all necessary approvals, authorizations and
consents of any Person and of all Governmental Authorities and courts
having jurisdiction with respect to the transactions contemplated by
this First Amendment.
(ii) NO INJUNCTION, ETC. No action, proceeding,
investigation, regulation or legislation shall have been instituted,
threatened or proposed before any governmental authority to enjoin,
restrain, or prohibit, or to obtain substantial damages in respect of,
or which is related to or arises out of this First Amendment or the
other Loan Documents executed in connection therewith or the
consummation of the transactions contemplated hereby or thereby, or
which, in the Agent's sole discretion, would make it inadvisable to
consummate the transactions contemplated by this First Amendment and
such other Loan Documents.
(iii) NO EVENT OF DEFAULT. Except with respect to
covenants, representations, warranties and other agreements amended by
this First Amendment, no Default or Event of Default shall have
occurred and be continuing.
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(iv) PAYMENT AT CLOSING; FEE LETTERS. The Borrower shall
have paid all accrued and unpaid fees or commissions due hereunder
(including, without limitation, the fees referenced in the fee letter
dated as of October 12, 1998 between the Borrower and the Agent and all
legal fees and expenses of the Agent) to the Agent and Lenders, and to
any other Person such amount as may be due thereto in connection with
the transactions contemplated hereby, including all taxes, fees and
other charges in connection with the execution, delivery, recording,
filing and registration of any of the Loan Documents executed in
connection herewith.
(e) MISCELLANEOUS. All opinions, certificates and other
instruments and all proceedings in connection with the transactions
contemplated by this First Amendment shall be satisfactory in form and
substance to the Lenders. The Lenders shall have received copies of all
other instruments and other evidence as the Lender may reasonably
request, in form and substance satisfactory to the Lenders, with
respect to the transactions contemplated by this First Amendment and
the taking of all actions in connection therewith.
SECTION 4. REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
SECTION 4.1. By its execution hereof, the Borrower hereby
certifies on behalf of itself and each of its Subsidiaries that each of the
representations and warranties (as amended hereby) set forth in the Credit
Agreement (excluding, however, those contained in SECTION 6.7 of the Credit
Agreement) and the other Loan Documents is true and correct as of the date
hereof (unless such representations and warranties are stated to relate solely
to an earlier date), in which case such representations and warranties shall be
true and correct as of such earlier date as if fully set forth herein; PROVIDED,
that the representations and warranties contained in SECTION 6.5 of the Credit
Agreement shall be deemed to relate to the July 7, 1998 financial information
delivered to the Agent and Lenders.
SECTION 4.2. Borrower hereby represents to the Agent and each
Lender that, except as previously disclosed by the Borrower to the Agent and the
Lenders pursuant to SECTION 6.7 of the Credit Agreement;
(a) no labor controversy, litigation, arbitration or
governmental investigation or proceeding is pending or, to the
knowledge of the Borrower, threatened against the Borrower or any of
its Subsidiaries which might materially adversely affect the Borrower's
consolidated business, operations, assets, financial condition or
properties or which purports to affect the legality, validity or
enforceability of the Credit Agreement, the Notes or any other Loan
Document; and
(b) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental investigation or
proceeding previously disclosed pursuant to SECTION 6.7 of the Credit
Agreement which might materially adversely affect the consolidated
businesses, operations, assets, financial condition or properties of
the Borrower and its Subsidiaries.
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SECTION 4.3. Borrower hereby represents to the Agent and each
Lender that, as of the date hereof, except with respect to covenants,
representations and warranties and other agreements amended by this First
Amendment, no Default or Event of Default has occurred and is continuing under
the Credit Agreement and, after giving effect to the transactions contemplated
hereby, no Default or Event of Default has occurred and is continuing under the
Credit Agreement.
SECTION 5. LIMITED FIRST AMENDMENT AND RESTATEMENT. Except as expressly
amended herein, (a) the Credit Agreement and each other Loan Document shall
continue to be, and shall remain, in full force and effect (including all
monetary limitations and other restrictions applicable to the Borrower and its
Subsidiaries and Affiliates) as in existence immediately prior to the date
hereof and (b) this First Amendment shall not be deemed (i) to be a waiver of,
or consent to, or a modification or amendment of, any other term or condition of
the Credit Agreement or any other Loan Documents or (ii) to prejudice any other
right or rights which the Agent or Lenders may now have or may have in the
future under or in connection with the Credit Agreement or the Loan Documents or
any of the instruments or agreements referred to therein, as the same may be
amended, restated or otherwise modified from time to time.
SECTION 6. EXPENSES. The Borrower shall pay all reasonable
out-of-pocket expenses of the Agent in connection with the preparation,
execution and delivery of this First Amendment, including without limitation,
the reasonable fees and disbursements of counsel for the Administrative Agent.
SECTION 7. CONFIRMATION OF GUARANTY AND PLEDGE, SECURITY AND ASSIGNMENT
AGREEMENTS. (a) Each of the Subsidiary Guarantors hereby acknowledges and
consents to the terms of this First Amendment and confirm that their respective
obligations under the Guaranty shall remain in full force and effect and shall
secure the Obligations of the Borrower under the Credit Agreement as amended by
this First Amendment, (b) the Borrower hereby confirms that its obligations
under the Pledge, Security and Assignment Agreement shall remain as amended by
this First Amendment in full force and effect and shall secure the Obligations
of the Borrower under the Credit Agreement and (c) each party hereto
acknowledges and consents to the terms of the Credit Agreement as amended by
this First Amendment and confirms the validity and enforceability of each Loan
Documents.
SECTION 8. GOVERNING LAW. This First Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 9. COUNTERPARTS. This First Amendment may be executed in
separate counterparts, each of which when executed and delivered is an original
but all of which taken together constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed as of the date and year first above written.
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BORROWER:
[CORPORATE SEAL] THE SPORTS AUTHORITY, INC.
By: /s/ X. X. XXXXXXX
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
AGREED TO AND ACKNOWLEDGED BY:
SUBSIDIARIES OF THE BORROWER:
[CORPORATE SEAL] AUTHORITY INTERNATIONAL, INC.
By: /s/ X. X. XXXXXXX
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
[Signature Pages Continue]
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[CORPORATE SEAL] OSR, INC.
By: /s/ X. X. XXXXXXX
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
[CORPORATE SEAL] THE SPORTS AUTHORITY CANADA,
INC.
By: /s/ X. X. XXXXXXX
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
[CORPORATE SEAL] THE SPORTS AUTHORITY FLORIDA,
INC.
By: /s/ X. X. XXXXXXX
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
[CORPORATE SEAL] THE SPORTS AUTHORITY MICHIGAN,
INC.
By: /s/ X. X. XXXXXXX
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
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FIRST UNION NATIONAL BANK
(on behalf of itself and as successor by
merger to CoreStates, N.A.)
By: /S/ XXXXX XXXXX MARKS
------------------------------------
Name: XXXXX XXXXX MARKS
Title: VICE PRESIDENT
[Signature Pages Continue]
11
FLEET NATIONAL BANK
By: /S/ XXXXXX X. XXXXXXX
----------------------------------
Name:XXXXXX X. XXXXXXX
Title: VICE PRESIDENT
[Signature Pages Continue]
12
COMERICA BANK
By:/S/ XXXXXX X. XXXXX
-------------------------------
Name: XXXXXX X. XXXXX
Title: VICE PRESIDENT
[Signature Pages Continue]
00
XXX XXXX XX XXX XXXX
By: /S/ XXXXX XXXXX
------------------------
Name: XXXXX XXXXX
Title: VICE PRESIDENT
[Signature Pages Continue]
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THE DAI-ICHI KANGYO BANK, LIMITED
ATLANTA AGENCY
By:/S/ XXXXXXX XXXXXXX
--------------------------------------
Name: XXXXXXX XXXXXXX
Title: CHIEF REPRESENTATIVE
[Signature Pages Continue]
00
XXXXXXXX XXXX, XXXXX XXXXXXX, N.A.
By:/S/ XXXXXXX X. XXXXX
-------------------------------------
Name: XXXXXXX X. XXXXX
Title: VICE PRESIDENT
[Signature Pages Continue]
00
XXXXX XXXX XX XXXXXXXXXX, N.A.
By:/S/ J. XXXXXXX XXXXXX
----------------------------------------
Name: J. XXXXXXX XXXXXX
Title: VICE PRESIDENT
[Signature Pages Continue]
17
WACHOVIA BANK, N.A.
By:/S/ XXXXX XXXXX
---------------------------------------------
Name: XXXXX XXXXX
Title: BANKING OFFICER
[Signature Pages Continue]
18
BANK OF MONTREAL
By: /S/ XXXXXX X. XXXXXX
----------------------------------------
Name: XXXXXX X. XXXXXX
Title: DIRECTOR
[Signature Pages Continue]
19
THE FUJI BANK AND TRUST COMPANY
By:/S/ XXXXXXX XXXXXXX
-------------------------------------
Name: XXXXXXX XXXXXXX
Title: VICE PRESIDENT & MANAGER
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EXHIBIT A
TO
FIRST AMENDMENT
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FORM OF BORROWING BASE CERTIFICATE
BORROWING BASE CERTIFICATE
THE SPORTS AUTHORITY, INC.
Date: ____________________
First Union National Bank,
as Administrative Agent
One First Union Center, 4th Floor
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attn: Syndication Agency Services
Telephone: 000-0000
Facsimile: 383-0288
--------------------------------------------------------------------------------
(1) Net Inventory of the Borrower and its Domestic
Subsidiaries determined in accordance with GAAP as $______________
of fiscal month ending
_________________________
--------------------------------------------------------------------------------
(2) Less Inventory deemed ineligible pursuant to
written notice to the Borrower in accordance
with the Credit Agreement __________
TOTAL INELIGIBLES __________
(3) Eligible Inventory (Line 1 minus Line 2) $______________
--------------------------------------------------------------------------------
(4) BORROWING BASE: 50% of Line 3.
Eligible Inventory $______________
--------------------------------------------------------------------------------
For the purpose of inducing the lenders party thereto (the "Lenders") to
continue to make loans or advances to THE SPORTS AUTHORITY, INC., a Delaware
corporation (the "Borrower") pursuant to the terms of the Amended and Restated
Credit Agreement dated December 22, 1997 (as amended, restated or otherwise
modified, the "Credit Agreement") by and among the Borrower, certain
Subsidiaries of the Borrower identified on the signature pages thereto, the
Lenders, the Agent and the Co-Agent, and the Loan Documents executed in
connection therewith, the undersigned hereby certifies to the Agent and Lenders
that: the foregoing Borrowing Base Certificate is true and correct in all
respects and is consistent with the books and records of the Borrower and its
Subsidiaries
THE SPORTS AUTHORITY, INC.
By:
-----------------------------------------
Name:
Title:
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EXHIBIT B
TO
FIRST AMENDMENT
FORM OF SECURITY AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, restated or otherwise modified,
this "Agreement"), dated as of October ____,1998 by and among THE SPORTS
AUTHORITY, INC., a corporation organized under the laws of Delaware (the
"Borrower") and the Subsidiaries of the Borrower identified on the signature
pages attached hereto (the "Subsidiary Grantors", and together with the Borrower
and each additional Grantor who executes a Security Agreement Supplement
substantially in the form of EXHIBIT A hereto, the "Grantors", each
individually, a "Grantor"), and FIRST UNION NATIONAL BANK, as administrative
agent (the "Agent") for the benefit of itself and the lenders (the "Lenders")
who are, or may become, parties to the Credit Agreement referred to below.
STATEMENT OF PURPOSE
Pursuant to the Amended and Restated Credit Agreement dated as of
December 22, 1997, by and among the Borrower, the Subsidiaries of the Borrower
identified on the signature pages thereto, the Lenders, the Agent and Fleet
National Bank, as Co-Agent (as amended, restated or otherwise modified, the
"Credit Agreement"), the Lenders have agreed to make certain extensions of
credit to the Borrower as more particularly described therein. Terms defined in
the Credit Agreement and not otherwise defined herein, when used in this
Agreement including its preamble and recitals, shall have the respective
meanings provided for in the Credit Agreement, as amended by the First
Amendment.
Pursuant to the Credit Agreement, the Lenders required that the
Domestic Subsidiaries of the Borrower execute and deliver a guaranty agreement
to secure the Obligations.
Because of certain changes in the Borrower's financial condition, the
Borrower has requested that the Lenders agree to certain amendments to the
Credit Agreement. Pursuant to the terms and conditions of the First Amendment to
the Credit Agreement dated as of even date herewith by and among the Borrower,
certain Subsidiaries of the Borrower identified on the signature pages thereto,
the Lenders, the Agent and the Co-Agent, the Lenders are willing to agree to
such amendments.
In connection with the transactions contemplated by the First Amendment
and as a condition precedent thereto, the Lenders have requested and the
Grantors have agreed to grant a continuing security interest in and to the
"Collateral" (as hereinafter defined) to secure the "Secured Obligations" (as
hereinafter defined).
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NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and to induce the Lenders to continue to make available extensions
of credit pursuant to the Credit Agreement, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. The following terms, when used in this
Agreement, shall have the following meanings:
"ACCOUNT DEBTOR" means any Person who is or may become obligated to any
Grantor under, with respect to, or on account of, an Account.
"ACCOUNTS" means "Accounts" as defined in the UCC, whether secured or
unsecured, now existing or hereafter created, now or hereafter owned or acquired
by any Grantor or in which any Grantor now or hereafter has or acquires any
right or interest.
"ACCOUNTS AGING REPORT" means an aged trial balance of all Accounts
existing as of a specified date, in a form reasonably satisfactory to the Agent,
specifying the names, addresses, face value and dates of invoices of each
Account Debtor obligated on any Accounts so listed.
"COLLATERAL" shall have the meaning given in SECTION 2(A) of this
Agreement.
"COLLATERAL ACCOUNT" means a cash collateral account established by the
Grantors with the Agent, in the name and under the exclusive dominion and
control of the Agent, pursuant to SECTION 6 hereof.
"FINANCING STATEMENTS" shall mean the Uniform Commercial Code Form
UCC-1 Financing Statements executed by the Grantors with respect to the
Collateral and to be filed in the jurisdictions set forth in the Perfection
Certificate.
"INSTRUMENTS" means all "instruments", "chattel paper" or "letters of
credit" (each as defined in the UCC) to the extent they are evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances,
now or hereafter owned or acquired by such Grantor or in which such Grantor now
or hereafter has or acquires any right or interest.
"INVENTORY" means all "inventory" as defined in the UCC wherever
located, including without limitation, all goods manufactured or acquired for
sale or lease and all raw materials, work-in-process and finished goods, whether
now or hereafter owned or acquired by any Grantor or in which such Grantor now
or hereafter has or acquires any right or interest.
"PERFECTION CERTIFICATE" means a certificate dated as of even date
herewith, substantially in the form of EXHIBIT B attached hereto, setting forth
the corporate or other names, chief executive office or principal place of
business in each state and other current locations of each Grantor and such
other
24
information as the Agent deems reasonably necessary for the perfection of the
security interests granted hereunder, completed and supplemented with the
schedules and attachments contemplated thereby to the reasonable satisfaction of
the Agent, and certified by the Chief Executive Officer, President, any
Executive Vice President, Chief Financial Officer or Treasurer of each Grantor
so authorized to act.
"PERMITTED LIENS" means all Liens respecting the Collateral permitted
pursuant to Section 7.2.3 of the Credit Agreement.
"PROCEEDS" means all proceeds (as defined by the UCC) of, and all other
profits, rentals or receipts, in whatever form, arising from the collection,
sale, lease, exchange, assignment, licensing or other disposition of, or
realization upon, Collateral, including, without limitation, all claims of any
Grantor against third parties for loss of, damage to or destruction of, or for
proceeds payable under, or unearned premiums with respect to, policies of
insurance in respect of, any Collateral, and any condemnation or requisition
payments with respect to any Collateral and all Collateral acquired with the
cash proceeds of any other Collateral.
"SCHEDULE OF INVENTORY" means a schedule of Inventory based upon each
Grantor's most recent physical inventory and its perpetual inventory records, in
a form reasonably satisfactory to the Agent.
"SECURED OBLIGATIONS" means (a) with respect to the Borrower, the
Obligations as defined in the Credit Agreement and (b) with respect to any
Subsidiary Guarantor, the obligations of such Subsidiary Guarantor under the
Guaranty and any renewals or extensions of any of the obligations thereunder.
"SECURITY INTERESTS" means the security interests granted by the
Grantors to the Agent hereby in respect of the Collateral.
"TAX REFUND" means all tax refund claims and any rights to receive a
refund, rebate or payment from any taxing authority.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York; PROVIDED that, if by reason of mandatory provisions of law, the
perfection or the effect of perfection or non-perfection of the Security
Interests in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than New York, "UCC" means the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such perfection or effect of perfection or non-perfection.
SECTION 2. THE SECURITY INTERESTS.
(a) In order to secure the payment when due of the Secured Obligations,
each Grantor hereby grants to the Agent, for the ratable benefit of itself and
the Lenders, a continuing security interest in and to all of such Grantors'
estate, right, title and interest in and to all of the following property,
whether now or hereafter owned or acquired by such Grantor or in which such
Grantor now has or hereafter has or acquires any estate, right, title or
interest, and whenever located (collectively,
25
along with any other property of such Grantor which may from time to time secure
the Secured Obligations pursuant to the terms of this Agreement, the
"Collateral"):
(i) Accounts (including all Instruments);
(ii) Tax Refund;
(iii) Inventory;
(iv) The Collateral Account, all cash deposited therein from
time to time, the investments made pursuant to SECTION 6 and other
monies and property of any kind of any Grantor in the possession or
under the control of the Agent or any Lender;
(v) All products and Proceeds of all or any of the
Collateral described in clauses (i) through (iii) hereof.
(b) The Security Interests are granted as security only and shall not
subject the Agent or any Lender to, or transfer to the Agent or any Lender, or
in any way affect or modify, any obligation or liability of any Grantor with
respect to any of the Collateral or any transaction in connection therewith.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and
warrants to the Agent and each Lender as follows:
(a) Such Grantor has the corporate or other applicable power and
authority and the legal right to execute and deliver, to perform its obligations
under, and to grant the Security Interests in the Collateral owned by it
pursuant to, this Agreement and has taken all necessary corporate action to
authorize its execution, delivery and performance of, and grant of the Security
Interests on the Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding obligation of
such Grantor enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies.
(c) Such Grantor is the sole owner of, and has good, indefeasible and
marketable title to, all of its respective Collateral owned by it, free and
clear of any Liens other than Permitted Liens.
(d) Other than financing statements or other similar or equivalent
documents or instruments with respect to Permitted Liens, no financing
statement, mortgage, security agreement or similar or equivalent document or
instrument covering all or any part of the Collateral is on file or of record in
any jurisdiction. No Collateral of such Grantor is in the possession of any
Person (other than the Grantors) asserting any claim thereto or security
interest therein, except that the Agent or its designee may have possession of
Collateral as contemplated hereby and a bailee, warehouseman, agent
26
or processor may have possession of the Collateral as contemplated by, and so
long as, the Grantors have complied with, SECTION 4(C)(III) and SECTION 4(C)(IV)
hereof.
(e) All of the information set forth in the Perfection Certificate
relating to such Grantor is true and correct as of the date hereof.
(f) Such Grantor has, contemporaneously herewith, delivered to the
Agent possession of all originals of all negotiable Instruments constituting
Collateral currently owned or held by such Grantor, if any (duly endorsed in
blank, if requested by the Agent).
(g) With respect to any Inventory of such Grantor: (i) all Inventory of
such Grantor is, and shall be at all times, located in the States listed in the
Perfection Certificate or as to which such Grantor has complied with the
provisions of SECTION 4(A)(I) hereof, except Inventory in transit from one
Grantor's location to another Grantor's location and (ii) no Inventory is, nor
shall at any time or times be, subject to any Lien whatsoever, except for
Permitted Liens.
(h) The Financing Statements are in appropriate form and when filed in
the offices specified in the Perfection Certificate, the Security Interests will
constitute valid and perfected security interests in the Collateral, prior to
all other Liens and rights of others therein (to the extent that a security
interest therein may be perfected by filing pursuant to the UCC) and all filings
and other actions necessary or desirable to perfect and protect such Security
Interests have been duly taken.
SECTION 4. FURTHER ASSURANCES; COVENANTS.
(a) GENERAL.
(i) No Grantor will change the location of its chief executive
office or principal place of business in any state unless it shall have
given the Agent thirty (30) days prior written notice thereof, executed
and delivered to the Agent all financing statements and financing
statement amendments which the Agent may request in connection
therewith and, if reasonably requested by the Agent, delivered an
opinion of counsel with respect thereto in accordance with SECTION
4(A)(V) hereof. No Grantor shall change the locations where it keeps or
holds any Collateral or any records relating thereto from any
applicable location described in the Perfection Certificate unless such
Grantor shall have given the Agent thirty (30) days prior written
notice of such change of location, executed and delivered to the Agent
all financing statements and financing statement amendments which the
Agent may request in connection therewith and, if reasonably requested
by the Agent, delivered an opinion of counsel with respect thereto in
accordance with SECTION 4(A)(V) hereof; PROVIDED, HOWEVER, that any
Grantor may keep Inventory at, or in transit to, any location described
in the Perfection Certificate. No Grantor shall in any event change the
location of any Collateral if such change would cause the Security
Interests in such Collateral to lapse or cease to be perfected.
(ii) No Grantor will change its name, identity or corporate or
other structure in any manner unless it shall have given the Agent
thirty (30) days prior written notice thereof,
27
executed and delivered to the Agent all financing statements and
financing statement amendments which the Agent may request in
connection therewith, and, if reasonably requested by the Agent,
delivered an opinion of counsel with respect thereto in accordance with
SECTION 4 (A)(V) hereof.
(iii) The Grantors will maintain the Agent's Lien on the
Collateral as a first priority perfected Lien thereon, except for the
Permitted Liens. Each Grantor will, from time to time, at its expense,
execute, deliver, file and record any statement, assignment,
instrument, document, agreement or other paper and take any other
action (including, without limitation, any filings of financing or
continuation statements under the UCC) that from time to time may be
necessary, or that the Agent may reasonably request, in order to
create, preserve, upgrade in rank (to the extent required hereby),
perfect, confirm or validate the Security Interests or to enable the
Agent to exercise and enforce any of its rights, powers and remedies
hereunder with respect to any of the Collateral. Prior to the
irrevocable payment in full of the Secured Obligations, to the extent
required by the immediately preceding sentence, each Grantor hereby
authorizes the Agent, upon the failure of any Grantor to so do within
ten (10) Business Days after receipt of notice in writing from the
Agent, to execute and file financing statements, financing statement
amendments or continuation statements without such Grantor's signature
appearing thereon. Each Grantor agrees that, except as otherwise
required by law, a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is
sufficient as a financing statement. The Grantors shall pay the
reasonable costs of, or incidental to, any recording or filing of the
Financing Statements and any other financing statements, financing
statement amendments or continuation statements concerning the
Collateral required to be made pursuant to this SECTION 4(A).
(iv) Each Grantor will, promptly upon request, provide to the
Agent all information and evidence the Agent may reasonably request
concerning the Collateral, and in particular the Accounts, to enable
the Agent to enforce the provisions of this Agreement.
(v) Prior to each date on which any Grantor proposes to take
any action contemplated by SECTION 4(A)(I) or SECTION 4 (A)(II) hereof,
if reasonably requested by the Agent, such Grantor shall, at its cost
and expense, cause to be delivered to the Agent and the Lenders an
opinion of counsel, satisfactory to the Agent, to the effect that all
financing statements and amendments or supplements thereto,
continuation statements and other documents required to be recorded or
filed in order to perfect and protect the Security Interests and
priority thereof against all creditors of and purchasers from such
Grantor have been filed in each filing office necessary or desirable
for such purposes and that all filing fees and taxes, if any, payable
in connection with such filings have been paid in full.
(vi) Each Grantor will pay when due all material taxes,
assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as
all material claims of any kind (including, without limitation, claims
for labor, materials and supplies) against or with respect to the
Collateral, except that no such charge need be paid if (A) the validity
thereof is being contested in good faith by appropriate
28
proceedings, (B) such proceedings do not involve any danger of the
sale, forfeiture or loss of, or creation of a Lien on, any of the
Collateral or any interest therein and (C) such charge is adequately
reserved against on such Grantor's books in accordance with GAAP.
(vii) The Grantors shall not
(1) sell, assign (by operation of law or otherwise)
or otherwise dispose of any of the Collateral, except as
permitted by the Credit Agreement or hereunder ; or
(2) create or suffer to exist any Lien or other
charge or encumbrance upon or with respect to any of the
Collateral to secure indebtedness of any Person or entity
other than Permitted Liens.
(b) ACCOUNTS, ETC.
(i) Each Grantor shall use all reasonable efforts in
accordance with past practice to cause to be collected from its Account
Debtors, as and when due, any and all amounts owing under or on account
of each Account (including, without limitation, Accounts which are
delinquent, such Accounts to be collected in accordance with past
practices) and to apply upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Account. The costs and
expenses (including, without limitation, attorney's fees) of collection
of Accounts incurred by such Grantor or the Agent shall be borne by
such Grantor.
(ii) Upon the occurrence and during the continuance of an
Event of Default, upon request of the Agent or the Required Lenders,
each Grantor will promptly notify (and each Grantor hereby authorizes
the Agent so to notify) each Account Debtor in respect of any Account
that such Account has been assigned to the Agent hereunder and that any
payments due or to become due in respect of such Account are to be made
directly to the Agent or its designee.
(iii) Each Grantor will perform and comply in all material
respects with all of its material obligations in respect of its
Accounts and the exercise by the Agent of any of its rights hereunder
shall not release such Grantor from any of its duties or obligations.
(iv) No Grantor will (A) amend, modify, terminate or waive any
material provision of any agreement giving rise to an Account in any
manner which could reasonably be expected to materially adversely
affect the value of the Collateral, taken as a whole, (B) fail to
exercise promptly and diligently each and every material right which it
may have under each agreement giving rise to an Account (other than any
right of termination) which could reasonably be expected to materially
adversely affect the value of the Collateral, taken as a whole, or (C)
fail to deliver to the Agent a copy of each written material demand,
notice or document received by it which could reasonably be expected to
materially adversely affect the value of the Collateral, taken as a
whole, relating in any way to any material agreement giving rise to an
Account.
29
(v) Other than in the ordinary course of business as generally
conducted by each Grantor, no Grantor will (A) grant any extension of
the time of payment of any of the Accounts or (B) compromise, compound
or settle the same for less than the full amount thereof, release,
wholly or partially, any Person liable for the payment thereof, or
allow any credit or discount whatsoever thereon.
(vi) At the request of the Agent or the Required Lenders, and
within fifteen (15) days after the end of each fiscal month after the
occurrence and during the continuance of an Event of Default, the
Grantors shall deliver to the Agent and each Lender an Accounts Aging
Report.
(c) INVENTORY, ETC.
(i) At the request of the Agent or Required Lenders, and
within fifteen (15) days after the end of each fiscal month after the
occurrence and during the continuance of an Event of Default, the
Grantors shall deliver to the Agent and each Lender a Schedule of
Inventory. Unless otherwise indicated thereon or in writing by the
Grantors, each Schedule of Inventory delivered by the Grantors to the
Agent shall constitute a representation with respect to the Inventory
listed thereon or referred to therein that: (A) all such Inventory is
located at places of business listed in the Perfection Certificate or
as to which the applicable Grantor has complied with the provisions of
SECTION 4(A)(I) hereof or on the premises identified on the then
current Schedule of Inventory or is Inventory in transit from one such
location to another such location and (B) no such Inventory is subject
to any Lien whatsoever, except for Permitted Liens.
(ii) Each Grantor will cause the Agent, for the ratable
benefit of itself and the Lenders, to be named as loss payee on each
insurance policy covering risks relating to any of its Inventory, as
reasonably requested by the Agent. Each Grantor will deliver to the
Agent, upon request of the Agent, copies of the insurance policies for
such insurance. Each such insurance policy shall provide that all
insurance proceeds shall be adjusted with and payable to the Agent, and
provide that no cancellation or termination thereof shall be effective
until at least thirty (30) days have elapsed after receipt by the Agent
of written notice thereof. The Agent agrees that, as long as no Default
or Event of Default has occurred and is continuing, any such net cash
proceeds received by it shall be promptly paid over to the Grantors.
(d) INDEMNIFICATION. Each Grantor agrees to pay, and to save the Agent
and the Lenders harmless from, any and all liabilities, reasonable costs and
expenses (including, without limitation, reasonable legal fees and expenses)
incurred by the Agent or any Lenders (i) with respect to, or resulting from, any
and all excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral, (ii) with respect to, or
resulting from, complying with any applicable law applicable to any of the
Collateral or (iii) in connection with any of the transactions contemplated by
this Agreement (except to the extent any such liabilities, costs and expenses
result from the gross negligence or willful misconduct of the Agent or Lenders).
In any suit, proceeding or action brought by the Agent under any Account for any
sum owing thereunder, or to enforce any
30
provisions of any Account, each Grantor will save, indemnify and keep the Agent
and the Lenders harmless from and against all expense, loss or damage suffered
by the Agent or any Lender by reason of any defense, setoff, counterclaim,
recoupment or reduction or liability whatsoever of the Account Debtor or any
other obligor thereunder, arising out of a breach by any Grantor of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such Account Debtor or obligor or
its successors from any Grantor (except to the extent any such expense, loss or
damage results from the gross negligence or willful misconduct of the Agent or
Lenders). The obligations of the Grantors under this SECTION 4(D) shall survive
the termination of the other provisions of this Agreement.
SECTION 5. REPORTING AND RECORDKEEPING. Each Grantor respectively
covenants and agrees with the Agent and the Lenders that from and after the date
of this Agreement and until the Commitments have terminated and all Secured
Obligations have been fully satisfied:
(a) MAINTENANCE OF RECORDS GENERALLY. Each Grantor will keep and
maintain at its own cost and expense adequate records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings with the
Collateral in accordance with past practices. All chattel paper given to such
Grantor with respect to any Accounts will be marked with the following legend:
"THIS WRITING AND THE OBLIGATIONS EVIDENCED OR SECURED HEREBY ARE SUBJECT TO THE
SECURITY INTEREST OF FIRST UNION NATIONAL BANK, AS AGENT". For the Agent's and
the Lenders' further security, each Grantor agrees that upon the occurrence and
during the continuation of any Event of Default, upon the request of the Agent
or the Required Lenders, such Grantor shall deliver and turn over any such books
and records directly to the Agent or its designee. Each Grantor shall permit any
representative of the Agent to inspect such books and records in accordance with
Section 7.1.5. of the Credit Agreement and will provide photocopies thereof to
the Agent upon its reasonable request.
(b) CERTAIN PROVISIONS REGARDING MAINTENANCE OF RECORDS AND REPORTING
RE: ACCOUNTS.
(i) In the event any amounts due and owing in excess of
$5,000,000 in the aggregate are in dispute between any Account Debtor
and any Grantor, such Grantor shall provide the Agent with written
notice thereof promptly after such Grantor's learning thereof,
explaining the reason for the dispute, all claims related thereto and
the amount in controversy.
(ii) Each Grantor will promptly notify the Agent in writing if
any Account or Accounts, the face value of which exceeds $5,000,000 in
the aggregate, arises or arise out of a contract with the United States
of America, or any department, agency, subdivision or instrumentality
thereof, or of any state (or department, agency, subdivision or
instrumentality thereof) where such state has a state assignment of
claims act or other law comparable to the Federal Assignment of Claims
Act. Each Grantor will take any action required or requested by the
Agent or give notice of the Agent's Security Interest in such Accounts
under the provisions of the Federal Assignment of Claims Act or any
comparable law or act enacted by any state or local Governmental
authority. Any notifications or other documents executed and delivered
to
31
the Agent in connection with the Federal Assignment of Claims Act or
any comparable state law may be promptly filed with the appropriate
Governmental authority by the Agent or held by the Agent until the
Agent or the Required Lenders decide in its or their sole discretion to
make any such filing.
(iii) The Grantors will promptly upon, but in no event later
than ten (10) Business Days after: (A) the Grantors learning thereof,
inform the Agent, in writing, of any material delay in such Grantor's
performance of any of its obligations to any Account Debtor and of any
assertion of any claims, offsets or counterclaims by any Account Debtor
and of any allowances, credits and/or other monies granted by such
Grantor to any Account Debtor, in each case involving amounts in excess
of $5,000,000 in the aggregate for all Accounts and Account Debtors;
and (B) the Grantors receipt or learning thereof, furnish to and inform
the Agent of any adverse information that, to the knowledge of the
Grantors, could reasonably be expected to materially adversely affect
the financial condition of any Account Debtor with respect to Accounts
exceeding $5,000,000 in the aggregate.
(c) FURTHER IDENTIFICATION OF COLLATERAL. Each Grantor will, if so
reasonably requested by the Agent, furnish to the Agent statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Agent may reasonably request, all in
reasonable detail.
(d) NOTICES. In addition to the notices required by SECTION 5(B)
hereof, each Grantor will advise the Agent promptly, in reasonable detail, (i)
of any material Lien or claim made or asserted against any of the Collateral (in
excess of $10,000,000), and (ii) of the occurrence of any other event which
could reasonably be expected to have a material adverse effect on the
Collateral, taken as a whole, or on the validity, perfection or priority of the
Security Interests.
SECTION 6. COLLATERAL ACCOUNT.
(a) There is hereby established with the Agent a Collateral Account in
the name and under the exclusive dominion and control of the Agent. There shall
be deposited from time to time into such account the cash proceeds of the
Collateral required to be delivered to the Agent pursuant to SECTION 6(B) hereof
or any other provision of this Agreement. Any income received by the Agent with
respect to the balance from time to time standing to the credit of the
Collateral Account, including any interest or capital gains on investments of
amounts on deposit in the Collateral Account, shall remain, or be deposited, in
the Collateral Account together with any investments from time to time made
pursuant to subsection (c) of this SECTION 6, shall vest in the Agent, shall
constitute part of the Collateral hereunder and shall not constitute payment of
the Secured Obligations until applied thereto as hereinafter provided.
(b) Upon the occurrence and during the continuance of an Event of
Default, if requested by the Agent, each Grantor shall instruct all Account
Debtors and other Persons obligated in respect of all Accounts to make all
payments in respect of the Accounts either (i) directly to the Agent (by
instructing that such payments be remitted to a post office box which shall be
in the name and under
32
the exclusive dominion and control of the Agent) or (ii) to one or more other
banks in any state in the United States (by instructing that such payments be
remitted to a post office box which shall be in the name and under the exclusive
dominion and control of such bank) under a Lockbox Letter substantially in the
form of EXHIBIT C hereto duly executed by each Grantor and such bank or under
other arrangements, in form and substance reasonably satisfactory to the Agent,
pursuant to which such Grantor shall have irrevocably instructed such other bank
(and such other bank shall have agreed) to remit all proceeds of such payments
directly to the Agent for deposit into the Collateral Account or as the Agent
may otherwise instruct such bank, and thereafter if the proceeds of any
Collateral shall be received by any of the Grantors, such Grantor will promptly
deposit such proceeds into the Collateral Account and until so deposited, all
such proceeds shall be held in trust by such Grantor for and as the property of
the Agent, for the benefit of itself and the Lenders and shall not be commingled
with any other funds or property of such Grantor. At any time after the
occurrence and during the continuance of an Event of Default, the Agent may
itself so instruct each Grantor's Account Debtors. All such payments made to the
Agent shall be deposited in the Collateral Account.
(c) Amounts on deposit in the Collateral Account shall be promptly
liquidated and applied to the payment of the Secured Obligations in the manner
specified in SECTION 10 hereof.
SECTION 7. GENERAL AUTHORITY.
(a) The Grantors hereby irrevocably appoint, after the occurrence and
during the continuance of an Event of Default, the Agent their true and lawful
attorney, with full power of substitution, in the name of each Grantor, the
Agent, the Lenders or otherwise, for the sole use and benefit of the Agent and
the Lenders, but at the Grantors' expense, to exercise, at any time from time to
time all or any of the following powers:
(i) to file the Financing Statements and any financing
statements, financing statement amendments and continuation statements
referred to in SECTIONS 4(A)(I), 4(A)(II), 4(A)(III) and 4(C)(IV)
hereof;
(ii) to demand, xxx for, collect, receive and give acquittance
for any and all monies due or to become due with respect to any
Collateral or by virtue thereof;
(iii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect to any Collateral;
(iv) to sell, transfer, assign or otherwise deal in or with
the Collateral and the Proceeds thereof, as fully and effectually as if
the Agent were the absolute owner thereof; and
(v) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference to the
Collateral;
PROVIDED that the Agent shall not take any of the actions described in this
SECTION 7(A) except those described in clause (i) above unless an Event of
Default shall have occurred and be continuing and the
33
Agent shall give the Grantors not less than ten (10) Business Days' prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral, except any Collateral which is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market. The Grantors agree that any such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC (to the extent
such Section is applicable).
(b) RATIFICATION. The Grantors hereby ratify all that said attorney
shall lawfully do or cause to be done by virtue hereof. The power of attorney
granted pursuant to Section 7(a) is a power coupled with an interest and shall
be irrevocable.
(c) OTHER POWERS. The Grantors also authorize the Agent, after the
occurrence and during the continuance of an Event of Default, at any time and
from time to time, to execute, in connection with the sale provided for in
SECTION 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
SECTION 8. REMEDIES UPON EVENT OF DEFAULT.
(a) If any Event of Default has occurred and is continuing, the Agent
may, upon the request of the Required Lenders (and only upon such request),
exercise on behalf of itself and the Lenders all rights of a secured party under
the UCC (whether or not in effect in the jurisdiction where such rights are
exercised) and, in addition, the Agent may, upon the request of the Required
Lenders (and only upon such request), (i) withdraw all cash, if any, in the
Collateral Account and investments made with amounts on deposit in the
Collateral Account, and apply such monies, investments and other cash, if any,
then held by it as Collateral as specified in SECTION 10 hereof and (ii) if
there shall be no such monies, investments or cash or if such monies,
investments or cash shall be insufficient to pay the Secured Obligations then
outstanding in full, sell the Collateral or any part thereof at public or
private sale, for cash, upon credit or for future delivery, and at such price or
prices as the Agent may deem satisfactory. The Agent or any Lender may be the
purchaser of any or all of the Collateral so sold at any public sale (or, if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations or if
otherwise permitted under applicable law, at any private sale) and thereafter
hold the same, absolutely, free from any right or claim of whatsoever kind. Each
Grantor will execute and deliver such documents and take such other action as
the Agent deems reasonably necessary or advisable in order that any such sale
may be made in compliance with law. Upon any such sale the Agent shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral so
sold (without warranty). Each purchaser at any such sale shall hold the
Collateral so sold to it absolutely, free from any claim or right of whatsoever
kind, including any equity or right of redemption of any Grantor. To the extent
permitted by law, each Grantor hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice of such sale shall be given to the
Grantors ten (10) Business Days prior to such sale and (A) in case of a public
sale, state the time and place fixed for such sale, and (B) in the case of a
private sale, state the day after which sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Agent may fix in the notice of such sale. At any
such sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as the Agent may determine. The Agent shall not
34
be obligated to make any such sale pursuant to any such notice. The Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Agent until the selling price is paid by the purchaser thereof,
but the Agent shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice. The Agent, instead
of exercising the power of sale herein conferred upon it, may proceed by a suit
or suits at law or in equity to foreclose the Security Interests and sell the
Collateral, or any portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction. The Grantors shall remain liable for any
deficiency.
(b) For the purpose of enforcing any and all rights and remedies under
this Agreement, the Agent may (i) require each Grantor to, and each Grantor
agrees that it will, at its expense and upon the request of the Agent, forthwith
assemble all or any part of the Collateral as directed by the Agent and make it
available at a place designated by the Agent which is, in the Agent's opinion,
reasonably convenient to the Agent and such Grantor, whether at the premises of
such Grantor or otherwise, (ii) to the extent permitted by applicable law,
enter, with or without process of law and without breach of the peace, any
premises where any of the Collateral is or may be located and, without charge or
liability to the Agent, seize and remove such Collateral from such premises,
(iii) have access to and use such Grantor's books and records relating to the
Collateral and (iv) prior to the disposition of the Collateral, store or
transfer such Collateral without charge in or by means of any storage or
transportation facility owned or leased by such Grantor, process, repair or
recondition such Collateral or otherwise prepare it for disposition in any
manner and to the extent the Agent deems appropriate.
SECTION 9. LIMITATION ON DUTY OF AGENT IN RESPECT OF COLLATERAL. Beyond
reasonable care in the custody thereof, the Agent shall have no duty as to any
Collateral in its possession or control or in the possession or control of any
agent or bailee or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Agent shall be
deemed to have exercised reasonable care in the custody of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which it accords its own property, and the Agent shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by the Agent in good faith.
SECTION 10. APPLICATION OF PROCEEDS. Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Agent in accordance with Section 4.7 of the Credit Agreement, and then to
payment to the Grantors or their successors or assigns, or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds. The Agent may make distribution hereunder in cash or in kind or, on a
ratable basis, in any combination thereof.
SECTION 11. CONCERNING THE AGENT. The provisions of Article IX of the
Credit Agreement shall inure to the benefit of the Agent in respect of this
Agreement and shall be binding upon the parties
35
to the Credit Agreement in such respect. In furtherance and not in derogation of
the rights, privileges and immunities of the Agent therein set forth:
(a) The Agent is authorized to take all such action as is
provided to be taken by it as Agent hereunder and all other action
incidental thereto. As to any matters not expressly provided for
herein, the Agent may request instructions from the Lenders and shall
act or refrain from acting in accordance with written instructions from
the Required Lenders (or, when expressly required by this Agreement or
the Credit Agreement, all the Lenders) or, in the absence of such
instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the Security Interests,
whether impaired by operation of law or by reason of any action or
omission to act on its part (other than any such action or inaction
constituting gross negligence or willful misconduct). The Agent shall
have no duty to ascertain or inquire as to the performance or
observance of any of the terms of this Agreement by any Grantor.
SECTION 12. APPOINTMENT OF COLLATERAL AGENTS. At any time or times,
with, so long as no Default or Event of Default has occurred and is continuing,
the consent of the Grantors (which consent shall not be unreasonably withheld),
in order to comply with any legal requirement in any jurisdiction or in order to
effectuate any provision of the Loan Documents, the Agent may appoint another
bank or trust company or one or more other Persons, either to act as collateral
agent or agents, jointly with the Agent or separately, on behalf of the Agent
and the Lenders with such power and authority as may be necessary for the
effectual operation of the provisions hereof and specified in the instrument of
appointment (which may, in the discretion of the Agent, include provisions for
the protection of such collateral agent similar to the provisions of SECTION 11
hereof).
SECTION 13. EXPENSES. In the event that the Grantors fail to comply
with the provisions of the Credit Agreement, this Agreement or any other Loan
Document, such that the value of any Collateral or the validity, perfection,
rank or value of the Security Interests are thereby diminished or potentially
diminished or put at risk, the Agent if requested by the Required Lenders may,
but shall not be required to, effect such compliance on behalf of the Grantors,
and the Grantors shall reimburse the Agent for the reasonable costs thereof on
demand. All insurance expenses and all reasonable expenses of protecting,
storing, warehousing, appraising, insuring, handling, maintaining and shipping
the Collateral, any and all excise, stamp, intangibles, transfer, property,
sales, and use taxes imposed by any state, federal, or local authority or any
other governmental authority on any of the Collateral, or in respect of the sale
or other disposition thereof, shall be borne and paid by the Grantors; and if
the Grantors fail promptly to pay any portion thereof when due, the Agent or any
Lender may, at its option, but shall not be required to, pay the same and charge
the Grantors' account therefor, and the Grantors agree to reimburse the Agent or
such Lender therefor on demand. All sums so paid or incurred by the Agent or any
Lender for any of the foregoing and any and all other sums for which the
Grantors may become liable hereunder and all reasonable costs and expenses
(including reasonable attorneys' fees, legal expenses and court costs) incurred
by the Agent or any Lender in enforcing or protecting the Security Interests or
any of their rights or remedies hereunder shall be payable by the
36
Grantors on demand and shall bear interest (after as well as before judgment)
until paid at the rate then applicable to Base Rate Loans under the Credit
Agreement and shall be additional Secured Obligations hereunder.
SECTION 14. NOTICES. All notices, communications and distributions
hereunder shall be given or made in accordance with Section 10.2 of the Credit
Agreement.
SECTION 15. RELEASE AND TERMINATION.
(a) Upon any sale, lease, transfer or other disposition of any item of
Collateral by any Grantor in accordance with the terms of the Loan Documents
(other than sales of Collateral in the ordinary course of business consistent
with past practices), the Agent will, at such Grantor's expense, execute and
deliver to such Grantor such documents as such Grantor shall request to evidence
the release of such item of Collateral from the assignment and security interest
granted hereby.
(b) This Agreement shall remain in effect from the First Amendment
Effective Date through and including the date upon which all Secured Obligations
shall have been indefeasibly and irrevocably paid and satisfied in full and the
Commitments terminated and upon such date the Security Interest granted hereby
shall terminate and all rights to the Collateral shall revert to the Grantors.
Upon any such termination, (i) the Agent shall promptly assign, release,
transfer and deliver to the Grantors the Collateral held by it hereunder, all
instruments of assignment executed in connection therewith, together with all
monies held by the Agent or any of its agents hereunder, free and clear of the
Liens hereof and (ii) the Agent and the Lenders will promptly execute and
deliver to the Grantors such documents and instruments (including but not
limited to appropriate UCC termination statements) as the Grantors shall request
to evidence such termination in each such case at the expense of the Grantors.
SECTION 16. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of
the Agent or any Lender to exercise, and no delay in exercising and no course of
dealing with respect to, any right under the Credit Agreement, this Agreement or
any other Loan Document shall operate as a waiver thereof or hereof; nor shall
any single or partial exercise by the Agent or any Lender of any right under the
Credit Agreement, this Agreement or any other Loan Document preclude any other
or further exercise thereof, and the exercise of any rights under this
Agreement, the Credit Agreement and the other Loan Documents are cumulative and
are not exclusive of any other remedies provided by law. This Agreement is a
Loan Document executed pursuant to the Credit Agreement.
SECTION 17. CHANGES IN WRITING. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Grantors and the Agent with the consent of the
Required Lenders (or, when expressly required by this Agreement or the Credit
Agreement, all of the Lenders).
SECTION 18. POWERS COUPLED WITH AN INTEREST. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
37
SECTION 19. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 20. HEADINGS. the various headings of this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or any provisions thereof or thereto.
SECTION 21. EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement. This Agreement shall become effective
when counterparts hereof executed on behalf of the Borrower and the Agent shall
have been received by the Agent.
SECTION 22. GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
SECTION 23. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that
(a) the Borrower may not assign or transfer its rights or obligations
hereunder without the prior written consent of the Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders are
subject to Section 10.11 of the Credit Agreement.
SECTION 24. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY
BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES
TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION.
38
THE BORROWER FURTHER IRREVOCABLY APPOINTS CT CORPORATION SYSTEM (THE "PROCESS
AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 0000 XXXXXXXX, XXX XXXX, XXX XXXX
00000, XXXXXX XXXXXX, AS ITS AGENT TO RECEIVE ON THE BORROWER'S BEHALF AND ON
BEHALF OF THE BORROWER'S PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND
COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH LITIGATION. SUCH
SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE
BORROWER IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND
THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO
ACCEPT SUCH SERVICE ON ITS BEHALF. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY
AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT
THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 25. WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE AGENT, THE LENDERS OR THE BORROWER. THE AGENT, THE LENDERS AND THE BORROWER
HEREBY AGREE THAT THEY WILL NOT SEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY
OTHER LITIGATION IN WHICH A JURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE
PROVISIONS OF THIS SECTION 25 HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO
AND SHALL BE SUBJECT TO NO EXCEPTIONS. THE BORROWER ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING
INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
39
[Signature Pages Follow]
40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers, all as of the day and
year first written above.
BORROWER
[CORPORATE SEAL] THE SPORTS AUTHORITY, INC.
By:
-------------------------------------
Name:
Title:
SUBSIDIARIES OF THE BORROWER:
[CORPORATE SEAL] AUTHORITY INTERNATIONAL, INC.
By:
-------------------------------------
Name:
Title:
[CORPORATE SEAL] OSR, INC.
By:
-------------------------------------
Name:
Title:
[CORPORATE SEAL] THE SPORTS AUTHORITY FLORIDA, INC.
By:
-------------------------------------
Name:
Title:
[Signature Pages Continue]
41
[CORPORATE SEAL] THE SPORTS AUTHORITY MICHIGAN, INC.
By:
-------------------------------------
Name:
Title:
[Signature Pages Continue]
42
AGENT:
FIRST UNION NATIONAL BANK, as
Agent
By:
-------------------------------------
Name:
Title:
43
EXHIBIT A
(to Security Agreement)
SECURITY AGREEMENT SUPPLEMENT
SECURITY AGREEMENT SUPPLEMENT, dated as of _______________, (the
"SUPPLEMENT"), made by [INSERT NAME OF DOMESTIC SUBSIDIARY], a
__________________ (the "Additional Grantor"), in favor of FIRST UNION NATIONAL
BANK, as Administrative Agent (in such capacity, the "Agent") under the Credit
Agreement (as defined in the Security Agreement referred to below) for the
ratable benefit of the Agent and Lenders (as so defined).
1. Reference is hereby made to the Security Agreement dated as of
October ___, 1998, made by THE SPORTS AUTHORITY, INC. and certain subsidiaries
thereof (collectively, the "Grantors"), in favor of the Agent (as amended,
restated or otherwise modified, the "Security Agreement"). This Supplement
supplements the Security Agreement, forms a part thereof and is subject to the
terms thereof. Capitalized terms used and not defined herein shall have the
meanings given thereto or referenced in the Security Agreement.
2. In order to secure the Credit Agreement, in accordance with the
terms thereof, and to secure the payment and performance of all of the Secured
Obligations, the Additional Grantor hereby grants to the Agent, for the ratable
benefit of itself and the Lenders, a continuing security interest in and to all
of the Additional Grantor's estate, right, title and interest in and to all
Collateral whether now or hereafter owned or acquired by the Additional Grantor
or in which the Additional Grantor now has or hereafter has or acquires any
rights, and wherever located (the "New Collateral").
3. The Security Interests are granted as security only and shall not
subject the Agent, the Co-Agent or any Lender to, or transfer to the Agent, the
Co-Agent or any Lender, or in any way affect or modify, any obligation or
liability of the Additional Grantor with respect to any of the New Collateral or
any transaction in connection therewith.
4. The Additional Grantor hereby agrees that it is a "Grantor" under
the Security Agreement as if a signatory thereto on the Closing Date of the
Credit Agreement, and the Additional Grantor shall comply with all of the terms,
covenants, conditions and agreements and hereby makes each representation and
warranty, in each case set forth therein and applicable to a "Grantor." The
Additional Grantor agrees that "Collateral" as used therein shall include all
New Collateral pledged pursuant hereto and the Security Agreement and "Security
Agreement" or "Agreement" as used therein shall mean the Security Agreement as
supplemented hereby.
5. Attached hereto is a supplement to the Perfection Certificate
delivered to the Agent on the Closing Date.
44
6. The Additional Grantor hereby acknowledges it has received a copy of
the Security Agreement and that it has read and understands the terms thereof.
7. The Additional Grantor hereby agrees that it shall deliver to the
Agent such UCC Financing Statements and all other certificates or other
documents and take such action as the Agent shall reasonably request in order to
effectuate the terms hereof and the Security Agreement.
[Signature Pages Follow]
45
IN WITNESS WHEREOF, the undersigned hereby causes this Supplement to be
executed and delivered as of the date first above written.
[CORPORATE SEAL] [INSERT NAME OF SUBSIDIARY]
By:
-------------------------------------
Name:
Title:
46
EXHIBIT B
(to Security Agreement)
PERFECTION CERTIFICATE
Reference is made to that certain Security Agreement d0ated as of
October ____, 1998, executed by the entities set forth on the signature pages
thereto (collectively, the "Grantors" and each, a "Grantor"), in favor of FIRST
UNION NATIONAL BANK, as administrative agent (the "Agent"), for the ratable
benefit of the Agent and the Lenders who are or may become a party to the Credit
Agreement referred to below (collectively, the "Lenders"). Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to them
in the Credit Agreement (as defined in the Security Agreement).
The Grantors hereby certify to the Agent and each Lender as follows:
1. NAMES, ETC.
(a) The exact name of each Grantor as it appears in its
Articles or Certificate of Incorporation, as applicable, is as follows:
(b) Except as set forth in SCHEDULE 1 attached hereto, no
Grantor has changed its identity or legal structure in any way within the past
five years.
(c) The following is a list of all other names (including
trade names or similar appellations) used by any Grantor or any of their
respective divisions or other business units at any time during the past five
years:
(d) The taxpayer identification numbers of the Grantors are as
follows:
2. CURRENT LOCATIONS.
47
(a) The chief executive offices of each of the Grantors are
located at the following addresses:
MAILING ADDRESS COUNTY STATE
--------------- ------ -----
(b) The following are the only locations at which the Grantors
maintain any books or records relating to any Accounts:
MAILING ADDRESS COUNTY STATE
--------------- ------ -----
(c) The following are all the locations not identified above
where the Grantors maintain any Inventory:
3. UNUSUAL TRANSACTIONS. Other than as set forth below, all Accounts
have been originated by the Grantors and all Inventory has been acquired by the
Grantors in the ordinary course of business.
48
4. RELIANCE. The undersigned acknowledges that the Agent and the
Lenders are entitled to rely and have, in fact, relied on the information
contained herein, and any successor or assign of the Agent or the Lenders is
entitled to rely on the information contained therein.
49
IN WITNESS WHEREOF, the undersigned have executed this Perfection
Certificate, this ____ day of ________________,_______.
GRANTOR:
[CORPORATE SEAL] THE SPORTS AUTHORITY, INC.
By:
-------------------------------------
Name:
Title:
SUBSIDIARIES OF GRANTOR:
[CORPORATE SEAL] AUTHORITY INTERNATIONAL, INC.
By:
-------------------------------------
Name:
Title:
[CORPORATE SEAL] OSR, INC.
By:
-------------------------------------
Name:
Title:
[CORPORATE SEAL] THE SPORTS AUTHORITY FLORIDA, INC.
By:
-------------------------------------
Name:
Title:
[CORPORATE SEAL] THE SPORTS AUTHORITY MICHIGAN, INC.
By:
-------------------------------------
Name:
Title:
50
EXHIBIT C
(to Security Agreement)
[FORM OF LOCKBOX LETTER]
_______________, _____
[Name and Address of Lockbox Bank)
Re: [CORPORATION]
Ladies and Gentlemen:
We hereby notify you that effective __________, ____, we have
transferred exclusive ownership and control of our lock-box account(s) no[s].
_____________________ (the "LOCKBOX ACCOUNT[S]") maintained with you under the
terms of the [Lockbox Agreement] attached hereto as Exhibit A (the "LOCKBOX
AGREEMENT[S]") to First Union National Bank, as Agent (the "AGENT").
We hereby irrevocably instruct you to make all payments to be made by
you out of or in connection with the Lockbox Account(s) (i) to the Agent for
credit to account no. ________ maintained by it at its office at
________________________ or (ii) as you may otherwise be instructed by the
Agent.
We also hereby notify you that the Agent shall be irrevocably entitled
to exercise any and all rights in respect of or in connection with the Lockbox
Account(s), including, without limitation, the right to specify when payments
are to be made out of or in connection with the Lockbox Account(s).
All funds deposited into the Lockbox Account(s) will not be subject to
deduction, set-off, banker's lien or any other right in favor of any other
person than the Agent, except that you may set-off against the Lockbox
Account(s) the face amount of any check deposited in and credited to such
Lockbox Account(s) which is subsequently returned for any reason. Your
compensation for providing the service contemplated herein shall be mutually
agreed between you and us from time to time and we will continue to pay such
compensation.
51
Please confirm your acknowledgment of and agreement to the foregoing
instructions by signing in the space provided below
Very truly yours,
By:
---------------------------------------
Name:
Title:
Acknowledged and agreed to as of this ________ day of ____________, _____.
[LOCKBOX BANK]
By:
------------------------------------------
Name:
Title:
52
