EX 99.1
Execution Version
SECOND AMENDED AND RESTATED FINANCING AGREEMENT
The CIT Group/Business Credit, Inc.
(as Agent and as Lender),
The Lenders
and
Big 5 Corp. and Big 5 Services Corp.
(as Companies)
Dated: December 15, 2004
$160,000,000 Term and Revolving Credit Facilities
TABLE OF CONTENTS
Page
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SECTION 1. Definitions................................. 1
SECTION 2. Conditions Precedent........................ 14
SECTION 3. Revolving Loans............................. 17
SECTION 4. Letters of Credit........................... 21
SECTION 5. Collateral.................................. 25
SECTION 6. Representations, Warranties and Covenants... 27
SECTION 7. Interest, Fees and Expenses................. 38
SECTION 8. Powers...................................... 40
SECTION 9. Events of Default and Remedies.............. 41
SECTION 10. Termination................................. 45
SECTION 11. Agreement between the Lenders............... 46
SECTION 12. Agency...................................... 49
SECTION 13. Miscellaneous............................... 53
EXHIBIT A - Assignment and Transfer Agreement
EXHIBIT B - Revolving Loan Promissory Note
EXHIBIT C - Term Loan Promissory Note
SCHEDULE I- Store Locations
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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation (hereinafter
"CITBC") with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
the Revolving Lenders, the Term Lenders and any other lenders from time to time
party hereto (CITBC and such other lenders are individually sometimes referred
to herein as a "Lender" and collectively as the "Lenders"), and CITBC as agent
for the Lenders, and BIG 5 CORP., a Delaware corporation (hereinafter referred
to as "Big 5"), and Big 5 Services Corp., a Virginia corporation (hereinafter
referred to as "Big 5 Services," and together with Big 5, collectively, the
"Companies", and each individually a "Company") having a principal place of
business at ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, have
previously entered into that certain Amended and Restated Financing Agreement,
dated as of March 20, 2003 (as amended and modified, from time to time, the
"Prior Financing Agreement").
The Companies have requested, and the Agent and Lenders to the Prior
Financing Agreement have made available to the Companies, Revolving Loans upon
the terms and conditions set forth in the Prior Financing Agreement.
The Companies, the Agent and the Lenders to the Prior Financing Agreement
wish to amend and restate the Prior Financing Agreement for the purpose of,
among other things, adding the Term Loan as set forth herein.
It is the intent of the parties that this Financing Agreement amends and
restates the Prior Financing Agreement in its entirety.
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of each Company's now existing and future: (a) accounts
(as defined in the UCC), and any and all other receivables (whether or not
specifically listed on schedules furnished to the Agent), including, without
limitation, all accounts created by, or arising from, all of each Company's
sales, leases, rentals of goods or renditions of services to its customers,
including but not limited to, those accounts arising under any of the Company's
trade names or styles, or through any of each Company's divisions; (b) any and
all instruments, documents, chattel paper (including electronic chattel paper)
(all as defined in the UCC); (c) unpaid seller's or lessor's rights (including
rescission, replevin, reclamation, repossession and stoppage in transit)
relating to the foregoing or arising therefrom; (d) rights to any goods
represented by any of the foregoing, including rights to returned, reclaimed or
repossessed goods; (e) reserves and credit balances arising in connection with
or pursuant hereto; (f) guarantees, supporting obligations, payment intangibles
and letter of credit rights (all as defined in the UCC); (g) insurance policies
or rights relating to any of the foregoing; (h) general intangibles pertaining
to any and all of the foregoing (including all rights to payment, including
those arising in connection with bank and non-bank credit cards), and including
books and records and any electronic media and software thereto; (i) notes,
deposits or property of account debtors securing the obligations of any such
account debtors to each Company; and (j) cash and non-cash proceeds (as defined
in the UCC) of any and all of the foregoing.
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AFFILIATE shall mean, as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person and the term "control" shall have
the meaning set forth in respect thereof in Rule 105 promulgated under the
Securities Act of 1933, as amended.
ANNIVERSARY DATE shall mean March 20, 2005 and the same date in every year
thereafter, provided, however, that if either Company gives notice, in
accordance with Section 10 of this Financing Agreement, to terminate on an
Anniversary Date and such date is not a Business Day, then the Anniversary Date
shall be the next succeeding Business Day.
ASSIGNMENT AND TRANSFER AGREEMENT shall mean the Assignment and Transfer
Agreement in the form of Exhibit A hereto.
AVAILABILITY shall mean at any time of determination the lesser of a) the Line
of Credit or b) the Borrowing Base, in each case, less the sum of x) the
outstanding aggregate amount of all Obligations (excluding all obligations in
respect of the outstanding amounts of any Letters of Credit and outstanding
principal amount of the Term Loan) and y) the Availability Reserve.
AVAILABILITY RESERVE shall mean at any time of determination an amount equal to
the sum of a) the then undrawn amount of all outstanding Letters of Credit, b)
the amount of all unpaid sales taxes due any state and which sales taxes have
been collected by the Companies, and c) an amount equal to three times the
monthly rent for leased facilities in lieu of landlord waivers which have not
been obtained in favor of the Agent for leased locations at which Inventory is
located, provided, however, that such reserve required under this clause (c)
shall cease upon receipt of landlord's waivers for the distribution centers and
not less than eighty-five (85) retail outlets.
BLOCKED ACCOUNT shall mean any Concentration Account owned by either Company
which is governed by a blocked account or similar agreement in form
substantially similar to Exhibit B attached hereto and which account is subject
to written instructions only from the Companies unless and until the Agent shall
give the institution holding such Concentration Account written instructions to
the contrary in accordance with the terms of Section 3.4 of this Financing
Agreement.
BORROWING BASE shall mean the amount determined by multiplying the then sum of
Eligible Inventory by the percentage provided for in Section 3.1 of this
Financing Agreement.
BUSINESS DAY shall mean any date on which both the Agent and ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Bank are open for business.
CAPITAL EXPENDITURES for any period shall mean the aggregate of all expenditures
of the Companies during such period that in conformity with GAAP are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the balance sheet of the Companies, reduced, to the
extent otherwise included therein, by the aggregate principal amount of all
Indebtedness (including obligations under capitalized lease obligations, but not
under this Financing Agreement) assumed or incurred after the date of this
Financing Agreement in connection with the acquisition of any capital asset
after the
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date of this Financing Agreement, other than the aggregate amount of principal
payments (including the principal component of payments under capitalized lease
obligations) made during such period on such Indebtedness, provided, however,
that the following shall in any event be excluded from the definition of Capital
Expenditures: (i) any such expenditures for Designated Sale-Leaseback
Properties, provided that to the extent any such Designated Sale-Leaseback
Property shall not have been financed pursuant to a sale-leaseback or mortgage
financing permitted hereunder within eighteen (18) months after the Companies
have designated the subject capital asset as a Designated Sale-Leaseback
Property, such expenditures shall be deemed to be Capital Expenditures incurred
on and as of the date of the expiration of such eighteen (18)-month period, and
(ii) any such expenditures made with (or, to the extent of the receipt during
the same fiscal year, expenditures in the amount of) the proceeds of sales of
Real Estate, or Equipment or similar fixed assets or the proceeds of insurance,
condemnation awards (or payments in lieu thereof) or indemnity payments received
from third parties for purposes of replacing or repairing the assets in respect
of which such proceeds, awards or payments were received, so long as such
expenditures are made within eighteen (18) months of receipt by either Company
of such proceeds, awards or payments.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheet of either Company.
CHASE BANK RATE shall mean the rate of interest per annum announced by ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ Bank, or its successor in interest, from time to time as its prime rate in
effect at its principal office in the County, City and State of New York. (The
prime rate is not intended to be the lowest rate of interest charged by ▇▇
▇▇▇▇▇▇ Chase Bank to its borrowers).
CLOSING DATE shall mean December [__], 2004.
COLLATERAL shall mean all present and future Accounts, Equipment, Inventory,
Documents of Title, General Intangibles, Real Estate, and Other Collateral.
COMMITMENT shall mean each Lender's commitment in accordance with this Financing
Agreement to make a Term Loan and/or Revolving Loans, as the case may be,
including risk participations in amounts under the Letter of Credit Sub-Line, in
the amount set forth on the signature pages hereof or the Assignment and
Transfer Agreement executed by each such Lender.
COMPANY LIQUIDITY shall mean, at any date of determination, an amount equal to
the Companies' (a) Availability plus (b) unrestricted cash, determined on a
basis consistent with past practices (and as cash is determined in accordance
with GAAP).
CONCENTRATION ACCOUNT shall mean any account owned by either Company which
receives funds from i) the Depository Accounts and ii) the credit card
companies.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for Parent,
Big 5, and their Subsidiaries, if any, eliminating all inter-company
transactions and prepared, in the
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case of any such quarterly or annual balance sheet, in accordance with GAAP
consistently applied.
COPYRIGHTS shall mean each Company's present and hereafter acquired copyrights,
copyright registrations, recordings, applications, designs, styles, licenses,
marks, prints and labels bearing any of the foregoing, goodwill, any and all
general intangibles, intellectual property and rights pertaining thereto, and
all cash and non-cash proceeds thereof.
CURRENT ASSETS shall mean, whenever used throughout this Financing Agreement,
those assets of Big 5 and its Subsidiaries, on a consolidated basis, which in
accordance with GAAP, consistently applied, are classified as "current".
CURRENT LIABILITIES shall mean, wherever used throughout this Financing
Agreement, those liabilities of Big 5 and its Subsidiaries, on a consolidated
basis, which in accordance with GAAP, consistently applied, are classified as
"current", provided, however, that notwithstanding GAAP, i) the Revolving Loans
and ii) the current portion of long term Permitted Indebtedness are not to be
considered "current liabilities."
CUSTOMARILY PERMITTED LIENS shall mean:
(a) liens of local or state authorities for franchise or other
like taxes provided the aggregate amounts of such liens shall not exceed
$1,500,000 in the aggregate at any one time;
(b) statutory liens of landlords and liens of carriers,
work-men, repairmen, warehousemen, mechanics, materialmen, vendors (other than
Inventory vendors or suppliers) and other like liens imposed by law, created in
the ordinary course of business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary
course of business including, without limitation, security deposits for leases,
surety bonds and appeal bonds, deposits in connection with utilities, workers'
compensation, unemployment insurance and other types of social security benefits
or to secure the performance of tenders, bids, contracts (other than for the
repayment or guarantee of borrowed money or purchase money obligations),
statutory obligations and other similar obligations; and
(d) easements (including, without limitation, reciprocal
easement agreements and utility agreements), licenses, leases, restrictions,
covenants, rights of way, encroachments, minor defects or irregularities in
title, variation and other restrictions, liens, mortgages, charges or other
encumbrances (whether or not recorded) affecting the Real Estate which do not
prohibit the use of the Real Estate for the retail sale of Inventory at either
Company's retail locations or the storage of Inventory at the Inventory
distribution centers.
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DEFAULT shall mean any event specified in Section 9.1 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal to the
sum of: i) two percent (2%) and ii) the then applicable rate of interest, which
Default Rate of Interest Rate the Agent, on behalf of the Lenders, shall be
entitled to charge the Companies on all Obligations due the Lenders by the
Company to the extent provided in Section 9.2(ii) of this Financing Agreement.
DEPOSITORY ACCOUNTS shall mean those accounts (other than Concentration
Accounts) owned by either Company and designated for the deposit of proceeds of
Collateral.
DESIGNATED SALE-LEASEBACK PROPERTY means a capital asset developed or to be
developed by either Company after the date of this Financing Agreement and as to
which such Company has notified the Agent in writing that such capital asset is,
at such time, a Designated Sale-Leaseback Property and as to which such Company
intends to enter into construction, sale-leaseback or mortgage financing,
provided that such Designated Sale-Leaseback Property shall cease to be a
Designated Sale-Leaseback Property upon the earlier to occur of eighteen (18)
months after the date of such notice and the date on which such Designated
Sale-Leaseback Property is financed pursuant to a sale-leaseback or mortgage
financing permitted hereunder.
DOCUMENTATION FEE shall mean the Agent's standard and reasonable fees relating
to any and all modifications, waivers, releases, amendments or additional
collateral with respect to this Financing Agreement, the Collateral and/or the
Obligations.
DOCUMENTS OF TITLE shall mean all of each Company's present and future documents
(as defined in the UCC), and any and all warehouse receipts, bills of lading,
shipping documents, chattel paper, instruments and similar documents, all
whether negotiable or not, and all goods and Inventory relating thereto and all
cash and non-cash proceeds of the foregoing.
EARLY TERMINATION FEE shall: i) mean the fee the Agent for the account of the
Revolving Lenders is entitled to charge the Companies in the event either
Company terminates the Line of Credit or this Financing Agreement before March
20, 2008; and ii) be determined by multiplying the Line of Credit by (x) three
quarters percent (0.75%) if the Early Termination Date occurs on or before March
20, 2006; (y) one half percent (0.5%) if the Early Termination Date occurs after
March 20, 2006 and on or before March 20, 2007; or (z) one quarter percent
(0.25%) if the Early Termination Date occurs after March 20, 2007 but before
March 20, 2008.
EBITDA shall mean, in any period, the net income (or net loss) of Big 5 and its
Subsidiaries, on a consolidated basis plus all amounts deducted in determining
net income in respect of Interest Expense, income tax obligations (paid or
accrued), depreciation expense and amortization expenses, non-cash straight line
rent expense and all other non-cash items, each determined in accordance with
GAAP consistently applied.
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ELIGIBLE INVENTORY shall mean the gross cost of each Company's finished goods
Inventory that conforms to the warranties herein less any (i) supplies, (ii)
Inventory not present in the United States of America, (iii) Inventory returned
or rejected by each Company's customers other than Inventory that is undamaged
and resalable in the normal course of business, (iv) Inventory to be returned to
each Company's suppliers, (v) Inventory in transit to or from third parties,
(vi) shrinkage, and (vii) reserves required by the Agent in accordance with the
standard set forth below and without duplication but only for the following: (a)
Inventory specially ordered by either Company for specific customers which
Inventory is uniquely different in size, shape, quality or color and which
uniquely different Inventory is not customarily sold by such Company; (b) market
value declines, to the extent the Inventory's value is below its cost; (c) ▇▇▇▇
and hold (deferred shipment or consignment sales); (d) markdowns, to the extent
the Inventory's value is below its cost; (e) Inventory which is not located at
either Company's retail store locations or warehouses (other than Inventory in
transit between the Companies' facilities); (f) demonstration items, to the
extent the Inventory's value is below its cost; (g) damaged or defective
Inventory; (h) obsolete Inventory (but not including undamaged Inventory which
is solely out-of-season); (i) Inventory at outlet locations not owned or
operated by either Company; (j) Inventory held for lease, but only to the extent
such Inventory held for lease exceeds twenty-five percent (25%) of the then
aggregate gross cost of Inventory; and (k) Inventory imported under letters of
credit issued without the assistance of the Letter of Credit Guaranty and then
only until the bank issuing such letters of credit has been reimbursed by the
Companies for any drafts under such letters of credit. The amount of such
reserves shall be determined solely by the Agent in its Reasonable Discretion.
EQUIPMENT shall mean all of each Company's present and hereafter acquired
equipment (as defined in the UCC), including, without limitation, all machinery,
equipment, furnishings and fixtures, and all additions, substitutions and
replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all proceeds thereof of whatever sort.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time, as applicable.
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 9.1 of this
Financing Agreement.
FEE LETTER shall mean that certain letter agreement, between the Agent and the
Companies, dated as of the date hereof.
FINANCING DOCUMENT(S) means this Financing Agreement, Term Loan Promissory
Notes, Revolving Loan Promissory Notes, the documents executed by the Guarantor,
the Fee Letter, and all other related agreements and documents issued or
delivered hereunder or thereunder or pursuant hereto or thereto (in each case as
the same may be amended, restated, or otherwise modified from time to time).
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FIXED CHARGE COVERAGE RATIO shall mean, for the twelve (12) month period then
ending, the ratio determined by dividing EBITDA by the sum of (i) Capital
Expenditures (excluding, for all twelve (12) month measurement periods, those
Capital Expenditures of the Companies incurred through the fiscal year ending
December 2005 that are expended for Big 5's new distribution center in an
aggregate for both Companies up to $20,000,000), (ii) Interest Expense, (iii)
scheduled amortization of any Indebtedness of the Companies excluding prepayment
of the Senior Notes, (iv) all federal, state, and local income tax expenses paid
or accrued, and (v) payments of dividends and distributions in respect of the
capital stock of the Companies (without duplication of the items set forth in
the foregoing clause (iv)).
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply. Except as otherwise provided in this
Financing Agreement, all computations and determinations as to accounting or
financial matters and all quarterly and annual consolidated financial statements
to be delivered pursuant to this Financing Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP. If any change in accounting principles from
those effective December 31, 2003 and used in preparation of the financial
statements required hereunder occurs or are hereafter occasioned by promulgation
of rules, regulations, pronouncements or opinions by or are otherwise required
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or successors thereto or agencies with similar
functions), and any such changes results in a change of the method of
calculation of, or affect the results of such calculation of, any financial
covenant, standard or term found herein, then the parties shall amend such
financial covenants, financial standards or terms so as to equitably reflect
such changes, with the desired result that the criteria for evaluating the
financial condition and results of operations of the Companies shall be the same
after such changes as if such changes had not been made.
GENERAL INTANGIBLES shall mean all of each Company's present and hereafter
acquired general intangibles (as defined in the UCC), and shall include, without
limitation, all present and future right, title and interest in and to: (a) all
Trademarks, trade names, corporate names, business names, logos and any other
designs or sources of business identities, (b) Patents, together with any
improvements on said Patents, utility models, industrial models, and designs,
(c) Copyrights, (d) trade secrets, (e) licenses, permits and franchises, (f) all
applications with respect to the foregoing, (g) all right, title and interest in
and to any and all extensions and renewals, (h) goodwill with respect to any of
the foregoing, (i) any other forms of similar intellectual property, (j) all
customer lists, distribution agreements, supply agreements, blueprints,
indemnification rights and tax refunds, together with all monies and claims for
monies now or hereafter due and payable in connection with any of the foregoing
or otherwise, and all cash and non-cash proceeds thereof, including, without
limitation, the proceeds or royalties of any licensing agreements between either
Company and any licensee of any of such Company's General Intangibles.
GUARANTOR shall mean Parent.
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INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, and (b) lease obligations which, in accordance
with GAAP, have been, or which should be capitalized.
INTEREST EXPENSE shall mean i) total cash interest obligations (paid or accrued)
of Big 5 and its Subsidiaries determined in accordance with GAAP on a basis
consistent with the latest audited statements of Big 5, excluding amortization
of financing fees related hereto and to other Indebtedness of Big 5 and its
Subsidiaries, prepayment penalties, fees or premiums related to the payment, in
whole or in part, of Indebtedness of Big 5 and its Subsidiaries and original
issue discounts, if any, minus ii) interest income, if any.
INVENTORY shall mean all of each Company's present and hereafter acquired
inventory (as defined in the UCC), including, without limitation, all
merchandise, inventory, and goods held for sale or lease and all additions,
substitutions and replacements thereof, wherever located, together with all
goods and materials used or usable in manufacturing, processing, packaging or
shipping same in all stages of production from raw materials through
work-in-process to finished goods - and all proceeds thereof of whatever sort.
INVESTMENT PROPERTY shall mean all of each Company's now owned and hereafter
acquired investment property (as defined in the UCC) and all proceeds thereof.
ISSUING BANK shall mean any bank issuing Letters of Credit for either Company.
LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
the Revolving Lenders acting through the Agent by the Issuing Bank for or on
behalf of either Company.
LETTER OF CREDIT GUARANTY shall mean any guaranty delivered by the Agent on
behalf of Revolving Lenders to the Issuing Bank of either Company's
reimbursement obligations under the Issuing Bank's reimbursement agreement,
application for Letters of Credit or other like documents.
LETTER OF CREDIT GUARANTY FEE shall mean the fee the Agent may charge on behalf
of Revolving Lenders under Section 7.2 of this Financing Agreement for: i)
issuing the Letter of Credit Guaranty or ii) otherwise aiding either Company in
obtaining Letters of Credit pursuant to Section 4.
LETTER OF CREDIT SUB-LINE shall mean Fifteen Million Dollars ($15,000,000).
LIBOR shall mean, at any time of determination, and subject to availability, the
London Interbank Offered Rate paid in London by ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank on one
month, two month, three month, six month, or nine month dollar deposits and if
such rates are not otherwise available, then those rates as published, under
"Money Rates", in the New York City edition of the Wall Street Journal or if
there is no such publication or statement therein as to Libor, then in any
publication used in the New York City financial community.
LIBOR LOAN shall mean the loans for which the Companies have elected to use
Libor for interest rate computations.
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LIBOR PERIOD shall mean the Libor for one month, two month, three month, six
month or nine month dollar deposits, as selected by the Companies.
LIBOR PROCESSING FEE shall mean the sum of $500.00 which the Agent, for its own
account, shall be entitled to charge the Companies in accordance with, but
subject to, the provisions of Section 7 of this Financing Agreement upon the
election of a Libor Loan.
LINE OF CREDIT shall mean the commitment of the Revolving Lenders acting through
the Agent to make loans and advances and issue Letter of Credit Guaranties, all
pursuant to and in accordance with, but subject to, Sections 3 and 4 of this
Financing Agreement, in the aggregate amount of $140,000,000 plus the amount of
principal repayment of the Term Loan, subject to and in accordance with Section
4A, or such lesser amount as the Company may elect in accordance with Section 7
of this Financing Agreement.
LINE OF CREDIT FEE shall: i) mean the fee due the Agent at the end of each month
for the Line of Credit, and ii) be determined by multiplying x) the difference
between the Line of Credit less the sum of a) the average daily Revolving Loans
outstanding during such month and b) the average daily undrawn face amount of
all outstanding Letters of Credit, for said month by y) three hundred
twenty-five hundredths of one percent (.325%) per annum for the number of days
in said month during which this Financing Agreement was in effect, provided that
the Line of Credit Fee payable on December 31, 2004 shall also include an amount
based on the Line of Credit Fee payable under the Prior Financing Agreement for
the period from December 1, 2004 up to the Closing Date.
MARGIN SECURITIES shall have the meaning assigned to such term in Regulation G
of the Board of Governors of the Federal Reserve System (12 C.F.R. 207, as
amended).
OBLIGATIONS shall mean all obligations of each Company to pay, as and when due
and payable, all amounts from time to time owing by and in respect of the
Financing Documents, including, without limitation, all loans and advances made
or to be made by the Lenders or the Agent on behalf of the Lenders to either
Company, or to others for either Company's account under any of the Financing
Documents; any and all indebtedness and obligations which may at any time be
owing by either Company under any Financing Document, whether now in existence
or incurred by either Company from time to time hereafter; whether secured by
pledge, lien upon or security interest in either Company's assets or property or
the assets or property of any other person, firm, entity or corporation; whether
such indebtedness is absolute or contingent, matured or unmatured, direct or
indirect and whether either Company is liable for such indebtedness as
principal, surety, endorser, guarantor or otherwise. Obligations shall also
include, without duplication of the foregoing, all indebtedness owing by either
Company under this Financing Agreement or under any other agreement or
arrangement hereafter entered into between either Company and the Agent on
behalf of the Lenders, including, but not limited to, obligations to the Lenders
or the Agent on behalf of the Lenders in respect of Letters of Credit issued
with the assistance of the Letter of Credit Guaranty, indebtedness or
obligations incurred by, or imposed on, the Agent or the Lenders as a result of
environmental claims arising out of either Company's operations, premises or
waste disposal practices or sites, either Company's liability to the Agent on
behalf of the Lenders under any instrument of guaranty or indemnity, or arising
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under any guaranty, endorsement or undertaking which the Agent on behalf of the
Lenders may make or issue to others for either Company's accounts, but in no
event shall Obligations include any obligations due any affiliate of a Lender.
OTHER COLLATERAL shall mean all of each Company's now owned and hereafter
acquired lockbox, blocked account and any other deposit accounts maintained with
any bank or financial institutions into which the proceeds of Collateral are or
may be deposited; all other deposit accounts; all Investment Property; all cash
and other monies and property in the possession or control of the Agent and/or
any of the Lenders; all books, records, ledger cards, disks and related data
processing software at any time evidencing or containing information relating to
any of the Collateral described herein or otherwise necessary or helpful in the
collection thereof or realization thereon; and all cash and non-cash proceeds of
the foregoing.
OUT-OF-POCKET EXPENSES shall mean all of the Agent's reasonable and documented
out of pocket expenses (including reasonable attorneys' fees) incurred relative
to the closing of this Financing Agreement and any amendment, modification or
waiver thereof, whether incurred heretofore or hereafter, and, in any case, with
appropriate documentation delivered to the Companies upon either Company's
request, which expenses shall include, without being limited to, the cost of
record searches, all costs and expenses incurred by the Agent in opening bank
accounts, depositing checks, receiving and transferring funds, and any charges
imposed on the Agent due to "insufficient funds" of deposited checks the Agent's
standard fee relating thereto, any amounts paid by the Agent on behalf of the
Lenders to an Issuing Bank or incurred by or charged to the Agent on behalf of
the Lenders by the Issuing Bank under the Letter of Credit Guaranty or either
Company's reimbursement agreement, application for letter of credit or other
like document which pertain either directly or indirectly to such Letters of
Credit, and the Agent's standard and reasonable fees relating to the Letters of
Credit and any drafts thereunder, reasonable and documented local counsel fees,
if any, fees and taxes relative to the filing of financing statements, and all
expenses, costs and fees set forth in Section 9.3 of this Financing Agreement.
PARENT shall mean Big 5 Sporting Goods Corporation, a Delaware corporation.
PATENTS shall mean all of each Company's present and hereafter acquired patents,
patent applications, registrations, any reissues or renewals thereof, licenses,
any inventions and improvements claimed thereunder, and all general intangible,
intellectual property and patent rights with respect thereto of each Company,
and all income, royalties, cash and non-cash proceeds thereof.
PERMITTED ENCUMBRANCES shall mean: (i) liens expressly permitted, or consented
to, by the Agent on behalf of the Lenders in accordance with Section 12.10; (ii)
Customarily Permitted Liens; (iii) liens granted the Agent on behalf of the
Lenders by the Companies; (iv) liens of judgment creditors, provided such liens
do not exceed, in the aggregate, at any time, $2,000,000 (other than liens
stayed, satisfied, bonded or insured to the reasonable satisfaction of the Agent
within (a) fifteen (15) calendar days of the date either Company acquired actual
knowledge of such judgment lien or (b) fifteen (15) calendar days of the date
such lien attached by levy, whichever first occurs); (v) liens for taxes, levies
or assessments
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not yet due and payable or which are being diligently contested in good faith by
the applicable Company by appropriate proceedings, and which liens are not (a)
senior to the lien of the Agent on behalf of the Lenders; or (b) for taxes due
the United States of America; (vi) liens, if any, given to an Issuing Bank in
connection with a Letter of Credit obtained with the assistance of the Letter of
Credit Guaranty; (vii) liens securing Purchase Money Obligations; (viii) liens
and other encumbrances in existence as of March 20, 2003; (ix) liens given to
issuers of letters of credit issued without the assistance of the Letter of
Credit Guaranty provided such liens (a) do not secure Indebtedness in excess of
$2,000,000 in the aggregate at any one time and (b) attach only to the Inventory
and/or Equipment acquired with the assistance of such letter of credit,
provided, however, that any Inventory subject to the lien permitted by this
clause (ix) shall not be considered Eligible Inventory until such lien is
terminated; (x) liens on assets, other than the Collateral, of either Company,
to secure the Indebtedness referenced in clause x of the definition of Permitted
Indebtedness; (xi) liens on the Margin Securities; and (xii) any extension,
renewal or replacement of any of the foregoing, provided that any extension,
renewal or replacement lien shall be limited to the property or assets covered
by the lien extended, renewed or replaced and the obligation secured by such
extension, renewal or replacement lien shall be in an amount not greater than
the obligations secured by the lien extended, renewed or replaced plus the
amount of all expenses, fees, premiums and penalties paid in connection with
such extension, renewals or replacement.
PERMITTED INDEBTEDNESS shall mean: (i) Indebtedness incurred in the ordinary
course of business for Inventory, services, taxes or labor; (ii) Indebtedness
arising in connection with Letters of Credit and the Financing Documents; (iii)
deferred taxes and other expenses incurred in the ordinary course of business;
(iv) other Indebtedness existing on the date of execution of this Financing
Agreement and listed in the most recent financial statement delivered to the
Agent or otherwise disclosed to the Agent in writing prior to the date hereof;
(v) Indebtedness arising in connection with or secured by, the Permitted
Encumbrances; (vi) Indebtedness under any letters of credit issued without the
assistance of the Letter of Credit Guaranty provided such Indebtedness does not
exceed $2,000,000 in the aggregate at any one time; (vii) Indebtedness of one
Company to another Company and Indebtedness of each Company to such Company's
Affiliates (other than the other Company) in an amount not to exceed $15,000,000
in the aggregate for both Companies combined at any one time; (viii) the Senior
Notes; (ix) Indebtedness incurred in the form of surety, customs and appeal
bonds and other obligations of a similar nature; (x) other Indebtedness of the
Company in an amount not to exceed $13,000,000 in the aggregate for both
Companies combined outstanding at any time outstanding, provided, such
Indebtedness is (a) not secured by the Collateral and (b) not due an Affiliate
of either Company or the Parent; (xi) Indebtedness in an aggregate amount not to
exceed $20,000,000 at any time which is subordinated to the Obligations on terms
and conditions reasonably acceptable to Required Lenders ("New Subordinated
Debt"); and (xii) any extension, renewal or replacement of any of the foregoing,
provided that any extension, renewal or replacement shall be in an amount not
greater than the Indebtedness so extended, renewed or replaced (plus the amount
of expenses, fees and any premium or penalty paid in connection with such
extension, renewal or replacement).
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PERMITTED INVESTMENTS shall mean (i) commercial paper and municipal bonds, in
each case issued or guaranteed by a Person rated P-1 or better by ▇▇▇▇▇'▇
Investors Service, Inc. ("Moody's") or A-1 or MIG-1 or better by Standard &
Poor's Corporation ("S & P"), (ii) certificates of deposit, time deposits,
Eurodollar deposits or bankers' acceptances maturing not more than one year
after the date of issue, issued by any commercial banking institution, which is
a member of the Federal Reserve System and has a combined capital and surplus
and undivided profits of not less than $100,000,000, (iii) repurchase agreements
having maturities of not more than one year and which are secured by readily
marketable direct obligations of the Government of the United States of America
or any agency thereof, (iv) readily marketable obligations of the Government of
the United States of America or any agency thereof; (v) readily marketable
obligations issued by any state of the United States or any political
subdivision thereof having a rating by Moody's or S & P of "A" or its equivalent
or better; (vi) Margin Securities and (vii) mutual funds regularly traded in the
United States of America whose investments are limited to those described in
clauses (i) through (v) above.
PERSON shall mean an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever nature.
PRIOR FINANCING AGREEMENT CARRYOVER AMOUNT shall mean, subject to all the terms
and conditions of this Financing Agreement, allowable dividend payments based on
the Companies' performance during the term of the Prior Financing Agreement in
an aggregate amount equal to Thirty Million Dollars ($30,000,000).
PURCHASE MONEY OBLIGATIONS shall mean the Indebtedness (a) incurred to
construct, purchase or lease Equipment and/or Real Estate and secured solely by
a lien on the Equipment and/or Real Estate, including construction, sale
leaseback and mortgage financing incurred in connection with Designated
Sale-Leaseback Property; (b) of a Person existing at the time such Person is
acquired by, merged into or consolidated with either Company in accordance with
this Financing Agreement provided such Indebtedness is not secured by
Collateral; or (c) secured by property (other than Collateral) acquired by
either Company existing at the time such property is or was acquired by either
Company.
REAL ESTATE shall mean each Company's leasehold and fee interests in real
property.
REASONABLE DISCRETION means the Agent's reasonable discretion in the exercise of
its reasonable business judgment using standards customarily applied by the
Agent to transactions involving retail clients and taking into account the
nature of the Company's business, consistently applied by Agent. When used with
respect to determination of reserves, in addition to the foregoing, such
standard shall take into consideration amounts representing, historically, each
Company's reserves, discounts, returns, claims, credits and allowances.
REPORTING DATE shall mean any date on which the Companies are to deliver to the
Agent any Collateral report pursuant to Section 3.2 of this Financing Agreement,
any financial
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statement or any other information requested of either Company pursuant to the
terms of this Financing Agreement.
REQUIRED LENDERS shall mean Lenders holding more than fifty percent (50%) of the
outstanding loans, advances, extensions of credit and letter of credit
participation interests of the Companies hereunder.
RETAINED CASH shall mean an amount of cash sufficient to provide each Company
with cash in an amount necessary to stock such Company's cash registers at its
retail locations and consistent with the business practices of such Company.
REVOLVING LENDERS shall mean each of the Revolving Lenders as set forth on the
signature pages attached hereto or any other party which now is or hereafter
becomes a Revolving Lender hereunder pursuant to Section 11.10 hereof.
REVOLVING LOAN PROMISSORY NOTES shall mean the Revolving Loan Promissory Notes,
in the form of Exhibit [ ] attached hereto, delivered by the Companies to the
Agent and each of the Revolving Lenders to evidence the Revolving Loans made
pursuant to, and repayable in accordance with, the provisions of Section 3 of
this Financing Agreement.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Company by the Revolving Lenders acting through the Agent
pursuant to Section 3 of this Financing Agreement.
SENIOR NOTES shall mean the Big 5 issued 10 7/8% Senior Notes due 2007 in the
original amount of $131,000,000.
SENIOR SECURED DEBT COVERAGE RATIO shall mean, for the twelve (12) month period
then ending, the ratio determined by dividing (i) the sum of the outstanding
Revolving Loan balance plus undrawn Letters of Credit plus outstanding Term Loan
balance by (ii) EBITDA.
SETTLEMENT DATE shall mean the date, weekly with respect to the Revolving Loans
and upon receipt of any payments with respect to the Term Loan, and more
frequently at the discretion of the Agent, the Agent and the Lenders shall
settle amongst themselves so that (x) the Agent shall not have, as Agent, any
money at risk and (y) on such Settlement Date the respective Lenders shall have
a pro rata amount of all outstanding Revolving Loans, Term Loan and Letters of
Credit, provided that each Settlement Date for a Lender shall be a Business Day
on which such Lender and its bank are open for business.
SUBSIDIARY shall mean as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interest having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to
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"Subsidiaries" in this Financing Agreement shall refer to a Subsidiary or
Subsidiaries of one of the Companies or the Parent.
TERM LOAN shall mean the term loan in the original principal amount of Twenty
Million Dollars ($20,000,000) made to the Companies, jointly and severally, by
the Agent on behalf of the Term Lenders pursuant to, and repayable in accordance
with, the provisions of Section 4.A.3 of this Financing Agreement.
TERM LENDERS shall mean each of the Term Lenders as set forth in the signature
pages hereto or any other party which now is or hereafter becomes a Term Lender
hereunder pursuant to Section 13 hereof.
TERM LOAN PROMISSORY NOTES shall mean the Term Loan Promissory Notes, in the
form of Exhibit [ ] attached hereto, delivered by the Companies to the Agent and
each of the Term Lenders to evidence the Term Loan made pursuant to, and
repayable in accordance with, the provisions of Section 4A of this Financing
Agreement.
TRADE ACCOUNTS PAYABLE shall mean, at any time of determination, the amounts due
any supplier for Inventory sold to either Company.
TRADE ACCOUNTS RECEIVABLE shall mean, at any time of determination, the amounts
due each Company by any i) credit card issuer and ii) any customer obligated on
an invoice, in each instance due as a result of a sale of Inventory or the
rendition of services by either Company.
TRADEMARKS shall mean all present and hereafter acquired trademarks, trademark
registrations, recordings, applications, trade names, trade styles, service
marks, prints and labels (on which any of the foregoing may appear), licenses,
reissues, renewals, and any other intellectual property and trademark rights
pertaining to any of the foregoing, together with the goodwill associated
therewith, and all cash and non-cash proceeds thereof.
UCC shall mean the Uniform Commercial Code of the State of California, and any
successor statute.
WORKING CAPITAL shall mean Current Assets in excess of Current Liabilities.
SECTION 2. CONDITIONS PRECEDENT
2.1. CONDITIONS TO THE INITIAL EXTENSION OF CREDIT. The obligation
of the Lenders acting through the Agent to make loans hereunder is subject to
the satisfaction of, or waiver of, immediately prior to or concurrently with the
making of such loans, the following conditions precedent:
(a) LIEN SEARCHES. The Agent shall have received tax, judgment
and Uniform Commercial Code searches satisfactory to the Agent for all locations
presently occupied or used by either of the Companies.
(b) CASUALTY INSURANCE. Each of the Companies shall have
delivered to the Agent evidence satisfactory to the Agent that casualty
insurance policies
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listing the Agent as an additional insured, loss payee or mortgagee, as the case
may be, are in full force and effect, all as set forth in Section 6.5 of this
Financing Agreement.
(c) OPINIONS. Counsel for the Companies shall have delivered
to the Agent on behalf of the Lenders opinions satisfactory to the Agent
opining, inter alia, that, subject to the i) filing, priority and remedies
provisions of the Uniform Commercial Code, ii) the provisions of the Bankruptcy
Code, insolvency statutes or other like laws, iii) the equity powers of a court
of law and iv) such other matters as may be agreed upon with the Lenders, the
Financing Agreement of the Companies and the Guaranty of the Guarantor x) are
valid, binding and enforceable according to their terms, y) are duly authorized
and z) do not violate any terms, provisions, representations or covenants in the
charter or by-laws of either Company or the Guarantor, or, to the knowledge of
such counsel, after reasonable inquiry, of any loan agreement, mortgage, deed of
trust, note, security or pledge agreement or indenture, identified by the
Companies and the Guarantor to such counsel as material, to which the Companies
and/or the Guarantor is a signatory or by which either Company or the Guarantor
or its assets are bound.
(d) ADDITIONAL DOCUMENTS. Each Company shall execute and
deliver to the Agent for the benefit of the Lenders all loan documents necessary
to consummate the lending arrangement contemplated between the Companies and the
Lenders. Without limiting the foregoing, one of the such additional documents is
the Reaffirmation of Co-Obligor Agreement by and among the Companies and the
Agent.
(e) BOARD RESOLUTION. The Agent for the benefit of the Lenders
shall have received a copy of the resolutions of the Board of Directors of each
Company, authorizing the execution, delivery and performance of (i) this
Financing Agreement, and (ii) any related agreements, certified by the Secretary
or Assistant Secretary of such Company, as of the date hereof, together with a
certificate of the Secretary or Assistant Secretary of such Company as to the
incumbency and signature of the officers of such Company executing this
Financing Agreement and any certificate or other documents to be delivered by it
pursuant hereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary.
(f) CORPORATE ORGANIZATION. The Agent for the benefit of the
Lenders shall have received (i) a copy of the Certificate of Incorporation of
each Company certified by the Secretary of State of its incorporation within
three (3) weeks of the Closing Date, and (ii) a copy of the By-Laws (as amended
through the date hereof) of the Company and certified by the Secretary or
Assistant Secretary of the Company.
(g) OFFICER'S CERTIFICATE. The Agent for the benefit of the
Lenders shall have received an executed Officer's Certificate of each Company,
satisfactory in form and substance to the Agent, certifying that: (i) the
representations and warranties contained herein are true and correct in all
material respects on and as of the date hereof; (ii) each Company is in
compliance with all of the terms and provisions set forth herein; and (iii) no
Event of Default or Default has occurred.
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(h) ABSENCE OF DEFAULT. No material adverse change in the
financial condition, business, prospects, profits (after giving affect to the
seasonal nature of the Company's business), operations or assets of either
Company shall have occurred since September 30, 2004. No Default or Event of
Default shall exist as of the date of this Financing Agreement.
(i) LEGAL RESTRAINTS/LITIGATION. At the date of execution of
this Financing Agreement, there shall be, to the actual knowledge of the
management of the Companies or to the actual knowledge of any Lender, no (x)
litigation, investigation or proceeding (judicial or administrative) pending or
threatened against either Company or its assets, by any agency, division or
department of any county, city, state, province or federal government arising
out of this Financing Agreement, the financing arrangement contemplated under
this Financing Agreement, the Prior Financing Agreement, or the transactions
under or in connection with the Prior Financing Agreement, (y) injunction, writ
or restraining order restraining or prohibiting the consummation of the
financing arrangements contemplated under this Financing Agreement or (z) suit,
action, investigation or proceeding (judicial or administrative) pending or
threatened against either Company, or its assets, which, is reasonably likely to
result in a material adverse effect on the business, operation, assets or
financial condition of either Company or the Collateral.
(j) PROJECTIONS. The Agent for the benefit of the Lenders
shall have received financial projections for the Companies through the fiscal
year ending December 2005, which projections must be certified by an officer of
each Company and must be satisfactory in form and substance to the Agent and the
Lenders.
(k) PAYMENT OF FEES. The Companies shall have paid all amounts
required by the Fee Letter and all Out-of-Pocket Expenses for which an invoice
has been delivered to the Companies.
(l) CONFIRMATION OF GUARANTY. The Guarantor shall have
executed and delivered to the Agent, for the benefit of the Lenders, a
confirmation of the continued effectiveness of its guaranty, in form and
substance reasonably acceptable to the Agent.
Upon the execution of this Financing Agreement and the initial
disbursement of loans hereunder, all of the above Conditions Precedent shall
have been deemed satisfied except as the Companies and the Agent shall otherwise
agree herein or in a separate writing.
2.2. CONDITIONS TO EACH EXTENSION OF CREDIT.
(a) Subject to the terms of this Financing Agreement,
including without limitation the Agent's rights pursuant to Section 10.2 hereof,
the agreement of the Agent on behalf of the Lenders to make any extension of
credit requested to be made by it to the Companies on any date (including,
without limitation, the initial extension of credit) is subject to the
satisfaction of the following conditions precedent:
(i) Representations and Warranties - Each of the
representations and warranties made by either Company in or pursuant to this
Financing
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Agreement shall be true and correct in all material respects on and as of such
date as if made on and as of such date.
(ii) No Default - No Default or Event of Default shall
have occurred and be continuing on such date or after giving effect to the
extension of credit requested to be made on such date.
(iii) Borrowing Base - Subject to the last sentence of
Section 3.1 and after giving effect to the extension of credit requested to be
made by the Companies on such date, the aggregate outstanding balance of the
Revolving Loans and outstanding Letters of Credit owing by the Companies will
not exceed the amount calculated as (A) the lesser of (i) the Line of Credit or
(ii) the Borrowing Base, minus (B) the Availability Reserves.
(b) Each borrowing by the Companies hereunder shall constitute
a representation and warranty by the Companies as of the date of such loan or
advance that each of the representations, warranties and covenants contained in
the Financing Agreement have been satisfied and are true and correct, except as
the Companies and the Agent and/or the Required Lenders shall otherwise agree
herein or in a separate writing.
SECTION 3. REVOLVING LOANS
3.1. The Revolving Lenders, acting through the Agent, agree, subject
to the terms and conditions of this Financing Agreement from time to time, and
within (x) the Availability and y) the Line of Credit, but subject to the
Agent's and the Revolving Lenders' (acting through the Agent) rights to make
"Overadvances", to make loans and advances to the Companies on a revolving
basis, and subject to the limitations set forth herein, the Companies may
borrow, repay and re-borrow Revolving Loans. All Revolving Loans shall be made
by the Revolving Lenders simultaneously and in accordance with their pro rata
shares. It is understood that (i) no Lender shall be responsible for any failure
by any other Lender to perform its obligation to make any Revolving Loans
hereunder, nor shall any commitment of any Lender be increased or decreased as a
result of any failure by any other Lender to perform its obligation to make any
Revolving Loans hereunder, (ii) no failure by any Revolving Lender to perform
its obligation to make any Revolving Loans hereunder shall excuse any other
Revolving Lender from its obligation to make any Revolving Loans hereunder, and
(iii) the obligations of each Revolving Lender hereunder shall be several, not
joint and several. Such loans and advances shall be in amounts up to the lesser
of (i) during the months of October, November, and December of each year, the
lesser of seventy-five percent (75%) of the value of Eligible Inventory or
eighty-eight percent (88%) of the orderly liquidation value (net of all costs
and expenses) of the Eligible Inventory; and (ii) during the months of January
through September of each year, the lesser of seventy percent (70%) of the value
of the Eligible Inventory or eighty-five percent (85%) of the orderly
liquidation value (net of all costs and expenses) of the Eligible Inventory. The
value of Eligible Inventory shall be determined at cost, by the cost inventory
method, using a valuation on a first in, first out basis in accordance with GAAP
excluding capitalized buying, handling and distribution costs, as reflected on
the Companies' books and records. The net orderly liquidation value of the
Eligible Inventory shall be determined from time to time in the
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Agent's Reasonable Discretion taking into account the results of the latest
appraisal. Companies shall pay the cost of the appraisal, provided that so long
as no Event of Default has occurred (unless such Event of Default has been cured
to the extent permitted by and under the terms of this Financing Agreement),
Companies shall not be charged with the cost of such appraisal more than once
per calendar year. All requests for loans and advances (other than LIBOR Loans)
must be received by an officer of the Agent no later than 2:00 p.m. New York
time on the Business Day on which such loans and advances are required. Should
the Companies request advances in excess of the limitations set forth in this
Section 3.1, such advances shall be considered "Overadvances" and, shall be made
by the Agent only with the consent of the Required Lenders and in the sole
discretion of the Required Lenders, subject to any additional terms the Required
Lenders deem necessary, and subject to the terms and provisions of clause (c) of
Section 12.10 hereof.
3.2. In furtherance of the continuing collateral assignment and
security interest in each Company's Accounts and Inventory, each Company shall
deliver to the Agent not later than: (1) if and when requested in writing by
Agent, an aging of such Company's Trade Accounts Receivable in such form and
manner as the Agent may reasonably require but consistent with the current
practices of such Company; (2) fourteen (14) days after the end of each month
(other than October, November and December), a monthly inventory confirmation
statement stating the aggregate amount of Eligible Inventory of the Companies;
and (3) five (5) Business Days after each Sunday in the months of October,
November and December, a weekly Inventory confirmation statement stating the
aggregate amount of Eligible Inventory of the Companies. With respect to all
such reports, each Company will provide to the Agent such additional information
and material as the Agent may reasonably request to effectively evaluate the
Trade Accounts Receivable and the collectability thereof and the mix of the
Inventory and such other information as the Agent may reasonably require to
evaluate the Companies' Trade Accounts Receivable and Inventory, such as
returns, claims, credits, allowances and information identifying and describing
the Trade Accounts Receivable. Failure to provide the Agent with the foregoing
information will in no way effect, diminish, modify, or limit the security
interest granted herein. Such reports are to be executed by a responsible
officer of each Company.
3.3. Each Company hereby represents and warrants that: (a) sales of
Inventory are, and shall be, based upon actual and bona fide sales and
deliveries of Inventory (x) in the ordinary course of such Company's business,
(y) in connection with the liquidation of an immaterial portion of the Inventory
or (z) after the occurrence of a casualty loss, bulk sales of salvageable
Inventory, and that, in any instance, the Inventory being sold and the proceeds
thereof are the exclusive property of such Company and are not and shall not be
subject to any lien, charge, arrangement, encumbrance, security interest, or
financing statement whatsoever other than the Permitted Encumbrances, provided,
however that if there is then no Default or Event of Default, the Companies may
make charitable transfers of Inventory in an aggregate amount for both Companies
not to exceed $1,500,000 in any fiscal year; (b) invoices representing Trade
Accounts Receivable or credit card receipts evidencing credit card sales are in
the name of such Company and except for disputes, offsets, defenses,
counterclaims, contras, returns or credits, all arising in the normal course of
such Company's business or except as may be promptly disclosed to the Agent, the
purchasers of such Inventory owe and are obligated to pay the amount stated in
the invoices
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or credit card receipts; and (c) except for the Permitted Encumbrances, any and
all taxes and fees relating to its business are such Company's sole
responsibility and that same will be paid when due (except as otherwise provided
in this Financing Agreement), and that none of said taxes or fees represent a
lien on or claim against the proceeds of any sale of Inventory. Each Company
agrees to issue credit memoranda promptly. Each Company also warrants and
represents that it is a duly and validly existing corporation and is qualified
to transact business in all states where the failure to so qualify would have a
material adverse effect on the business of such Company or the ability of such
Company to enforce collection of Trade Accounts Receivable due from Persons
residing in that state.
3.4. During the term of this Financing Agreement, the Company may
and will, at its expense, consistent with such Company's existing business
practices, enforce, collect and receive all amounts owing on the Accounts.
Except for the Retained Cash, all checks or cash from the sale of Inventory must
be deposited promptly to the Depository Accounts, and promptly thereafter and
therefrom, to a Blocked Account. Each Company shall require that all amounts due
under credit card sales be remitted by the credit card companies to a Blocked
Account. Each Company agrees that it will only direct the flow of funds from the
Depository Accounts and the credit card remitters to the Blocked Accounts. The
institutions holding such Blocked Accounts will be instructed that when it is
satisfied that such funds on deposit are "good funds", such institution will
remit such "good funds" to the applicable Company's operating account.
Notwithstanding anything herein contained to the contrary, if (x) there is then
an Event of Default or (y) the Companies have Availability of less than zero
($0) for three (3) consecutive Business Days, then the Agent, acting on behalf
of the Lenders, may advise the banks holding the Blocked Accounts to remit all
proceeds of Collateral to the Agent for the account of the Lenders. The Agent
will immediately rescind these instructions (a) upon the waiver of the Event of
Default and (b) when the Companies have Availability of zero ($0) or greater.
All amounts received by the Agent for the account of the Lenders will be
credited to the Obligations upon the Agent's receipt of "good funds" at its bank
account in New York, New York on the Business Day of receipt if received no
later than 2 p.m. New York time or on the next succeeding Business Day if
received after 2 p.m. New York time. No checks, drafts or other instruments
received by the Agent will constitute final payment unless and until such
instruments have actually been collected. If the loan account reflects a zero
Revolving Loan balance and there is then no Event of Default, then the Agent
shall promptly remit to the operating accounts of the Companies any credit
balances in the loan account.
3.5. (a) The Agent shall maintain a single separate account on its
books in the name of both of the Companies' in which the Companies will be
charged with loans, advances and payments under the Letter of Credit Guaranty,
made to either Company or for its account, and with any other Obligations,
including any and all reasonable costs, expenses and reasonable and documented
attorney's fees which the Agent may incur in connection with the exercise of any
of the rights or powers herein conferred or in the prosecution or defense of any
action or proceeding to enforce or protect any rights of the Agent or of any
Lender in connection with this Financing Agreement or the Collateral assigned
hereunder, or any Obligations owing by the Companies. The Companies will be
credited with all amounts received by the Agent from the Companies or from
others for the Companies' account, including, as above set forth, all amounts
received by the Agent in payment of Accounts and
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such amounts will be applied to payment of the Obligations. In no event shall
prior recourse to any Accounts or other security granted to or by the Companies
be a prerequisite to the Agent's right to demand payment of any Obligation.
Further, it is understood that neither the Agent nor any Lender shall have any
obligation whatsoever to perform in any respect any of either Company's
contracts or obligations relating to the Accounts.
(b) The Companies are engaged in an integrated operation that requires
financing on a basis permitting the availability of credit from time to time to
each Company as required for the continued successful operation of each Company.
Each Company expects to derive benefit, directly or indirectly, from such
availability since the successful operation of each Company is dependent on the
continued successful performance of the functions of the integrated group. In
order to utilize the collective borrowing powers of the Companies in the most
efficient and economical manner, and in order to facilitate the handling of the
accounts of the Companies on the Agent's books, the Companies have requested,
and the Agent has agreed to handle accounts of the Companies on the Agent's
books on a combined basis. Accordingly, in lieu of maintaining separate accounts
on the Agent's books in the name of each of the Companies, the Agent shall
maintain one account. Loans and advances made by the Agent to the Companies will
be charged to the account indicated above, along with any charges and expenses
under this Financing Agreement. The loan account will be credited, with all
amounts received by the Agent from either of the Companies or from others for
their account. It is expressly understood and agreed by each Company that the
Agent shall have no obligation to account separately to either Company. It is
expressly understood and agreed by each of the Companies that the Agent shall
have no responsibility to inquire into the correctness of the apportionment,
allocation, or disposition of (X) any loans and advances made to either of the
Companies or (Y) any of the Agent's expenses and charges relating thereto. The
Companies jointly and severally unconditionally guarantee to the Agent and the
Lenders the prompt payment in full of (A) all loans and advances made and to be
made by the Agent and/or the Lenders to any of them under this Financing
Agreement, as well as (B) all other Obligations of the Companies to the Agent
and/or the Lenders and hereby expressly confirm in all respects the suretyship
waivers and cross-guaranties executed by each of the Companies in the Agent's
and/or the Lenders' favor. All collateral security now or hereafter given to the
Agent and/or the Lenders by any of the Companies, shall secure all loans and
advances made by the Agent and/or the Lenders to any of the Companies, and shall
be deemed to be pledged to the Agent as security for any and all other
Obligations of the Companies to the Agent and/or the Lenders as set forth under
any Financing Document. It is understood that, notwithstanding the fact that
each Company is a distinct and separate legal entity, the handling of the
accounts of the Companies in a combined fashion, as more fully set forth herein,
has been done solely at the Companies' request and as an accommodation to the
Companies, and that the Agent shall incur no liability to the Companies as a
result thereof. To induce the Agent and the Lenders to do so, and in
consideration thereof, each Company hereby agrees, jointly and severally, to
indemnify the Agent and the Lenders and hold the Agent and the Lenders harmless
against any and all liability, expense, loss or claim of damage or injury, made
against the Agent and/or the Lenders by any of the Companies or by any third
party whosoever, arising from or incurred solely by reason of (1) the method of
handling the accounts of the Companies as herein provided, (2) the Agent relying
on any instructions of any of the Companies, or (3) any other action taken by
the Agent in accordance with this Section 3.5(b) of this Financing
-20-
Agreement, provided, however that Companies shall not be liable for the
foregoing indemnification obligations in the event such liability, expense, loss
or claim arises primarily from such indemnified party's own gross negligence or
willful misconduct.
3.6. After the end of each month, the Agent, on its own behalf
and/or acting on behalf of the Lenders, shall promptly send the Companies a
statement showing the accounting for the charges, loans, advances, payments
under the Letter of Credit Guaranty, and other transactions occurring between
the Agent, on its own behalf, and/or acting on behalf of the Lenders and the
Companies during that month. The monthly statement shall be deemed correct and
binding upon the Companies and shall constitute an account stated between the
Companies, the Agent, and the Lenders unless the Agent receives a written
statement of the exceptions within thirty (30) days of the date of the monthly
statement.
3.7. In the event that (a) the outstanding balance of Revolving
Loans exceeds (b) the amount calculated as (i) the lesser of (A) the Line of
Credit or (B) the Borrowing Base, minus (ii) the Availability Reserves, any such
nonconsensual Overadvance shall be due and payable to Agent immediately upon
Agent's demand therefor; provided, however, that any consensual Overadvance made
pursuant to Section 3.1 hereof shall be due as and when specified in the
requisite consent of Required Lenders.
SECTION 4. LETTERS OF CREDIT
In order to assist the Companies in establishing or opening i) documentary
Letters of Credit with an Issuing Bank to cover the purchase and importation of
inventory and ii) standby Letters of Credit with an Issuing Bank to cover such
other matters as the Companies may so decide, other than for the purchase of
Inventory or to secure present or future Trade Accounts Payable, the Companies
have requested the Agent, acting on behalf of the Revolving Lenders, to join in
the applications for such Letters of Credit, and/or guarantee payment or
performance of such Letters of Credit and any drafts or acceptances thereunder
through the issuance of the Letters of Credit Guaranty, thereby lending the
Revolving Lenders' credit to the Companies, and the Revolving Lenders, acting
through the Agent, have agreed to do so. These arrangements shall be handled by
the Agent, acting on behalf of the Revolving Lenders, subject to the terms and
conditions set forth below.
4.1. Within the Line of Credit and subject to Availability, the
Revolving Lenders, acting through the Agent, shall assist the Companies in
obtaining such Letters of Credit in an aggregate amount for both Companies
outstanding at any one time not to exceed the Letter of Credit Sub-Line. The
Agent's assistance with respect to Letters of Credit for amounts in excess of
the limitations set forth herein shall at all times and in all respects be in
the Agent's sole discretion. Notwithstanding anything herein to the contrary,
upon the occurrence of a Default and/or an Event of Default, the Agent's
assistance with respect to any Letters of Credit shall be in the Agent's sole
discretion unless such Event of Default is waived in writing, or such Default is
cured to the Agent's satisfaction in the exercise of its reasonable business
judgment during any applicable grace or cure period.
4.2. The Agent, acting on behalf of the Revolving Lenders, shall
have the right, without notice to the Companies, to charge the loan account with
the amount of any and all indebtedness, liability or obligation of any kind paid
or incurred under the Letters of
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Credit Guaranty at the earlier of: a) payment by the Agent under the Letters of
Credit Guaranty, or b) termination of this Financing Agreement in accordance
with Section 10 of this Financing Agreement. Any amount so charged to the loan
account shall be charged against any credit balances then in the loan account,
and if there are then insufficient credit balances then to the extent of such
insufficiency such amount shall be deemed a Revolving Loan hereunder and shall
incur interest at the rate provided for in Section 7.1 of this Financing
Agreement.
4.3. [Intentionally Left Blank].
4.4. In connection with any Letter of Credit, neither the Agent nor
any Lender shall be responsible for: the existence, character, quality,
quantity, condition, packing, value or delivery of the goods purporting to be
represented by any documents; any difference or variation in the character,
quality, quantity, condition, packing, value or delivery of the goods from that
expressed in the documents; the validity, sufficiency or genuineness of any
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged,
other than as a result of the gross negligence of the Agent and/or any Revolving
Lender; the time, place, manner or order in which shipment is made; partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else in
connection with any Inventory which is the subject of any Letter of Credit or
the shipping thereof; or any breach of contract between the shipper or vendors
and either Company. Furthermore, without being limited by the foregoing, neither
the Agent nor any Lender shall be responsible for any act or omission with
respect to or in connection with any Inventory which is the subject of any
Letter of Credit.
4.5. In connection with any Letter of Credit, the Companies agree
that any action taken by the Agent, if taken in good faith, or any action taken
by any Issuing Bank, under or in connection with the Letters of Credit, the
guarantees, the drafts or acceptances, or the Collateral, shall, as between the
Companies and the Agent, be binding on the Companies and shall not put the Agent
or any Revolving Lender in any resulting liability to the Companies other than
as a result of the gross negligence or willful misconduct of the Agent or such
Revolving Lender. After the occurrence of an Event of Default which is not
waived, the Agent shall have the full right and authority to clear and resolve
any questions of non-compliance of documents; to give any instructions as to
acceptance or rejection of any documents or goods; to execute any and all
steamship or airways guaranties (and applications therefor), indemnities or
delivery orders; to grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances, or documents; and to
agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances; all in the Agent's sole name, and the
Issuing Bank shall be entitled to comply with and honor any and all such
documents or instruments executed by or received solely from the Agent, all
without any notice to or any consent from the Companies, provided, however, that
the Agent shall give the applicable Company notice of the acceptance or
rejection of any goods.
-22-
4.6. In connection with any Letter of Credit, without the Agent's
express consent (which consent shall not be unreasonably withheld) and, where
applicable, endorsement in writing, the Companies agree: a) not to execute any
and all applications for steamship or airway guaranties, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances or documents; or to agree to any
amendments, renewals, extensions, modifications or changes of any of the terms
or conditions of any of the Letters of Credit, applications, drafts or
acceptances; and b) after the occurrence of an Event of Default which is not
waived, not to i) clear and resolve any questions of non-compliance of
documents, or ii) give any instructions as to acceptance or rejection of any
documents or goods.
4.7. In connection with any Letter of Credit, the Companies agree
that any necessary import, export or other licenses or certificates for the
import or handling of the Inventory will have been promptly procured, and all
foreign and domestic governmental laws and regulations in regard to the shipment
and importation of the Inventory, or the financing thereof will have been
promptly and fully complied with, except to the extent that any such
non-procurement or non-compliance will not have a material adverse effect on
such Inventory; and any certificates in that regard that the Agent, on behalf of
the Revolving Lenders, may at any time reasonably request will be promptly
furnished. In this connection, each Company warrants and represents that, to its
actual knowledge, all shipments made under any of the Letters of Credit are in
accordance with the laws and regulations of the countries in which the shipments
originate and terminate, and are not prohibited by any such laws and
regulations, except to the extent that any failure to so comply will not have a
material adverse effect on such shipments. The Companies assume all risk,
liability and responsibility for, and agree to pay and discharge, all present
and future local, state, federal or foreign taxes, duties, or levies in
connection with any Inventory or goods purchased, imported or acquired under the
Letter of Credit. Any embargo, restriction, laws, customs or regulations of any
country, state, province, city, or other political subdivision, where the
Inventory is or may be located, or wherein payments are to be made, or wherein
drafts may be drawn, negotiated, accepted, or paid, shall be solely the
Companies' risk, liability and responsibility.
4.8. Upon any payments made to the Issuing Bank under the Letter of
Credit Guaranty, the Agent, for the benefit of the Revolving Lenders, shall
acquire by subrogation, any rights, remedies, duties or obligations granted or
undertaken by either Company to the Issuing Bank in any application for Letters
of Credit, any standing agreement relating to Letters of Credit or otherwise,
all of which shall be deemed to have been granted to the Agent for the benefit
of the Revolving Lenders and apply in all respects to the Agent and the
Revolving Lenders and shall be in addition to any rights, remedies, duties or
obligations contained herein.
4.9. Nothing in this Financing Agreement is intended to relieve any
Issuing Bank from any liability to any Person.
-23-
SECTION 4.A. TERM LOAN
4.A.1 Each Company hereby agrees to execute and deliver to the Agent on
behalf of the Term Lenders the Term Loan Promissory Notes, to evidence the Term
Loan to be extended by the Agent on behalf of the Term Lenders.
4.A.2 Upon the Agent's receipt of the Term Loan Promissory Notes, the Term
Lenders hereby agree to extend to the Companies the Term Loan.
4.A.3 Subject to Section 4.A.4 below, the principal amount of the Term
Loan shall be repaid by the Companies to the Agent on behalf of the Term Lenders
as follows: Six Million Six Hundred Sixty-Six Thousand Six Hundred Sixty-Seven
Dollars ($6,666,667) on the date occurring one (1) year from the Closing Date;
Six Million Six Hundred Sixty-Six Thousand Six Hundred Sixty-Seven Dollars
($6,666,667) on the date occurring two (2) years from the Closing Date; and the
remaining principal balance, together with all accrued and unpaid interest
thereon, on the date occurring three (3) years from the Closing Date; provided,
however, the Companies may prepay, without penalty, the principal amount of the
Term Loan, at any time, at their option, in whole or in part in a minimum amount
of $5,000,000 or, if less, the remaining balance thereof, together with accrued
and unpaid interest thereon, provided that at the time of any such prepayment
and after giving effect thereto, (a) no Default or Event of Default shall have
occurred and be continuing under the Financing Agreement and (b) the
Availability under the Revolving Loans shall be at least $25,000,000 after
giving effect to any prepayment made during the months of February through
September of any year or $35,000,000 after giving effect to any prepayment made
during the months of October through January of any year. Once repaid in whole
or in part, the Term Loan may not be reborrowed under this Financing Agreement.
Prepayments of the Term Loan will be applied to principal installments in
inverse order of maturity.
4.A.4 In the event this Financing Agreement or the Line of Credit is
terminated by the Agent, the Required Lenders or the Companies or any one of
them pursuant to the terms of this Financing Agreement, the Term Loan shall
become due and payable on the effective date of such termination notwithstanding
any provision to the contrary in the Term Loan Promissory Notes or this
Financing Agreement.
4.A.5 Each Company hereby authorizes the Agent to charge the Companies'
loan account with the amount of all Obligations owing under this Section 4A
hereof as such amounts become due.
4.A.6 Upon any repayment of the Term Loan and so long as no Default or
Event of Default has occurred and is then continuing, the Line of Credit will
automatically increase by an amount equal to such repayment and the Commitment
of each Term Lender who is also a Revolving Lender with respect to Revolving
Loans shall increase in an amount equal to its pro rata share of such repayment.
Upon any such automatic increase, there shall be a settlement among the
Revolving Lenders so as to ensure that, as of the date of such automatic
increase, the Revolving Lenders shall have their proportionate share of all
outstanding Obligations relating to the Revolving Loans.
-24-
SECTION 5. COLLATERAL
5.1. As security for the prompt payment in full of all loans and
advances made and to be made to the Companies from time to time by the Agent on
behalf of the Lenders pursuant hereto, as well as to secure the payment in full
of the other Obligations, each Company hereby pledges and grants to the Agent
for the benefit of the Lenders a continuing general lien upon and security
interest in all of its:
(a) Accounts;
(b) Documents of Title;
(c) Equipment;
(d) General Intangibles;
(e) Inventory; and
(f) Other Collateral.
5.2. The security interests granted hereunder shall extend and
attach to:
(a) All Collateral which is presently in existence and which
is owned by either Company or in which either Company has any interest (but only
to the extent of such interest), whether held by either Company or others for
its account;
(b) All Inventory and any portion thereof which may be
returned, rejected, reclaimed or repossessed by the Agent or either Company from
any of either Company's customers, as well as to all supplies, goods,
incidentals, packaging materials, labels and any other items which contribute to
the finished goods or products manufactured or processed by either Company, or
to the sale, promotion or shipment thereof.
5.3. Each Company agrees to take reasonable steps, consistent with
current business practices, to safeguard, protect and hold all Inventory and
make no disposition thereof except in the manner or for the purpose described in
Section 3.3 of this Financing Agreement. Inventory may be sold and shipped by
each Company to its customers in the ordinary course of such Company's business,
and such Company will collect all proceeds of such sales, consistent with
reasonable business practices in existence on the date of execution of this
Financing Agreement or consistent with the business practices of like companies
in the retail industry, provided, however, that all proceeds of all such sales
(including cash, checks and instruments for the payment of money), other than
the Retained Cash, are promptly deposited in accordance with Section 3.4 of this
Financing Agreement. Upon the sale, exchange, or other disposition of Inventory,
as herein provided, the security interest in the Inventory provided for herein
shall, without break in continuity and without further formality or act,
continue in, and attach to, the proceeds, including any instruments for the
payment of money, accounts receivable, contract rights, documents of title,
shipping documents, chattel paper and all other cash and non-cash proceeds of
such sale, exchange or disposition. As to any such sale, exchange or other
disposition, the Agent
-25-
on behalf of the Lenders shall have a security interest in all of the rights of
each Company as an unpaid seller, including stoppage in transit, replevin,
rescission and reclamation. Each Company hereby agrees to immediately forward
any and all proceeds of Collateral (other than Retained Cash) to the Depository
Account, and to hold any such proceeds (including any notes and instruments), in
trust for the Agent, on behalf of the Lenders, pending delivery to the Agent.
Irrespective of the Agent's perfection status in any and all of the General
Intangibles, including, without limitations, any Patents, Trademarks, Copyrights
or licenses with respect thereto, each Company hereby irrevocably grants the
Agent a royalty free license to sell, or otherwise dispose of or transfer, in
accordance with Section 9.3 of this Financing Agreement, and the applicable
terms hereof, any of the Inventory upon the occurrence of an Event of Default
which has not been waived in writing by the Agent.
5.4. The rights and security interests granted to the Agent for the
benefit of the Lenders hereunder are to continue in full force and effect,
notwithstanding the termination of this Financing Agreement or the fact that the
loan account on the books of the Agent may from time to time be temporarily in a
credit position, until the satisfaction in full of all Obligations and the
termination of this Financing Agreement. Any delay or omission by the Agent to
exercise any right hereunder, shall not be deemed a waiver thereof, or be deemed
a waiver of any other right, unless such waiver shall be in writing and signed
by the Agent. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion. Upon satisfaction in full
of all Obligations and the termination of this Financing Agreement, the Agent
will take, at the Companies' request and expense, all actions and do all things
reasonably necessary to release the rights and security interests in the
Collateral, and upon any partial release of Collateral, the Agent will take, at
the Companies' request and expense, all actions and do all things reasonably
necessary to release the rights and security interests in the Collateral that is
the subject of such partial release.
5.5. To the extent that the Obligations are now or hereafter secured
by any assets or property other than the Collateral or by the guarantee,
endorsement, assets or property of any other person, then the Agent shall have
the right in its sole discretion to determine which rights, security, liens,
security interests or remedies the Agent shall at any time pursue, foreclose
upon, relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of the Agent's or
any Lenders' rights hereunder.
5.6. Any reserves or credit balances in the loan account and any
other property or assets of either Company in the possession of the Agent may be
held by the Agent as security for any Obligations and applied in whole or
partial satisfaction of such Obligations when due. The liens and security
interests granted herein and any other lien or security interest the Agent may
have in any other assets of the Companies, shall secure payment and performance
of all now existing and future Obligations. The Agent may, in its Reasonable
Discretion, charge any or all of the Obligations to the loan account when due.
5.7. Each Company possesses all General Intangibles and rights
thereto necessary to conduct its business as conducted as of the Closing Date
and each Company shall maintain its rights in, and the value of, the foregoing
in the ordinary course of its
-26-
business, including, without limitation, by making timely payment with respect
to any applicable licensed rights. Each Company shall deliver to the Agent,
and/or shall cause the appropriate party to deliver to the Agent, from time to
time such pledge or security agreements with respect to General Intangibles (now
or hereafter acquired) of such Company and its subsidiaries as the Agent shall
reasonably require to obtain valid first liens thereon (subject to the Permitted
Encumbrances set forth in the definition thereof in clauses (i) (if and to the
extent consented to by Lenders as senior liens), (ii), (vi), (vii), (ix), (x),
(xi), and, with respect to such clauses only, (xii)). In furtherance of the
foregoing, each Company shall provide timely notice to the Agent of any
additional Patents, Trademarks, trade names, service marks, Copyrights, brand
names, trade names, logos and other trade designations acquired or applied for
subsequent to the Closing Date and each Company shall execute such documentation
as the Agent may reasonably require to obtain and perfect its lien thereon. Each
Company hereby irrevocably grants to the Agent a royalty-free, non-exclusive
license in the General Intangibles, including trade names, Trademarks,
Copyrights, Patents, licenses, and any other proprietary and intellectual
property rights and any and all right, title and interest in any of the
foregoing, for the sole purpose, upon the occurrence and during the continuance
of an Event of Default, of having the right to advertise for sale and sell or
transfer any Inventory bearing any of the General Intangibles, and apply the
proceeds thereof to the Obligations hereunder, all as further set forth in this
Financing Agreement and irrespective of the Agent's lien and perfection in any
General Intangibles.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1. Each Company hereby warrants and represents that: i) the fair
value of its assets exceed the book value of its liabilities; ii) such Company
is generally able to pay its debts as they become due and payable; and iii) such
Company does not have unreasonably small capital to carry on its business as it
is currently conducted absent extraordinary and unforeseen circumstances. Each
Company further warrants and represents that except for the Permitted
Encumbrances and liens of which the Agent is aware on the date hereof, each of
the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral. Further, that except for
the Permitted Encumbrances, each Company is or will be at the time additional
Collateral is acquired by it, the absolute owner of the Collateral with full
right to pledge, sell, consign, transfer and create a security interest therein,
free and clear of any and all claims, consignments, or liens in favor of others,
and that such Company will, at its expense, defend the same from any and all
claims and demands (other than the Permitted Encumbrances) of any other person.
6.2. Each Company agrees to maintain accurate books and records
pertaining to the Collateral. Prior to the occurrence of an Event of Default,
the Agent, accompanied by the Lenders or their respective agents may, from time
to time (but no more than twice per fiscal year of the Companies) upon
reasonable notice, enter upon each Company's premises at any time during normal
business hours, or at such other times as the Agent and the Companies may agree
upon, for the purpose of inspecting the Collateral and any and all records
pertaining thereto, all at the Agent's and the applicable Lender's expense.
During the continuance of an Event of Default, the Agent, accompanied by the
Lenders or their respective agents may, at the Companies' expense, enter each
Company's premises,
-27-
upon reasonable notice and during normal business hours, and as often as the
Agent deems reasonably necessary, to inspect the Collateral and the books and
records of each Company. Each Company agrees to afford the Agent prior written
notice of any change in the location of any Collateral, other than to locations
that are known to the Agent and at which the Agent has otherwise fully perfected
its liens thereon. Set forth on Schedule I hereto is a list of all of each
Company's retail stores and the addresses of such stores. Each Company is also
to advise the Agent promptly, in sufficient detail, of any material adverse
change relating to the type, quantity or quality of the Collateral or on the
security interests granted to the Agent therein.
6.3. [Intentionally Left Blank].
6.4. Each Company agrees to comply with the requirements of all
state and federal laws in order to grant to the Agent for the benefit of the
Lenders valid and perfected first security interests in the Collateral, subject
only to the Permitted Encumbrances. The Agent is hereby authorized by each
Company, to the extent permitted by applicable law, to file any financing
statements covering the Collateral whether or not the Company's signature
appears thereon and the Agent agrees to provide the Companies with copies of
such financing statements. Each Company hereby consents to and ratifies any and
all execution and/or filing of financing statements on or prior to the Closing
Date by the Agent. Each Company agrees to do whatever the Agent may reasonably
request, from time to time, by way of: filing notices of liens, financing
statements, amendments, renewals and continuations thereof; cooperating with the
Agent's employees and agents; keeping Inventory stock records; transferring
proceeds of Collateral to the Agent's possession in accordance with the terms of
this Financing Agreement; and performing such further acts as the Agent on
behalf of the Lenders may reasonably require in order to effect the purposes of
this Financing Agreement.
6.5. Each Company agrees to i) maintain on Inventory, insurance
under such policies of insurance, with such insurance companies, in such
reasonable amounts and covering such insurable risks on as is reasonably
acceptable to the Agent and ii) maintain or caused to be maintained on Real
Estate and Equipment, insurance under such policies of insurance with such
insurance companies selected by the Companies, on terms no less favorable than
the insurance coverage in place as of the date hereof (other than with respect
to the deductible amounts and limits of such coverage). All policies covering
the Inventory are, subject to the rights of any holders of Permitted
Encumbrances holding claims senior to the Agent, to be made payable to the Agent
on behalf of the Lenders under a standard non-contributory "mortgagee", "lender"
or "secured party" clause and are to contain such other provisions as the Agent
may reasonably require to fully protect by insurance the Agent's interest in the
Inventory and to any payments to be made under such policies with respect to the
Inventory. All original policies or true copies thereof or certificates thereof
are to be delivered to the Agent, with all premiums current with the loss
payable endorsement in the Agent's favor, and shall provide for not less than
ten (10) days prior written notice to the Agent of the exercise of any right of
cancellation. If either Company fails to maintain such insurance, the Agent may
arrange for such insurance, but at the Companies' expense and without any
responsibility on the Agent's or any Lender's part for: obtaining the insurance,
the solvency of the insurance companies, the adequacy of the coverage, or the
collection of
-28-
claims. Upon the occurrence of an Event of Default which is not waived, the
Agent shall, subject to the rights of any holders of Permitted Encumbrances
holding claims senior to the Agent, have the sole right, in the name of the
Agent or either Company, to file claims under any insurance policies with
respect to the Inventory, to receive, receipt and give acquittance for any
payments that may be payable thereunder with respect to the Inventory, and to
execute any and all endorsements, receipts, releases, assignments, reassignments
or other documents that may be necessary to effect the collection, compromise or
settlement of any claims with respect to the Inventory under any such insurance
policies. In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to Collateral shall be deposited in the Depository
Accounts in accordance with Section 3.4 of this Financing Agreement.
6.6. Each Company agrees to pay, when due, all local, domestic and
foreign (as applicable) taxes, assessments, and other charges (herein "taxes")
lawfully levied or assessed upon such Company or the Collateral, provided,
however, that such taxes need not be paid on or before the date fixed for
payment thereof if: i) such taxes are being diligently contested by the
Companies in good faith and by appropriate proceedings; ii) the Companies
establish such reserves as may be required by GAAP; iii) such taxes are not
secured by a filed lien which is senior to the liens of the Agent on the
Collateral and iv) such taxes secured by a filed lien are not due the United
States of America. To prevent the imminent foreclosure of any tax liens (whether
such liens are senior or junior to the liens of the Agent) or in the event the
Agent on behalf of the Lenders is exercising its remedies as a secured creditor
on Collateral, then the Agent may, on the Companies' behalf, pay any taxes then
due and secured by a lien on the Collateral and the amount thereof shall be an
Obligation secured hereby.
6.7. Subject to the provisions of Section 6.6 above, each Company:
(a) agrees to comply with all acts, rules, regulations and orders of any
legislative, administrative or judicial body or official, including, but not
limited to, the Fair Labor Standards Act, as set forth in Section 201 through
Section 219 of Title 29 of the United States Code, which the failure to comply
with would have a materially adverse impact on the Collateral, or on the
operation of the business of such Company, provided that the Companies may
contest any acts, rules, regulations, orders and directions of such bodies or
officials in any reasonable manner which will not materially adversely effect
the Agent's liens or priority in the Collateral; and (b) agrees to comply with
all environmental statutes, acts, rules, regulations or orders as presently
existing or as adopted or amended in the future, applicable to the ownership
and/or use of its Real Estate and operation of its business, which the failure
to comply with would have a materially adverse impact on any material part of
the Collateral, or on the operation of the business of either Company. The
Companies shall not be deemed to have breached any provision of this Section 6.7
if (i) the failure to comply with the requirements of this Section 6.7 resulted
from good faith error or innocent omission, (ii) the applicable Company promptly
commences and diligently pursues a cure of such breach and such cure is
eventually, within a reasonable time frame based upon the circumstances and the
amount of work required, completed and (iii) such failure has not resulted in a
materially adverse effect on any material portion of the Collateral or the
business, financial condition or operations of either Company.
-29-
6.8. Until termination of this Financing Agreement and satisfaction
in full of all Obligations due hereunder, Big 5 agrees that, unless the Agent
shall have otherwise consented in writing, Big 5 will furnish, or cause to be
furnished, to the Agent, not later than: (a) one hundred and twenty (120) days
after the end of each fiscal year of Big 5, an audited Consolidated Balance
Sheet as at the close of such year and consolidated statements of operations,
cash flows, shareholders' equity and reconciliation of surplus of the Parent,
Big 5 and their Subsidiaries for such year, audited by independent public
accountants selected by Big 5 and satisfactory to the Agent, (the Agent hereby
agrees that KPMG Peat Marwick is satisfactory to the Agent); (b) forty-five (45)
days after the end of each month, other than a month that constitutes a fiscal
year end, a Consolidated Balance Sheet as at the end of such period and
consolidated statements of operations and cash flows of the Parent, Big 5 and
their Subsidiaries for such period, certified by an authorized financial or
accounting officer of Big 5; and (c) a reasonable time after request, such
further information regarding the business affairs and financial condition of
the Companies as the Agent may reasonably request, including, without
limitation, annual cash flow projections in form reasonably satisfactory to the
Agent. Each financial statement required to be submitted under clauses a and b
above must be accompanied by an Officer's Certificate, signed by the President,
Senior Vice President, Vice President, Controller, or Treasurer, of Big 5
pursuant to which such officer must certify that: (i) the financial statement(s)
fairly and accurately represent(s) the financial condition of Parent, Big 5 and
their Subsidiaries, at the end of the particular accounting period, as well as
the operating results of Parent, Big 5 and their Subsidiaries, during such
accounting period, subject to year-end audit adjustments; (ii) during the
particular accounting period: (x) there has been no Default or Event of Default
under this Financing Agreement, provided, however, that if any such officer has
knowledge that any such Default or Event of Default has occurred during such
period, the existence of and a detailed description of same shall be set forth
in such Officer's Certificate; and (y) no senior officer of either Company has
received any notice of cancellation with respect to its property insurance
policies or certifying as to replacement policies therefor; and (iii) the
exhibits attached to such monthly and annual financial statement(s) constitute
detailed calculations showing compliance with all financial covenants applicable
for such period, if any, contained in this Financing Agreement. Notwithstanding
anything in this Financing Agreement to the contrary, should the Parent purchase
the assets of, or capital stock of, a Person, or create or incorporate another
Person of which it owns a majority of such Person's capital stock, then the
references to Consolidated Balance Sheet shall mean the Consolidated Balance
Sheet of Big 5 and its Subsidiaries only and all references to Parent and its
Subsidiaries shall, without further action, be immediately deleted from this
Section 6.8.
6.9. Big 5 shall pay and satisfy in full the Senior Notes no later
than December 22, 2004.
6.10. Until termination of this Financing Agreement and satisfaction
of all Obligations due hereunder, each Company agrees that, without the prior
written consent of the Agent, except as otherwise herein provided, such Company
will not:
A. Incur, create, assume or permit any lien,
charge, security interest, encumbrance or judgment,
(whether
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as a result of a purchase money or title retention
transaction, or other security interest, or otherwise)
to exist on i) the Collateral, except for the Permitted
Encumbrances and ii) any of its other assets whether
real, personal or mixed, whether now owned or hereafter
acquired, except for the Permitted Encumbrances;
B. Incur or create any Indebtedness other than the
Permitted Indebtedness;
C. Except for Permitted Indebtedness, borrow any
money on the security of the Collateral from sources
other than the Agent acting on behalf of the Lenders;
D. Sell, lease, assign, transfer or otherwise
dispose of i) Collateral, except as otherwise
specifically permitted by this Financing Agreement, or
ii) either all or substantially all of the other assets
of such Company;
E. Merge, consolidate or otherwise alter or modify
its corporate name, principal place of business,
jurisdiction of incorporation, structure or existence,
or enter into or engage in any operation or activity
materially different from that presently being conducted
by such Company or otherwise related to the retail
sporting goods industry, provided, however, that on
fifteen (15) days prior notice to the Agent, such
Company may, without obtaining the consent of the Agent
or any Lender i) merge its Subsidiaries or a Person into
itself provided x) such Company is the survivor of the
mergers; y) no liens on the assets of the Subsidiaries
or the Person survive such merger other than liens that
constitute Permitted Encumbrances; z) such Person was an
entity with its principal place of business, state of
formation and assets in the United States of America;
aa) such Person was engaged in the retail sporting goods
industry; and bb) such Company, immediately after giving
effect to such merger, is in full compliance with all of
the terms and provisions of this Financing Agreement,
provided, however, that such Person's or Subsidiary's
Inventory shall not be deemed Eligible Inventory until
such time as the Agent has completed to its reasonable
satisfaction an examination and review of such Inventory
and such Person's or Subsidiary's books and records; and
ii) alter or modify its corporate name or principal
place of business;
F. Assume, guarantee, endorse, or otherwise become
liable upon the obligations of any person, firm, entity
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or corporation, other than i) by the endorsement of
negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business,
ii) pursuant to obligations in effect on the date
hereof, iii) in connection with subleases pursuant to
which such Company is the sub-lessor, iv) home
relocation loans to or on behalf of employees, v) in the
ordinary course of such Company's business or for
purposes deemed reasonable by such Company provided such
obligations under this clause v) shall not exceed
$10,000,000 in the aggregate for both Companies at any
one time, and vi) in favor of the Agent for the benefit
of the Lenders;
G. Declare or pay any dividend of any kind on, or
purchase, acquire, redeem or retire, any of its capital
stock or equity interest of any class whatsoever,
whether now or hereafter outstanding, except that:
(i) Big 5 may declare and pay dividends on its
capital stock:
(a) provided that no Default or Event of Default
is then in existence or will be in existence after
giving effect to such dividend, in cash (but not subject
to any limitation based upon Company Liquidity) in
(1) amounts sufficient to enable the Parent to
(y) pay income or franchise taxes of the
Companies due as a result of the filing of a
consolidated, combined or unitary tax return
in which the operations of the Companies are
included, and
(z) reimburse the Parent for out-of-pocket
expenses incurred by the Parent for the
joint or several benefit of the Parent and
the Companies, including fees and expenses
of its directors for attending the Board of
Directors' meeting, and
(2) additional amounts in the fiscal year ending
December 31, 2005 and any subsequent fiscal year
not to exceed $5,000,000 plus the net cash
proceeds realized from sales by Big 5, in any
fiscal year starting with the fiscal year ending
December 31, 2005, of its capital stock plus the
Prior Financing Agreement Carryover Amount less
the sum of all dividends paid
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out of the Prior Financing Agreement Carryover
Amount in any previous fiscal year during the term
of this Financing Agreement, subject to the
following:
(w) if Big 5 does not pay in any fiscal year
aggregate dividends under Section
6.10G.(i)(a)(2) equal to or greater than the
sum of $5,000,000 plus the net cash proceeds
realized from sales by Big 5 in such fiscal
year of its capital stock, the difference
may be added to the amount permitted in
subsequent fiscal years,
(x) prior to declaring any dividend under
Section 6.10G.(i)(a)(2), Big 5 shall submit
to Agent a certificate signed by the
President, Senior Vice President, Vice
President, Controller, or Treasurer of Big 5
in form and substance satisfactory to Agent,
which certificate must: (i) state the
proposed amount of the dividend and proposed
dividend payment date, which date must be
within ninety (90) days of the date of the
certificate; (ii) certify that no Default or
Event of Default has occurred and is
continuing; (iii) certify that, to the best
of such officer's knowledge and belief after
diligent investigation, after giving effect
to the proposed dividend, no Default or
Event of Default is expected to occur during
the period from the dividend's declaration
date to and including its payment date; and
(iv) attach reasonably detailed projections
of the Companies' Fixed Charge Coverage
Ratio and Senior Secured Debt Coverage Ratio
in support of such certifications,
(y) Big 5 shall not pay dividends under
Section 6.10G.(i)(a)(2) in excess of Three
Million Dollars ($3,000,000) in any fiscal
quarter,
(z) if a Default or Event of Default exists
on the dividend payment date or would result
from the dividend payment, the dividend may
nonetheless be paid on the dividend payment
date set forth in the certificate so long as
no Default or Event of Default existed on
the date of the certificate delivered to
Agent or on the
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dividend declaration date and the other
criteria under Section 6.10G.(i)(a)(2) are
satisfied;
(b) in kind (i.e. in the form of capital stock
only and not subject to any limitation based upon
Company Liquidity), and
(c) in cash in any amount if and only if such Big
5 dividend or other distribution under this clause (c)
is used either to repurchase, acquire or redeem issued
and outstanding capital stock of Parent or to pay a cash
dividend thereon; provided that such Big 5 dividend or
other distribution under this clause (c) may not be
declared or paid if a Default or Event of Default is
then in existence or will be in existence after giving
effect to the payment of such dividend, or if, after
giving effect to the making of such dividend or other
distribution under this clause (c), there shall be less
than $40,000,000 in Company Liquidity, subject to the
following;
(x) prior to declaring any dividend under
Section 6.10G.(i)(c), Big 5 shall submit to
Agent a certificate signed by the President,
Senior Vice President, Vice President,
Controller, or Treasurer of Big 5 in form
and substance satisfactory to Agent, which
certificate must: (i) state the proposed
amount of the dividend and proposed dividend
payment date, which date must be within
ninety (90) days of the date of the
certificate; (ii) certify that no Default or
Event of Default has occurred and is
continuing; (iii) certify that, to the best
of such officer's knowledge and belief after
diligent investigation, after giving effect
to the proposed dividend, no Default or
Event of Default is expected to occur during
the period from the dividend's declaration
date to and including its payment date and
the Company Liquidity will be equal to or
greater than Forty Million Dollars
($40,000,000) at all times during such
period; and (iv) attach reasonably detailed
projections of Company Liquidity, Fixed
Charge Coverage Ratio, and Senior Secured
Debt Coverage Ratio in support of such
certifications,
(y) if a Default or Event of Default exists
on the dividend payment date or would result
from
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the dividend payment, the dividend may
nonetheless be paid on the dividend payment
date set forth in the certificate delivered
to Agent so long as, after giving effect to
such dividend, Company Liquidity is equal to
or greater than Forty Million Dollars
($40,000,000) and no Default or Event of
Default existed on the date of the
certificate delivered to Agent or on the
dividend declaration date;
and
(ii) Big 5 Services may declare and pay dividends and
distributions to Big 5 to the extent permitted by
applicable law.
H. [Intentionally Omitted].
I. Make any advance or loan to, or any investment
in, any Person, except for i) advances, loans or
investments in existence on the date of execution of
this Financing Agreement; ii) Permitted Investments;
iii) loans and advances to employees in the ordinary
course of business for travel, entertainment and home
relocation; iv) loans and advances to employees to
enable employees to purchase the capital stock of Parent
provided such loans and advances do not exceed
$2,000,000 in the aggregate for both Companies at any
one time, provided, however, that such $2,000,000
limitation shall not be applicable if the cash proceeds
of such stock purchases are immediately reinvested by
the Parent in the capital stock of Big 5 or are
immediately used to repay Indebtedness of Parent to the
Companies; v) advances or loans to, or investments in,
joint ventures or Subsidiaries of Big 5, provided,
however, that if such loans or advances are not being
used to acquire, directly or indirectly, assets for the
benefit of Big 5 or such advances, loans, or investments
are not made to Big 5 Services, such loans, advances or
investments may not exceed $2,500,000 in the aggregate
for both Companies at any one time; and vi) other loans,
advances and investments to, or with the Parent,
provided same do not exceed in the aggregate outstanding
at any one time $10,000,000 in the aggregate for both
Companies.
6.11. [Intentionally Omitted].
6.12. Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, Big 5 and its Subsidiaries,
on a consolidated
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basis, shall maintain at the end of each fiscal quarter, a Fixed Charge Coverage
Ratio of not less than 1.0 to 1.0.
6.13. Until termination and payment and satisfaction in full of all
Obligations related to the Term Loan, Big 5 and its Subsidiaries, on a
consolidated basis, shall maintain at the end of each fiscal month, a Senior
Secured Debt Coverage Ratio of not greater than 2.5 to 1.0.
6.14. The Companies agree to advise the Agent, promptly, in writing
of: (a) all quantifiable expenditures (actual or anticipated) in excess of
$1,500,000 pertaining to the Real Estate and operations in any fiscal year for
(i) environmental clean-up, (ii) environmental compliance or (iii) environmental
testing and the impact of said expenses on Working Capital; and (b) any notices
either Company receives from any local, state or federal authority advising such
Company of any environmental liability (real or potential) stemming from any of
such Company's operations, premises, its waste disposal practices, or waste
disposal sites used by such Company and to provide the Agent with copies of all
such notices if so required.
6.15. Without the prior written consent of the Agent, each Company
agrees that it will not: enter into any transaction, including, without
limitation, any purchase, sale, transfer, lease, loan or exchange of property
with Parent or any Subsidiary or Affiliate other than i) transactions in the
ordinary course of such Company's business and on terms no less favorable than
the terms otherwise attainable by such Company from a Person not an Affiliate;
ii) as otherwise permitted in this Financing Agreement, including, without
limitation, Permitted Indebtedness, to the extent applicable; iii) reimbursement
of fees and expenses to directors for the expenses incurred by such directors
for attending the Companies' Board of Directors' meetings; and iv) all customary
compensation arrangements, including participation in employee benefit plans.
6.16. Big 5 shall conduct or cause to be conducted, not less than
once in any calendar year, an actual physical count of its Inventory at each
store. Such physical inventory count shall, in part, be conducted or reviewed by
an entity that is not an Affiliate of the Companies and which entity shall be
experienced in conducting or reviewing such a physical inventory. Big 5 shall,
within forty-five (45) days after the end of each month, provide to the Agent
for each Lender a schedule prepared by Big 5 of the results of the Inventory
counts completed at Big 5's stores during that month. Concurrently therewith,
Big 5 shall provide the Agent for each Lender with the results of the internally
prepared cycle counts completed at Big 5's distribution centers during that
month. Such cycle counts shall be reviewed by Big 5's independent public
accountants in their normal annual review process. Upon the Agent's reasonable
request, Big 5 will provide the Agent with further details of Inventory count
and review results, so long as the Agent's request is for information readily
available to Big 5 on existing internally or externally prepared Inventory
reports.
6.17. Each Company shall remit any and all sales taxes when due to
the appropriate sales tax authorities when any such remittances are due,
provided, however, that such remittances need not be made on or before such due
date if: (i) such sales taxes are
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being diligently contested by such Company in good faith and by appropriate
proceedings; (ii) such Company establishes such reserves as may be required by
GAAP; and iii) the failure to remit such sales taxes does not create a lien in
favor of such sales tax authorities or impose upon the Agent or any Lender any
obligation to segregate proceeds.
6.18. Each Company hereby agrees to indemnify and hold harmless the
Agent and the Lenders and their respective officers, directors, employees,
attorneys and agents (each an "Indemnified Party") from, and holds each of them
harmless against, any and all losses, liabilities, obligations, claims, actions,
damages, out-of-pocket costs and out-of-pocket expenses (including reasonable
and documented attorney's fees) arising out of or incurred with respect to the
Financing Documents, including without limitation those which may arise from or
relate to: (a) the Depository Account, the Blocked Accounts, the lockbox and/or
any other depository account and/or the agreements executed in connection
therewith; (b) any transactions or occurrences relating to Letters of Credit
established or opened for either Company's account, the collateral relating
thereto and any drafts or acceptances thereunder, and all Obligations
thereunder, including any such loss or claim due to any errors or actions taken
by, or any omissions, negligence or misconduct of, any Issuing Banks; (c) any
and all claims or expenses asserted against the Agent or a Lender as a result of
any environmental pollution, hazardous material or environmental clean-up
relating to the Real Estate, or any claim or expense which results from either
Company's operations (including, but not limited to, either Company's off-site
disposal practices) and use of the Real Estate, which the Agent or a Lender may
sustain or incur (other than solely as a result of the physical actions of the
Agent or the Lenders or their respective employees or agents on the Companies'
premises which are determined to constitute gross negligence or willful
misconduct by a court of competent jurisdiction), all whether through the
alleged or actual negligence of such person or otherwise, and (d) any sale or
transfer of Collateral, preserving, maintaining or securing the Collateral,
defending its interests in Collateral (including pursuant to any claims brought
by either Company, either Company as debtor-in-possession, any secured or
unsecured creditors of either Company, any trustee or receiver in bankruptcy, or
otherwise); except and to the extent in each case that the same results from the
gross negligence or willful misconduct of any Indemnified Party. Each Company
hereby agrees that this indemnity shall survive termination of this Financing
Agreement, as well as payments of Obligations which may be due hereunder, but
such survival shall be limited to two (2) years with respect to the indemnity
described in clause (c) hereof. The Agent may, in its Reasonable Discretion,
establish such Availability Reserves with respect thereto as it may deem
advisable under the circumstances and, upon any termination hereof, hold such
reserves as cash reserves for any such contingent liabilities.
6.19 The Companies agree to comply with all applicable anti-money
laundering and terrorism laws, regulations and executive orders in effect from
time to time (including, without limitation, the USA Patriot Act (Pub. L. No.
107-56). The Companies also agree to ensure that no person who owns a
controlling interest in or otherwise controls either of the Companies is a
person designated under Section 1(b), (c) or (d) of Executive Order No. 13224 or
any other similar Executive Order. The Companies acknowledge that Agent's
performance hereunder is subject to compliance with all such laws, regulations
and executives orders, and in furtherance of the foregoing, the Companies agree
to provide to Agent all information about the Companies' ownership, officers,
directors, customers and
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business structure as Agent reasonably may require to comply with, such laws,
regulations and executive orders.
SECTION 7. INTEREST, FEES AND EXPENSES
7.1. Interest on the Revolving Loans shall be payable monthly as of
the end of each month and shall be at a rate equal to the sum of the Chase Bank
Rate or Libor, as applicable, plus an applicable interest rate margin determined
in accordance with the following:
(a) From the date of this Financing Agreement through June 30,
2005, interest on the Revolving Loans shall be equal to the Chase Bank Rate plus
0.00% and Libor plus 1.25%, as applicable.
(b) Except as provided in Section 7.1(c), from July 1, 2005
and thereafter the applicable interest rate margin on the Revolving Loans shall
be in the amount set forth in the table below that corresponds to the average
daily outstanding aggregate balance of Revolving Loans and undrawn Letters of
Credit for the most recently ended fiscal quarter:
Average Quarterly
Revolving Loans and
undrawn Letters of Credit
Balance Chase Bank Rate Margin Libor Margin
--------------------------- ---------------------- ------------
Less than $80,000,000 0.00% 1.25%
$80,000,000 to $100,000,000 0.00% 1.50%
More than $100,000,000 0.25% 1.75%
(c) If EBITDA (as evidenced by the most recent fiscal
quarter's financial statement) for the four fiscal quarters then ended is less
than or equal to $50,000,000, the applicable margin for Revolving Loans (other
than Libor Loans) will be 0.50% and the applicable margin for Libor Loans will
be 2.00%.
7.2. Interest on the Term Loan shall be payable monthly as of the
end of each month and shall be at a rate equal to the sum of the Chase Bank Rate
or Libor, as applicable, plus an applicable interest rate margin in the amount
set forth in the table below that corresponds to then-current balance of the
Term Loan:
Term Loan Balance Chase Bank Rate Margin Libor Margin
------------------------ ---------------------- ------------
$10,000,000 or less 1.00% 3.00%
Greater than $10,000,000 1.50% 3.50%
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7.3. A change in the interest rate margin for Revolving Loans will
become effective the first day of each month for which a change of margin is
appropriate. The change in the interest rate margins for the Term Loan will
become effective the first Business Day after the Term Loan balance is reduced
to $10,000,000 or less. Interest on the Revolving Loans and the Term Loan will
be computed on a per annum basis, on the average of the net balances owing by
the Companies in the Companies' account at the close of each day during such
month. The Companies may elect to use Libor as to any new or then outstanding
Revolving Loans or Term Loan portion provided x) there is then no Default or
Event of Default, unless such Default or Event of Default has been waived in
writing by Agent, and y) the Companies have so advised the Agent of their
election to use Libor and the Libor Period selected no later than three (3)
Business Days prior to the proposed borrowing or, in the case of a Libor
election with respect to a then outstanding Revolving Loan or Term Loan portion,
three (3) Business Days prior to the conversion of any then outstanding
Revolving Loans or Term Loan portions to Libor Loans and z) the election and
Libor shall be effective, provided, there is then no unwaived Default or Event
of Default, on the fourth Business Day following said notice. The Libor
elections must be for $100,000 or whole multiples thereof. If no such election
is timely made or can be made, then the Agent shall use the Chase Bank Rate and
the applicable interest rate margin set forth above to compute interest. In the
event of any change in the Chase Bank Rate, the interest rate hereunder shall
change, as of the first day of the month following any change, so as to reflect
the changed Chase Bank Rate. The rates hereunder shall be calculated based on a
365-day year. The Agent shall be entitled to charge the Companies' account at
the rate provided for herein when due until all Obligation have been paid in
full. Interest on the Term Loan will be for the ratable benefit of the Term
Lenders and interest on the Revolving Loans will be for the ratable benefit of
the Revolving Lenders.
7.4. In consideration of the Letter of Credit Guaranty, the
Companies shall pay to the Agent, for the ratable benefit of Revolving Lenders,
the Letter of Credit Guaranty Fee which shall be an amount equal to one and
one-quarter percent (1 1/4%) per annum, payable monthly, on the face amount of
each outstanding Letter of Credit less the amount of any and all amounts
previously drawn under such Letter of Credit.
7.5. Any charges, fees, commissions, costs and expenses charged to
the Agent for either Company's account by any Issuing Bank in connection with or
arising out of Letters of Credit issued pursuant to this Financing Agreement or
out of transactions relating thereto will be charged to the loan account in full
when charged to or paid by the Agent and when made by any such Issuing Bank
shall be conclusive on the Agent.
7.6. The Companies shall reimburse or pay the Agent, as the case may
be, for: a) all Out-of-Pocket Expenses and b) any applicable Documentation Fees.
7.7. Upon the last Business Day of each month, commencing with
December 31, 2004, the Companies shall pay the Agent for the account of the
Revolving Lenders the Line of Credit Fee.
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7.8. The Companies shall pay to the Agent all amounts under the Fee
Letter on the Closing Date.
7.9. [Intentionally Left Blank].
7.10. Immediately upon the advice to the Agent by the Companies of
the Companies' election of a Libor Loan, the Companies shall pay to the Agent
for the Agent's account only the Libor Processing Fee which shall be
non-refundable.
7.11. The Companies shall pay to the Agent for the account of the
Lenders such amount or amounts as shall compensate the Agent, the Lenders or
their Participants (as defined below), if any, for any loss, costs or expenses
incurred by the Agent, the Lenders or their Participants if any, (as reasonably
determined by the Agent, the Lenders or their Participants if any) as a result
of: (i) any payment or prepayment on a date other than the last day of a Libor
Period for such Libor Loan, or (ii) any failure of the Companies to borrow a
Libor Loan on the date for such borrowing specified in the relevant notice; such
compensation to include, without limitation, an amount equal to any loss or
expense suffered by the Agent, the Lenders or their Participants if any, during
the period from the date of receipt of such payment or prepayment or the date of
such failure to borrow to the last day of such Libor Period if the rate of
interest obtained by the Agent, the Lenders or their Participants if any, upon
the reemployment of an amount of funds equal to the amount of such payment,
prepayment or failure to borrow is less than the rate of interest applicable to
such Libor Loan for such Libor Period. The determination by the Agent, the
Lenders or their Participants, if any, of the amount of any such loss or
expense, when set forth in a written notice to the Companies, containing the
calculations thereof in reasonable detail, shall constitute prima facie evidence
thereof.
7.12. The Companies may at any time, on ten (10) Business Days prior
written notice to the Agent, reduce the Line of Credit provided that: (i) any
reduction shall be permanent and irrevocable; (ii) a reduction must be for at
least $5,000,000 or whole multiples thereof; and (iii) the Companies shall
immediately repay the Agent the amount by which the Obligations exceed the
amount of the Borrowing Base less the Availability Reserve.
7.13. Each Company hereby confirms and authorizes the Agent, and the
Agent hereby agrees, to charge the loan account with the amount of all
Obligations due hereunder as such payment becomes due. In the unlikely event the
Agent is unable or unwilling to charge any such Obligation to the loan account,
then the Agent shall so notify the Companies in writing and, without limiting
any of the Agent's and Lenders' rights and remedies hereunder, the amount so
requested shall be due and payable thirty (30) days after such demand.
SECTION 8. POWERS
Subject to the last paragraph in this Section 8, each Company hereby
constitutes the Agent on behalf the Lenders or any person or agent the Agent may
reasonably designate as its attorney-in-fact, at each Company's cost and
expense, to exercise all of the following
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powers, which being coupled with an interest, shall be irrevocable until all
Obligations to the Agent and the Lenders have been satisfied and this Financing
Agreement terminated:
(a) To receive, take, endorse, sign, assign and deliver, all
in the name of the Agent or such Company, any and all checks, notes, drafts, and
other documents or instruments relating to the Collateral for i) deposit to a
Blocked Account (consistent with the terms of Section 3.4 of this Financing
Agreement) or ii) after the acceleration by the Agent of the Obligations for
application to satisfaction of the Obligations consistent with the terms of
Section 9.3 hereof;
(b) To request, not more frequently than two (2) times per
fiscal year, from customers indebted on Trade Accounts Receivable, in the name
of such Company or the Agent's designee, information concerning the amounts
owing on the Trade Accounts Receivable provided, however, that such request made
be made only if the then aggregate balance of the Trade Accounts Receivable is
in excess of $3,500,000;
(c) To request from customers indebted on Trade Accounts
Receivable at any time, in the name of the Agent, information concerning the
amounts owing on the Trade Accounts Receivable;
(d) To transmit to customers indebted on Trade Accounts
Receivable notice of the Agent's interest therein and to notify customers
indebted on Trade Accounts Receivable to make payment directly to the Agent for
such Company's account; and
(e) To take or bring, in the name of CITBC or such Company,
all steps, actions, suits or proceedings reasonably deemed by CITBC necessary or
desirable to enforce or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the powers
set forth in (a), (c), (d) and (e) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES
9.1. Notwithstanding anything hereinabove to the contrary, the Agent
acting for the Lenders may terminate this Financing Agreement immediately upon
the occurrence of any of the following (herein "Events of Default"):
(a) cessation of business of either Company or the calling of
a general meeting of the creditors of either Company for purposes of
compromising the debts and obligations of such Company;
(b) either Company admits in writing its inability to
generally pay its debts as they mature;
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(c) the commencement by either Company of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law;
(d) the commencement against either Company of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law provided, however, that such Default shall not be
deemed an Event of Default if the proceeding, petition, case or arrangement is
dismissed within sixty (60) days of the filing of, or the commencement of, such
petition, case, proceeding or arrangement;
(e) material breach by either Company of any warranty,
representation (representations and warranties referred to in this subparagraph
e shall be deemed made as of each i) Reporting Date, whether or not any report
is in fact given to the Agent or ii) request for a Revolving Loan or iii)
request for the Agent's assistance in obtaining a Letter of Credit or iv) the
posting of any Obligation to the loan account) or any covenant contained herein
(other than those otherwise referred to in this Section 9) or in any other
agreement between either Company and the Agent relating to this Financing
Agreement, provided that such Default by either Company of any of the
warranties, representations or covenants referred to in this clause (e) shall
not be deemed to be an Event of Default unless and until such Default shall
remain unwaived or unremedied to the Agent's reasonable satisfaction for a
period of fifteen (15) days from the date of the Agent's discovery of such
breach (the Agent shall endeavor to notify the Companies of such breach but the
failure to so notify shall not detract from the Agent's rights or give the
Companies any claim, course of action or defense);
(f) breach by either Company of any warranty, representation
or covenant of: i) the first sentence of Section 3.3; or ii) Section 3.4; or
iii) Section 5.3; or iv) Section 6.5 (only as it relates to insurance on the
Inventory); or v) Section 6.6; or vii) Section 6.10 (other than sub-paragraphs A
(ii), B and F thereof); or Section 6.17;
(g) breach by either Company of sub-paragraphs A (ii), B or F
of Section 6.10, provided that such Default by either Company shall not be
deemed to be an Event of Default unless and until such Default shall remain
unwaived or unremedied for a period of fifteen (15) days from the date of such
Default;
(h) (i) failure of the Companies to pay when due any amounts
in respect of the Term Loan, and (ii) except as otherwise provided in Section
7.12 of this Financing Agreement, failure of the Companies to pay any other
Obligations within ten (10) days of the due date thereof;
(i) either Company shall (i) engage in any "prohibited
transaction" as defined in ERISA, (ii) have any "accumulated funding deficiency"
as defined in ERISA, (iii) have any Reportable Event as defined in ERISA, (iv)
terminate any Plan, as defined in ERISA or (v) be engaged in any proceeding in
which the Pension Benefit Guaranty Corporation shall seek appointment, or is
appointed, as trustee or administrator of any Plan, as defined in ERISA, and
with respect to this sub-paragraph (i) such event or
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condition (x) remains uncured for a period of ninety (90) days from date of
occurrence and (y) could reasonably be expected to subject that Company to any
tax, penalty or other liability materially adverse to the business, operations
or financial condition of such Company and its Subsidiaries taken as a whole; or
(j) either Company shall default in the payment of, or other
performance under, any indenture or other instrument evidencing recourse
Indebtedness of either Company in excess of $5,000,000, if as a result of such
default, the maturity of any Indebtedness evidenced by any such indenture or
instrument is accelerated prior to its stated maturity.
9.2. Upon the occurrence of a Default and/or an Event of Default, at
the option of the Agent, all loans and advances provided for in Section 3.1 of
this Financing Agreement shall be made thereafter in the Agent's sole discretion
and the obligation of the Agent acting for the Lenders to make Revolving Loans
and/or assist the Companies in obtaining Letters of Credit shall cease until
such time as the Default is timely cured to the Agent's reasonable satisfaction
or the Event of Default is waived. Further, at the option of the Agent, or at
the direction of the Required Lenders, upon the occurrence of an Event of
Default (unless waived): (i) all Obligations shall upon notice (provided,
however, that no such notice is required if the Event of Default is the Event of
Default listed in Sections 9.1(c) or 9.1(d)) become immediately due and payable;
(ii) the Agent may thereafter charge the Companies the Default Rate of Interest
on all then outstanding or thereafter incurred Obligations in lieu of the
interest provided for in Section 7.1 of this Financing Agreement provided (a)
the Agent has given the Companies written notice of the Event of Default,
provided, however, that no notice is required if the Event of Default is the
Event of Default listed in Sections 9.1(c) or 9.1(d) and (b) the Companies have
failed to cure the Event of Default within fifteen (15) days after (x) the Agent
deposited such notice in the United States mail or (y) the occurrence of the
Event of Default listed in Sections 9.1(c) or 9.1(d); and iii) the Agent may,
and shall at the direction of the Required Lenders, immediately terminate this
Financing Agreement upon notice to the Companies, provided, however, that no
notice of termination is required if the Event of Default is the Event of
Default listed in Sections 9.1(c) or 9.1(d). Notwithstanding anything herein
contained to the contrary, if the Agent waives all Events of Default, then by
written notice to the Companies, the acceleration of the Obligations will be
rescinded and all remedies and actions then being exercised by the Agent shall
cease. The exercise of any option is not exclusive of any other option which may
be exercised at any time by the Agent.
9.3. Upon the occurrence of any Event of Default, the Agent may, to
the extent permitted by law: (a) remove from any premises where same may be
located copies of any and all documents, instruments, files and records,
relating to the Accounts, or the Agent may use such of each Company's personnel,
supplies or space at each Company's places of business or otherwise, as may be
necessary to properly administer and control the Accounts or the handling of
collections and realizations thereon; (b) bring suit, in the name of either
Company or the Agent, and generally shall have all other rights respecting said
Accounts, including without limitation the right to: accelerate or extend the
time of payment, settle, compromise, release in whole or in part, any amounts
owing on any Accounts and issue credits in the name of either Company or the
Agent; (c) sell, assign and
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deliver the Collateral and any returned, reclaimed or repossessed merchandise,
with or without advertisement, at public or private sale, for cash, on credit or
otherwise, at the Agent's sole option and discretion, and, to the extent
permitted by applicable law, the Agent may bid or become a purchaser at any such
sale, free from any right of redemption, which right is hereby expressly waived
by the Companies; (d) foreclose the security interests created herein by any
available judicial procedure, or to take possession of any or all of the
Inventory without judicial process, and to enter any premises where any
Inventory may be located for the purpose of taking possession of or removing the
same; and (e) exercise any other rights and remedies provided in law, in equity,
by contract or otherwise. The Agent shall have the right, without notice or
advertisement, to sell, lease, or otherwise dispose of all or any part of the
Collateral whether in its then condition or after further preparation or
processing, in the name of either Company or the Agent, or in the name of such
other party as the Agent may designate, either at public or private sale or at
any broker's board, in lots or in bulk, for cash or for credit, with or without
warranties or representations, and upon such other terms and conditions as the
Agent in its sole discretion may deem advisable, and, to the extent permitted by
applicable law, the Agent shall have the right to purchase at any such sale. If
any Inventory shall require repairing, maintenance or preparation, the Agent
shall have the right, at its option, to do such of the aforesaid as is
necessary, for the purpose of putting the Inventory in such saleable form as the
Agent shall reasonably deem appropriate. Each Company agrees, at the request of
the Agent, to assemble the Inventory and to make it available to the Agent at
premises of the Companies or such other location reasonably designated by the
Agent for the purpose of the Agent's taking possession of, removing or putting
the Inventory in saleable form. However, if notice of intended disposition of
any Collateral is required by law, it is agreed that ten (10) days notice shall
constitute reasonable notification and full compliance with the law. The net
cash proceeds resulting from the Agent's exercise of any of the foregoing
rights, (after deducting all reasonable charges, costs and expenses, including
reasonable attorneys' fees) shall be applied by the Agent to the payment of the
Obligations, whether due or to become due, and the Companies shall remain liable
to the Agent for any deficiencies, and the Agent in turn agrees to remit to the
Companies or their respective successors or assigns, any surplus resulting
therefrom. The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of any
other rights, all of which shall be cumulative.
9.4. (a) Any payment by the Companies (including any payment made by
the Companies by drawing on the Line of Credit) that the Companies designate as
a payment of principal or interest on the Term Loan must be applied as follows:
FIRST, unless the Agent otherwise elects in its sole discretion, to
the payment of all Out-of-Pocket Expenses; and
SECOND, to the Obligations owed to the Term Lenders.
(b) All other payments by or on behalf of the Companies or from the
proceeds of any Collateral must be applied as follows:
FIRST, unless the Agent otherwise elects in its sole
discretion, to the payment of all Out-of-Pocket Expenses;
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SECOND, to all Obligations owed to the Revolving Lenders
(including the payment or cash collateralization of the outstanding
Obligations relating to Letters of Credit);
THIRD, to the Obligations owed to the Term Lenders;
FOURTH, to the payment of all other Obligations which shall
have become due and payable under the Financing Documents otherwise
and not repaid pursuant to clauses "FIRST", "SECOND", and "THIRD,"
preceding; and
FIFTH, to the payment of the surplus, if any, to whomever may
be lawfully entitled to receive such surplus.
(c) In carrying out the foregoing clauses (a) and (b), (i) amounts
received shall be applied in the numerical order provided until exhausted prior
to application to the next succeeding category, (ii) amounts to be applied
pursuant to clause (a) "SECOND" or clause (b) "SECOND" and "THIRD" shall be
applied within such category first to fees, expenses, and costs payable under
the Financing Documents, then to accrued and unpaid interest, then to
outstanding principal and to pay or collateralize outstanding Obligations
relating to Letters of Credit, and (iii) to the extent that any amounts
available for distribution pursuant to clause (b) "SECOND" preceding are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by the Agent in a cash collateral account and applied
(A) first, to reimburse the bank(s) that issued the Letters of Credit for any
drawings under such Letters of Credit and (B) then, following the expiration of
all Letters of Credit, to all other obligations in the manner specified above.
SECTION 10. TERMINATION
Except as otherwise permitted herein, the Agent may, and shall at the
direction of the Required Lenders, terminate this Financing Agreement and the
Line of Credit only as of March 20, 2008 or any subsequent Anniversary Date and
then only by giving the Companies at least ninety (90) days prior written notice
of termination. Notwithstanding the foregoing, the Agent may terminate the
Financing Agreement immediately upon the occurrence of an Event of Default upon
notice to the Companies, provided, however, that if the Event of Default is an
event listed in Sections 9.1(c) or 9.1(d) of this Financing Agreement, the Agent
may, and shall at the direction of the Required Lenders, regard the Financing
Agreement as terminated and notice to that effect is not required. This
Financing Agreement, unless terminated as herein provided, shall automatically
continue from Anniversary Date to Anniversary Date. The Companies may, at any
time, terminate this Financing Agreement and the Line of Credit upon at least
thirty (30) days' prior written notice to the Agent, provided that the Companies
pay to the Agent for the account of the Revolving Lenders, concurrent with
payment of the Obligations, the Early Termination Fee. All Obligations shall
become due and payable as of any termination hereunder or under Section 9
hereof. All of the Agent's rights, liens and security interests shall continue
after any termination until all Obligations have been satisfied in full. Pending
payment in full of all Obligations,
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the Agent can withhold any credit balances in the loan account (unless supplied
with an indemnity satisfactory to the Agent) to cover all of the Obligations,
whether absolute or contingent, provided, however, that if the remaining unpaid
Obligations arise solely out of the outstanding amounts of Letters of Credit,
the Agent will, at the Companies' request, retain, solely as collateral, credit
balances in an amount equal to one hundred and five percent (105%) of the then
outstanding amounts of Letters of Credit unless the Companies provide the Agent
with back-to-back letters of credit from a financial institution reasonably
acceptable to the Agent, on terms reasonably acceptable to the Agent, in an
amount equal to one hundred and five percent (105%) of the then outstanding
amounts of Letters of Credit. When all other Obligations have been paid in full
in cash and the outstanding amount of Letters of Credit have been so secured by
cash or by the back-to-back letters of credit, in either event in an amount
equal to one hundred and five percent (105%) of the then outstanding amounts of
Letters of Credit pursuant to a fully executed agreement between the Agent and
the Companies and pursuant to which the Companies agree to reimburse the Agent
for any Letter of Credit claims that exceed the cash collateral or the back to
back letters of credit, then for all purposes of this Financing Agreement, this
Financing Agreement shall be treated by the parties hereto as terminated and all
other Collateral will be released. No Early Termination Fee will accrue if the
Revolving Line of Credit is terminated as a result of a refinancing led by the
Agent.
SECTION 11. AGREEMENT BETWEEN THE LENDERS
11.1. (a) The Agent, for the account of the Lenders, shall disburse
all loans and advances to the Companies and shall handle all collections of
Collateral and repayment of Obligations. It is understood that for purposes of
advances to the Companies and for purposes of this Section 11 the Agent is using
the funds of the Agent.
(b) Unless the Agent shall have been notified in writing by
any Lender prior to any advance to the Companies that such Lender will not make
the amount which would constitute its share of the borrowing on such date
available to the Agent, the Agent may assume that such Lender shall make such
amount available to the Agent on a Settlement Date, and the Agent may, in
reliance upon such assumption, make available to the Companies a corresponding
amount. A certificate of the Agent submitted to any Lender with respect to any
amount owing under this subsection shall be conclusive, absent manifest error.
If such Lender's share of such borrowing is not in fact made available to the
Agent by such Lender on the Settlement Date, the Agent shall be entitled to
recover such amount with interest thereon at the rate per annum applicable to as
appropriate, Revolving Loans or the Term Loan hereunder, on demand, from the
Companies without prejudice to any rights which the Agent may have against such
Lender hereunder. Nothing contained in this subsection shall relieve any Lender
which has failed to make available its ratable portion of any borrowing
hereunder from its obligation to do so in accordance with the terms hereof.
Nothing contained herein shall be deemed to obligate Agent to make available to
the Companies the full amount of a requested advance when the Agent has any
notice (written or otherwise) that any of the Lenders will not advance its
ratable portion thereof.
11.2. On the Settlement Date, the Agent and the Lenders shall each
remit to the other, in immediately available funds, all amounts necessary so as
to ensure that, as of
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the Settlement Date, the Revolving Lenders shall have their proportionate share
of all outstanding Obligations in respect of the Revolving Loans and Letters of
Credit and the Term Lenders shall have their proportionate share of all
outstanding Obligations in respect of the Term Loans.
11.3. The Agent shall forward to each Lender, at the end of each
month, a copy of the account statement rendered by the Agent to the Company.
11.4. The Agent shall, after receipt of any interest and fees earned
under this Financing Agreement, promptly remit to the Term Lenders and the
Revolving Lenders, as appropriate, their pro rata portion of such interest and
fees, provided, however, that the Lenders (other than CITBC in its role as
Agent) shall not share in the fees set forth in the Fee Letter, Documentation
Fees or Libor Processing Fee except as may have otherwise been agreed in writing
between the Agent and the Lenders.
11.5. (a) Each Company acknowledges that the Lenders, with the
consent of the Agent, which consent shall not be unreasonably withheld, may sell
participations in the loans and extensions of credit made and to be made to the
Companies hereunder (the "Participants"), provided, however, that a Participant
may not so purchase a participation in an amount less than $5,000,000 or the
then aggregate amount of such Lender's interest in the loans and advances and
extensions of credit hereunder. Each Company further acknowledges that in doing
so, the Lenders may grant to such Participants certain rights which would
require the Participant's consent to certain waivers, amendments and other
actions with respect to the provisions of this Financing Agreement, provided
that the consent of any such Participant shall not be required except for
matters requiring the consent of all Lenders hereunder as set forth in Section
12.10 hereof.
(b) The Company authorizes each Lender to disclose to any
Participant or purchasing lender (each, a "Transferee") and any prospective
Transferee any and all financial information in such Lender's possession
concerning the Companies and their affiliates which has been delivered to such
Lender by or on behalf of the Companies pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Companies in connection
with such Lender's credit evaluation of either Company and its affiliates prior
to entering into this Agreement or the Prior Financing Agreement, provided,
however, that prior to such disclosure to a then or potential Participant the
Lender must first obtain from the then or potential Participant a
confidentiality agreement in form and substance similar to the confidentiality
paragraph of this Financing Agreement.
11.6. Each Company has made and will, from time to time, make
available to the Agent and/or the Lenders certain financial and other business
information (the "Confidential Information") relating to its business. By their
signatures hereto or to the Assignment and Transfer Agreement, the Agent and
each Lender agree to maintain the confidentiality of all Confidential
Information, and to disclose such information only (a) to officers, directors or
employees of such Agent or Lender and their legal or financial advisors, in each
case to the extent necessary to carry out this Financing Agreement and in the
case of CITBC, to CIT Group Holdings, Inc., or CIT Group, Inc., and in the case
of any other Lender, to such other Lender's parent organization, but only, in
the case of all of the
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foregoing Persons referred to in this clause (a), after the Agent or the Lender,
as the case may be, has advised each such Person to maintain the confidentiality
of the Confidential Information, (b) to any other Person to the extent the
disclosure of such information to such Person is required in connection with the
examination of a Lender's records by appropriate authorities, pursuant to court
order, subpoena or other legal process or otherwise as required by law or
regulation, and (c) to Transferees or potential Transferees but only after such
Transferees or potential Transferees have executed a written confidentiality
agreement substantially in the form of this paragraph. The Lenders, the Agent,
Transferees and potential Transferees shall not be required to maintain the
confidentiality of any portion of the Confidential Information which (a) is
known by such Person or its agents, advisors or representatives prior to
disclosure or (b) becomes generally available to the public provided that the
disclosure of such Confidential information does not violate a confidentiality
agreement of which the Transferees, potential Transferees, the Agent or the
Lender, as the case may be, has actual knowledge.
11.7. Each Company hereby agrees that each Lender is solely
responsible for its portion of the Line of Credit or the Term Loan, as
applicable, and that neither the Agent nor any Lender shall be responsible for,
nor assume any obligations for, the failure of any Lender to make available its
portion of the Line of Credit or the Term Loan. Further, should any Lender
refuse to make available its portion of the Line of Credit or the Term Loans,
then another Lender may, but without obligation to do so, increase,
unilaterally, its portion of the Line of Credit in which event the Companies are
so obligated to that other Lender.
11.8. In the event that the Agent, the Lenders or any one of them is
sued or threatened with suit by either Company, or by any receiver, trustee,
creditor or any committee of creditors on account of any preference, voidable
transfer or lender liability issue, alleged to have occurred or been received as
a result of, or during the transactions contemplated under, this Financing
Agreement, then in such event any money paid in satisfaction or compromise of
such suit, action, claim or demand and any expenses, costs and attorneys' fees
paid or incurred in connection therewith, whether by the Agent, the Lenders or
any one of them, shall be shared proportionately by the Lenders. In addition,
any costs, expenses, fees or disbursements incurred by outside agencies or
attorneys retained by the Agent to effect collection or enforcement of any
rights in the Collateral, including enforcing, preserving or maintaining rights
under this Financing Agreement shall be shared proportionately between and among
the Lenders to the extent not reimbursed by the Companies or from the proceeds
of Collateral. The provisions of this paragraph shall not apply to any (i)
suits, actions, proceedings or claims that are unrelated, directly or
indirectly, to this Financing Agreement, or (ii) costs, fees, expenses or
disbursements resulting solely from the gross negligence or willful misconduct
of the Agent or any Lender.
11.9. Each of the Lenders agrees with each other Lender that any
money or assets of either Company held or received by such Lender, no matter how
or when received, shall be applied to the reduction of the Obligations (to the
extent permitted hereunder) after x) the occurrence of an Event of Default and
y) the election by the Required Lenders to accelerate the Obligations. In
addition, each Company authorizes, and the Lenders shall have the right, without
notice, upon any amount becoming due and payable hereunder, to
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set-off and apply against any and all property held by, or in the possession of
such Lender the Obligations due such Lenders.
11.10. CITBC shall have the right at any time to assign to one or
more commercial banks, commercial finance lenders or other financial
institutions all or a portion of its rights and obligations under this Financing
Agreement (including, without limitation, under its obligations the Line of
Credit, the Revolving Loans, the Term Loan, and its rights and obligations with
respect to Letters of Credit). In any event, CITBC shall retain for its own
account an amount at least equal to a pro-rata share equal to the highest
pro-rata share held by any Participant (other than the pro-rata share held by
Bank of America, N.A.), and in no event less than 20% of the amount of the
Obligations ("CITBC Hold Position"); provided, however, that such CITBC Hold
Position shall cease while there is then an Event of Default and only until such
Event of Default is waived. Should CITBC during an Event of Default assign
additional interests, then the CITBC Hold Position shall be the remaining amount
of CITBC's position if and when such Event of Default is waived. Upon execution
of an Assignment and Transfer Agreement, (i) the assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such assignment, have the rights and obligations of
CITBC as the case may be hereunder and (ii) CITBC shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
assignment, relinquish its rights and be released from its obligations under
this Financing Agreement. Each Company shall, if necessary, execute any
documents reasonably required to effectuate the assignments. No other Lender may
assign its interest, in whole or in part, in the loans and advances and
extensions of credit hereunder without i) the prior written consent of the
Agent, which consent shall not be unreasonably withheld; ii) the payment to the
Agent (solely for the Agent's account) by the current or prospective Lender of a
$5,000 fee for processing the assignment; and (iii) if the Transferee is a
Foreign Lender (as defined in Section 13.5 hereof), such Foreign Lender first
complies with the provisions of Section 13.5 hereof provided, however, that the
immediately preceding clauses (i) and (ii) hereof shall not apply in connection
with any assignment by a Lender to an affiliate of such Lender, or in connection
with any merger, consolidation, sale, transfer, or other disposition of all or
any substantial portion of the business or loan portfolio of a Lender.
Additionally, no other Lender shall assign such Lender's interest in the loans
and advances and extensions of credit hereunder (or any portion thereof) unless
the interest to be so assigned is either not less than $5,000,000 or all of such
Lender's entire interest in the loans and advances and extensions of credit
hereunder, except that such minimum assignment amount does not apply to an
assignment of a Term Lender's interest in the Term Loan if, and to the extent
that, the assignment is necessary to ensure that the assigning Term Lender's
position in the Term Loan is not greater than CITBC's position in the Term Loan.
Notwithstanding anything to the contrary herein contained, prior to any such
assignment and/or the disclosure of the Confidential Information, such
Transferee, actual or potential, shall execute a confidentiality agreement in
form and substance substantially similar to the confidentiality paragraph of
this Financing Agreement.
SECTION 12. AGENCY
12.1. Each Lender hereby irrevocably designates and appoints CITBC
as the Agent for the Lenders under the Financing Documents and irrevocably
authorizes
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CITBC as Agent for such Lender, to take such action on its behalf under the
provisions of the Financing Agreement and all ancillary documents and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms of this Financing Agreement and all ancillary documents
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Financing
Agreement, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into Financing Agreement and the ancillary documents
or otherwise exist against the Agent.
12.2. The Agent may execute any of its duties under this Financing
Agreement and all ancillary documents by or through agents or attorneys-in-fact
and shall be entitled to the advice of counsel concerning all matters pertaining
to such duties.
12.3. Neither the Agent nor any of its officers, directors,
employees, agents, or attorneys-in-fact shall be (i) liable to any Lender for
any action lawfully taken or omitted to be taken by it or such person under or
in connection with the Financing Agreement and all ancillary documents (except
for its or such person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by either Company or any officer thereof
contained in the Financing Agreement and all ancillary documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by, the Agent under or in connection with the Financing Agreement
and all ancillary documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Financing Agreement and all
ancillary documents or for any failure of the Companies to perform their
obligations thereunder. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, the Financing Agreement and all
ancillary documents or to inspect the properties, books or records of the
Companies.
12.4. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper person
or persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Companies), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or refusing
to take any action under the Financing Agreement and all ancillary documents
unless it shall first receive such advice or concurrence from all of the
Lenders, or the Required Lenders, as the case may be, as it deems appropriate or
it shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under the Financing Agreement
and all ancillary documents in accordance with a request from all of the
Lenders, or the Required Lenders, as the case may be, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders.
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12.5. The Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or the Companies describing such Default or Event
of Default. In the event that the Agent receives such a notice, the Agent shall
promptly give notice thereof to the Lenders. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Required Lenders; provided that unless and until the Agent shall have
received such direction, the Agent may in the interim (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable and in the best
interests of the Lenders.
12.6. Each Lender expressly acknowledges that neither the Agent nor
any of its officers, directors, employees, agents or attorneys-in-fact has made
any representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Companies, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender and based on such documents and information
as it has deemed appropriate, made its own appraisal of, and investigation into,
the business, operations, property, financial and other condition and
creditworthiness of the Companies and made its own decision to enter into this
Financing Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under the Financing Agreement and to make such investigation as it deems
necessary to inform itself as to the business, operations, property, financial
and other condition or creditworthiness of the Companies. The Agent, however,
shall provide the Lenders with copies of all inventory confirmation statements,
Collateral examinations and/or reviews, financial statements, projections and
business plans which come into the possession of the Agent or any of its
officers, employees, agents or attorneys-in-fact. Further, the Agent shall use
reasonable efforts to give the Lenders reasonable prior notice of the date of
the Agent's visit to either Company's premises for purposes of inspecting the
Collateral and books and records pertaining thereto.
12.7. The Lenders agree to indemnify the Agent in its capacity as
such (to the extent not reimbursed by the Companies and without limiting the
obligation of the Companies to do so), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever (including negligence on the
part of the Agent) which may at any time be imposed on, incurred by or asserted
against the Agent in anyway relating to or arising out of this Financing
Agreement on any ancillary documents or any documents contemplated by or
referred to herein or the transactions contemplated hereby or any action taken
or omitted by the Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Agent's gross
negligence or willful misconduct. The agreements in this paragraph shall survive
the payment of the obligations.
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12.8. The Agent may make loans to, and generally engage in any kind
of business with the Companies as though the Agent were not the Agent hereunder.
With respect to its loans made or renewed by it or loan obligations hereunder as
Revolving Lender and Term Lender, the Agent shall have the same rights and
powers, duties and liabilities under the Financing Agreement as any Lender and
may exercise the same as though they were not the Agent and the terms "Revolving
Lender," "Term Lender," "Lender," and "Lenders" shall include the Agent in its
individual capacities.
12.9. The Agent may resign as Agent upon thirty (30) days' notice to
the Lenders and such resignation shall be effective upon the appointment of a
successor Agent. If the Agent shall resign as Agent, then the Lenders shall
appoint a successor agent for the Lenders whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent and the term "Agent" shall
mean such successor agent effective upon its appointment, and the former Agent's
rights, powers and duties as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent or any of the parties to
this Financing Agreement, provided, however, that the Lenders shall: (a) notify
the Companies of the successor Agent and (b) request the consent of the
Companies to such successor Agent, which consent shall not be unreasonably
withheld. The Companies shall be deemed to have consented to the successor Agent
if the Lenders do not receive from the Companies, within ten (10) days of the
Lenders' notice to the Companies, a written statement of the Companies'
objection to the successor Agent. Should the Companies not consent and no
acceptable successor Agent is agreed upon within thirty (30) days of the date
the Companies advised the Lenders of their objection to the successor Agent,
then the Lenders may appoint (without the Companies' consent) another successor
Agent. After any retiring Agent's resignation hereunder as Agent the provisions
of this Section 14 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent.
12.10. Notwithstanding anything contained in this Financing
Agreement to the contrary, the Agent will not, without the prior written consent
of all Lenders: (a) amend the Financing Agreement to (v) increase the rate of
advance against Eligible Inventory as set forth in Section 3.1 of this Financing
Agreement (provided, however, that the foregoing shall not prevent the making of
Overadvances pursuant to Section 3.1 hereof with the consent of and on the terms
agreed to by Required Lenders) or increase the Line of Credit or the Term Loan;
(w) reduce the interest rates; (x) reduce or waive (i) any fees in which the
Lenders share hereunder; or (ii) the repayment of any Obligations due Lenders;
(y) extend the maturity of the Obligations; or (z) alter or amend (1) this
Section 12.10, (2) Section 9.4, or (3) the definitions of Eligible Inventory,
Collateral or Required Lenders, or the Agent's criteria for determining
compliance with such definitions of eligibility; (b) release or permit or
consent to liens on Collateral with an aggregate value greater than $5,000,000
without a corresponding reduction in the Obligations to the Lenders, or (c)
intentionally make any Revolving Loan or assist in opening any Letter of Credit
hereunder if after giving effect thereto the total of Revolving Loans and
Letters of Credit hereunder for the Companies would exceed one hundred and ten
percent (110%) of the maximum amount available under Sections 3 and 4 hereof. In
all other respects and except as otherwise specifically provided to the contrary
in this Financing Agreement, the Agent is authorized to take such actions or
fail to take such actions if the Agent, in its reasonable discretion, deems such
to be advisable and in the best interest of the Lenders, including, but not
limited to, the termination of the
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Financing Agreement upon the occurrence of an Event of Default, unless it is
specifically instructed to the contrary by the Required Lenders. Unless
otherwise expressly provided in the Financing Documents, any amendment of the
terms of the Financing Documents requires the written consent of the Required
Lenders or such greater percentage as may be required by the terms of the
Financing Documents.
12.11. Each Lender agrees that notwithstanding the provisions of
Section 10 of this Financing Agreement any Revolving Lender may terminate this
Financing Agreement or the Line of Credit only as of the fourth or any
subsequent Anniversary Date and then only by giving the Agent one hundred and
twenty (120) days prior written notice thereof. Within thirty (30) days after
receipt of any such termination notice, the Agent shall, at its option, either
(i) give notice of termination to the Companies hereunder or (ii) purchase the
Lender's share of the Obligations hereunder for the full amount thereof plus
accrued interest thereon. Unless so terminated this Financing Agreement and the
Line of Credit shall be automatically extended from Anniversary Date to
Anniversary Date.
12.12. Each Lender acknowledges that (i) Agent is the agent for both
the Revolving Lenders and the Term Lenders, (ii) CITBC holds a larger share of
the Term Loan Commitments than the Revolving Loans Commitments, and (iii) there
is a conflict between the duties of the Agent for and on behalf of the Term
Lenders and duties of the Agent for and on behalf of the Revolving Lenders. Each
Lender hereby waives any conflict of interest which the Agent may have as a
result of the foregoing and agrees that the Agent shall have no liability to any
Lender based upon CITBC's exercise of its duties as Agent hereunder and its
position as a Revolving Lender and a Term Lender; provided however that such
waiver shall not extend to actions by CITBC that constitute gross negligence or
willful misconduct.
SECTION 13. MISCELLANEOUS
13.1. Except as otherwise expressly provided, each Company hereby
waives diligence, demand, presentment and protest and any notices thereof as
well as notice of nonpayment, notice of dishonor, notice of intent to accelerate
and notice of acceleration. No delay or omission of the Agent or the Companies
to exercise any right or remedy hereunder, whether before or after the happening
of any Event of Default, shall impair any such right or shall operate as a
waiver thereof or as a waiver of any such Event of Default. No single or partial
exercise by the Agent of any right or remedy precludes any other or further
exercise thereof, or precludes any other right or remedy.
13.2. Neither this Financing Agreement nor any provision hereof may
be waived, amended or modified except as pursuant to an agreement or agreements
in writing entered into by the Companies, the Agent, the Lenders or the Required
Lenders, as the case may be.
13.3. THIS WRITTEN AGREEMENT AND THE OTHER DOCUMENTS REFERENCED
HEREIN OR CONTEMPLATED HEREBY REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
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AGREEMENTS AMONG THE PARTIES. EACH COMPANY ACKNOWLEDGES AND AGREES THAT THE
SECURITY INTEREST GRANTED BY IT PURSUANT TO THE PRIOR FINANCING AGREEMENT (AND
MAINTAINED PURSUANT TO THIS FINANCING AGREEMENT) CONTINUES (WITHOUT
INTERRUPTION) IN FULL FORCE AND EFFECT IN FAVOR OF THE AGENT FOR THE BENEFIT OF
LENDERS. UPON THE EFFECTIVENESS OF THIS FINANCING AGREEMENT, THE TERMS AND
CONDITIONS OF THE PRIOR FINANCING AGREEMENT ARE HEREBY AMENDED AND RESTATED IN
THEIR ENTIRETY BY THIS FINANCING AGREEMENT.
13.4. It is the intent of the Companies, the Agent and the Lenders
to conform strictly to all applicable state and federal usury laws. All
agreements between the Companies and the Agent, acting on behalf of the Lenders,
whether now existing or hereafter arising and whether written or oral, are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason of acceleration of the maturity hereof or otherwise, shall the amount
contracted for, charged or received by the Agent, acting on behalf of the
Lenders, for the use, forbearance, or detention of the money loaned hereunder or
otherwise, or for the payment or performance of any covenant or obligation
contained herein or in any other document evidencing, securing or pertaining to
the Obligations evidenced hereby which may be legally deemed to be for the use,
forbearance or detention of money, exceed the maximum amount which the Agent,
acting on behalf of the Lenders, is legally entitled to contract for, charge or
collect under applicable state or federal law. If from any circumstance
whatsoever fulfillment of any provisions hereof or of such other documents, at
the time performance of such provision shall be due, shall involve transcending
the limit of validity prescribed by law, then the obligations to be fulfilled
shall be automatically reduced to the limit of such validity, and if from any
such circumstance the Agent, acting on behalf of the Lenders, shall ever receive
as interest or otherwise an amount in excess of the maximum that can be legally
collected, then such amount which would be excessive interest shall be applied
to the reduction of the principal indebtedness hereof and any other amounts due
with respect to the Obligations evidenced hereby, but not to the payment of
interest and if such amount which would be excessive interest exceeds the
Obligations and all other non-interest indebtedness described above, then such
additional amount shall be refunded to the Companies. In determining whether or
not all sums paid or agreed to be paid by the Companies for the use, forbearance
or detention of the Obligations of the Companies to the Agent, acting on behalf
of the Lenders, under any specific contingency, exceeds the maximum amount
permitted by applicable law, the Companies and the Agent, acting on behalf of
the Lenders, shall, to the maximum extent permitted under applicable law, (a)
characterize any non-principal payment as an expense, fee or premium rather than
as sums paid or agreed to be paid by the Companies for the use, forbearance or
detention of the Obligations of the Companies to the Agent, acting on behalf of
the Lenders, (b) exclude voluntary prepayments and the effect thereof, and (c)
to the extent not prohibited by applicable law, amortize, prorate, allocate and
spread in equal parts, the total amount of all sums paid or agreed to be paid by
the Companies for the use, forbearance or detention of the Obligations of the
Companies to the Agent, acting on behalf of the Lenders, throughout the entire
contemplated term of the Obligations so that the interest rate is uniform
throughout the entire term of the Obligations. The terms and provisions of this
paragraph
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shall control and supersede every other provision hereof and all other
agreements between the Companies and the Agent, acting on behalf of the Lenders.
13.5. Any Lender organized under the laws of a jurisdiction outside
of the United States (a "Foreign Lender") shall deliver to Agent and the
Companies (i) two valid, duly completed copies of IRS Form 1001 or 4224 or
successor applicable form, as the case may be, and any other required form,
certifying in each case that such Foreign Lender is entitled to receive payments
under this Financing Agreement without deduction or withholding of any United
States federal income taxes, or (ii) if such Foreign Lender is not a "bank"
within the meaning of Section 881(c) (3) (A) of the Internal Revenue Code and
cannot deliver either IRS Form 1001 or 4224 pursuant to clause (i) above, (A) a
duly completed certificate of non-withholding acceptable to the Companies and
the Agent in their reasonable discretion (any such certificate, a "Tax
Certificate") and (B) two valid, duly completed copies of IRS Form W-8 or
successor applicable form, as the case may be, to establish an exemption from
United States backup withholding tax. Each such Foreign Lender shall also
deliver to Agent and the Companies two further copies of said Form 1001 or 4224
or Form W-8 and a Tax Certificate, or successor applicable forms, or other
manner of required certification, as the case may be, on or before the date that
any such form expires or becomes obsolete or otherwise is required to be
resubmitted as a condition to obtaining an exemption from a required withholding
of United States of America federal income tax or after the occurrence of any
event requiring a change in the most recent form previously delivered by it to
the Companies and Agent, and such extensions or renewals thereof as may
reasonably be requested by the Companies and Agent, certifying (x) in the case
of a Form 1001 or 4224 that such Foreign Lender is entitled to receive payments
under this Financing Agreement without deduction or withholding of any United
States federal income taxes, or (y) in the case of a Form W-8 and a Tax
Certificate, establishing an exemption from United States backup withholding
tax.
13.6. If any provision hereof or of any other agreement made in
connection herewith is held to be illegal or unenforceable, such provision shall
be fully severable, and the remaining provisions of the applicable agreement
shall remain in full force and effect and shall not be affected by such
provision's severance. Furthermore, in lieu of any such provision, there shall
be added automatically as a part of the applicable agreement a legal and
enforceable provision as similar in terms to the severed provision as may be
possible.
13.7. TO THE EXTENT PERMITTED BY LAW, THE COMPANIES, THE LENDERS AND
THE AGENT HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
ARISING OUT OF THIS FINANCING AGREEMENT. EACH COMPANY HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED. ANY JUDICIAL PROCEEDING BROUGHT BY OR
AGAINST EITHER COMPANY WITH RESPECT TO ANY OF THE OBLIGATIONS, THIS FINANCING
AGREEMENT OR ANY RELATED AGREEMENT MAY BE BROUGHT IN ANY COURT OF COMPETENT
JURISDICTION IN THE STATE OF CALIFORNIA, UNITED STATES OF AMERICA, AND, BY
EXECUTION AND DELIVERY OF THIS FINANCING AGREEMENT, EACH COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION
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WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
FINAL, NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
FINANCING AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE AGENT TO BRING
PROCEEDINGS AGAINST EITHER COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. EACH
COMPANY WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OF
VENUE OR BASED UPON FORUM NON CONVENIENS.
13.8. Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing, and shall be deemed to
have been validly served, given or delivered when hand delivered, including
overnight delivery by a courier service or sent by facsimile, or five days after
deposit in the United States mails, with proper first class postage prepaid and
addressed to the party to be notified as follows:
A. if to CITBC or the Agent, at:
The CIT Group/Business Credit, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Retail Credit Manager
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Jenkens & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
B. if to the Companies at:
Big 5 Corp.
Big 5 Services Corp.
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Big 5 Corp.
Big 5 Services Corp.
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▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a further copy to:
Irell & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
C. if to any other Lender, at the address
specified in the Assignment and Transfer Agreements
or to such other address as any party may designate for itself by like
notice.
13.9. All loans, advances, and other financial accommodations
hereunder shall be deemed to be jointly funded to and received by the Companies.
Each Company jointly and severally agrees to pay, and shall be jointly and
severally liable under this Agreement for, all of the Obligations, regardless of
the manner or amount in which proceeds of loans are used, allocated, shared, or
disbursed by or among the Companies themselves, or the manner in which the
Agents and/or any Lender accounts for such loans or other extensions of credit
on its books and records. Each Company shall be liable for all amounts due to
the Agents and/or any Lender under this Financing Agreement, regardless of which
Company actually receives loans or other extensions of credit hereunder or the
amount of such loans and extensions of credit received or the manner in which
the Agents and/or such Lender accounts for such loans or other extensions of
credit on its books and records. Each Company's indebtedness, liabilities, and
obligations with respect to loans and other extensions of credit made to it, and
such Company's indebtedness, liabilities, and obligations arising as a result of
the joint and several liability of such Company hereunder, with respect to loans
made to the other Company hereunder, shall be separate and distinct obligations,
but all such indebtedness, liabilities, and obligations shall be primary
obligations of such Company.
13.10. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
FINANCING AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
13.11. This Financing Agreement may be executed in counterparts,
each of which shall constitute an original but all of which when taken together
shall constitute but one agreement. Delivery of an executed counterpart of this
Financing Agreement by telefacsimile or electronic file image shall be equally
effective as delivery of a manually executed counterpart.
[the remainder of this page left blank intentionally; signatures to follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be executed and delivered in Los Angeles, California by their
proper and duly authorized officers as of the date set forth above.
BIG 5 CORP.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Title: Senior Vice President and Chief
Financial Officer
---------------------------------
BIG 5 SERVICES CORP.,
a Virginia corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Title: Senior Vice President and
General Counsel
---------------------------------
THE CIT GROUP/BUSINESS CREDIT, INC. (as
Agent and Lender)
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Title: Vice President
---------------------------------
Revolving Loan Commitment: $41,000,000
Term Loan Commitment: $15,000,000
BANK OF AMERICA, N.A,
(as Lender)
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------------
Title: Vice President
---------------------------------
Revolving Loan Commitment: $64,000,000
S-1
Amended and Restated Financing Agreement
PNC BANK, NATIONAL ASSOCIATION (as Lender)
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Title: Vice President
---------------------------------
Revolving Loan Commitment: $10,000,000
GE BUSINESS CAPITAL CORPORATION
f/k/a/ Transamerica Business Capital Corporation
(as Lender)
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Title: Duly Authorized Signer
Revolving Loan Commitment: $25,000,000
Term Loan Commitment: $5,000,000
S-2
Amended and Restated Financing Agreement
EXHIBIT A -- ASSIGNMENT AND TRANSFER AGREEMENT
Dated: _____________, 200_
Reference is made to the Second Amended and Restated Financing Agreement
dated as of December__, 2004 (as amended, modified, supplemented and in effect
from time to time, the "Financing Agreement"), among Big 5 Corp., a Delaware
corporation ("Big 5"), Big 5 Services Corp., a Virginia corporation (hereinafter
referred to as "Big 5 Services" and, together with Big 5, collectively, the
"Companies", and each individually a "Company"), the Lenders named therein, and
The CIT Group/Business Credit, Inc., as Agent (the "Agent"). Initially
capitalized terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Financing Agreement. This Assignment and Transfer
Agreement, between the Assignor (as defined and set forth on Schedule 1 hereto
and made a part hereof) and the Assignee (as defined and set forth on Schedule 1
hereto and made a part hereof) is dated as of the Effective Date (as set forth
on Schedule 1 hereto and made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date, an undivided interest (the "Assigned Interest") in and to all
the Assignor's rights and obligations under the Financing Agreement respecting
those, and only those, financing facilities contained in the Financing Agreement
as are set forth on Schedule 1 (collectively, the "Assigned Facilities" and
individually, an "Assigned Facility"), in a principal amount for each Assigned
Facility as set forth on Schedule 1.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Financing Agreement or any other instrument,
document or agreement executed in conjunction therewith (collectively the
"Ancillary Documents") or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Financing Agreement, any Collateral
thereunder or any of the Ancillary Documents furnished pursuant thereto, other
than that it is the legal and beneficial owner of the interest being assigned by
it hereunder and that such interest is free and clear of any adverse claim and
(ii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Companies or any guarantor or the
performance or observance by the Company or any guarantor of any of its
respective obligations under the Financing Agreement or any of the Ancillary
Documents furnished pursuant thereto.
3. The Assignee (i) represents and warrants that it is legally authorized
to enter into this Assignment and Transfer Agreement; (ii) confirms that it has
received a copy of the Financing Agreement, together with the copies of the most
recent financial statements of the Company, and such other documents and
information as it has deemed appropriate to make its own credit analysis; (iii)
agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Financing Agreement; (iv) appoints and
authorizes the Agent to take
Exhibit A-1
such action as agent on its behalf and to exercise such powers under the
Financing Agreement as are delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; (v) agrees that it will
be bound by the provisions of the Financing Agreement and will perform in
accordance with its terms all the obligations which by the terms of the
Financing Agreement are required to be performed by it as Lender; and (vi) if
the Assignee is organized under the laws of a jurisdiction outside the United
States, attaches the forms prescribed by the Internal Revenue Service of the
United States certifying as to the Assignee's exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Financing Agreement or such other documents as are necessary to indicate
that all such payments are subject to such tax at a rate reduced by an
applicable tax treaty.
4. Following the execution of this Assignment and Transfer Agreement, such
agreement will be delivered to the Agent for acceptance by it and the Company,
effective as of the Effective Date.
5. Upon such acceptance, from and after the Effective Date, the Agent
shall make all payments in respect of the Assigned Interest (including payments
of principal, interest, fees and other amounts) to the Assignee, whether such
amounts have accrued prior to the Effective Date or accrue subsequent to the
Effective Date. The Assignor and Assignee shall make all appropriate adjustments
in payments for periods prior to the Effective Date made by the Agent or with
respect to the making of this assignment directly between themselves.
6. From and after the Effective Date, (i) the Assignee shall be a party to
the Financing Agreement and, to the extent provided in this Assignment and
Transfer Agreement, have the rights and obligations of a Lender thereunder, and
(ii) the Assignor shall, to the extent provided in this Assignment and Transfer
Agreement, relinquish its rights and be released from its obligations under the
Financing Agreement.
7. THIS ASSIGNMENT AND TRANSFER AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective duly authorized officers on
Schedule 1 hereto.
Exhibit A-2
SCHEDULE 1 TO ASSIGNMENT AND TRANSFER AGREEMENT
Name of Assignor:______________________
Name of Assignee:______________________
Effective Date of Assignment: _________________, 200__
Percentage Assigned of
Each Facility (Shown
as a percentage of
Principal aggregate original
Amount (or, principal amount
with respect to [or, with respect to
Letters of Credit Letters of Credit,
Assigned face amount) face amount]
Facilities Assigned of all Lenders)
---------------------- ------------------- ----------------------
Revolving Loans $____________ ____________%
Letter of Credit
participation interest $____________ ____________%
Total $____________
Fees:
Rates:
Term Loan: $_________ ___________%
Exhibit A-3
Agreed and Accepted by:
THE CIT GROUP/BUSINESS ________________________,
CREDIT, INC., as Agent as Assignor
By: By:
Title: Title:
BIG 5 CORP. ________________________,
(the "Company") as Assignee
By: By:
Title: Title:
Exhibit A-4
EXHIBIT B -- REVOLVING LOAN PROMISSORY NOTE
Exhibit B-1
REVOLVING CREDIT NOTE
$[_________] Dated as of December __, 2004
FOR VALUE RECEIVED, the undersigned (herein individually a "Company"
and collectively the "Companies"), hereby, jointly and severally, absolutely and
unconditionally promise to pay to the order of [__________________]
(hereinafter, including its successors and permitted assigns, "Payee") with
offices located at [____________________], in lawful money of the United States
of America and in immediately available funds, the principal amount of
[______________________] Dollars ($[__________]), or such other principal amount
as is advanced pursuant to Section 3.1 and Section 4.1 of the Financing
Agreement (as herein defined). Subject to the terms of the Financing Agreement,
the Revolving Loans may be borrowed, repaid and reborrowed by the Companies. A
final balloon payment in an amount equal to the outstanding aggregate balance of
principal and interest remaining unpaid, if any, under this Note as shown on the
books and records of the Agent shall be due and payable on the termination of
the Financing Agreement.
The Companies, jointly and severally, further absolutely and
unconditionally promise to pay to Payee, in the manner provided in the Financing
Agreement, interest, in like money, on the unpaid principal amount owing
hereunder from time to time from the date hereof on the dates and at the rates
specified in Section 7 of the Financing Agreement.
If any payment on this Note becomes due and payable on a day other than
a Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is one of the Revolving Loan Promissory Notes referred to in
the Second Amended and Restated Financing Agreement, dated as of the date
hereof, as the same may be amended and restated and in effect from time to time,
among the Companies, the Agent, Payee and the other financial institutions party
thereto from time to time (the "Financing Agreement"), and is subject to, and
entitled to, all of the terms, provisions and benefits thereof and is subject to
optional and mandatory prepayment, in whole or in part, as provided therein. All
initially capitalized terms used herein shall have the meaning provided therefor
in the Financing Agreement, unless otherwise defined herein.
The date and amount of the advance(s) made hereunder may be recorded on
the grid page or pages that may be attached hereto and made part of this Note or
the separate ledgers maintained by the Agent. The aggregate unpaid principal
amount of all advances made pursuant hereto may be set forth in the balance
column on said grid page or such ledgers maintained by the Agent. All such
advances, whether or not so recorded, shall be due as part of this Note.
The Companies confirm that any amount received by or paid to the Agent
in connection with the Financing Agreement and/or any balances standing to its
credit on any of its or their accounts on the Agent's books under the Financing
Agreement may in accordance with the terms
1
of the Financing Agreement be applied in reduction of this Note, but no balance
or amounts shall be deemed to effect payment in whole or in part of this Note
unless the Agent shall have actually charged such account or accounts for the
purposes of such reduction or payment of this Note.
Upon the occurrence of any one or more of the Events of Default
specified in the Financing Agreement or upon termination of the Financing
Agreement, all amounts then remaining unpaid on this Note may become, or be
declared to be, immediately due and payable as provided in the Financing
Agreement.
Each of the undersigned further agrees to pay all expenses, including
attorneys' fees and legal expenses, incurred by the holder of this Note in
endeavoring to collect any amounts payable hereunder that are not paid when due,
whether by acceleration or otherwise.
This Note shall be construed under and governed by the laws of the
State of California.
TO THE EXTENT PERMITTED BY LAW, THE COMPANIES, PAYEE AND THE AGENT
HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING
OUT OF THIS NOTE.
[The remainder of this page is intentionally blank.]
2
This Note is entered into as of the date first set forth above.
BIG 5 CORP.,
a Delaware corporation
By:_________________________________
Name:_______________________________
Title:______________________________
BIG 5 SERVICES CORP.,
a Virginia corporation
By:_________________________________
Name:_______________________________
Title:______________________________
3
EXHIBIT C -- TERM LOAN PROMISSORY NOTE
Exhibit C-1
TERM LOAN PROMISSORY NOTE
$[__________] December __, 2004
FOR VALUE RECEIVED, the undersigned (herein individually a "Company"
and collectively the "Companies"), hereby, jointly and severally, absolutely and
unconditionally promise to pay to the order of [___________________________], a
[______] corporation (hereinafter, including its successors and permitted
assigns, "Payee"), with offices located at [___________________________], in
lawful money of the United States of America and in immediately available funds,
the principal amount of [__________]Dollars ($[_______]) on the dates specified
in Section 4.A. of the Financing Agreement (as defined below).
The Companies, jointly and severally, further absolutely and
unconditionally promise to pay to Payee, in the manner provided in the Financing
Agreement, interest, in like money, on the unpaid principal amount owing
hereunder from time to time from the date hereof on the dates and at the rates
specified in Section 7 of the Financing Agreement. A final payment in an amount
equal to the outstanding aggregate balance of principal and interest remaining
unpaid, if any, under this Term Loan Promissory Note (this "Note") as shown on
the books and records of the Agent shall be due and payable on the termination
of the Financing Agreement.
If any payment on this Note becomes due and payable on a day other than
a Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is one of the Term Loan Promissory Notes referred to in the
Second Amended and Restated Financing Agreement, dated as of the date hereof, as
the same may be amended and restated and in effect from time to time, among the
Companies, the Agent, Payee, and the other financial institutions party thereto
from time to time (the "Financing Agreement"), and is subject to, and entitled
to, all of the terms, provisions and benefits thereof and is subject to
optional, in whole or in part, as provided therein. All capitalized terms used
herein shall have the meaning provided therefor in the Financing Agreement,
unless otherwise defined herein.
The Companies confirm that any amount received by or paid to the Agent
in connection with the Financing Agreement or any balances standing to its
credit on any of its or their accounts on the Agent's books under the Financing
Agreement shall in accordance with the terms of the Financing Agreement be
applied in reduction of this Note, but no balance or amounts shall be deemed to
effect payment in whole or in part of this Note unless the Agent shall have
actually charged such account or accounts for the purposes of such reduction or
payment of this Note.
Upon the occurrence of any one or more of the Events of Default
specified in the Financing Agreement or upon termination of the Financing
Agreement, all amounts then remaining unpaid on this Note may become, or be
declared to be, immediately due and payable as provided in the Financing
Agreement.
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Each of the undersigned further agrees to pay all expenses, including
attorneys' fees and legal expenses, incurred by the holder of this Note in
endeavoring to collect any amounts payable hereunder that are not paid when due,
whether by acceleration or otherwise.
This Note shall be construed under and governed by the laws of the
State of California.
TO THE EXTENT PERMITTED BY LAW, THE COMPANIES, PAYEE AND THE AGENT
HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING
OUT OF THIS NOTE.
[The remainder of this page intentionally left blank.]
2
This Note is entered into as of the date first written above.
BIG 5 CORP.,
a Delaware corporation
By:_________________________________
Name:_______________________________
Title:______________________________
BIG 5 SERVICES CORP.,
a Virginia corporation
By:_________________________________
Name:_______________________________
Title:______________________________
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SCHEDULE I -- STORE LOCATIONS
Schedule I-1
