----------------------------------------------
----------------------------------------------
CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
FIRST TEAM SPORTS, INC.,
HESPELER HOCKEY HOLDING, INC.,
HESPELER HOCKEY COMPANY,
FIRST TEAM SPORTS GmbH
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Dated as of: September 8, 1999
[GRAPHIC OMITTED][GRAPHIC OMITTED]
----------------------------------------------
----------------------------------------------
CREDIT AND SECURITY AGREEMENT
Dated as of September 8, 1999
First Team Sports, Inc., a Minnesota corporation, Hespeler Hockey
Holding, Inc., a Minnesota corporation, Hespeler Hockey Company, a Nova Scotia
unlimited liability company, and First Team Sports GmbH, an Austrian corporation
(collectively, the "Borrower"), and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association (the "Lender"), hereby agree as
follows:
1. Definitions
1.1 Definitions.
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term
is defined in the UCC and the PPSA, including without limitation the
aggregate unpaid obligations of customers and other account debtors to
the Borrower arising out of the sale or lease of goods or rendition of
services by the Borrower on an open account or deferred payment basis.
"Advance" means a Revolving Advance or a Term Advance.
"Affiliate" or "Affiliates" means any Person controlled by,
controlling or under common control with the Borrower, including
(without limitation) any Subsidiary of the Borrower. For purposes of
this definition, "control," when used with respect to any specified
Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as
amended, supplemented or restated from time to time.
"Availability" means the difference of (i) the Borrowing Base
and (ii) the outstanding principal balance of the Revolving Note plus
the L/C Amount.
"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in
Minneapolis, Minnesota.
"Borrowing Base" means, at any time and subject to change from
time to time in the Lender's commercially reasonable judgment, the
lesser of:
(a) the Maximum Line; or
(b) the sum of:
(i) 100% of the balance of the Custodial Account, as
determined after conversion into U.S. Dollars at Opening
Norwest Spot Price in the North American foreign exchange
session as quoted by Reuters, plus
(ii) 80% of Eligible Accounts, plus
(iii) 35% of Eligible Finished Goods Inventory and
20% of Eligible In-Transit Inventory,
provided that in no event shall Availability
attributable to Eligible In-Transit
Inventory exceed $400,000, provided,
further, that (x) during the period from
February 1 through May 31 in any year,
Advances against Eligible Inventory shall
not exceed $3,500,000, or (y) during the
period from June 1 through January 31 in any
year, Advances against Eligible Inventory
shall not exceed $2,500,000.
"City of Anoka Subordination Agreement" means the
Subordination Agreement of even date herewith, executed by the City of
Anoka, Minnesota in the Lender's favor and acknowledged by the
Borrower.
"Collateral" means all of the Borrower's Equipment, General
Intangibles, Inventory, Receivables, Investment Property, all sums on
deposit in the Custodian Account and in any Collateral Account or
Toronto Dominion Collateral Account, and any items in any Lockbox or
Toronto Dominion Lockbox; together with (i) all substitutions and
replacements for and products of any of the foregoing; (ii) proceeds of
any and all of the foregoing; (iii) in the case of all tangible goods,
all accessions; (iv) all accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection
with any tangible goods; and (v) all warehouse receipts, bills of
lading and other documents of title now or hereafter covering such
goods.
"Collateral Account" has the meaning given in the Collateral
Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement of even date herewith by and among the Borrower and the
Lender.
"Commitment" means the Lender's commitment to make Advances to
or for the Borrower's account pursuant to Article 2.
"Credit Facility" means the credit facility being made
available to the Borrower by the Lender pursuant to Article 2.
"Custodial Pledge Agreement" means the Custodial Pledge and
Security Agreement of even date herewith by and among the Borrower and
the Lender.
"Custodial Account" means those accounts maintained with the
Lender, in the name of the Lender on behalf of the Borrower, to hold
Austrian shillings and Canadian Dollars.
"Dated Accounts" means (i) all Accounts of First Team Sports,
Inc. that have a stated due date of more than thirty (30) days from the
invoice date of such Account and (ii) all Accounts of Hespeler Hockey
Company that have a stated due date of more than forty-five (45) days
from the invoice date of such Account.
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as at the date as of which Debt is to be
determined. For purposes of determining a Person's aggregate Debt at
any time, "Debt" shall also include the aggregate payments required to
be made by such Person at any time under any lease that is considered a
capitalized lease under GAAP.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the
earlier of (i) the day when a Default or Event of Default occurs or
(ii) the fifteen day of any month during which a Default or Event of
Default has occurred, and in either case ending on the date the Lender
notifies the Borrower in writing that such Default or Event of Default
has been cured or waived.
"Default Rate" means, with respect to the Revolving Advances,
an annual rate equal to two percent (2%) over the Revolving Floating
Rate, which rate shall change when and as the Revolving Floating Rate
changes and with respect to the Term Advance, an annual rate equal to
two percent (2%) over the Term Floating Rate, which rate shall change
when and as the Term Floating Rate changes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Earnings After Taxes" for a period means, post-tax earnings
from continuing operations for such period.
"Eligible Accounts" means all unpaid Accounts, net of any
credits, except the following shall not in any event be deemed Eligible
Accounts:
(i) That portion of (i) Accounts of First Team
Sports, Inc. that have a stated due date of 30 days or less
after the invoice date that are unpaid after the earlier of 60
days or more after such stated due date or 150 days after the
shipping date, or (ii) Accounts of Hespeler Hockey Company
that have a stated due date of 45 days or less after the
invoice date that are unpaid after the earlier of 60 days or
more after such stated due date or 150 days after the shipping
date, provided, however, that Dated Accounts shall be
ineligible if not paid within 30 days of the stated due date
or 150 days after the shipping date;
(ii) That portion of Accounts that is disputed or
subject to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as
applicable, by the Borrower to the customer;
(iv) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be
included in Eligible Accounts that portion of Accounts owed by
such units of government for which the Borrower has provided
evidence satisfactory to the Lender that (A) the Lender has a
first priority perfected security interest and (B) such
Accounts may be enforced by the Lender directly against such
unit of government under all applicable laws);
(v) Accounts owed by an account debtor located
outside the United States or Canada which are not (A) backed
by a bank letter of credit naming the Lender as beneficiary or
assigned to the Lender, in the Lender's possession and
acceptable to the Lender in all respects, in its sole
discretion, (B) covered by a foreign receivables insurance
policy acceptable to the Lender in its sole discretion;
(vi) Accounts owed by an account debtor that is
insolvent, the subject of bankruptcy proceedings or has gone
out of business;
(vii) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected
security interest in the Lender's favor or which are subject
to any lien, security interest or claim in favor of any Person
other than the Lender including without limitation any payment
or performance bond;
(ix) That portion of Accounts that has been
restructured, extended, amended or modified;
(x) That portion of Accounts that constitutes
advertising, finance charges, service charges or sales or
excise taxes;
(xi) Accounts owed by an account debtor, regardless
of whether otherwise eligible, if 25% or more of the total
amount due under Accounts from such debtor is ineligible under
clauses (i), (ii) or (ix) above;
(xii) Accounts owed by any one account debtor to the
extent such Accounts exceed 15% of the Borrower's total
Accounts;
(xiii) Accounts of First Team Sports GmbH;
(xiv) Accounts whose invoice amount equals or exceeds
$50,000, unless the Lender receives copies of such invoices
and corresponding shipping documents and such documents are
deemed acceptable to the Lender in its sole discretion; and
(xv) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion.
"Eligible Finished Goods Inventory" means Eligible Inventory
consisting of finished goods ready for sale by Borrower.
"Eligible In-Transit Inventory" means Inventory manufactured
in Asia that the Borrower takes title to immediately after such
Inventory has left its Asian port in route to the United States.
"Eligible Inventory" means all Inventory of the Borrower, at
the lower of cost or market value as determined in accordance with
GAAP; provided, however, that the following shall not in any event be
deemed Eligible Inventory:
(i)
(i) Inventory that is: in-transit (but not including
Eligible In-Transit Inventory as such term is defined herein);
located at any warehouse, job site or other premises not
approved by the Lender in writing; located outside of the
states, or localities, as applicable, in which the Lender has
filed financing statements to perfect a first priority
security interest in such Inventory; covered by any negotiable
or non-negotiable warehouse receipt, xxxx of lading or other
document of title; on consignment from any Person; on
consignment to any Person or subject to any bailment unless
such consignee or bailee has executed an agreement with the
Lender;
(ii) Supplies, packaging, parts, raw materials or
sample Inventory;
(iii) Work-in-process Inventory;
(iv) Inventory that is damaged, obsolete, slow moving
or not currently saleable in the normal course of the
Borrower's operations;
(v) Inventory that the Borrower has returned, has
attempted to return, is in the process of returning or intends
to return to the vendor thereof;
(vi) Inventory that is perishable or live;
(vii) Inventory manufactured by the Borrower pursuant
to a license unless the applicable licensor has agreed in
writing to permit the Lender to exercise its rights and
remedies against such Inventory except that Kablooe Product
Inc. and Creative Pool Trendscouting GmbH shall be deemed
Eligible Inventory; provided, however, if no Default or Event
of Default has occurred and is continuing hereunder, the
Inventory manufactured by the Borrower pursuant to those
certain license agreements between the Borrower and WDG
Enterprises, Inc. and International Marketing Management,
L.L.C., respectively, shall be deemed to be Eligible Inventory
for a period of ninety (90) days from the date of this
Agreement even though such licensors have not agreed in
writing to permit the Lender to exercise its rights and
remedies against such Inventory;
(viii) Inventory that is subject to a security
interest in favor of any Person other than the Lender;
(ix) Inventory that is located in Canada or Austria;
and
(x) Inventory otherwise deemed ineligible by the
Lender in its sole discretion.
"Environmental Indemnity Agreement" means the Environmental
Indemnity Agreement dated of even date herewith and executed by First
Team Sports, Inc. in favor of the Lender with regard to the Premises.
"Environmental Laws" has the meaning specified in Section 5.12.
"Equipment" means all of the Borrower's equipment, as such
term is defined in the UCC and the PPSA, whether now owned or hereafter
acquired, including but not limited to all present and future
machinery, vehicles, furniture, fixtures, manufacturing equipment, shop
equipment, office and record-keeping equipment, parts, tools, supplies,
and including specifically (without limitation) the goods described in
any equipment schedule or list herewith or hereafter furnished to the
Lender by the Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Funding Date" has the meaning given in Section 2.1.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.5.
"General Intangibles" or "Intangibles" means all of the
Borrower's general intangibles, as such term is defined in the UCC and
the PPSA, whether now owned or hereafter acquired, including (without
limitation) all present and future patents, patent applications,
copyrights, trademarks, trade names, trade secrets, customer or
supplier lists and contracts, manuals, operating instructions, permits,
franchises, the right to use the Borrower's name, and the goodwill of
the Borrower's business.
"Hazardous Substance" has the meaning given in Section 5.12.
"Inventory" means all of the Borrower's inventory, as such
term is defined in the UCC and the PPSA, whether now owned or hereafter
acquired, whether consisting of whole goods, spare parts or components,
supplies or materials, whether acquired, held or furnished for sale,
for lease or under service contracts or for manufacture or processing,
and wherever located.
"Investment Property" means all of the Borrower's investment
property, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all securities,
security entitlements, securities accounts, commodity contracts,
commodity accounts, stocks, bonds, mutual fund shares, money market
shares and U.S. Government securities.
"L/C Amount" means the sum of (i) the aggregate undrawn face
amount of any issued and outstanding Letters of Credit and (ii) the
unpaid amount of the Obligation of Reimbursement.
"L/C Application" means an application and agreement for
letters of credit in a form acceptable to the Lender.
"Letter of Credit" has the meaning specified in Section 2.2.
"Life Insurance Assignment" means an Assignment of Life
Insurance Policy as Collateral to be executed by the owner and the
beneficiary thereof, in form and substance satisfactory to the Lender,
granting the Lender a first priority lien on the Life Insurance Policy
to secure payment of the Obligations.
"Life Insurance Policy" has the meaning given in Section 6.11.
"Loan Documents" means this Agreement, the Notes and the
Security Documents.
"Lockbox" has the meaning given in the Lockbox Agreement.
"Lockbox Agreement" means the Lockbox Agreement by and among
the Borrower and the Lender, of even date herewith.
"Maturity Date" means August 31, 2002.
"Maximum Line" means $10,000,000, unless said amount is
reduced pursuant to Section 2.10, in which event it means the amount to
which said amount is reduced.
"Mortgage" means the Mortgage and Security Agreement and
Fixture Financing Statement dated of even date herewith and executed by
First Team Sports, Inc. in favor of the Lender, granting the Lender a
first priority lien with regard to the Borrower's facility in the
Premises.
"Net Worth" means the Borrower's fiscal year-to-date after-tax
net worth minus any dividends distributed by the Borrower in such
fiscal year, as determined in accordance with GAAP.
"Note" means the Revolving Note or the Term Note, and "Notes"
means the Revolving Note and the Term Note.
"Obligations" means the Notes and each and every other debt,
liability and obligation of every type and description which the
Borrower may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created
or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of the Borrower,
and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole,
joint, several or joint and several, and including specifically, but
not limited to, all indebtedness of the Borrower arising under this
Agreement, the Notes or any other loan or credit agreement or guaranty
between the Borrower and the Lender, whether now in effect or hereafter
entered into.
"Obligations of Reimbursement" has the meaning given in
Section 2.3.
"Patent Security Agreement" means the Patent and Trademark
Security Agreement by the Borrower in favor of the Lender of even date
herewith.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for the Borrower's employees and covered by Title IV of ERISA.
"PPSA" means the Personal Property Security Act (Ontario), as
in effect from time to time.
"Premises" means all premises where the Borrower conducts its
business and has any rights of possession, including, but not limited
to, the premises legally described in Exhibit D attached hereto.
"Prime Rate" means the rate of interest publicly announced
from time to time by the Lender as its "prime rate" or, if such bank
ceases to announce a rate so designated, any similar successor rate
designated by the Lender.
"Receivables" means each and every right of the Borrower to
the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes
or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other person who subsequently
transfers such person's interest to the Borrower, whether such right to
payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which the
Borrower may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against
any property of such account debtor or other obligor; all including but
not limited to all present and future accounts, contract rights, loans
and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
"Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.1.
"Revolving Floating Rate" means an annual rate equal to the
Prime Rate, which annual rate shall change when and as the Prime Rate
changes.
"Revolving Note" means the Borrower's revolving promissory
notes, payable to the order of the Lender in substantially the form of
Exhibit A hereto and any note or notes issued in substitution therefor,
as the same may hereafter be amended, supplemented or restated from
time to time.
"Security Documents" means this Agreement, the Mortgage, the
Environmental Indemnity Agreement, the Collateral Account Agreement,
the Lockbox Agreement, the Toronto-Dominion Lockbox Agreement, the
Custodial Pledge Agreement, the Patent Security Agreement and any other
document delivered to the Lender from time to time to secure the
Obligations, as the same may hereafter be amended, supplemented or
restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Subordination Agreement" means the City of Anoka
Subordiantion Agreement and any other subordination agreement accepted
by the Lender from time to time, as the same may hereafter be amended,
supplemented or restated from time to time.
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by the Borrower, by the Borrower and
one or more other Subsidiaries, or by one or more other Subsidiaries.
"Term Advance" has the meaning specified in Section 2.4.
"Term Floating Rate" means an annual rate equal to the Prime
Rate, which annual rate shall change when and as the Prime Rate
changes.
"Term Note" means the Borrower's promissory note, payable to
the order of the Lender in substantially the form of Exhibit B hereto
and any note or notes issued in substitution therefor, as the same may
hereafter be amended, supplemented or restated from time to time.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrower terminates the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations.
"Toronto-Dominion Lockbox" has the meaning given in the
Toronto-Dominion Lockbox Agreement.
"Toronto-Dominion Lockbox Agreement" means the Lockbox
Agreement by and among the Borrower and The Toronto-Dominion Bank, of
even date herewith.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.13 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
1.2 Cross References.
All references in this Agreement to Articles, Sections and subsections,
shall be to Articles, Sections and subsections of this Agreement unless
otherwise explicitly specified.
2. Amount and Terms of the Credit Facility
2.1 Revolving Advances.
The Lender agrees to make advances to the Borrower from time to time
from the date all of the conditions set forth in Section 4.1 are satisfied (the
"Funding Date") to the Termination Date, on the terms and subject to the
conditions herein set forth (the "Revolving Advances"). The Lender shall have no
obligation to make a Revolving Advance if, after giving effect to such requested
Revolving Advance, the sum of the outstanding and unpaid Revolving Advances
would exceed the Borrowing Base. The Borrower's obligation to pay the Revolving
Advances shall be evidenced by the Revolving Note and shall be secured by the
Collateral as provided in Article 3 and by the Mortgage, provided, however, that
the amount of Revolving Advances secured by the Mortgage shall be limited to
$1,500,000. Within the limits set forth in this Section 2.1, the Borrower may
borrow, prepay pursuant to Section 2.10 and reborrow. The Borrower agrees to
comply with the following procedures in requesting Revolving Advances under this
Section 2.1:
(a) The Borrower shall make each request for a Revolving
Advance to the Lender before 11:00 a.m. (Minneapolis time) of the day
of the requested Revolving Advance. Requests may be made in writing or
by telephone, specifying the date of the requested Revolving Advance
and the amount thereof. Each request shall be by (i) any officer of the
Borrower; or (ii) any person designated as the Borrower's agent by any
officer of the Borrower in a writing delivered to the Lender; or (iii)
any person whom the Lender reasonably believes to be an officer of the
Borrower or such a designated agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article 4, the Lender shall disburse the proceeds of the requested
Revolving Advance by crediting the same to the Borrower's demand
deposit account maintained with the Lender unless the Lender and the
Borrower shall agree in writing to another manner of disbursement. Upon
the Lender's request, the Borrower shall promptly confirm each
telephonic request for an Advance by executing and delivering an
appropriate confirmation certificate to the Lender. The Borrower shall
repay all Advances even if the Lender does not receive such
confirmation and even if the person requesting an Advance was not in
fact authorized to do so. Any request for an Advance, whether written
or telephonic, shall be deemed to be a representation by the Borrower
that the conditions set forth in Section 4.2 have been satisfied as of
the time of the request.
2.2 Letters of Credit.
(a) The Lender agrees, on the terms and subject to the
conditions herein set forth, to issue, from the Funding Date to the
Termination Date, one or more irrevocable standby or documentary
letters of credit (each, a "Letter of Credit") for the Borrower's
account. The Lender shall have no obligation to issue any Letter of
Credit if the face amount of the Letter of Credit to be issued would
exceed the Borrowing Base less the sum of (A) all outstanding and
unpaid Revolving Advances and (B) the L/C Amount.
Each Letter of Credit, if any, shall be issued pursuant to a separate
L/C Application entered into by the Borrower and the Lender and
completed in a manner satisfactory to the Lender. The terms and
conditions set forth in each such L/C Application shall supplement the
terms and conditions hereof, but if the terms of any such L/C
Application and the terms of this Agreement are inconsistent, the terms
hereof shall control.
(b) No Letter of Credit shall be issued with an expiration
date later than the Termination Date in effect as of the date of
issuance.
(c) Any request to cause the Lender to issue a Letter of
Credit under this Section 2.2 shall be deemed to be a representation by
the Borrower that the conditions set forth in Section 4.2 have been
satisfied as of the date of the request.
2.3 Payment of Amounts Drawn Under Letters of Credit; Obligation of
Reimbursement.
The Borrower agrees to pay to the Lender any and all amounts required
to be paid under the applicable L/C Application, when and as required to be paid
thereby, and the amounts designated below, when and as designated:
(a) The Borrower hereby agrees to pay the Lender on the day a
draft is honored under any Letter of Credit a sum equal to all amounts
drawn under such Letter of Credit plus any and all reasonable charges
and expenses that the Lender may pay or incur relative to such draw and
the applicable L/C Application, plus interest on all such amounts,
charges and expenses as set forth below (the Borrower's obligation to
pay all such amounts is herein referred to as the "Obligation of
Reimbursement").
(b) Whenever a draft is submitted under a Letter of Credit,
the Lender shall make a Revolving Advance in the amount of the
Obligation of Reimbursement and shall apply the proceeds of such
Revolving Advance thereto. Such Revolving Advance shall be repayable in
accordance with and be treated in all other respects as a Revolving
Advance hereunder.
(c) If a draft is submitted under a Letter of Credit when the
Borrower is unable, because a Default Period then exists or for any
other reason, to obtain a Revolving Advance to pay the Obligation of
Reimbursement, the Borrower shall pay to the Lender on demand and in
immediately available funds, the amount of the Obligation of
Reimbursement together with interest, accrued from the date of the
draft until payment in full at the Default Rate. Notwithstanding the
Borrower's inability to obtain a Revolving Advance for any reason, the
Lender is irrevocably authorized, in its sole discretion, to make a
Revolving Advance in an amount sufficient to discharge the Obligation
of Reimbursement and all accrued but unpaid interest thereon.
(d) The Borrower's obligation to pay any Revolving Advance
made under this Section 2.3 shall be evidenced by Revolving Note and
shall bear interest as provided in Section 2.6.
2.4 Term Advance.
The Lender agrees, on the terms and subject to the conditions herein
set forth, to make a single advance to the Borrower (via a title insurance
company) in an amount not to exceed $4,500,000, on or after the Funding Date
(the "Term Advance"). The Borrower's obligation to pay the Term Advance shall be
evidenced by the Term Note and shall be secured by the Mortgage. Upon
fulfillment of the applicable conditions set forth in Article 4, the Lender
shall deposit the proceeds of the Term Advance by crediting the same to the
Borrower's demand deposit account identified in Section 2.1(b), unless the
Lender and the Borrower shall agree in writing to another manner of
disbursement.
2.5 Payment of Term Note.
The outstanding principal balance of the Term Note shall be due and
payable as follows:
(a) Beginning on October 1, 1999, and on the first day of each
month thereafter, in monthly principal installments equal to $18,750,
plus interest.
(b) On the Termination Date, the entire unpaid principal
balance of the Term Note, and all unpaid interest accrued thereon,
shall in any event be due and payable.
2.6 Interest; Default Interest; Participations; Usury.
Interest accruing on the Notes shall be due and payable in arrears on
the first day of each month.
(a) Revolving Note. Except as set forth in Sections 2.6(c) and
2.6(e), the outstanding principal balance of the Revolving Note shall
bear interest at the Revolving Floating Rate; provided, however, if the
Borrower generates Net Income of no less than $500,000 for its fiscal
year ending February 28, 2000 and no Default or Event of Default has
occurred and is continuing hereunder, the Revolving Note shall bear
interest at the Revolving Floating Rate less one quarter of one percent
(.25%) per annum, effective within thirty (30) days of the Lender's
receipt of the audited financial statements required under Section
6.1(a).
(b) Term Note. Except as set forth in Sections 2.6(c) and
2.6(e), the outstanding principal balance of the Term Note shall bear
interest at the Term Floating Rate; provided, however, if the Borrower
generates Net Income of no less than $500,000 for its fiscal year
ending February 28, 2000 and no Default or Event of Default has
occurred and is continuing hereunder, the Term Note shall bear interest
at the Term Floating Rate less one quarter of one percent (.25%) per
annum, effective within thirty (30) days of the Lender's receipt of the
audited financial statements required under Section 6.1(a).
(c) Default Interest Rate. At any time during any Default
Period, in the Lender's sole discretion and without waiving any of its
other rights and remedies, the principal of the Advances outstanding
from time to time shall bear interest at the Default Rate, effective
for any periods designated by the Lender from time to time during that
Default Period.
(d) Participations. If any Person shall acquire a
participation in the Advances under this Agreement, the Borrower shall
be obligated to the Lender to pay the full amount of all interest
calculated under this Agreement, along with all other fees, charges and
other amounts due under this Agreement, regardless if such Person
elects to accept interest with respect to its participation at a lower
rate than the Revolving Floating Rate or the Term Floating Rate, or
otherwise elects to accept less than its pro rate share of such fees,
charges and other amounts due under this Agreement.
(e) Usury. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law.
2.7 Fees.
(a) Origination Fee. The Borrower hereby agrees to pay the
Lender a fully earned and non-refundable origination fee of $34,000,
due and payable upon the execution of this Agreement. The Lender
acknowledges receipt of $19,000 toward payment of this fee and the
fees, costs and expenses described in Sections 2.7(b) and 9.6.
(b) Unused Line Fee. For the purposes of this Section 2.7(b),
"Unused Amount" means the Maximum Line reduced by outstanding Revolving
Advances and the L/C Amount. The Borrower agrees to pay to the Lender
an unused line fee at the rate of one quarter of one percent (.25%) per
annum on the average daily Unused Amount from the date of this
Agreement to and including the Termination Date, due and payable
monthly in arrears on the first day of the month and on the Termination
Date.
(c) Audit Fees. The Borrower hereby agrees to pay the Lender,
on demand, audit fees in connection with any audits or inspections
conducted by the Lender of any Collateral or the Borrower's operations
or business at the rates established from time to time by the Lender as
its audit fees (which fees are currently $500 per day per auditor or
$62.50 per hour per auditor), together with all actual out-of-pocket
costs and expenses incurred in conducting any such audit or inspection;
provided, however, that except during Default Periods, the Borrower
shall not have to reimburse the Lender for such fees, costs and
expenses to the extent they exceed $5000 per calendar year. For the
purposes of this subsection, the term "audit fees" shall not include
the fees incured by the Lender as a result of due diligence and audit
pick-ups conducted prior to the date of this Agreement, which fees
shall be reimbursed by the Borrower up to the amount of $5000.
2.8 Computation of Interest and Fees; When Interest Due and Payable.
Interest accruing on the outstanding principal balance of the Advances
and fees hereunder outstanding from time to time shall be computed on the basis
of actual number of days elapsed in a year of 360 days. Interest shall be
payable in arrears on the first day of each month and on the Termination Date.
2.9 Capital Adequacy.
If any Related Lender determines at any time that its Return has been
reduced as a result of any Rule Change, such Related Lender may require the
Borrower to pay it the amount necessary to restore its Return to what it would
have been had there been no Rule Change; provided, however, that the Borrower
may prepay without penalty under Section 2.11 or this Section 2.9, all, but not
part, of the Revolving Advances and the Term Advance by obtaining a firm
commitment to lend with terms substantially similar to the terms of the Loan
Facility but, after giving effect to the Rule Change, the loan resulting from
such firm commitment will not subject the Borrower to the costs being required
by such Related Lender to restore its Return. For purposes of this Section 2.9:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital
adequacy, or the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable
agency, whether or not having the force of law, that applies to any
Related Lender. Such rules include rules requiring financial
institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters
of credit.
(b) "Return," for any period, means the return as determined
by such Related Lender on the Advances based upon its total capital
requirements and a reasonable attribution formula that takes account of
the Capital Adequacy Rules then in effect. Return may be calculated for
each calendar quarter and for the shorter period between the end of a
calendar quarter and the date of termination in whole of this
Agreement.
(c) "Rule Change" means any change in any Capital Adequacy
Rule occurring after the date of this Agreement, but the term does not
include any changes in applicable requirements that at the Closing Date
are scheduled to take place under the existing Capital Adequacy Rules
or any increases in the capital that any Related Lender is required to
maintain to the extent that the increases are required due to a
regulatory authority's assessment of the financial condition of such
Related Lender.
(d) "Related Lender" includes (but is not limited to) the
Lender, any parent corporation of the Lender and any assignee of any
interest of the Lender hereunder and any participant in the loans made
hereunder.
Certificates of any Related Lender sent to the Borrower from time to time
claiming compensation under this Section 2.9, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender hereunder to restore its Return shall
be conclusive absent manifest error. In determining such amounts, the Related
Lender may use any reasonable averaging and attribution methods.
2.10 Voluntary Prepayment; Reduction of the Maximum Line; Termination
of the Credit Facility by the Borrower.
Except as otherwise provided herein, the Borrower may prepay the
Revolving Advances in whole at any time or from time to time in part. The
Borrower may prepay the Term Advance (other than in accordance with Section
2.5), terminate the Credit Facility or reduce the Maximum Line at any time if it
(i) gives the Lender at least 30 days' prior written notice and (ii) pays the
Lender the prepayment, termination or line reduction fees in accordance with
Section 2.11. Any prepayment of the Term Advance (other than in accordance with
Section 2.5) or reduction in the Maximum Line must be in an amount not less than
$100,000 or an integral multiple thereof. If the Borrower reduces the Maximum
Line to zero, all Obligations shall be immediately due and payable. Any partial
prepayments of the Term Note (other than in accordance with Section 2.5) shall
be applied to principal payments due and owing in inverse order of their
maturities. Upon termination of the Credit Facility and payment and performance
of all Obligations, the Lender shall release or terminate the Security Interest
and the Security Documents.
2.11 Termination and Line Reduction Fees; Prepayment Fees.
(a) Termination and Line Reduction Fees. If the Credit
Facility is terminated for any reason as of a date other than the
Maturity Date, or the Borrower reduces the Maximum Line, the Borrower
shall pay to the Lender a fee in an amount equal to a percentage of the
Maximum Line (or the reduction, as the case may be) as follows: (i)
three percent (3%) if the termination or reduction occurs on or before
the first anniversary of the Funding Date; (ii)two percent (2%) if the
termination or reduction occurs after the first anniversary of the
Funding Date but on or before the second anniversary of the Funding
Date; and (iii) one percent (1%) if the termination or reduction occurs
after the second anniversary of the Funding Date.
(b) Prepayment Fees. If any portion of the Term Note is paid
other than in accordance with Section 2.5, the Borrower shall pay to
the Lender a prepayment fee in an amount equal to a percentage of the
amount so paid as follows: (i) three percent (3%) if the payment occurs
on or before the first anniversary of the Funding Date; (ii) two
percent (2%) if the payment occurs after the first anniversary of the
Funding Date but on or before the second anniversary of the Funding
Date; and (iii) one percent (1%) if the payment occurs after the second
anniversary of the Funding Date. Any partial prepayments of the Term
Note shall be applied to principal payments due and owing in inverse
order of their maturities and must be in a minimum amount of $100,000.
(c) Waiver of Termination, Line Reduction and Prepayment Fees.
The Borrower will not be required to pay the termination, line
reduction and prepayment fees otherwise due under this Section 2.11 if
such termination, line reduction or prepayment is made because of
increased cash flow generated from the Borrower's operations or
refinancing by an affiliate of the Lender.
2.12 Mandatory Prepayment.
Without notice or demand, if the outstanding principal balance of the
Revolving Advances shall at any time exceed the Borrowing Base, the Borrower
shall immediately prepay the Revolving Advances to the extent necessary to
eliminate such excess. Any payment received by the Lender under this Section
2.12 or under Section 2.10 may be applied to the Obligations, in such order and
in such amounts as the Lender, in its discretion, may from time to time
determine; provided that any prepayment under Section 2.10 which the Borrower
designates as a partial prepayment of the Term Note shall be applied to
principal installments of the Term Note in inverse order of maturity.
2.13 Payment.
The Lender from time to time at its discretion shall, after allowing
two (2) Banking Days, apply deposited funds in the Collateral Account to the
payment of the Obligations, in any order or manner of application satisfactory
to the Lender, by transferring such funds to the Lender's general account. All
wire transfer funds received by the Lender on behalf of the Borrower shall be
applied on a same-day basis (provided such funds are received prior to 1:00 p.m.
central standard time). The Lender may hold all payments not constituting
immediately available funds for up to three (3) additional days before applying
them to the Obligations. Notwithstanding anything in Section 2.1, the Borrower
hereby authorizes the Lender, in its discretion at any time or from time to time
without the Borrower's request and even if the conditions set forth in Section
4.2 would not be satisfied, to make a Revolving Advance in an amount equal to
the portion of the Obligations from time to time due and payable.
2.14 Payment on Non-Banking Days.
Whenever any payment to be made hereunder shall be stated to be due on
a day which is not a Banking Day, such payment may be made on the next
succeeding Banking Day, and such extension of time shall in such case be
included in the computation of interest on the Advances or the fees hereunder,
as the case may be.
2.15 Use of Proceeds.
The Borrower shall use the proceeds of Advances for ordinary working
capital purposes and to payoff loans from its senior lenders.
2.16 Liability Records.
The Lender may maintain from time to time, at its discretion, liability
records as to the Obligations. All entries made on any such record shall be
presumed correct until the Borrower establishes the contrary. Upon the Lender's
demand, the Borrower will admit and certify in writing the exact principal
balance of the Obligations that the Borrower then asserts to be outstanding. Any
billing statement or accounting rendered by the Lender shall be conclusive and
fully binding on the Borrower unless the Borrower gives the Lender specific
written notice of exception within 45 days after receipt.
3. Security Interest; Occupancy; Setoff
3.1 Grant of Security Interest.
The Borrower hereby pledges, assigns and grants to the Lender a
security interest (collectively referred to as the "Security Interest") in the
Collateral, as security for the payment and performance of the Obligations. The
Security Interest created hereby is intended to commence when this Agreement is
executed by the Borrower and delivered to the Lender.
3.2 Notification of Account Debtors and Other Obligors.
The Lender may at any time (whether or not a Default Period then
exists) notify any account debtor or other person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. The Borrower will join in
giving such notice if the Lender so requests. At any time after the Borrower or
the Lender gives such notice to an account debtor or other obligor, the Lender
may, but need not, in the Lender's name or in the Borrower's name, (a) demand,
xxx for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and handle the Borrower's mail, applying all Collateral as permitted under
this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.
3.3 Assignment of Insurance.
As additional security for the payment and performance of the
Obligations, the Borrower hereby assigns to the Lender any and all monies
(including, without limitation, proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of the Borrower with
respect to, any and all policies of insurance now or at any time hereafter
covering the Collateral or any evidence thereof or any business records or
valuable papers pertaining thereto, and the Borrower hereby directs the issuer
of any such policy to pay all such monies directly to the Lender. At any time,
whether or not a Default Period then exists, the Lender may (but need not), in
the Lender's name or in the Borrower's name, execute and deliver proof of claim,
receive all such monies, endorse checks and other instruments representing
payment of such monies, and adjust, litigate, compromise or release any claim
against the issuer of any such policy.
3.4 Occupancy.
(a) The Borrower hereby irrevocably grants to the Lender the
right to take possession of the Premises at any time during a Default
Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good xxxxx xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all
such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of
any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession,
occupancy or use of any of the Premises, the Borrower shall reimburse
the Lender promptly for the full amount thereof. In addition, the
Borrower will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or
the provisions of this Section 3.4.
3.5 License.
Without limiting the generality of the Patent Security Agreement, the
Borrower hereby grants to the Lender a non-exclusive, worldwide and royalty-free
license to use or otherwise exploit all trademarks, franchises, trade names,
copyrights and patents of the Borrower for the purpose of selling, leasing or
otherwise disposing of any or all Collateral during any Default Period.
3.6 Financing Statement.
A carbon, photographic or other reproduction of this Agreement or of
any financing statements signed by the Borrower is sufficient as a financing
statement and may be filed as a financing statement in any state or province to
perfect the security interests granted hereby. The Borrower authorizes the
Lender to file such financing statements and financing change statements as the
Lender may deem appropriate to perfect on an on-going basis and continue the
Security Interest. For this purpose, the following information is set forth:
Name and address of Debtor:
First Team Sports, Inc.
0000 Xxxx Xxxxxxxxx
Xxxxx, Xxxxxxxxx 00000
Federal Tax Identification No. 00-0000000
Hespeler Hockey Holding, Inc.
0000 Xxxx Xxxxxxxxx
Xxxxx, Xxxxxxxxx 00000
Federal Tax Identification No. 00-0000000
Hespeler Hockey Company
0000 Xxxx Xxxxxxxxx
Xxxxx, Xxxxxxxxx 00000
Federal Tax Identification No. 000000000
First Team Sports GmbH
Triester Strasse 391
Graz, Austria 8055
Federal Tax Identification No. 990/9505
Name and address of Secured Party:
Norwest Bank Minnesota, National Association
Norwest Center
Sixth Street and Marquette Avenue
X0000-000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Federal Tax Identification No. 00-0000000
3.7 Setoff.
The Borrower agrees that the Lender may at any time or from time to
time, at its sole discretion and without demand and without notice to anyone,
setoff any liability owed to the Borrower by the Lender, whether or not due,
against any Obligation, whether or not due. In addition, each other Person
holding a participating interest in any Obligations shall have the right to
appropriate or setoff any deposit or other liability then owed by such Person to
the Borrower, whether or not due, and apply the same to the payment of said
participating interest, as fully as if such Person had lent directly to the
Borrower the amount of such participating interest.
3.8 Rights and Remedies under PPSA.
In addition to those rights granted herein and in any other agreement
now or hereafter in effect between the Borrower and the Lender and in addition
to any other rights the Lender may have at law or in equity, the Lender shall
have, both before and after any Event of Default, all rights and remedies of a
secured party under the PPSA. However, the Lender shall not be liable or
accountable for any failure to exercise its remedies, take possession of,
collect, enforce, realize, sell, lease, license or otherwise dispose of
Collateral or to institute any proceedings for such purposes.
3.9 Appointment of Receiver.
Upon the occurrence of and during the continuance of any Event of
Default, the Lender may appoint or reappoint by instrument in writing, any
person or persons, whether an officer or officers or an employee or employees of
the Lender or not, to be a receiver or receivers (hereinafter called a
"Receiver," which term when used herein shall include a receiver and manager) of
Collateral (including any interest, income or profits therefrom) and may remove
any Receiver so appointed and appoint another in his/her stead. Any such
Receiver shall, so far as concerns responsibility for his/her acts, be deemed
the agent of the Borrower and not of the Lender and the Lender shall not be in
any way responsible for any misconduct, negligence or non-feasance on the part
of any such Receiver, his/her servants, agents or employees. Subject to the
provisions of the instrument appointing him/her, any such Receiver shall have
power to take possession of Collateral, to preserve Collateral or its value, to
carry on or concur in carrying on all or any part of the business of the
Borrower and to sell, lease, license or otherwise dispose of or concur in
selling, leasing, licensing or otherwise disposing of Collateral. To facilitate
the foregoing powers, any such Receiver may, to the exclusion of all others, to
the extent permitted by law (provided that any limitations under applicable law
shall only apply to the extent that they may not be waived or otherwise varied),
including the Borrower, enter upon, use and occupy all premises owned or
occupied by the Borrower wherein Collateral may be situate, maintain Collateral
upon such premises, borrow money on a secured or unsecured basis and use
Collateral directly in carrying on the Borrower's business or as security for
loans or advances to enable the Receiver to carry on Borrower's business or
otherwise, as such Receiver shall, in its discretion, determine. Except as may
be otherwise directed by the Lender, all Money received from time to time by
such Receiver in carrying out his/her appointment shall be received in trust for
and paid over to the Lender. Every such Receiver may, in the discretion of the
Lender, be vested with all or any of the rights and powers of the Lender. This
Section 3.9 shall only apply to the Collateral of Hespeler Hockey Company
located in Canada.
4. Conditions of Lending
4.1 Conditions Precedent to the Initial Revolving and Term Advance.
The Lender's obligation to make the initial Revolving Advance and Term
Advance hereunder shall be subject to the condition precedent that the Lender
shall have received all of the following, each in form and substance
satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Notes, properly executed by the Borrower.
(c) The Mortgage, properly executed by First Team Sports, Inc.
(d) The Environmental Indemnity Agreement, properly executed
by First Team Sports, Inc.
(e) A commitment for a mortgagee's title insurance policy
regarding the Premises secured by the Mortgage, in form and substance
acceptable to the Lender.
(f) The Life Insurance Assignment, properly executed by the
beneficiary and owner thereof, and the Life Insurance Policy, each in
form and substance satisfactory to the Lender, together with such
evidence as the Lender may request that the Life Insurance Policy is
subject to no assignments or encumbrances other than the Life Insurance
Assignment.
(g) The Collateral Account Agreement, properly executed by the
Borrower.
(h) The Lockbox Agreement, properly executed by the Borrower.
(i) The Toronto-Dominion Lockbox Agreement, properly executed
by the Borrower and The Toronto-Dominion Bank.
(j) The Custodial Pledge Agreement, properly executed by the
Borrower.
(k) The Patent Security Agreement, properly executed by the
Borrower.
(l) The City of Anoka Subordination Agreement, properly
executed by the City of Anoka, Minnesota and acknowledged by the
Borrower.
(m) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against the Borrower, (ii) no financing statements or
assignments of patents, trademarks or copyrights have been filed and
remain in effect against the Borrower except those financing statements
and assignments of patents, trademarks or copyrights relating to
Permitted Liens or to liens held by Persons who have agreed in writing
that upon receipt of proceeds of the Advances, they will deliver UCC or
PPSA releases and/or terminations and releases of such assignments of
patents, trademarks or copyrights satisfactory to the Lender, and (iii)
the Lender has duly filed all financing statements (including Canadian
financing statements) necessary to perfect the Security Interest, to
the extent the Security Interest is capable of being perfected by
filing.
(n) A certificate of the Borrower's Secretary or Assistant
Secretary certifying as to (i) the resolutions of the Borrower's
directors and, if required, shareholders, authorizing the execution,
delivery and performance of the Loan Documents, (ii) the Borrower's
articles of incorporation and bylaws, and (iii) the signatures of the
Borrower's officers or agents authorized to execute and deliver the
Loan Documents and other instruments, agreements and certificates,
including Advance requests, on the Borrower's behalf.
(o) A current certificate issued by the Secretary of State or
similar governing authority of the state or jurisdiction where each
Borrower is incorporated, certifying that such Borrower is in
compliance with all applicable organizational requirements of such
state or jurisdiction.
(p) Evidence that the Borrower is duly licensed or qualified
to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it
makes such licensing or qualification necessary.
(q) A certificate of an officer of the Borrower in his
personal capacity as an officer of the Borrower, confirming, in his
personal capacity, the representations and warranties set forth in
Article 5.
(r) An opinion of counsel to the Borrower, addressed to the
Lender.
(s) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(t) After giving effect to the requested initial Revolving
Advance, Availability will still total at least $1,000,000;
(u) Payment of the fees and commissions due through the date
of the initial Advance under Section 2.7 and expenses incurred by the
Lender through such date and required to be paid by the Borrower under
Section 9.6, including all legal expenses incurred through the date of
this Agreement.
(v) Such other documents as the Lender in its sole discretion
may require.
4.2 Conditions Precedent to All Advances.
The Lender's obligation to make each Advance shall be subject to the
further conditions precedent that on such date:
(a) the representations and warranties contained in Article 5
are correct on and as of the date of such Advance as though made on and
as of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result
from such Advance which constitutes a Default or an Event of Default.
5. Representations and Warranties
The Borrower represents and warrants to the Lender as follows:
5.1 Corporate Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations; Tax Identification Number.
First Team Sports, Inc. is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Minnesota, Hespeler
Hockey Holding, Inc. is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Minnesota, Hespeler Hockey Company
is an unlimited liability company, duly organized, validly existing and in good
standing under the laws of Nova Scotia, and First Team Sports GmbH is a
corporation, duly organized, validly existing and in good standing under the
laws of Austria. Each Borrower is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary. Each Borrower has all requisite power and authority,
corporate or otherwise, to conduct its business, to own its properties and to
execute and deliver, and to perform all of its obligations under, the Loan
Documents. During their existence, each Borrower has done business solely under
the names set forth in Schedule 5.1 hereto. The Borrower's chief executive
office and principal place of business is located at the address set forth in
Schedule 5.1 hereto, and all of the Borrower's records relating to its business
or the Collateral are kept at that location. All Inventory and Equipment is
located at that location or at one of the other locations set forth in Schedule
5.1 hereto. Each Borrower's tax identification number is correctly set forth in
Section 3.6 hereto.
5.2 Authorization of Borrowing; No Conflict as to Law or Agreements.
The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Borrower's stockholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof (except for
the Mortgage and fixture financing statements that will be filed by the Lender
after the execution of this Agreement); (iii) violate any provision of any law,
rule or regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to the Borrower or of the
Borrower's articles of incorporation or bylaws; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which the Borrower is a party
or by which it or its properties may be bound or affected; provided, however,
the Borrower makes no representations or warranties under this subsection (iv)
about any license agreements the Borrower may have with any of its licensors
listed in Section 8.1(r); or (v) result in, or require, the creation or
imposition of any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature (other than the Security Interest and
the Mortgage lien) upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower.
5.3 Legal Agreements.
This Agreement constitutes and, upon due execution by the Borrower, the
other Loan Documents will constitute the legal, valid and binding obligations of
the Borrower, enforceable against the Borrower in accordance with their
respective terms.
5.4 Subsidiaries.
Except as set forth in Schedule 5.4 hereto, the Borrower has no
Subsidiaries.
5.5 Financial Condition; No Adverse Change.
The Borrower has heretofore furnished to the Lender audited financial
statements of the Borrower for its fiscal year ended February 29, 1999 and
unaudited financial statements of the Borrower for the fiscal year-to-date
period ended June 30, 1999 and those statements fairly present the Borrower's
financial condition on the dates thereof and the results of its operations and
cash flows for the periods then ended and were prepared in accordance with
generally accepted accounting principles. Since the date of the most recent
financial statements, there has been no material adverse change in the
Borrower's business, properties or condition (financial or otherwise).
5.6 Litigation.
Except as set forth in Schedule 5.6 hereto, there are no actions, suits
or proceedings pending or, to the Borrower's knowledge, threatened against or
affecting the Borrower or any of its Affiliates or the properties of the
Borrower or any of its Affiliates before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to the Borrower or any of its Affiliates, would
have a material adverse effect on the financial condition, properties or
operations of the Borrower or any of its Affiliates.
5.7 Regulation U.
The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any Advance will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
5.8 Taxes.
The Borrower and its Affiliates have paid or caused to be paid to the
proper authorities when due all federal, state, provincial, municipal and local
taxes required to be withheld by each of them. The Borrower and its Affiliates
have filed all federal, state, provincial and local tax returns which to the
knowledge of the officers of the Borrower or any Affiliate, as the case may be,
are required to be filed, and the Borrower and its Affiliates have paid or
caused to be paid to the respective taxing authorities all taxes as shown on
said returns or on any assessment received by any of them to the extent such
taxes have become due.
5.9 Titles and Liens.
The Borrower has good and absolute title to all Collateral described in
the collateral reports provided to the Lender and all other Collateral,
properties and assets reflected in the latest financial statements referred to
in Section 5.5 and all proceeds thereof, free and clear of all mortgages,
security interests, liens and encumbrances, except for Permitted Liens. No
financing statement naming the Borrower as debtor is on file in any office
except to perfect only Permitted Liens.
5.10 Plans.
Except as set forth in Schedule 5.10 hereto, neither the Borrower nor
any of its Affiliates maintains or has maintained any Plan. Neither the Borrower
nor any Affiliate has received any notice or has any knowledge to the effect
that it is not in full compliance with any of the requirements of ERISA. No
Reportable Event or other fact or circumstance which may have an adverse effect
on the Plan's tax qualified status exists in connection with any Plan. Neither
the Borrower nor any of its Affiliates has:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued
benefits which are or which may become payable to participants or
beneficiaries of any such Plan).
5.11 Default.
The Borrower is in compliance with all provisions of all agreements,
instruments, decrees and orders to which it is a party or by which it or its
property is bound or affected, the breach or default of which could have a
material adverse effect on the Borrower's financial condition, properties or
operations.
5.12 Environmental Matters.
(a) Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(i) "Environmental Law" means any federal, state,
provincial, local or other governmental statute, regulation,
law or ordinance dealing with the protection of human health
and the environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) Except as provided on Schedule 5.12 hereto, to the
Borrower's best knowledge, there are not present in, on or under the
Premises any Hazardous Substances in such form or quantity as to create
any liability or obligation for either the Borrower or the Lender under
common law of any jurisdiction or under any Environmental Law, and no
Hazardous Substances have ever been stored, buried, spilled, leaked,
discharged, emitted or released in, on or under the Premises in such a
way as to create any such liability.
(c) To the Borrower's best knowledge, the Borrower has not
disposed of Hazardous Substances in such a manner as to create any
liability under any Environmental Law.
(d) There are not and there never have been any requests,
claims, notices, investigations, demands, administrative proceedings,
hearings or litigation, relating in any way to the Premises or the
Borrower, alleging liability under, violation of, or noncompliance with
any Environmental Law or any license, permit or other authorization
issued pursuant thereto. To the Borrower's best knowledge, no such
matter is threatened or impending.
(e) To the Borrower's best knowledge, the Borrower's
businesses are and have in the past always been conducted in accordance
with all Environmental Laws and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary
for the lawful and efficient operation of such businesses are in the
Borrower's possession and are in full force and effect. No permit
required under any Environmental Law is scheduled to expire within 12
months and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
(f) To the Borrower's best knowledge, the Premises are not and
never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state, provincial or local
list, schedule, log, inventory or database.
(g) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or Borrower's
businesses.
5.13 Submissions to Lender.
All financial and other information provided to the Lender by or on
behalf of the Borrower in connection with the Borrower's request for the credit
facilities contemplated hereby is true and correct in all material respects and,
as to projections, valuations or pro forma financial statements, present a good
faith opinion as to such projections, valuations and pro forma condition and
results.
5.14 Financing Statements.
The Borrower has provided to the Lender signed financing statements, or
has authorized the Lender's agent to file financing statements, sufficient when
filed to perfect the Security Interest and the other security interests created
by the Security Documents. When such financing statements are filed in the
offices noted therein, the Lender will have a valid and perfected security
interest in all Collateral and all other collateral described in the Security
Documents which is capable of being perfected by filing financing statements.
None of the Collateral or other collateral covered by the Security Documents is
or will become a fixture on real estate, unless a sufficient fixture filing is
in effect with respect thereto.
5.15 Rights to Payment.
Each right to payment and each instrument, document, chattel paper and
other agreement constituting or evidencing Collateral or other collateral
covered by the Security Documents is (or, in the case of all future Collateral
or such other collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, setoff or counterclaim,
of the account debtor or other obligor named therein or in the Borrower's
records pertaining thereto as being obligated to pay such obligation.
6. Borrower's Affirmative Covenants
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
6.1 Reporting Requirements.
The Borrower will deliver, or cause to be delivered, to the Lender each
of the following, which shall be in form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days
after the end of each fiscal year of the Borrower, the Borrower's
audited financial statements with the unqualified opinion of
independent certified public accountants selected by the Borrower and
acceptable to the Lender, which annual financial statements shall
include the Borrower's balance sheet as at the end of such fiscal year
and the related statements of the Borrower's income, retained earnings
and cash flows for the fiscal year then ended, prepared, if the Lender
so requests, on a consolidating and consolidated basis to include any
Affiliates, all in reasonable detail and prepared in accordance with
GAAP, together with (i) copies of all management letters prepared by
such accountants; (ii) a report signed by such accountants stating that
in making the investigations necessary for said opinion they obtained
no knowledge, except as specifically stated, of any Default or Event of
Default hereunder and all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrower is in
compliance with the requirements set forth in Sections 6.13 and 6.14;
and (iii) a certificate of the Borrower's chief financial officer
stating that such financial statements have been prepared in accordance
with GAAP and whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder and, if so,
stating in reasonable detail the facts with respect thereto;
(b) as soon as available and in any event within 20 days after
the end of each month, an unaudited/internal balance sheet and
statements of income of the Borrower as at the end of and for such
month and for the year to date period then ended, prepared, if the
Lender so requests, on a consolidating and consolidated basis to
include any Affiliates, in reasonable detail and stating in comparative
form the figures for the corresponding date and periods in the previous
year, all prepared in accordance with GAAP, subject to year-end audit
adjustments; and accompanied by a certificate of the Borrower's chief
financial officer, substantially in the form of Exhibit C hereto
stating (i) that such financial statements have been prepared in
accordance with GAAP, subject to year-end audit adjustments, (ii)
whether or not such officer has knowledge of the occurrence of any
Default or Event of Default hereunder not theretofore reported and
remedied and, if so, stating in reasonable detail the facts with
respect thereto, and (iii) all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrower is in
compliance with the requirements set forth in Sections 6.13 and 6.14;
(c) within 15 days after the end of each month or more
frequently if the Lender so requires, agings of the Borrower's accounts
receivable and its accounts payable, an inventory certification report,
and a calculation of the Borrower's Accounts, Eligible Accounts,
Inventory and Eligible Inventory as at the end of such month or shorter
time period;
(d) at least 30 days before the beginning of each fiscal year
of the Borrower, the projected balance sheets and income statements for
each month of such year, each in reasonable detail, representing the
Borrower's good faith projections and certified by the Borrower's chief
financial officer as being the most accurate projections available and
identical to the projections used by the Borrower for internal planning
purposes, together with such supporting schedules and information as
the Lender may in its discretion require;
(e) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower of the type
described in Section 5.12 or which seek a monetary recovery against the
Borrower in excess of $100,000;
(f) as promptly as practicable (but in any event not later
than five business days) after an officer of the Borrower obtains
knowledge of the occurrence of any breach, default or event of default
under any Security Document or any event which constitutes a Default or
Event of Default hereunder, notice of such occurrence, together with a
detailed statement by a responsible officer of the Borrower of the
steps being taken by the Borrower to cure the effect of such breach,
default or event;
(g) as soon as possible and in any event within 30 days after
the Borrower knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, the statement of the Borrower's chief
financial officer setting forth details as to such Reportable Event and
the action which the Borrower proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event to the
Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within 10 days after
the Borrower fails to make any quarterly contribution required with
respect to any Plan under Section 412(m) of the Internal Revenue Code
of 1986, as amended, the statement of the Borrower's chief financial
officer setting forth details as to such failure and the action which
the Borrower proposes to take with respect thereto, together with a
copy of any notice of such failure required to be provided to the
Pension Benefit Guaranty Corporation;
(i) promptly upon knowledge thereof, notice of (i) any
disputes or claims by the Borrower's customers exceeding $50,000
individually or $150,000 in the aggregate during any fiscal year; (ii)
credit memos exceeding $100,000; (iii) any goods returned to or
recovered by the Borrower exceeding $100,000; and (iv) any change in
the persons constituting the Borrower's officers and directors;
(j) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any
Collateral or such other collateral or the prospect of payment thereof;
(k) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have
sent to its stockholders;
(l) promptly after the sending or filing thereof, copies of
all regular and periodic reports which the Borrower shall file with the
Securities and Exchange Commission or any national securities exchange;
(m) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which
could materially and adversely affect the Borrower's business or its
financial condition; and
(n) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents
and delivery receipts for goods sold, and such other material, reports,
records or information as the Lender may request.
6.2 Books and Records; Inspection and Examination.
The Borrower will keep accurate books of record and account for itself
pertaining to the Collateral and pertaining to the Borrower's business and
financial condition and such other matters as the Lender may from time to time
request in which true and complete entries will be made in accordance with GAAP
and, upon the Lender's request, will permit any officer, employee, attorney or
accountant for the Lender to audit, review, make extracts from or copy any and
all corporate and financial books and records of the Borrower at all times
during ordinary business hours, to send and discuss with account debtors and
other obligors requests for verification of amounts owed to the Borrower, and to
discuss the Borrower's affairs with any of its directors, officers, employees or
agents. The Borrower will permit the Lender, or its employees, accountants,
attorneys or agents, to examine and inspect any Collateral, other collateral
covered by the Security Documents or any other property of the Borrower at any
time during ordinary business hours.
6.3 Account Verification.
The Lender may at any time and from time to time send or require the
Borrower to send requests for verification of Accounts or notices of assignment
to account debtors and other obligors. The Lender may also at any time and from
time to time telephone account debtors and other obligors to verify Accounts.
The Lender will endeavor to use a nominee name when conducting Account
verifications, but is not obligated hereunder to do so.
6.4 Compliance with Laws.
(a) The Borrower will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would
materially and adversely affect its business or its financial condition
and (ii) use and keep the Collateral, and require that others use and
keep the Collateral, only for lawful purposes, without violation of any
federal, state or local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by any Environmental Laws, and will not
generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any liability or obligation
under the common law of any jurisdiction or any Environmental Law.
6.5 Payment of Taxes and Other Claims.
The Borrower will pay or discharge, when due, (a) all taxes,
assessments and governmental charges levied or imposed upon it or upon its
income or profits, upon any properties belonging to it (including, without
limitation, the Collateral) or upon or against the creation, perfection or
continuance of the Security Interest, prior to the date on which penalties
attach thereto, (b) all federal, state, provincial, municipal and local taxes
required to be withheld by it, and (c) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a lien or charge upon any
properties of the Borrower; provided, that the Borrower shall not be required to
pay any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings and for
which proper reserves have been made.
6.6 Maintenance of Properties.
(a) The Borrower will keep and maintain the Collateral, the
other collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition,
repair and working order (normal wear and tear excepted) and will from
time to time replace or repair any worn, defective or broken parts;
provided, however, that nothing in this Section 6.6 shall prevent the
Borrower from discontinuing the operation and maintenance of any of its
properties if such discontinuance is, in the Lender's judgment,
desirable in the conduct of the Borrower's business and not
disadvantageous in any material respect to the Lender.
(b) The Borrower will defend the Collateral against all claims
or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) The Borrower will keep all Collateral and other collateral
covered by the Security Documents free and clear of all security
interests, liens and encumbrances except Permitted Liens.
6.7 Insurance.
The Borrower will obtain and at all times maintain insurance with
insurers believed by the Borrower to be responsible and reputable, in such
amounts and against such risks as may from time to time be required by the
Lender, but in all events in such amounts and against such risks as is usually
carried by companies engaged in similar business and owning similar properties
in the same general areas in which the Borrower operates. Without limiting the
generality of the foregoing, the Borrower will at all times maintain business
interruption insurance including coverage for force majeure and keep all
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Lender may reasonably request, with
any loss payable to the Lender to the extent of its interest, and all policies
of such insurance shall contain a lender's loss payable endorsement for the
Lender's benefit acceptable to the Lender and a mortgagee clause. All policies
of liability insurance required hereunder shall name the Lender as an additional
insured.
6.8 Preservation of Existence.
The Borrower will preserve and maintain its existence and all of its
rights, privileges and franchises necessary or desirable in the normal conduct
of its business and shall conduct its business in an orderly, efficient and
regular manner.
6.9 Delivery of Instruments.
Upon request by the Lender, the Borrower will promptly deliver to the
Lender in pledge all instruments, documents and chattel papers constituting
Collateral, duly endorsed or assigned by the Borrower.
6.10 Collateral Account.
(a) If, notwithstanding the instructions to debtors to make
payments to the Lockbox, the Borrower receives any payments on
Receivables (other than the Receivables of First Team Sports GmbH), the
Borrower shall deposit such payments into the Collateral Account or
Custodial Account. Until so deposited, the Borrower shall hold all such
payments in trust for and as the property of the Lender and shall not
commingle such payments with any of its other funds or property.
(b) Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by the Borrower, except
after full payment and discharge of all Obligations.
(c) All deposits in the Collateral Account shall constitute
proceeds of Collateral and shall not constitute payment of the
Obligations. The Lender from time to time at its discretion shall,
after allowing two (2) Banking Days, apply deposited funds in the
Collateral Account to the payment of the Obligations, in any order or
manner of application satisfactory to the Lender, by transferring such
funds to the Lender's general account.
(d) All items deposited in the Collateral Account shall be
subject to final payment. If any such item is returned uncollected, the
Borrower will immediately pay the Lender, or, for items deposited in
the Collateral Account, the bank maintaining such account, the amount
of that item, or such bank at its discretion may charge any uncollected
item to the Borrower's commercial account or other account. The
Borrower shall be liable as an endorser on all items deposited in the
Collateral Account, whether or not in fact endorsed by the Borrower.
6.11 Key Person Life Insurance.
First Team Sports, Inc. shall maintain insurance upon the lives of (i)
Xxxx X. Xxxxx, its president and chief executive officer and (ii) Xxxxx X.
Xxxxxxxxxx, its vice chairman, in both instances with a death benefit thereunder
in an amount not less than $500,000 (collectively, the "Life Insurance Policy").
The right to receive the proceeds of the Life Insurance Policy shall be assigned
to the Lender by the Life Insurance Assignment.
6.12 Performance by the Lender.
If the Borrower at any time fails to perform or observe any of the
foregoing covenants contained in this Article 6 or elsewhere herein, and if such
failure shall continue for a period of ten calendar days after the Lender gives
the Borrower written notice thereof (or in the case of the agreements contained
in Sections 6.5, 6.7, and 6.10, immediately upon the occurrence of such failure,
without notice or lapse of time), the Lender may, but need not, perform or
observe such covenant on behalf and in the name, place and stead of the Borrower
(or, at the Lender's option, in the Lender's name) and may, but need not, take
any and all other actions which the Lender may reasonably deem necessary to cure
or correct such failure (including, without limitation, the payment of taxes,
the satisfaction of security interests, liens or encumbrances, the performance
of obligations owed to account debtors or other obligors, the procurement and
maintenance of insurance, the execution of assignments, security agreements and
financing statements, and the endorsement of instruments); and the Borrower
shall thereupon pay to the Lender on demand the amount of all monies expended
and all costs and expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Lender in connection with or as a result of the
performance or observance of such agreements or the taking of such action by the
Lender, together with interest thereon from the date expended or incurred at the
applicable floating rate. To facilitate the Lender's performance or observance
of such covenants of the Borrower, the Borrower hereby irrevocably appoints the
Lender, or the Lender's delegate, acting alone, as the Borrower's attorney in
fact (which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of the Borrower any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by the Borrower under this Section 6.12.
6.13 Minimum Net Worth.
The Borrower's Net Worth, determined as at the end of each month, shall
not decrease by more than $1,750,000 at any time from February 28, 1999 through
the period ending July 31, 2000.
6.14 Minimum Earnings After Taxes.
The Borrower will achieve as of its fiscal year ending February 29,
2000, Earnings After Taxes, of not less than $1.00 and will achieve as of July
31, 2000, Earnings After Taxes of not less than $100,000.
6.15 New Covenants.
On or before July 31, 2000, the Borrower and the Lender shall agree on
new mutually acceptable covenant levels for Sections 6.13 and 6.14 for periods
after such date. The new covenant levels will be based at such a level as to
require the Borrower to maintain sufficient cash flow to service its Debt and
capital expenditures.
7. Negative Covenants
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower agrees that, without the Lender's prior
written consent:
7.1 Liens.
The Borrower will not create, incur or suffer to exist any mortgage,
deed of trust, pledge, lien, security interest, assignment or transfer upon or
of any of its assets, now owned or hereafter acquired, to secure any
indebtedness; excluding, however, from the operation of the foregoing, the
following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the Borrower's business or
operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed in
Schedule 7.1 hereto, securing indebtedness for borrowed money permitted
under Section 7.2;
(c) the Security Interest and liens and security interests
created by the Security Documents; and
(d) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrower not exceeding
the cost or fair market value thereof and so long as no Default Period
is then in existence and none would exist immediately after such
acquisition.
7.2 Indebtedness.
The Borrower will not incur, create, assume or permit to exist any
indebtedness or liability on account of deposits or advances or any indebtedness
for borrowed money or letters of credit issued on the Borrower's behalf, or any
other indebtedness or liability evidenced by notes, bonds, debentures or similar
obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date
hereof and listed in Schedule 7.2 hereto; and
(c) indebtedness relating to liens permitted in accordance
with Section 7.1.
7.3 Guaranties.
The Borrower will not assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligations of any other
Person, except:
(a) the endorsement of negotiable instruments by the Borrower
for deposit or collection or similar transactions in the ordinary
course of business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.2 hereto.
7.4 Investments and Subsidiaries.
(a) The Borrower will not purchase or hold beneficially any
stock or other securities or evidences of indebtedness of, make or
permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including
specifically but without limitation any partnership or joint venture,
except:
(i) investments in direct obligations of the United
States of America or any agency or instrumentality thereof
whose obligations constitute full faith and credit obligations
of the United States of America having a maturity of one year
or less, commercial paper issued by U.S. corporations rated
"A-1" or "A-2" by Standard & Poors Corporation or "P-1" or
"P-2" by Xxxxx'x Investors Service or certificates of deposit
or bankers' acceptances having a maturity of one year or less
issued by members of the Federal Reserve System having
deposits in excess of $100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the
Federal Deposit Insurance Corporation);
(ii) travel advances or loans to the Borrower's
officers and employees not exceeding at any one time an
aggregate of $25,000;
(iii) ownership of or advances to a Borrower or a
Subsidiary listed in Schedule 5.4;
(iv) advances not to exceed $50,000 in the aggregate
to vendors of telephone and copier support and credit report
contracts; and
(v) advances in the form of progress payments or
prepaid rent, not exceeding two (2) months or security
deposits.
(b) The Borrower will not create or permit to exist any
Subsidiary, other than the Subsidiaries in existence on the date hereof
and listed in Schedule 5.4.
7.5 Dividends.
Except as set forth below, the Borrower will not declare or pay any
dividends (other than dividends payable solely in stock of the Borrower) on any
class of its stock or make any payment on account of the purchase, redemption or
other retirement of any shares of such stock or make any distribution in respect
thereof, either directly or indirectly.
7.6 Sale or Transfer of Assets; Suspension of Business Operations.
The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations; provided, however, that the Borrower
may either dissolve Mothership Distribution, Inc. or merge such entity into
First Team Sports, Inc. The Borrower will not in any manner transfer any
property without prior or present receipt of full and adequate consideration.
7.7 Consolidation and Merger; Asset Acquisitions.
The Borrower will not consolidate with or merge into any Person, or
permit any other Person to merge into it, or acquire (in a transaction analogous
in purpose or effect to a consolidation or merger) all or substantially all the
assets of any other Person; provided, however, that the Borrower may merge
Mothership Distribution, Inc. into First Team Sports, Inc.
7.8 Sale and Leaseback.
The Borrower will not enter into any arrangement, directly or
indirectly, with any other Person whereby the Borrower shall sell or transfer
any real or personal property, whether now owned or hereafter acquired, and then
or thereafter rent or lease as lessee such property or any part thereof or any
other property which the Borrower intends to use for substantially the same
purpose or purposes as the property being sold or transferred.
7.9 Restrictions on Nature of Business.
The Borrower will not engage in any line of business materially
different from that presently engaged in by the Borrower and will not purchase,
lease or otherwise acquire assets not related to its business.
7.10 Accounting.
The Borrower will not adopt any material change in accounting
principles other than as required by GAAP. The Borrower will not adopt, permit
or consent to any change in its fiscal year.
7.11 Discounts.
The Borrower will not, after notice from the Lender, grant any
discount, credit or allowance to any customer of the Borrower or accept any
return of goods sold, or at any time (whether before or after notice from the
Lender) modify, amend, subordinate, cancel or terminate the obligation
constituting an Eligible Account of any account debtor or other obligor of the
Borrower.
7.12 Defined Benefit Pension Plans.
The Borrower will not adopt, create, assume or become a party to any
defined benefit pension plan, unless disclosed to the Lender pursuant to Section
5.10.
7.13 Other Defaults.
The Borrower will not permit any breach, default or event of default to
occur under any note, loan agreement, indenture, lease, mortgage, contract for
deed, security agreement or other contractual obligation binding upon the
Borrower that would have a material adverse effect on the financial condition,
properties or operations of the Borrower.
7.14 Place of Business; Name.
The Borrower will not transfer its chief executive office or principal
place of business, or move, relocate, close or sell any business location. The
Borrower will not permit any tangible Collateral or any records pertaining to
the Collateral to be located in any state or province or area in which, in the
event of such location, a financing statement covering such Collateral would be
required to be, but has not in fact been, filed in order to perfect the Security
Interest. The Borrower will not change its name.
7.15 Organizational Documents; S Corporation Status.
No Borrower will amend its certificate of incorporation, articles of
incorporation or bylaws. No Borrower will become an S Corporation within the
meaning of the Internal Revenue Code of 1986, as amended.
7.16 Change in Ownership.
Except for First Team Sports, Inc., no Borrower will issue or sell any
of its stock so as to change the percentage of voting and non-voting stock owned
by such Borrower's shareholders, and except for First Team Sports, Inc., no
Borrower will permit or suffer to occur the sale, transfer, assignment, pledge
or other disposition of any or all of the issued and outstanding shares of stock
of such Borrower.
8. Events of Default, Rights and Remedies
8.1 Events of Default.
"Event of Default", wherever used herein, means any one of the
following events:
(a) Default in the payment of the Obligations on demand or on
any portion of the Obligations that otherwise becomes due and payable;
(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrower under this Agreement;
(c) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement; provided,
however, that no Event of Default shall be deemed to exist with regard
to a Default in the performance of Section 6.13 or Section 6.14 unless
such Default continues for a period of thirty (30) days from the
commencement of the Default Period for such Default under Section 6.13
or Section 6.14;
(d) Any Borrower shall be or become insolvent, or admit in
writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors; or any Borrower shall apply
for or consent to the appointment of any receiver, trustee, or similar
officer for it or for all or any substantial part of its property; or
such receiver, trustee or similar officer shall be appointed without
the application or consent of such Borrower; or any Borrower shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceeding relating to it
under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against any
Borrower; or any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against a substantial part of
the property of any Borrower;
(e) A petition shall be filed by or against any Borrower under
the United States Bankruptcy Code or the Bankruptcy and Insolvency Act
(Canada) naming such Borrower as debtor;
(f) The Life Insurance Policy shall be terminated, by the
Borrower or otherwise; or the Life Insurance Policy shall be scheduled
to terminate within 30 days and the Borrower shall not have delivered a
satisfactory renewal thereof to the Lender; or the Borrower shall fail
to pay any premium on the Life Insurance Policy when due; or the
Borrower shall take any other action that impairs the value of the Life
Insurance Policy;
(g) Any representation or warranty made by the Borrower in
this Agreement, or by the Borrower (or any of its officers) in any
agreement, certificate, instrument or financial statement or other
statement contemplated by or made or delivered pursuant to or in
connection with this Agreement or any such guaranty shall prove to have
been incorrect in any material respect when deemed to be effective;
(h) The rendering against the Borrower of a final judgment,
decree or order for the payment of money in excess of $50,000 and the
continuance of such judgment, decree or order unsatisfied and in effect
for any period of 30 consecutive days without a stay of execution;
(i) A default under any bond, debenture, note or other
evidence of indebtedness of the Borrower owed to any Person other than
the Lender, or under any indenture or other instrument under which any
such evidence of indebtedness has been issued or by which it is
governed, or under any lease of any of the Premises, and the expiration
of the applicable period of grace, if any, specified in such evidence
of indebtedness, indenture, other instrument or lease;
(j) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
30 days after written notice to such effect shall have been given to
the Borrower by the Lender; or a trustee shall have been appointed by
an appropriate United States District Court to administer any Plan; or
the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to administer
any Plan; or the Borrower shall have filed for a distress termination
of any Plan under Title IV of ERISA; or the Borrower shall have failed
to make any quarterly contribution required with respect to any Plan
under Section 412(m) of the Internal Revenue Code of 1986, as amended,
which the Lender determines in good faith may by itself, or in
combination with any such failures that the Lender may determine are
likely to occur in the future, result in the imposition of a lien on
the Borrower's assets in favor of the Plan;
(k) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing any
obligations of the Borrower hereunder or under any note;
(l) Any Borrower shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of
its assets, without the Lender's prior written consent;
(m) Any Borrower shall fail to pay, withhold, collect or remit
any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor) or notice of any state or federal tax liens shall be
filed or issued;
(n) Default in the payment of any amount owed by the Borrower
to the Lender other than any indebtedness arising hereunder;
(o) The Borrower shall take or participate in any action which
would be prohibited under the provisions of any Subordination Agreement
or make any payment on the Subordinated Indebtedness (as defined in any
Subordination Agreement) that any Person was not entitled to receive
under the provisions of such Subordination Agreement;
(p) Any event or circumstance with respect to the Borrower
shall occur such that the Lender shall believe in good faith that the
prospect of payment of all or any part of the Obligations or the
performance by the Borrower under the Loan Documents is impaired or any
material adverse change in the business or financial condition of the
Borrower shall occur;
(q) Any breach, default or event of default by or attributable
to any Affiliate under any agreement between such Affiliate and the
Lender;
8.2 Rights and Remedies.
During any Default Period, the Lender may exercise any or all of the
following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the
Commitment to be terminated, whereby the same shall forthwith
terminate.
(b) the Lender may, by notice to the Borrower, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which
the Borrower hereby expressly waives;
(c) the Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to the
Borrower to the payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC and
the PPSA, including, without limitation, the right to take possession
of Collateral, or any evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or notice
thereof, which the Borrower hereby expressly waives) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and,
in connection therewith, the Borrower will on demand assemble the
Collateral and make it available to the Lender at a place to be
designated by the Lender which is reasonably convenient to both
parties;
(e) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(f) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
8.3 Certain Notices.
If notice to the Borrower of any intended disposition of Collateral or
any other intended action is required by law in a particular instance, such
notice shall be deemed commercially reasonable if given (in the manner specified
in Section 9.3) at least ten calendar days before the date of intended
disposition or other action.
9. Miscellaneous
9.1 No Waiver; Cumulative Remedies.
No failure or delay by the Lender in exercising any right, power or
remedy under the Loan Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law.
9.2 Amendments.
No amendment, modification, termination or waiver of any provision of
any Loan Document or consent to any departure by the Borrower therefrom or any
release of a Security Interest shall be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances.
9.3 Addresses for Notices.
Except as otherwise expressly provided herein, all notices, requests,
demands and other communications provided for under the Loan Documents shall be
in writing and shall be (a) personally delivered, (b) sent by first class United
States or Canadian mail, as the case may be, (c) sent by overnight courier of
national reputation, or (d) transmitted by telecopy, in each case addressed or
telecopied to the party to whom notice is being given at its address or
telecopier number as set forth below:
If to the Borrower:
First Team Sports, Inc., et al.
0000 Xxxx Xxxxxxxxx
Xxxxx, Xxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxx Xxxxxxx
If to the Lender:
Norwest Bank Minnesota, National Association
Norwest Center
Sixth Street and Marquette Avenue
N9312-040
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxx Xxxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article 2 shall not be
effective until received by the Lender.
9.4 Further Documents.
The Borrower will from time to time execute and deliver or endorse any
and all instruments, documents, conveyances, assignments, security agreements,
financing statements and other agreements and writings that the Lender may
reasonably request in order to secure, protect, perfect or enforce the Security
Interest or the Lender's rights under the Loan Documents (but any failure to
request or assure that the Borrower executes, delivers or endorses any such item
shall not affect or impair the validity, sufficiency or enforceability of the
Loan Documents and the Security Interest, regardless of whether any such item
was or was not executed, delivered or endorsed in a similar context or on a
prior occasion).
9.5 Collateral.
This Agreement does not contemplate a sale of accounts, contract rights
or chattel paper, and, as provided by law, the Borrower is entitled to any
surplus and shall remain liable for any deficiency. The Lender's duty of care
with respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled if it exercises reasonable care in physically keeping such Collateral,
or in the case of Collateral in the custody or possession of a bailee or other
third person, exercises reasonable care in the selection of the bailee or other
third person, and the Lender need not otherwise preserve, protect, insure or
care for any Collateral. The Lender shall not be obligated to preserve any
rights the Borrower may have against prior parties, to realize on the Collateral
at all or in any particular manner or order or to apply any cash proceeds of the
Collateral in any particular order of application.
9.6 Costs and Expenses.
The Borrower agrees to pay on demand all costs and expenses, including
(without limitation) attorneys' fees, incurred by the Lender in connection with
the Obligations, this Agreement, the Loan Documents, and any other document or
agreement related hereto or thereto, and the transactions contemplated hereby,
including without limitation all such costs, expenses and fees incurred in
connection with the negotiation, preparation, execution, amendment,
administration, performance, collection and enforcement of the Obligations and
all such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.
9.7 Indemnity.
In addition to the payment of expenses pursuant to Section 9.6, the
Borrower agrees to indemnify, defend and hold harmless the Lender, and any of
its participants, parent corporations, subsidiary corporations, affiliated
corporations, successor corporations, and all present and future officers,
directors, employees, attorneys and agents of the foregoing (the "Indemnitees")
from and against any of the following (collectively, "Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by
reason of the execution and delivery of the Loan Documents or
the making of the Advances;
(ii) any claims, loss or damage to which any
Indemnitee may be subjected if any representation or warranty
contained in Section 5.12 proves to be incorrect in any
respect or as a result of any violation of the covenant
contained in Section 6.4(b); and
(iii) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any
kind or nature whatsoever (including, without limitation, the
reasonable fees and disbursements of counsel) in connection
with the foregoing and any other investigative, administrative
or judicial proceedings, whether or not such Indemnitee shall
be designated a party thereto, which may be imposed on,
incurred by or asserted against any such Indemnitee, in any
manner related to or arising out of or in connection with the
making of the Advances and the Loan Documents or the use or
intended use of the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 9.7 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
9.8 Participants.
The Lender and its participants, if any, are not partners or joint
venturers, and the Lender shall not have any liability or responsibility for any
obligation, act or omission of any of its participants. All rights and powers
specifically conferred upon the Lender may be transferred or delegated to any of
the Lender's participants, successors or assigns.
9.9 Execution in Counterparts.
This Agreement and other Loan Documents may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which counterparts, taken together, shall constitute
but one and the same instrument.
9.10 Binding Effect; Assignment; Complete Agreement; Exchanging
Information.
The Loan Documents shall be binding upon and inure to the benefit of
the Borrower and the Lender and their respective successors and assigns, except
that the Borrower shall not have the right to assign its rights thereunder or
any interest therein without the Lender's prior written consent. This Agreement,
together with the Loan Documents, comprises the complete and integrated
agreement of the parties on the subject matter hereof and supersedes all prior
agreements, written or oral, on the subject matter hereof. Without limiting the
Lender's right to share information regarding the Borrower and its Affiliates
with the Lender's participants, accountants, lawyers and other advisors, the
Lender, Norwest Corporation, and all direct and indirect subsidiaries of Norwest
Corporation, may exchange any and all information they may have in their
possession regarding the Borrower and its Affiliates, and the Borrower waives
any right of confidentiality it may have with respect to such exchange of such
information.
9.11 Severability of Provisions.
Any provision of this Agreement which is prohibited or unenforceable
shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof.
9.12 Headings.
Article and Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
9.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.
The Loan Documents shall be governed by and construed in accordance
with the substantive laws (other than conflict laws) of the State of Minnesota.
This Agreement shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Minnesota. The
parties hereto hereby (i) consent to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or the Borrower in connection with this Agreement or the other Loan
Documents shall be venued in either the District Court of Hennepin County,
Minnesota, or the United States District Court, District of Minnesota, Fourth
Division; and (iv) agree that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. THE PARTIES WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO
THIS AGREEMENT.
9.14 Taxes.
All payments of principal of, and interest on, the Notes and all other
amounts payable hereunder shall be made free and clear of and without deduction
for any present or future income, excise, capital, goods and services, use,
stamp or franchise taxes and other taxes, surtaxes, fees, duties, withholdings
or other charges of any nature whatsoever imposed by any governmental authority,
excluding franchise taxes and taxes imposed on or measured by the Lender's net
income or receipts (all non-excluded items being called "Taxes"). If any
withholding or deduction from any payment to be made by any Borrower hereunder
is required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then such Borrowers will:
(1) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(2) promptly forward to the Lender an official receipt or other
documentation satisfactory to the Lender evidencing such
payment to such authority; and
(3) pay to the Lender as additional interest such additional
amount or amounts as is necessary to ensure that the net
amount actually received by the Lender will equal the full
amount the Lender would have received had no such withholding
or deduction been required.
Moreover, if any Taxes are directly asserted against the Lender with respect to
any payment received by the Lender hereunder, the Lender may pay such Taxes and
the Borrower will promptly pay such additional amounts (including any penalty,
interest or expense) as is necessary in order that the net amount received by
the Lender after the payment of such Taxes (including any Taxes on such
additional amount) shall equal the amount the Lender would have received had
such Taxes not been asserted.
If any Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Lender, the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lender for any
incremental Taxes, interest or penalties that may become payable by the Lender
as a result of any such failure, whether or not such Taxes were correctly or
legally asserted. For purposes of this Section 9.14, a distribution hereunder by
the Lender shall be deemed a payment by the Borrower.
9.15 Joint and Several Liability.
This Agreement and the Notes are executed by more than one Borrower and
each Borrower agrees to be jointly and severally liable hereon, and the release
by the Lender of one or more such Borrowers shall not release or diminish the
liability of the remaining Borrowers hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION FIRST TEAM SPORTS, INC.
By: /s/ Xxxxx X. Xxxx By: /s/ Xxxx X. Xxxxxxx
Name: Xxxxx X. Xxxx Name: Xxxx X. Xxxxxxx
Title: Vice President Title: CFO
HESPELER HOCKEY HOLDING, INC.
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: CFO
HESPELER HOCKEY COMPANY
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: CFO
FIRST TEAM SPORTS GmbH
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: Acting Agent
Table of Contents
1. DEFINITIONS.................................................................1
1.1 Definitions............................................................1
1.2 Cross References......................................................10
2. AMOUNT AND TERMS OF THE CREDIT FACILITY....................................10
2.1 Revolving Advances....................................................10
2.2 Letters of Credit.....................................................11
2.3 Payment of Amounts Drawn Under Letters of Credit;
Obligation of Reimbursement...........................................11
2.4 Term Advance..........................................................12
2.5 Payment of Term Note..................................................12
2.6 Interest; Default Interest; Participations; Usury.....................13
2.7 Fees..................................................................13
2.8 Computation of Interest and Fees; When Interest Due and Payable.......14
2.9 Capital Adequacy......................................................14
2.10 Voluntary Prepayment; Reduction of the Maximum Line; Termination
of the Credit Facility by the Borrower...............................15
2.11 Termination and Line Reduction Fees; Prepayment Fees.................15
2.12 Mandatory Prepayment.................................................16
2.13 Payment..............................................................16
2.14 Payment on Non-Banking Days..........................................17
2.15 Use of Proceeds......................................................17
2.16 Liability Records....................................................17
3. SECURITY INTEREST; OCCUPANCY; SETOFF.......................................17
3.1 Grant of Security Interest............................................17
3.2 Notification of Account Debtors and Other Obligors....................17
3.3 Assignment of Insurance...............................................18
3.4 Occupancy.............................................................18
3.5 License...............................................................18
3.6 Financing Statement...................................................18
3.7 Setoff................................................................20
4. CONDITIONS OF LENDING......................................................21
4.1 Conditions Precedent to the Initial Revolving and Term Advance........21
4.2 Conditions Precedent to All Advances..................................23
5. REPRESENTATIONS AND WARRANTIES.............................................23
5.1 Corporate Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations; Tax Identification Number..........24
5.2 Authorization of Borrowing; No Conflict as to Law or Agreements.......24
5.3 Legal Agreements......................................................25
5.4 Subsidiaries..........................................................25
5.5 Financial Condition; No Adverse Change................................25
5.6 Litigation............................................................25
5.7 Regulation U..........................................................25
5.8 Taxes.................................................................25
5.9 Titles and Liens......................................................26
5.10 Plans................................................................26
5.11 Default..............................................................26
5.12 Environmental Matters................................................26
5.13 Submissions to Lender................................................27
5.14 Financing Statements.................................................27
5.15 Rights to Payment....................................................28
6. BORROWER'S AFFIRMATIVE COVENANTS...........................................28
6.1 Reporting Requirements................................................28
6.2 Books and Records; Inspection and Examination.........................30
6.3 Account Verification..................................................31
6.4 Compliance with Laws..................................................31
6.5 Payment of Taxes and Other Claims.....................................31
6.6 Maintenance of Properties.............................................31
6.7 Insurance.............................................................32
6.8 Preservation of Existence.............................................32
6.9 Delivery of Instruments...............................................32
6.10 Collateral Account...................................................32
6.11 Key Person Life Insurance............................................33
6.12 Performance by the Lender............................................33
6.13 Minimum Net Worth....................................................34
6.14 Minimum Earnings After Taxes.........................................34
6.15 New Covenants........................................................34
7. NEGATIVE COVENANTS.........................................................34
7.1 Liens.................................................................34
7.2 Indebtedness..........................................................35
7.3 Guaranties............................................................35
7.4 Investments and Subsidiaries..........................................35
7.5 Dividends.............................................................36
7.6 Sale or Transfer of Assets; Suspension of Business Operations.........36
7.7 Consolidation and Merger; Asset Acquisitions..........................36
7.8 Sale and Leaseback....................................................36
7.9 Restrictions on Nature of Business....................................37
7.10 Accounting...........................................................37
7.11 Discounts............................................................37
7.12 Defined Benefit Pension Plans........................................37
7.13 Other Defaults.......................................................37
7.14 Place of Business; Name..............................................37
7.15 Organizational Documents; S Corporation Status.......................38
7.16 Change in Ownership..................................................38
8. EVENTS OF DEFAULT, RIGHTS AND REMEDIES.....................................38
8.1 Events of Default.....................................................38
8.2 Rights and Remedies...................................................40
8.3 Certain Notices.......................................................41
9. MISCELLANEOUS..............................................................41
9.1 No Waiver; Cumulative Remedies........................................41
9.2 Amendments............................................................41
9.3 Addresses for Notices.................................................41
9.4 Further Documents.....................................................42
9.5 Collateral............................................................42
9.6 Costs and Expenses....................................................43
9.7 Indemnity.............................................................43
9.8 Participants..........................................................44
9.9 Execution in Counterparts.............................................44
9.10 Binding Effect; Assignment; Complete Agreement; Exchanging
Information..........................................................44
9.11 Severability of Provisions...........................................44
9.12 Headings.............................................................44
9.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.............45
9.14 Taxes................................................................45
9.15 Joint and Several Liability..........................................46
