Exhibit 10.11
SIXTH AMENDMENT TO FINANCING AGREEMENT
This Sixth Amendment to Financing Agreement (this "Sixth Amendment") is
entered into as of April 10, 2003 by and among FACTORY 2-U STORES, INC., a
Delaware corporation ("Company"), THE CIT GROUP/BUSINESS CREDIT, INC., a New
York corporation, in its capacity as Agent ("Agent") under the Financing
Agreement (defined below); THE CIT GROUP/BUSINESS CREDIT, INC., a New York
corporation, in its capacity as the Tranche A Lender (collectively, together
with any other Persons who may subsequently become a Tranche A Lender, the
"Tranche A Lenders"); and GB RETAIL FUNDING, LLC, a Massachusetts limited
liability company in its capacity as the Tranche B Lender (together with any
other Persons who may subsequently become a Tranche B Lender, the "Tranche B
Lender"); (collectively, the Tranche A Lenders and the Tranche B Lender shall be
referred to herein as the "Lenders").
Witnesseth
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A. Agent, Company and the Tranche A Lenders have previously entered into
that certain Financing Agreement dated as of March 3, 2000, as amended by that
certain First Amendment to Financing Agreement dated as of April 13, 2000, that
certain Second Amendment to Financing Agreement dated as of April 10, 2001, that
certain Third Amendment to Financing Agreement dated as of April 9, 2002, that
certain Fourth Amendment to Financing Agreement dated as of September 16, 2002
("Fourth Amendment"), and that certain Fifth Amendment to Financing Agreement
dated as of February 14, 2003 ("Fifth Amendment") (as so amended, and as it may
be further modified, amended, restated or supplemented, the "Financing
Agreement"), pursuant to which the Tranche A Lenders have provided Company with
certain Revolving Loans (as defined in the Financing Agreement) and other
financial accommodations.
B. The Company has requested that the Tranche B Lender provide it with
Seven Million Five Hundred Thousand Dollars ($7,500,000) in junior secured
loans, and the Tranche B Lender has agreed to provide such Loans, subject to the
terms and conditions set forth in this Sixth Amendment to Financing Agreement.
C. The Agent and Tranche A Lenders consent to the Company's receipt of such
loans from the Tranche B Lender, on the terms and conditions set forth herein,
in the Agency Agreement (defined below) and other Loan Documents.
D. The Company, Agent and Lenders desire to amend the Financing Agreement
on the terms and subject to the conditions set forth in this Sixth Amendment.
NOW THEREFORE, in consideration of the foregoing and the terms and
conditions hereof, the parties do hereby agree as follows, effective as of the
date set forth above:
1. Definitions. Capitalized terms used herein and not defined or amended
herein shall have the same meaning as in the Financing Agreement.
(A) Existing Definitions:
The following existing definitions in the Financing Agreement are
hereby amended as follows:
"Availability": shall mean at any time the result of the following:
(A) the Borrowing Base,
minus
(B) the then outstanding balance of all Tranche A Obligations,
minus
(C) the then Stated Amount of all outstanding Letters of Credit,
minus
(D) the Availability Reserve;
minus
(E) the Availability Block.
"Availability Reserve": The existing definition of "Availability
Reserve" in the Financing Agreement is hereby deleted and the following inserted
in its place:
"Availability Reserves" shall mean such reserves as may be
established by the Agent as it deems necessary in its commercially reasonable
discretion to reflect (i) negative forecasts and/or trends in the Company's
business, profits, operations or financial condition that could reasonably be
expected to have a Material Adverse Effect on the Company or the Agent's
ability to realize on the Collateral or (ii) other issues, circumstance or
facts that could otherwise negatively impact the Company, its business,
profits, operations or financial conditions or assets or its ability to realize
on the Collateral. Availability Reserves shall initially be based on the
following: (a) delinquent sales taxes, (b) delinquent rental payments for the
Company's leased premises (other than with respect to Closed Stores) and a
reserve of up to two (2) months rent for any retail store location in
Washington State for which a satisfactory landlords' waiver has not been
obtained and, (c) accrued but unpaid ad valoreum taxes.
"Borrowing Base": The existing definition of "Borrowing Base" is
hereby deleted and such term shall hereafter refer to the least of
(A) the Tranche A Loan Ceiling;
(B) the Tranche A Borrowing Base; and
(C) the Overall Borrowing Base.
"Customary Permitted Liens": In addition to those liens listed in
subparagraphs (a), (b) and (c) of the existing definition "Customary Permitted
Liens" shall include the following:
(d) encumbrances in favor of the Agent as security for the Obligations;
and
(e) those encumbrances listed on Schedule 1 annexed hereto.
"Early Termination Date": shall include, in addition to the existing
text thereof, the date on which any of the events referred to in Sections
10.1(b), (c) and (d) shall occur, but shall exclude a Change of Control under
Section 10.1(q) hereof.
"Early Termination Fee": The existing definition of "Early Termination
Fee" is hereby redenominated to mean "Tranche A Early Termination Fee".
"EBITDA": The existing definition of "EBITDA" is deleted and replaced
with the following:
EBITDA shall mean the Company's net income for any period,
plus the following, to the extent deducted in calculating net income:
(i) interest expense (net of interest income), (ii) income tax expense,
(iii) depreciation expense, (iv) amortization expense, (v) non-cash
extraordinary losses and losses on the sale of assets outside the ordinary
course of business, and (vi) non-cash stock option compensation charges and
the effect of extraordinary and/or non-recurring gains or losses for such
period, all as determined in accordance with GAAP) on a basis consistent with
the latest audited financial statements of the Company.
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"Eligible In-Transit Inventory" shall only apply to Inventory being
shipped to the Company from a location in the United States and not from a
foreign location.
"Eligible Inventory": In addition to the reserves specified in
subparagraph (h) of such definition, the Agent may establish reserves for
lay-away items and gift cards; provided, however, that initially a reserve for
gift cards shall be established only if the outstanding amount thereof
exceeds three hundred thousand dollars ($300,000) and a reserve for
lay-a-way items shall only be established at any time that the aggregate
amount of Inventory subject to lay-a-way programs exceeds four hundred
thousand dollars ($400,000) and in each case shall be equal to the amount of
Eligible Inventory in such categories in excess of such thresholds (subject in
each case to adjustment from time to time in the Agent's reasonable discretion).
"Fifth Amendment": The Fifth Amendment to the Financing Agreement
dated as of February 14, 2003.
"Fourth Amendment": The Fourth Amendment to the Financing Agreement
dated as of September 16, 2002.
"Lenders": shall refer collectively to the Tranche A Lenders
and the Tranche B Lender except for the following Sections where the
references to "Lenders" are hereby amended to refer solely to the
"Tranche A Lenders": Sections 3.1, 3.8, all of Section 5, Sections 8.1 - 8.11,
(inclusive), and Paragraph 3 of the Fifth Amendment.
"Obligations": The definition of Obligations is intended to mean
and is hereby amended, to include, without limitation, any and all amounts owed
to the Tranche A Lenders and the Tranche B Lender including, but not limited
to, the Tranche A Obligations and the Tranche B Obligations.
"Out-of-Pocket Expenses": shall include all Out-of-Pocket Expenses
incurred by the Agent and each Lender and shall include without limitation,
the Agent's internal audit fees based on its then current per diem/per auditor
charges, not to exceed five thousand dollars ($5,000) per audit.
"Permitted Indebtedness": In addition to the categories of
Indebtedness specified as being "Permitted Indebtedness" in the Financing
Agreement, Permitted Indebtedness shall include all Indebtedness secured by
a Permitted Encumbrance. The requirements in subparagraph (f) of the definition
of Permitted Indebtedness in respect to Indebtedness arising from sale/leaseback
transaction or loans secured by the Company's equipment shall include, in
addition to those specified in subsections (i) - (iv) thereof, the
following which shall be referenced as subparagraph (f)(v) of such definition:
(v) the net cash proceeds from such sale/leaseback or loan
transaction shall be paid to the Agent for distribution to the
Lenders to the extent required under Section 8.15 of the
Financing Agreement.
"Required Lenders": Until the Tranche B Obligations are paid
in full, Required Lenders shall mean the consent of such Lenders as is
required pursuant to the Agency Agreement. Thereafter, the existing
definition shall apply.
"Revolving Loans" shall refer to advances made by the Tranche A
Lenders, from time to time, to or for the account of the Company by the Agent
on behalf of the Tranche A Lenders pursuant to Section 3 of this Financing
Agreement.
"Triggering Availability": The existing definition of Triggering
Availability is deleted and replaced with the following:
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Triggering Availability shall mean at any time the excess of the
Tranche A Borrowing Base (determined without regard to the Tranche A
Loan Ceiling) over the sum of (x) the outstanding aggregate amount
of all Tranche A Obligations, plus (y) the Availability Reserve, plus
(z) the Availability Block.
(B) New Definitions:
The following defined terms are hereby added to the Financing
Agreement:
"Agency Agreement": shall mean that certain Agency Agreement dated
as of April 10, 2003 by and among the Agent, the Tranche A Lenders and the
Tranche B Lenders.
"Availability Block" shall mean Seven Million Five Hundred Thousand
Dollars ($7,500,000).
"Blocked Account" as defined in Section 7.1(A)(xxi) hereof.
"Capital Expenditures": shall mean the expenditure of funds or the
incurrence of liabilities for the acquisition of property, plant, equipment,
furniture, fixtures, leasehold improvements and software which are capitalized
in accordance with GAAP and are consistent with the Company's business plan in
the aggregate.
"Change of Control": shall mean (a) the acquisition by any group of
Persons of beneficial ownership of 50% or more of the issued and outstanding
capital stock of the Company having the right, under ordinary circumstances, to
vote for the election of directors of the Company; (b) more than one-half
(1/2) of the Persons who were directors of the Company on the first day
of any period consisting of twelve (12) consecutive calendar months shall
cease for any reason, other than death or disability, to be directors of the
Company and successors for such directors have not been approved by a
majority of the directors of the Company still in office who were directors at
the beginning of such period or whose election or nomination was so approved or
(c) any merger or consolidation of the Company of or with any other Person or
the sale of all or substantially all of the property, assets or capital stock of
the Company.
"Closed Stores": The retail store locations denoted as already having
been closed on updated Schedule 2 hereto.
"Distribution Center Property": shall mean any location at which the
Company now or hereafter operates a distribution center or warehouse, which, at
present, consist of the following locations.
0000 Xxxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000
0000 Xxxxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000
0000 Xxxxxx Xxxxx Xxxxx, #000, Xxxxxxxxxx, XX 00000
0000 Xxxxx Xxxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000
"Inventory Reserves" shall mean the reserves which the Agent is
permitted to establish in respect to Inventory under Subsection (h) of the
definition of Eligible Inventory.
"Knowledge" shall mean the actual knowledge of the Company's current
senior management.
"Loan Documents": This Financing Agreement, the Agency Agreement and
each instrument and document previously, now or subsequently executed
and/or delivered in conjunction with this Financing Agreement and each other
instrument or document from time to time executed and/or delivered in
connection with the arrangements contemplated hereby.
"Material Adverse Change": Any event, fact, circumstance, change in, or
effect on, the business of the Company, taken as a whole, which individually or
in the aggregate or on a cumulative basis with any other then existing events,
facts, circumstances, changes in, or effects on, the Company or the Collateral,
taken as a whole:
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(a) would reasonably be expected to material adversely affect
the ability of the Company, to (i) operate or conduct its business in
all material respects in the manner in which such business is
currently operated or conducted, or (ii) perform its obligations under
the Loan Documents; or
(b) would reasonably be expected to have a material adverse
effect on the value, enforceability, or collectibility of a material
portion of the Collateral.
"Material Adverse Effect": a result, consequence, or outcome which
constitutes a Material Adverse Change.
"Overall Borrowing Base": Shall equal the sum of the following as of
any date as in effect on such date:
(A) The aggregate value of Eligible Inventory (including
Eligible In Transit Inventory) determined at the lower of cost or
market on a first-in, first-out basis multiplied by the Overall
Inventory Advance Percentage; provided, however, that in no event
shall the value of Eligible in-Transit Inventory included in the
Overall Borrowing Base exceed the lesser of (a) $5,000,000 or (b)
40% of the aggregate value of Eligible Inventory;
plus
(B) Eighty-Five Percent (85%) of the outstanding Eligible
Accounts Receivable of the Company,
minus
(C) the then outstanding balance of principal due on Tranche B
Loan I.
"Overall Inventory Advance Percentage" shall mean the lower of (a)
seventy nine and two-tenths percent (79.2%) of the aggregate value of Eligible
Inventory or (b) one hundred percent (100%) of the Net Orderly Liquidation
Value of Eligible Inventory as a percentage of the total Inventory as
determined by the most recent Inventory appraisal, as provided for in Section
7.13 hereof.
"Overloan": as defined in the Agency Agreement.
"Permissible Overloans": As defined in the Agency Agreement.
"Person": Any natural person, any corporation, limited liability
company, trust, partnership, joint venture or other enterprise or entity.
"Piper Distribution Center Property": shall mean the Distribution
Center located at 0000 Xxxxx Xxxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000.
"Piper Tranche B Senior Collateral": shall mean all Tranche B Senior
Collateral located on or used in connection with the Piper Distribution Center
Property.
"Sixth Amendment": The Sixth Amendment to the Financing Agreement
dated as of April 10, 2003.
"Stated Amount": The maximum amount for which a Letter of Credit
may be honored.
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"Tranche A Borrowing Base": shall equal the sum of the following
as of any date (but not to exceed the Tranche A Loan Ceiling):
(A) Eighty-Five Percent (85%) of the outstanding Eligible
Accounts Receivable of the Company,
Plus
(B) the aggregate value of Eligible Inventory (including Eligible
In-Transit Inventory) determined at the lower of cost or market on a
first-in, first-out basis, multiplied by the Inventory Advance
Percentage; provided, however, that in no event shall the value of
Eligible In-Transit Inventory included in the Tranche A Borrowing
Base exceed the lesser of (a) $5,000,000 or (b) forty percent (40%)
of the aggregate value of Eligible Inventory.
"Tranche A Commitment": shall mean, with respect to each Tranche A
Lender, that respective Tranche A Lender's Tranche A Dollar Commitment.
"Tranche A Debt": shall mean the aggregate of the Company's
Obligations, and indebtedness of any character to the Tranche A Lenders that
arise from or are related to Tranche A Loans, including without limitation any
Overloans and Tranche A Fees.
"Tranche A Dollar Commitment": As set forth under the signature block
for each Tranche A Lender for this Sixth Amendment (as such amounts may change
in accordance with the provisions of this Agreement), provided, however, that
the aggregate of Tranche A Dollar Commitments shall not exceed the Tranche A
Loan Ceiling.
"Tranche A Early Termination Fee": is defined in Section 11.2 of this
Financing Agreement.
"Tranche A Fees" shall mean all fees (such as the Letter of Credit
Guaranty Fee, Loan Facility Fee, Collateral Management Fee, Documentation
Fee, Loan Facility Fee, Line of Credit Fee and the Tranche A Early Termination
Fee and any fee payable to the Agent or Tranche A Lenders in connection with an
amendment or waiver of a provision of this Agreement) payable by the Company
to the Agent, Tranche A Lenders or their Affiliates in respect of the
Tranche A Loans including any fee payable to any Affiliate of the Agent or
Tranche A Lenders on account of the issuance of Letters of Credit
pursuant to this Financing Agreement.
"Tranche A Lenders": shall mean each Tranche A Lender to which
reference is made in the Preamble of the Sixth Amendment and any other Person
who becomes a "Tranche A Lender" in accordance with the provisions of
this Financing Agreement.
"Tranche A Loans": shall mean all Revolving Loans made hereunder.
"Tranche A Loan Ceiling": shall mean Fifty Million Dollars
($50,000,000) as such ceiling may be increased or decreased in accordance
with the terms of the Loan Documents to which the Company is a party.
"Tranche A Maturity Date" shall mean March 3, 2006.
"Tranche A Obligations": shall mean the aggregate of Tranche A Debt
and Tranche A Fees.
"Tranche A Percentage Commitment": As set forth under the signature
block for each Tranche A Lender for such Tranche A Lender reflecting, the ratio
of (i) the amount of the Tranche A Dollar Commitment of such Tranche A Lender
to (ii) the aggregate amount of the Tranche A Dollar Commitments of all
Tranche A Lenders (as such percentage may change in accordance with the
provisions of this Agreement).
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"Tranche A Senior Collateral": shall mean all Collateral which
is not Tranche B Senior Collateral.
"Tranche B Anniversary Fee": Defined in the Tranche B Fee Letter.
"Tranche B Commitment Fee": Defined in the Tranche B Fee Letter.
"Tranche B Debt": shall mean the aggregate of the Company's
Obligations, and indebtedness of any character to the Tranche B Lender that
arise from or are related to the Tranche B Loans, including, but not limited to,
Tranche B Fees.
"Tranche B Early Termination Fee": The fee payable pursuant to
Section 8.14 hereof.
"Tranche B Fees" shall mean all fees (such as the Tranche B Commitment
Fee, Tranche B Anniversary Fee and Tranche B Early Termination Fee payable
by the Company in respect of the Tranche B Debt pursuant to the Tranche B Fee
Letter or Sections 8.13 or 8.14 hereof.
"Tranche B Fee Letter" shall mean the letter from the Tranche B
Lender to the Company dated the date hereof concerning the fees due from the
Company to the Tranche B Lender, as such letter may be amended, restated,
modified or supplemented.
"Tranche B Loans" shall mean collectively Tranche B Loan I and
Tranche B Loan II.
"Tranche B Loan I": shall mean the loan in the original principal
amount of Six Million Five Hundred Thousand Dollars ($6,500,000) evidenced by
Tranche B Note I.
"Tranche B Loan II" shall mean the Loan in the original principal
amount of One Million Dollars ($1,000,000) evidenced by Tranche B Note II.
"Tranche B Notes": shall mean collectively, Tranche B Term
Note I and Tranche B Term Note II.
"Tranche B Maturity Date" shall mean April 10, 2004, which date may be
extended pursuant to Section 11.1 hereof.
"Tranche B Term Note I": shall mean the note dated the date hereof
evidencing Tranche B Term Loan I in the original principal amount of Six Million
Five Hundred Thousand Dollars ($6,500,000).
"Tranche B Term Note II" shall mean the note dated the date hereof
evidencing Tranche B Term Loan II in the original principal amount of One
Million Dollars ($1,000,000).
"Tranche B Senior Collateral": shall mean (i) all furniture, fixtures,
machinery and equipment of the Company and (ii) all products, proceeds
(including, without limitation, all leases and rents arising therefrom),
substitutions and accessions of or to any of the foregoing, wherever located and
whether cash or non-cash.
2. Conditions Precedent.
The obligation of the Agent and each of the Lenders to make loans under
the Financing Agreement is subject to the satisfaction of, or waiver of,
immediately prior to or concurrently with the making of such loans, each of the
conditions precedent set forth in Sections 2.1(a-t inclusive) of the Financing
Agreement as of the effective date of this Sixth Amendment. Without limitation
of the generality of the foregoing, on or before the effective date of this
Sixth Amendment, the Company shall furnish the Agent with the following items:
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(a) The Agent shall have received updated copies of the Searches referenced in
Subsection 2.1(a) of the Financing Agreement through a date substantially
contemporaneous with the effective date hereof and such searches shall have
confirmed that Agent has a duty perfected, first lien on the Collateral
pursuant to Section 2.1(b) of the Financing Agreement.
(b) The Agent shall have received evidence reasonably satisfactory to the Agent
that casualty insurance policies listing the Agent and each of the Lenders,
as additional insureds and loss payees are in full force and effect and
that such policies comply with Section 7.5 of the Financing Agreement.
(c) Pursuant to Subsection 2.1(c) of the Financing Agreement, any additional
UCC filings required to perfect the security interest of the Agent in the
Collateral shall have been properly filed in each applicable jurisdiction.
(d) The Company's counsel shall have furnished the Agent and each of the
Lenders with a satisfactory legal opinion as referenced in Subsection
2.1(d) of the Financing Agreement.
(e) The Company shall have confirmed that the Subordination Agreements
referenced in Subsection 2.1(f) of the Financing Agreement remain in full
force and effect and extend to the Tranche B Loans and shall have delivered
on April, 2003 Acknowledgement Agreement in respect to each such
Subordination Agreements.
(f) The Agent shall have received a landlord's waiver for the Piper
Distribution Center Property or the Company shall have satisfied the Agent
that it shall make diligent efforts to obtain such waiver within thirty
(30) days following the effective date.
(g) The Agent shall have been satisfied that the bailee agreements referenced
in Subsection 2.1(h) of the Financing Agreement remain in full force and
effect and shall have satisfied Agent that it shall make diligent efforts
to obtain any other bailee agreements Agent reasonably deems necessary
within thirty (30) days following the effective date.
(h) The Agent shall have received updated Board Resolutions, Incumbency
Certificate and related documents of the kind referenced in Subsection
2.1(i) of the Financing Agreement shall have been provided to the Agent in
respect to this Sixth Amendment and the documents being executed and
delivered in conjunction therewith.
(i) The Agent shall have received updated corporate organizational documents of
the type referenced in Subsection (j) of the Financing Agreement shall have
been updated through a date substantially contemporaneous with the
effective date.
(j) The Company shall have delivered an updated Officers Certificate as
referenced in Subsection 2.1(k) as of the effective date.
(k) The provisions of Subsections 2.1(l), (m), (o) and (q) of the Financing
Agreement shall each have been satisfied.
(l) Agent and each Lender shall have received, reviewed and be satisfied with
the twelve month cash budget projection referenced in Subsection 2.1(p) of
the Financing Agreement for the Company's 2003 fiscal year, ended January
31, 2004.
(m) The Company agrees that within thirty (30) days of the date hereof, at the
Company's expense (not to exceed $7,500 in the aggregate for Agent's and
all Lenders' Counsel), the Agent's counsel shall prepare and the parties
shall each execute an Amended and Restated Financing Agreement
incorporating this Sixth Amendment and all prior amendments to the
Financing Agreement.
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In addition, the obligations of the Tranche B Lender to advance the Tranche
B Loan is subject to the following additional conditions precedents:
(n) After giving effect to all outstanding Tranche A Loans and the funding of
the Tranche B Loans and payments to be made or expenses incurred in
connection with this Sixth Amendment, Availability shall not be less than
$15,000,000.
(o) All reasonable fees and expenses related to the Sixth Amendment of the
Agent's and the Tranche B Lender's counsel shall have been paid.
(p) The Company shall have executed and delivered the Tranche B Notes, the
Tranche B Fee Letter and any and all other documents or instruments which
may be reasonably requested by the Agent or Tranche B Lender.
(q) The Agent and each Lender shall have executed and delivered the Agency
Agreement.
(r) The Agent shall have received such additional blocked account agreements,
Credit Card Acknowledgements and Credit Card Agreements as it may
reasonably request or shall be reasonably satisfied that the Company has
made satisfactory arrangements to obtain such documents within thirty (30)
days following the effective date.
3. Amendments to Section 3.
(a) The parties acknowledge that Section 3.1 of the Financing Agreement
is hereby amended to provide as follows:
Section 3.1
The Tranche A Lenders agree, subject to terms and conditions of this
Financing Agreement from time to time to make Revolving Loans to the
Company on a revolving basis (i.e., subject to the limitations set
forth herein, the Company may borrow, repay and re-borrow such Revolving
Loans). The amount of the Revolving Loans available to be advanced to
the Company shall be equal to Availability, as determined by the Agent from
time to time. Each request from the Company for a Revolving Loan shall
constitute, unless otherwise disclosed in writing to the Agent and the
Tranche A Lenders, a representation and warranty by the Company that after
giving effect to the requested advance, no Default or Event of Default
shall have occurred and that such requested Revolving Loan is within the
Availability that then exists. All requests for Revolving Loans and
advances must be received by an Officer of the Agent no later than 1:00
p.m., New York time of the Business Day on which such loan and advances are
required. Should the Agent for any reason honor any request for advances in
excess of Availability, such advances shall be considered "Overadvances."
The Agent and Tranche A Lenders acknowledge that the Agent shall be
permitted to make an Overadvance hereunder, without the Tranche B Lender's
consent, only if, and to the extent permitted under the Agency Agreement.
(b) The following new Section 3.1A is hereby added to the Financing
Agreement.
3.1(A) Subject to the terms hereof, the Tranche B Lender agrees to advance
the Tranche B Loans to the Company on the date hereof consisting of the
Tranche B Loan I in the amount of Six Million Five Hundred Thousand
Dollars ($6,500,000) and Tranche B Loan II in the amount of One Million
Dollars ($1,000,000).
(c) All references to "Revolving Loan Account" in Section 3.6 or other
provisions of the Financing Agreements or Loan Documents are hereby amended to
read "Loan Account" and such Loan Account shall include the Tranche B
Obligations in addition to the Tranche A Obligations.
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(d) The Agent shall send a copy of the monthly statement referred to in
Section 3.7 hereof to the Tranche B Lender simultaneously with sending it to the
Company.
4. Amendments to Section 6.
(a) The Company hereby confirms that the security interests in the
Collateral granted to the Agent pursuant to Section 6.1 of the Financing
Agreement is intended to secure all of the Obligations of the Company to the
Agent and each Lender, including, but not limited to, all Tranche A Obligations
and all Tranche B Obligations and in confirmation thereof, the Company hereby
pledges to the Agent, for the benefit of all of the Lenders (including the
Tranche A Lenders and the Tranche B Lenders), a continuing lien and security
interest in all of the Collateral to secure all of the Obligations (including,
but not limited to, the Tranche A Obligations and the Tranche B Obligations).
(b) The following is hereby added as Section 6.8 of the Financing
Agreement:
6.8(a) The Company irrevocably and unconditionally authorizes and
grants a power of attorney to the Agent to file at any time and
from time to time such financing statements with respect to the
Collateral naming the Agent or its designee as the secured party
and such Company as debtor, as the Agent may require, and
including any other information with respect to the Company or
otherwise required by part 5 of Article 9 of the UCC of such
jurisdiction as the Agent may determine, together with any
amendments and continuations with respect thereto (including, but
not limited to, amendments of the UCC financing statements
previously filed in favor of the CIT Group/Business Credit, Inc.
to reflect the assignment thereof to the Agent as secured party),
which authorization shall apply to all financing statements filed
on, prior to or after the date hereof. The Company hereby
ratifies and approves all financing statements naming any Tranche
A Lenders or the Agent or its designee as secured party and the
Company as debtor with respect to the Collateral (and any
amendments with respect to such financing statements) filed by or
on behalf of Agent or any Lender prior to the date hereof and
ratifies and confirms the authorization of the Agent to file such
financing statements (and amendments, if any) and amendments
reflecting the assignment thereof to the Agent, on behalf of all
of the Lenders. In no event shall the Company, without the
consent of the Agent (which may not be unreasonably withheld), at
any time file, or permit or cause to be filed, any correction
statement or termination statement with respect to any previously
filed financing statement (or amendment or continuation with
respect thereto) naming the Agent or the Tranche A Lenders or
their respective designees as secured party and the Company as
debtor.
(b) The Company does not have any chattel paper (whether tangible or
electronic) or instruments as of the date hereof. In the event
that the Company shall be entitled to or shall receive any
chattel paper or instrument after the date hereof, the Company
shall promptly notify the Agent thereof in writing. Promptly upon
the receipt thereof by or on behalf of the Company (including by
any agent or representative), the Company shall deliver, or cause
to be delivered to the Agent, all tangible chattel paper and
instruments that the company may at any time acquire, accompanied
by such instruments of transfer or assignment duly executed in
blank as the Agent may from time to time specify, in each case
except as the Agent may otherwise agree. At the Agent's option,
the Company shall, or the Agent may at any time on behalf of the
Company , cause the original of any such instrument or chattel
paper to be conspicuously marked in a form and manner acceptable
to the Agent with the following legend referring to chattel paper
or instruments as applicable: "This chattel paper instrument is
subject to the security interest of CIT Group/Business Credit
Inc., as Agent and any sale, transfer, assignment or encumbrance
of this chattel paper instrument violates the rights of such
secured party."
(c) In the event that the Company shall at any time hold or acquire
an interest in any electronic chattel paper or any "transferable
record" (as such term is defined in Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or in
Section 16 of the Uniform Electronic Transactions Act as in
effect in any relevant jurisdiction), the Company shall promptly
notify the Agent thereof in writing. Promptly upon the Agent's
request, the company shall take, or cause to be taken, such
actions as the Agent may reasonably request to give the Agent
control of such electronic chattel paper under Section 9-105 of
the UCC and control of such transferable record under Section 201
of the Federal Electronic Signatures in Global and National
Commerce Act or, as the case may be, Section 16 of the Uniform
Electronic Transactions Act, as in effect in such jurisdiction.
10
(d) The Company does not own or hold, directly or indirectly,
beneficially or as record owner or both, any investment property,
as of the date hereof, or have any investment account, securities
account, commodity account or other similar account with any bank
or other financial institution or other securities intermediary
or commodity intermediary as of the date hereof (except for a
money market account maintained at Bank of America, the balance
of which shall not exceed $10,000 unless and until documentation
sufficient to grant the Agent a perfected first lien security
interest in such account and all funds deposited therein for the
benefit of the Lenders has been executed and delivered to the
Agent.).
(i) In the event that the Company shall be entitled to or shall
at any time after the date hereof hold or acquire any
certificated securities, the Company shall promptly endorse,
assign and deliver the same to the Agent, accompanied by
such instruments of transfer or assignment duly executed in
blank as the Agent may from time to time specify.
(ii) The Company shall not, directly or indirectly, after the
date hereof open, establish or maintain any investment
account, securities account, commodity account or any other
similar account (other than a deposit account) with any
securities intermediary or commodity intermediary unless
each of the following conditions is satisfied: (A) the Agent
shall have received not less than five (5) Business Days
prior written notice of the intention of the Company to open
or establish such account which notice shall specify in
reasonable detail and specificity acceptable to the Agent
the name of the account, the owner of the account, the name
and address of the securities intermediary or commodity
intermediary at which such account is to be opened or
established, the individual at such intermediary with whom
the Company is dealing and the purpose of the account, (B)
the securities intermediary or commodity intermediary (as
the case may be) where such account is opened or maintained
shall be acceptable to the Agent, and (C) on or before the
opening of such investment account, securities account or
other similar account with a securities intermediary or
commodity intermediary, the Company shall as the Agent may
specify either (1) execute and deliver, and cause to be
executed and delivered to the Agent, an Investment Property
Control Agreement with respect thereto duly authorized,
executed and delivered by the Company and such securities
intermediary or commodity intermediary or (2) arrange for
the Agent to become the entitlement holder with respect to
such investment property on terms and conditions acceptable
to the Agent; provided, however, that subject to the terms
of this Agreement, the Company shall retain the right to
liquidate or otherwise dispose of such investment property
unless and until an Event of Default has occurred and is
continuing so long as the Company makes arrangements to
grant the Agent a perfected security interest in the
proceeds thereto.
(e) The Company is not the beneficiary or otherwise entitled to any right
to payment under any letter of credit, banker's acceptance or similar
instrument as of the date hereof. In the event that the Company shall
be entitled to or shall receive any right to payment under any letter
of credit, banker's acceptance or any similar instrument, whether as
beneficiary thereof or otherwise after the date hereof, the Company
shall promptly notify the Agent thereof in writing. The Company shall
immediately, as the Agent may specify, either (i) deliver, or cause to
be delivered to the Agent, with respect to any such letter of credit,
banker's acceptance or similar instrument, the written agreement of
the issuer and any other nominated person obligated to make any
payment in respect thereof (including any confirming or negotiating
bank), in form and substance satisfactory to the Agent, consenting to
the assignment of the proceeds of the letter of credit to the Agent by
the Company as security and agreeing to make all payments thereon
directly to the Agent or as the Agent may otherwise direct or (ii)
cause the Agent as secured party to become, at the Company's expense,
the transferee beneficiary of the letter of credit, banker's
acceptance or similar instrument (as the case may be).
11
(f) The Company does not have any commercial tort claims as of the date
hereof. In the event that the Company shall at any time after the date
hereof have any commercial tort claims, the Company shall promptly
notify the Agent thereof in writing, which notice shall (i) set forth
in reasonable detail the basis for and nature of such commercial tort
claim and (ii) include the express grant by the Company to the Agent
of a security interest in such commercial tort claim (and the proceeds
thereof). In the event that such notice does not include such grant of
a security interest, the sending thereof by the Company to the Agent
shall be deemed to constitute such grant to the Agent.
(g) The Company shall take any other actions reasonably requested by the
Agent from time to time to cause the attachment, perfection and first
priority of, and the ability of the Agent to enforce, the security
interest of the Agent in any and all of the Collateral, including,
without limitation, (i) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under the
UCC or other applicable law, to the extent, if any, that the Company's
signature thereon is required therefor, (ii) causing the Agent's name
to be noted as secured party on any certificate of title for a titled
good if such notation is a condition to attachment, perfection or
priority of, or ability of the Agent to enforce, the security interest
of the Agent in such Collateral, (iii) complying with any provision of
any statute, regulation or treaty of the United States as to any
Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of the Agent to
enforce, the security interest of the Agent in such Collateral, (iv)
obtaining the consents and approvals of any governmental authority or
third party, including, without limitation, any consent of any
licensor, lessor or other person obligated on Collateral, and taking
all actions required by any earlier versions of the UCC or by other
law, as applicable in any relevant jurisdiction, provided, however,
that:
(i) the Company shall not be required to expend any funds to obtain
such an approval or consent from a governmental authority or
third party (except for UCC filing and other recording fees and
filing fees) and;
(ii) the foregoing shall not be deemed to require the Company to
obtain landlord's waivers except as otherwise required under
Section 7.1A (viii) hereof.
(c) The following is hereby added as Section 6.9 of the Financing
Agreement:
6.9 Following the occurrence and during the continuance of any
Event of Default and to the extent otherwise permitted pursuant
to this Agreement, the Company hereby irrevocably constitutes and
appoints the Agent as the Company's true and lawful attorney, with
full power of substitution, to convert the Collateral into cash at
the sole risk, cost, and expense of the Company, but for the benefit
of the Agent and the Lenders. The rights and powers granted the
Agent by the within appointment include but are not limited to the
right and power to:
(i) Prosecute, defend, compromise, or release any action relating
to the Collateral.
(ii) Sign change of address forms to change the address to which
the Company's mail is to be sent to such address as the Agent
shall designate; receive and open the Company's mail; remove
any cash or other proceeds of Collateral therefrom and
turn over the balance of such mail either to the Company or
to any trustee in bankruptcy, receiver, assignee for the
benefit of creditors of the Company, or other legal
representative of the Company whom the Agent determines to be
the appropriate person to whom to so turn over such mail.
12
(iii) Endorse the name of the Company in favor of the Agent upon
any and all checks, drafts, notes, acceptances, or other
items or instruments; sign and endorse the name of the
Company on, and receive as secured party, any of the
Collateral, any invoices, schedules of Collateral, freight or
express receipts, or bills of lading, storage receipts,
warehouse receipts, or other documents of title respectively
relating to the Collateral.
(iv) Sign the name of the Company on any notice to such Company's
account debtors or verification of the Accounts; sign Company's
name on any proof of claim in bankruptcy against account debtors,
and on notices of lien, claims of mechanic's liens, or
assignments or releases of mechanic's liens securing the
Accounts.
(v) Take all such action as may be necessary to obtain the payment of
any letter of credit and/or banker's acceptance of which the
Company is a beneficiary.
(vi) Repair, manufacture, assemble, complete, package, deliver, alter
or supply goods, if any, necessary to fulfill in whole or in part
the purchase order of any customer of the Company .
(vii)Use, license or transfer any or all general intangibles of the
Company.
5. Amendments to Section 7
(a) Section 7 of the Financing Agreement is hereby amended to add the
following 7.1A thereto:
7.1A As an inducement to each of the Lenders and the Agent to enter
into the Sixth Amendment, the Company hereby confirms that all
representations and warranties made under Section 7 of the
Financing Agreement continue to be true, accurate and complete as
of the date of the Sixth Amendment except as indicated on the
updated schedules attached hereto as Updated Schedule 1 (Existing
Liens) and Updated Schedule 2 (Collateral Locations, Chief
Executive Office and Trade Names). In addition, the Company makes
the following representations, warranties and covenants:
(i) The Company shall pay each Obligation when due (or on demand
if payable on demand), and shall promptly, punctually and
faithfully perform each of its other Obligations and
liabilities under this Financing Agreement and the other
Loan Documents.
(ii) The Company shall not change its state of incorporation or
its taxpayer identification number without providing at
least thirty (30) days prior written notice thereof to the
Agent.
(iii)The Company is duly organized, validly existing, and in
good standing under the laws of the jurisdiction in which it
is organized and in each jurisdiction where foreign
qualification is required for it to be qualified to do
business, except for any violations that would not
individually or in the aggregate, result in a Material
Adverse Effect. The Company is duly authorized to enter
into, and perform its obligations under, this Agreement and
the agreements, instruments and documents executed in
conjunction herewith. The execution, delivery and
performance by the Company of this Agreement will not
violate the Company's charter, partnership agreement or
operating agreement, any law or any provision thereof,
except for any violations that would not individually or in
the aggregate, result in a Material Adverse Effect.
13
(iv) Updated Schedule 2 annexed hereto contains a listing of all
names in which the Company ever conducted its business and
all entities and/or Persons with whom the Company ever
consolidated or merged, or from whom the Company ever
acquired in a single transaction or series of related
transactions substantially all of such entity or Person's
assets or stock.
(v) The Company will not change its name or conduct its business
under any name not listed on Updated Schedule 2 except upon
not less than twenty-one (21) days prior written notice to
the Agent and compliance with all the other provisions of
this Financing Agreement.
(vi) The Company has and will maintain sufficient infrastructure
to conduct its business as presently conducted and
contemplated to be conducted as described in its business
plan; and owns and possesses or has a right to use all
assets necessary for the conduct of its business (including,
but not limited to, agreements concerning the use of
property of any third person necessary for the conduct of
its business).
(vii)Except for Eligible In-Transit Inventory in the possession
of a consolidator, freight forwarder or customs broker, no
tangible personal property of the Company is in the care or
custody of any third party or stored under an entrustment or
bailment arrangement with a third party and none shall
hereafter be placed under such care, custody, storage or
entrustment unless a bailee agreement reasonably
satisfactory to Agent is executed and delivered by such
third party and in respect to Inventory which is in transit
to the Company, such Inventory constitutes Eligible
In-Transit Inventory.
(viii) For each location in the State of Washington, Virginia or
Pennsylvania, the Company will use reasonable efforts to
supply the Agent with a landlord's waiver or the Agent shall
establish an Availability Reserve for such location equal to
two (2) months rent for each retail store location unless
and until such time as a satisfactory landlord's waiver in
respect to such location is delivered to the Agent.
(ix) The Company does not have any Indebtedness with the
exception of Permitted Indebtedness.
(x) Updated Schedule 2 annexed hereto contains a schedule of all
leases for any location which any Company operates a retail
store (including, but not limited to temporary or seasonal
store locations) or warehouse, distribution center or
manufacturing facility, identifying which type of facility
is located on each site and whether such site is the
location of a retail store which has been closed or which
the Company intends to close during the remainder of its
2003 fiscal year ended January 31, 2004. Except as set forth
in Updated Schedule 2, and in respect to Closed Stores, each
of such leases is in full force and effect, and the Company
is not in default or violation of any such lease (except
with respect to any non-payment of rent in connection with a
good faith dispute) and the Company has not received any
notice of termination, default or cancellation of any such
lease.
(xi) The Company is in full compliance with all applicable
provisions and ERISA or otherwise applicable law in respect
to any and all retirement or employee benefit plans
maintained by it and has filed all reports required to be
filed in respect to or under ERISA or other applicable law.
14
(xii)Except as describe in Updated Schedule 3 annexed hereto,
there is not presently pending or to the knowledge of the
Company, threatened by or against the Company any litigation
which would reasonably expect to have a Material Adverse
Effect upon the Company's financial condition or ability to
conduct its business or the Collateral.
(xiii) Updated Schedule 2 hereto correctly and completely sets
forth the Company's Chief Executive's Office, all of the
Company's Collateral locations and all trade names of the
Company.
(xiv)Updated Schedule 1 hereto summarizes all existing liens
outstanding against the Company and or any of its affiliates
in any applicable jurisdictions;
(xv) The Company is in compliance all applicable laws, other than
any laws the noncompliance with which would not reasonably
expected to have a Material Adverse Effect. The Company has
not received any notice of violation of any applicable law,
which violation has not been cured or otherwise remedied,
and which violations would have a Material Adverse Effect.
(xvi)The Company, to the Company's Knowledge, has not been and
is not presently party to any collective bargaining
agreement or other labor contract. There is not presently
pending and, to the Company's knowledge, there has not been
threatened, any (i) strike, slowdown, picketing, work
stoppage or employee grievance process; (ii) any proceeding
against or effecting the Company relating to the alleged
violation of any law applicable to labor relations or the
National Labor Relations Board, the Equal Employment
Opportunity Commission or any comparable government body,
which, if determined adversely to the Company would have a
Material Adverse Effect or (iii) any lockout of any
employees by the Company or any application for
certification of collective bargaining agent.
(xvii) Except as may relate to the audit currently being
conducted by the Internal Revenue Service or as disclosed on
Schedule 4 hereto, to the Company's Knowledge, the Company
has (i) paid, as they have become due and payable, all taxes
and employment contributions and other charges of any kind
or nature levied or which could be claimed against the
Company or the Collateral by any Person whose claim could
result in an encumbrance upon any assets of the Company or
by any governmental authority except for such taxes,
contributions, and other charges (x) the failure to pay
which would not reasonably be expected to have a Material
Adverse Effect, or (y) which are being contested in good
faith through appropriate proceedings; (ii) properly
withheld or collected and properly paid over to the relevant
governmental authority withholding any payroll or other tax
from employees, or other funds received in trust from a
third party including sales taxes except for such taxes or
other funds the failure to withhold, collect or pay over
which would not reasonably be expected to have a Material
Adverse Effect; (iii) timely made all contributions or other
payments as may be required pursuant to any pension or other
employee benefit plan established by the Company except for
such contributions and payments the failure to timely make
which would not reasonably be expected to have a Material
Adverse Effect, (iv) timely filed all tax and other returns
or other reports with each governmental authority with whom
the Company is obligated to file such reports except for
such returns or reports the failure to file which would not
reasonably be expected to have a Material Adverse Effect,
and (v) has not to its Knowledge received any notice from a
state, federal or local taxing authority that it has
assessed any additional taxes or notifying the Company of a
failure to pay taxes or file any tax returns in respect to
any prior period or otherwise alleging that the Company may
have additional tax liability except for such taxes or tax
returns the failure to pay or file as applicable, which
would not reasonably be expected to have a Material Adverse
Effect. For purposes of this subsection, Material Adverse
Effect shall refer to a negative impact of at least One
Hundred Thousand Dollars ($100,000).
15
(xviii) To its Knowledge, the Company has never been legally
responsible for any release or reported release of any
hazardous material or received notification of any release
or reported release of any hazardous material from any site
occupied or operated by the Company.
(xix)All financial reports and other financial or Collateral
information provided by the Company to the Agent and Lenders
in conjunction with the Obligations are true, accurate and
complete in all material respects and all financial
statements provided by the Company to the Agents and Lenders
were prepared in accordance with GAAP consistently applied.
(xx) Annexed hereto as Schedule 5 is a schedule of all present
Depository Accounts maintained by the Company, which
Schedule includes, with respect to each Depository Account
(i) the name and address of the depository; (ii) the account
number(s) of the account(s) maintained with such depository;
and (iii) a contact person at such depository. The Company
will provide the Agent with at least ten (10) business days
prior notice prior to its establishment of any additional
Depository Accounts.
(xxi)All funds in any Depository Account and all proceeds of
Credit Card Receivables shall be deposited within two (2)
Business Days of their receipt into the Company's depository
account at Bank of America (the "Blocked Account") listed on
Schedule 5 hereto. The Company acknowledges that the
contents of each Depository Account and of the Blocked
Account constitute Collateral and proceeds of Collateral.
The Company further acknowledges that Bank of America, the
Company, and the Agent are parties to a Blocked Account
Agreement dated as of March, 2000 pursuant to which, inter
alia, Bank of America acknowledged that the Agent has been
granted a lien on all funds deposited in the Blocked
Account, and agreed that upon notice from the Agent, it
shall commence to wire transfer funds deposited in the
Blocked Account as directed by the Agent. The Company
confirms that such Blocked Account Agreement remains in full
force and effect, constitutes a legally valid, binding and
enforceable obligation of the Company and Bank of America
and that the rights granted to the Agent thereunder are
intended to be for the benefit of both the Tranche A Lenders
and the Tranche B Lender. The foregoing provisions regarding
Depository Accounts and Blocked Accounts shall be subject to
Section 3.4 of the Financing Agreement which permits the
Company to enforce, collect and receive all amounts owing on
Accounts and manage and direct its Depository Accounts
unless and until Triggering Availability is less than
$10,000,000 or as otherwise provided therein.
(b) The provisions of the second sentence of Section 7.2 regarding the
Agent's right to inspect the Collateral and any and all records
pertaining to the collateral or otherwise maintained by the Company is
hereby amended as follows:
The Company agrees that the Agent and any Lender, and their
respective agent, may enter upon the Company's premises
at any time upon reasonable prior notice to the Company
and inspect the Company's books, records or the
Collateral provided, however, that the Company shall
only be required to reimburse the Agent's and/or such
Lender's Out-of-Pocket Expenses related to such
inspection twice in a twelve (12) month period except
that (x) at any time Triggering Availability is less
than ($20,000,000) and at all times thereafter until
such time as the Company maintains Triggering
16
Availability of Twenty Million Dollars ($20,000,000) or
more for a period of ninety (90) consecutive days or
(y) following the occurrence and during the continuance
of an Event of Default, the Agent and the Lenders shall
not be limited in the number of times Agent or Lender
or their respective agents may enter upon the Company's
premises and the Company shall be obligated to
reimburse the Agent and/or Lenders for all
Out-of-Pocket Expenses related to all such inspections
without limitation.
(c) Notwithstanding anything in the existing text of Section 7.3, at all
times any Obligations are outstanding, the Company shall provide each
Lender with all reports required to be furnished under Section 7.3 of
the Financing Agreement and the Agent and each Lender with a borrowing
base report on the dates listed on Schedule 6 hereto for the Company's
2003 fiscal year, (which schedule shall be revised by the Company and
the Agent for subsequent fiscal years) regardless of the level of
Triggering Availability which may exist and at any time Triggering
Availability is less than Ten Million Dollars ($10,000,000) or
following the occurrence and during the continuance of any Event of
Default, the Company shall provide such report on a weekly basis. In
addition to the financial information required to be provided under
Sections 7.3 and 7.8 of the Financing Agreement, the Company agrees to
provide the Agent and each Lender with the additional reports listed
on Schedule 7 hereto (which reports shall be provided monthly on or
before the twentieth (20th) day of the next month unless indicated to
the contrary).
(d) The following additional paragraph is added to Section
7.3 of the Financing Agreement.
In addition to the preceding reports, the Company shall promptly
provide the Agent, with a copy to each Lender, with written notice of, the
occurrence of any of the following, which written notice shall set forth as
to the facts and circumstances in respect to which such notice is being
given, with reasonable specificity: (i) any change in its board of
directors, or any of its chief executive officers, president or chief
financial officer; (ii) the completion of any physical count encompassing
at least twenty-five percent (25%) of its Inventory, together with a copy
of the results thereof; (iii) any failure by the Company to pay rent (other
than in connection with a good faith dispute) at more than five (5) retail
store locations at the same time (except for the Closed Stores or the Piper
Distribution Center property) continuing unremedied for more than thirty
(30) days; (iv) the occurrence of any Default (within five (5) Business
Days after the Company has Knowledge of such occurrence ) (provided,
however, that failure to give any such notice shall not, by itself,
constitute an Event of Default if the Default is cured at or within ten
(10) business days following the giving of such notice); (v) any change in
the Company's independent accountant; (vi) any litigation which would be
reasonably expected to have a Material Adverse Effect on the Company; and
(vii) copies of any press releases and all annual, periodic and current
reports it files with the Securities and Exchange Commission
(d) Intentionally Omitted.
(e) In addition to those actions specified in Section 7.9
of the Financing Agreement, the Company agrees that
until termination of the Financing Agreement and
payment and satisfaction of all Obligations due
hereunder in full, the Company shall not, unless the
Agent and Tranche B Lender provides their prior
written consent (which will not be unreasonably
withheld), do any of the following:
(i) So long as any Tranche B Obligations are
outstanding, execute any lease or commit to open or become
legally obligated to open any additional retail store
locations unless (i) such lease or commitment is consistent
with a business plan submitted to and deemed reasonable by
Agent and each Lender; (ii) if such store is in Washington
State, the Company shall use reasonable efforts to obtain a
landlord's waiver in respect to the subject store; and (iii)
without the prior written consent of Agent and the Tranche B
17
Lenders, not to be unreasonably withheld, such commitment
will not result in the opening of more than eight (8) stores
during the Company's fiscal year 2003 ended January 31, 2004
and twenty-five (25) stores during fiscal year 2004 ended
January 31, 2005, and a number of stores to be determined by
Agent, in its discretion, after consultation with the Company
and each Lender, for any subsequent fiscal year during which
any Obligations are outstanding, provided, however, that, if
the Company provides the Agent with a business plan for
fiscal year 2004, providing for the opening of more than
twenty-five (25) stores in such fiscal year and the Agent, in
its discretion after consultation with the Tranche B Lender,
deems such plan reasonable, the Company shall be permitted to
open up the number of stores contemplated by such business
plan without having to obtain Agent's or the Tranche B
Lender's prior written consent. Anything to the contrary
notwithstanding, the provisions of this subsection (i) shall
terminate at such time as there are no Tranche B Obligations
outstanding.
(ii) Amend, modify or otherwise alter materially the
terms of any lease in a manner which, individually or in the
aggregate, would have a Material Adverse Effect on the
Company.
(iii) So long as any Tranche B Obligations are
outstanding: commit to close any retail store locations or
the Piper Road Distribution Center Property except that the
Company may close up to twenty-four (24) of its permanent
retail stores in place at the beginning of fiscal 2003
(including the Closed Stores) or 2004 during each of such
fiscal years without the consent of the Agent and Tranche B
Lender provided that there does not exist a Default or Event
of Default at the time of such closure and provided further,
however, that if the Company provides the Agent with a
business plan for fiscal 2004 or any subsequent fiscal year
providing for the closing of more than twenty-four (24)
stores in such fiscal year and the Agent, in its discretion,
after consultation with the Tranche B Lender, deems such plan
reasonable, the Company shall be permitted to close the
number of stores contemplated by such business plan without
having to obtain Agent's or Tranche B Lender's prior written
consent. In the event that the Company intends to close more
than ten (10) stores at the same time, the Company shall
engage a professional liquidator unless the Agent and the
Tranche B Lender, in their reasonable discretion, consent to
permit the Company to conduct such closings.
(f) Section 7.13 of the Financing Agreement is hereby amended
so as to require the Company to provide the Agent with appraisals of
the Net Orderly Liquidation Value of Inventory twice each year at such
time as the Agent may reasonably require at the Company's expense,
provided, however, that if, (A) the Company fails to maintain
Triggering Availability of at least Twenty Million Dollars
($20,000,000) for a period of ninety (90) consecutive days, Agent, in
its discretion, may require that up to an additional two (2) gross
recovery update appraisals per year be conducted at the Company's
expense and (B) in the event that the Company closes more than
twenty-four (24) stores in any fiscal year, the Agent may in its
discretion, require one (1) additional gross recovery update appraisal,
conducted at the Company's expense.
(g) The following additional financial covenants are hereby
added to the Financing Agreement:
7.15 So long as any Tranche B Obligations are
outstanding, the Company shall either (a) have a Triggering
Availability of at least Ten Million Dollars ($10,000,000) on
the last three (3) days of each month commencing on May 3,
2003 or (b) not permit or suffer its EBITDA tested as of the
last day of each fiscal month, commencing on May 3, 2003,, on
a cumulative basis, to be less than the Minimum EBITDA listed
in the following chart for the applicable period specified on
such chart, with the first measurement to occur as of May 3,
2003 for the fiscal quarter then ended, and each subsequent
measurement shall pertain to the period beginning on February
2, 2003 and ending on the date of measurement listed on the
chart below.
18
------------------------------- --------------------------
Period Ending Minimum EBITDA
------------------------------- --------------------------
------------------------------- --------------------------
May 3, 2003 $ (1,870,000)
------------------------------- --------------------------
------------------------------- --------------------------
May 31, 2003 $ (1,771,000)
------------------------------- --------------------------
------------------------------- --------------------------
July 5, 2003 $ (323,760)
------------------------------- --------------------------
------------------------------- --------------------------
August 2, 2003 $ 136,000
------------------------------- --------------------------
------------------------------- --------------------------
August 30, 2003 $ 2,165,000
------------------------------- --------------------------
------------------------------- --------------------------
October 4, 2003 $ 2,032,000
------------------------------- --------------------------
------------------------------- --------------------------
November 1, 2003 $ 3,452,000
------------------------------- --------------------------
------------------------------- --------------------------
November 29, 2003 $ 5,167,000
------------------------------- --------------------------
------------------------------- --------------------------
January 3, 2004 $ 13,201,000
------------------------------- --------------------------
------------------------------- --------------------------
January 31, 2004 $ 10,971,000
------------------------------- --------------------------
The required Minimum EBITDA levels for each fiscal month from and
after February 1, 2004 shall be measured on a rolling 12-month basis and
shall be established based on eighty percent (80%) of the Company's
cumulative projected EBITDA levels as shown on the Company's business plan
for fiscal year 2004, provided that the Agent and Tranche B Lender has
deemed such business plan reasonable in their discretion, or in the absence
of a business plan deemed reasonable by the Agent and Tranche B Lender, by
the Agent, in the Agent's discretion, after consultation with the Company
and the Lenders, based on such financial information as may be in the
Agent's possession, subject to readjustment in the Agent's discretion,
after consultation with the Company and each Lender, upon the Company's
subsequent delivery of a business plan which is deemed reasonably
acceptable by the Agent and Tranche B Lender. Anything to the contrary
notwithstanding, the provisions of this Section 7.15 shall terminate at
such time as there are no Tranche B Obligations outstanding.
7.16 During the period from December 22 through January 5 of each
year so long as any Tranche B Obligations are outstanding, there shall be
no outstanding balance of the Revolving Loans (exclusive of Letters of
Credit) and the Stated Amount of Outstanding Letters of Credit shall not
exceed $12,200,000.
7.17 The Company shall not incur more than Five Million Dollars
($5,000,000) in aggregate Capital Expenditures on a consolidated basis
during its fiscal year ended January 31, 2004 without the prior written
consent of the Agent and Tranche B Lender. In the event that the Tranche B
Maturity Date is extended beyond April 10, 2004, as provided in Section
11.1(a) hereof, the Company shall not incur aggregate Capital Expenditures
in excess of 115% of the Capital Expenditures shown on a business plan for
Company's 2004 fiscal year (or any subsequent fiscal year), which is deemed
reasonable by the Agent and the Tranche B Lender in their discretion. In
the event that the Company has not delivered an updated, preliminary
business plan approved by management (subject to approval by the Company's
Board of Directors) deemed reasonably acceptable by the Agent and Tranche B
Lender by January 31 of the prior fiscal year, the permissible level of
Capital Expenditures for the succeeding fiscal year shall be established by
the Agent, in its discretion, after consultation with the Company and the
Tranche B Lender, based on such financial information as is then in the
Agent's possession, subject to readjustment, in the Agent's discretion,
upon the Company's subsequent delivery of a business plan which is
reasonably acceptable to the Agent and Tranche B Lender. Upon establishment
of such new level of Capital Expenditures for such subsequent fiscal year,
such new levels shall be deemed to be incorporated into this Section 7.17.
19
7.18 The Company shall at all times keep proper books of account, in
which full, true and accurate entries shall be made of the Company's
transactions, all in accordance with GAAP (if applicable), applied
consistently with prior periods to, thoroughly reflect the financial
condition of the Company at the close of, and as a result of operations
for, the periods in question, the Company shall, upon reasonable prior
notice during normal business hours, accord the Agent and each Lender and
the respective representatives with access from time to time as the Agent,
and such Lenders and their representatives may require or request to
examine, inspect, and copy and make extracts from any and all of the
Company's books, records, electronically stored data, papers and files.
6. Amendments to Section 8.
(a) The Company hereby confirms that it has authorized the Agent to
charge the Loan Account or other sums; credit or other amount due to the Company
for any or all amounts due hereunder to the Tranche B Lender (in addition to
amounts due to the Tranche A Lender) as such payments become due and payable and
further confirms that the provisions of Section 8.11 hereof are intended to, and
shall, apply to the Tranche B Obligations.
(b) Section 8 of the Financing Agreement is hereby amended by adding
the following new sections after section 8.11 thereof:
8.12 The unpaid principal balance of each of the Tranche B
Loans shall bear interest, until repaid, at a rate per annum equal to
Fourteen and one-half percent (14.5%) per annum (based upon a 360-day
year and actual days elapsed), which shall be due and payable on the
first day of each month in arrears commencing on May 1, 2003.
Following the occurrence and during the continuance of any Event of
Default (and whether or not Agent exercises any of the rights or
remedies provided hereunder on account thereof), the Tranche B Loan
shall bear interest at a rate of sixteen and one-half percent (16.5%)
per annum and all such interest shall be payable on demand.
8.13 In addition to any other fee or expense to be paid by
the Company on account of the Tranche B Loans, the Company shall pay
the Tranche B Lender directly, the "Tranche B Commitment Fee" and the
"Tranche B Anniversary Fee" as and when provided in the Tranche B Fee
Letter.
8.14 In the event that an Early Termination Date occurs, or
the Tranche B Loan is otherwise repaid in full for any reason, prior
to January 31, 2004, the Company shall pay the Agent for the benefit
of the Tranche B Lender, or to the Tranche B Lender directly, the
"Tranche B Early Termination Fee" payable on the date of such
repayment or termination, determined as follows:
The Tranche B Early Termination Fee shall equal the difference
between (A) One Million One Hundred Thousand Dollars
($1,100,000) and (B) the sum of all Tranche B Interest,
Tranche B Commitment Fees and Tranche B Anniversary Fees
actually paid in cash by the Company and received by the
Tranche B Lender, but in no event less than zero dollars ($0).
8.15 The full unpaid balance of Tranche B Term Loan I shall
be due and payable on the first to occur of the Tranche B Maturity
Date or an Early Termination Date, provided, however, that the Company
shall not pay the balance of Tranche B Term Loan I on the Tranche B
Maturity Date if an Event of Default hereunder then exists or if such
payment would create an Event of Default hereunder and provided
further, however, that, notwithstanding the foregoing, the failure of
the Company to pay the full outstanding balance of Tranche B Loan I on
the Tranche B Maturity Date shall constitute an Event of Default
hereunder. The principal balance of the Tranche B Term Loan II shall
be due and payable out of the net proceeds received by the Company
from a sale or refinancing of the Tranche B Senior Collateral
(including, but not limited to, a sale/leaseback thereof) as provided
20
below in this Section 8.15; provided, however, that in the event that
the full unpaid balance of Tranche B Term Note II has not been paid by
October 31, 2003, the Company shall make the following payments in
respect to principal due thereunder: on November 1, 2003, such amount
as is necessary to reduce the outstanding principal balance of Tranche
B Term Loan II to seven hundred thousand dollars ($700,000) and on the
first day of December, 2003 and each month thereafter until the entire
outstanding balance of Tranche B Loan II has been paid, the lesser of
(a) One Hundred Thousand Dollars ($100,000) or (b) the outstanding
principal balance of the Tranche B Loan II.
Any principal or interest in respect to the Tranche B Loan II
which has not been paid by the Tranche B Maturity Date shall be due
and payable on such date unless such date is extended pursuant to
Section 8.13 hereof in which event the Company shall continue to make
principal payments of One Hundred Thousand Dollars ($100,000) per
month until the Tranche B Loan II is paid in full. The Agent and each
of the Lenders hereby agree that items of Tranche B Senior Collateral
may be sold, refinanced or included in a sale/leaseback transaction;
provided that: (i) in respect to all Tranche B Senior Collateral other
than the Piper Tranche B Senior Collateral the net proceeds of such
transactions shall be paid to the Agent for application against the
Tranche B Loan II until the outstanding balance thereof has been paid
and, thereafter, shall be applied against the Tranche A Loans and (ii)
in respect to the Piper Tranche B Senior Collateral, the net proceeds
are distributed as follows:
(A) if such net proceeds are less than Two Million
Dollars ($2,000,000.00), the first One Million Dollars
($1,000,000.00) of such net proceeds shall be paid to Agent
for application in reduction of Tranche B Loan II;
(B) if such net proceeds are greater than Two
Million Dollars ($2,000,000.00) but less than Three Million
Dollars ($3,000,000.00), the first Five Hundred Thousand
Dollars ($500,000.00) of such net proceeds shall be paid to
Agent for application in reduction of Tranche B Term Loan II;
and
(C) if such net proceeds are greater than Three
Million Dollars ($3,000,000.00) the Company may retain the
full amount thereof.
7. Amendments to Section 10.
(a) 7.1.(e) is hereby amended by adding the following proviso:
provided, however, that the Company shall have only ten (10) days to
remedy a default related to its failure to provide a Borrowing Base
Certificate on the date when due hereunder and, provided further, however
that the Company shall not have any cure period in respect to any
misrepresentation which is material.
(b) Section 10.1 of the Loan Agreement is hereby amended by adding the
following additional Events of Default after subparagraph (i) thereof:
(j) material breach by the Company of its leases for more than five
(5) retail locations at the same time (exclusive of leases
for Closed Stores) or the Piper Distribution Center Property
such that such lease(s) could be terminated by the landlord
therefor.
(k) The entry of a final, nonappealable order by a court of
competent jurisdiction allowing any Person to attach, by
trustee, mesne, or other process, any of the Company's funds
or assets, the Company in excess of $375,000.
(l) The entry of any final judgment against the Company in
excess of $375,000, which judgment is not satisfied (if a money
judgment) or appealed from (with execution or similar process
stayed) within the applicable appeals period or not covered in
full by insurance.
21
(m) The entry of any order or the imposition of any other process
having the force of law, the effect of which is to restrain in
any material way the conduct by the Company of its business in
the ordinary course, which is not removed within thirty (30) days
of its issuance.
(n) The conviction of, or entry of a final, non-appealable order
against the Company, under any federal, state, municipal, and
other civil or criminal statute, rule, regulation, order or other
legal requirement in a proceeding instituted by a governmental
unit or agency where the relief, penalties, or remedies include
the forfeiture of any property of the Company and/or the
imposition of any stay or other order, the effect of which could
be to restrain in any material way the conduct by the Company of
its business in the ordinary course or have another Material
Adverse Effect.
(o) Any challenge by or on behalf of the Company or any guarantor of
the Obligation to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in
accordance with the subject Loan Document's terms or which seeks
to void, avoid, limit, or otherwise adversely affect any security
interest created by or in any Loan Document or any payment made
pursuant thereto.
(p) Any determination by any court or any other judicial or
government authority that any Loan Document is not enforceable
strictly in accordance with the subject Loan Document's terms or
which voids, avoids, limits, or otherwise adversely affects any
security interest created by any Loan Document or any payment
made pursuant thereto.
(q) So long as any Tranche B Obligations are outstanding, any Change
of Control unless, within sixty (60) days of such Change of
Control either (i) Tranche B Lender shall have consented thereto
(which consent shall not be unreasonably withheld) in writing or
(ii) the Tranche B Obligations shall have been paid in full (and
the Tranche B Lender hereby agrees that any such payment may be
made without any prepayment penalty).
(r) The Company shall fail to observe or perform any condition
precedent or subsequent to the Sixth Amendment or any covenant
contained therein or any representation or warranty made
thereunder shall fail to be true, accurate or complete as of the
date when made or any covenant made thereunder shall be breached,
unless such representation or warranty is rendered true, accurate
and complete or the breach of such covenant is cured within
twenty-one (21) days of notice from the Agent specifying such
failure or breach .
(b) The Company, Agent and each Lender agree that the exercise by the
Agent of the rights and remedies provided under Sections 10.2 and 10.3 of the
Financing Agreement shall be subject to the provisions of the Agency Agreement
so long as of the Tranche B Obligations remain outstanding.
(c) The following is hereby inserted as Section 10.3(d) of the
Financing Agreement:
(d) Any and all deposits or other sums at any time credited by or due
to the Company from the Agent or any Lender or any participant (a "Participant")
in the Tranche A Loans or Tranche B Loans contemplated hereby or from any
Affiliate of any Agent or any Lender or any Participant and any cash,
securities, instruments or other property of the Company in the possession of
any Agent or any Lender, any Participant or any such Affiliate, whether for
safekeeping or otherwise (regardless of the reason such Person had received the
same) shall at all times constitute security for all Obligations and for any and
all other obligations of the Company to any Agent or any Lender or any
Participant or any such Affiliate and may be applied or set off against the
Obligations at any time, whether or not such are then due and whether or not
other collateral is then available to the Agent, Lender, Participant or
Affiliate.
22
8. Amendments to Section 11.
(a) Section 11.1 of the Financing Agreement is hereby amended to read
as follows: 11.1 The Tranche A Loans shall be due and payable on the
Tranche A Maturity Date. Subject to the proviso to the first sentence of
Section 8.15 hereof, the Tranche B Loans shall be due and payable on the
Tranche B Maturity Date; provided, however, that, at the written request of
the Company received by the Tranche B Lender and the Agent on or before
March 1, 2004, the Tranche B Maturity Date in respect to Tranche B Loan I
and the unamortized portion of Tranche B Loan II shall be extended for an
additional term of twelve (12) months (i.e., through April 9, 2005), so
long as the Company is in compliance with all of the following conditions:
(i) For the Company's 2003 Fiscal Year ended January 31, 2004,
the Company shall have achieved a minimum EBITDA of Ten Million Three
Hundred Thousand Dollars ($10,300,000), as audited by the
Company's outside accountants; and
(ii) As of the last day of fiscal year 2003, the Company shall
have Eligible Inventory with a value determined at the lower of cost
or market on a first-in, first-out basis of at least Forty Million
Dollars ($40,000,000).
(iii) On or before the effective date of such notice, the Company
shall have furnished the Agent and Tranche B Lender with a preliminary
business plan for 2004, approved by the Company's management
(subject to approval by the Company's Board of Directors) which the
Tranche B Lender has deemed reasonably acceptable, in its discretion.
In the event that the Tranche B Maturity Date is extended, on or
before April 10, 2004, the Company shall pay the Tranche B Lender the
Tranche B Anniversary Fee due on such date pursuant to the Tranche B Fee
Letter.
(b) Section 11.2 of the Loan Agreement is hereby amended to clarify
that the provisions thereof concerning the automatic continuation of the
Financing Agreement and the provisions of the fourth and fifth
sentences thereof concerning the circumstances in which the Early Termination
Fee is or is not due only apply to the Tranche A Early Termination Fee and not
to the Tranche B Early Termination Fee.
(c) The sixth sentence of Section 11.2 is hereby deleted.
9. Amendments to Section 12.
(a) Section 12.6 of the Loan Agreement is hereby amended by adding the
following additional notice to parties as subsection (d) thereof:
To Tranche B Lender:
Xx. Xxxxxxxx Xxxxx, Managing Director
Xxxxxx Xxxxxxxx Retail Funding, LLC
Xxxxxx Xxxxxxxx Group
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
23
Copies of any such notices should also be provided to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxx Xxxxxxx Xxxxxxx Israels LLP
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
All notices to Agent or the Tranche A Lender shall henceforth be sent
to the following addresses:
The CIT Group/Business Credit, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Credit Manager/Retail Finance Group
Fax: (000) 000-0000
With a copy to:
Xxxxxx Xxxxx, Esq.
Xxxxxxxxx Xxxxx Fields & Younger
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
(b) Section 12.7 of the Loan Agreement is hereby amended to read as
follows:
The validity, interpretation and enforcement of this Financing
Agreement shall be governed by and construed under the laws of
the State of California; provided, however, that the Tranche B
Notes and the provisions setting forth the Tranche B Lenders
and the Company's and Tranche B's rights and obligations in
respect to principal, interest and fees on the Tranche B Loans
shall be governed and construed, as between Company and
Tranche B Lender only, under the laws of the Commonwealth of
Massachusetts. Notwithstanding the above, all matters and
provisions relating to the Collateral and all matters and
provisions as between Agent and Tranche A Lenders or between
Agent and/or Tranche A Lenders, on the one hand, and Company
or Tranche B Lenders, on the other hand, shall be governed by
and construed under the laws of the State of California.
(c) Section 12.8 of the Financing Agreement shall be deemed
deleted so long as the Agency Agreement is in effect.
(d) The following new Section 12.9 is hereby added to the Financing
Agreement
12.9 Agent's or Lenders' Discretion.
(a) Each reference in the Financing Agreement or
other Loan Documents to the exercise of discretion
or the like by Agent or any Lender shall be to
Agent's or such Lender's exercise of its
commercially reasonable judgment, in good faith,
based upon Agent's or such Lender's consideration of
any such factor as Agent's or such Lender, taking
into account information of which Agent or such
Lender then has actual knowledge, believes:
24
1. Will or reasonably could be expected to materially affect: the
value of the Collateral, the enforceability of the Agent's and
Lender's security and collateral interests therein, or the amount
which the Agent or Lenders would likely realize therefrom (taking
into account delays which may possibly be encountered in the
Agent's or Lender's realizing upon the Collateral and likely
Out-Of-Pocket Expenses).
2. Indicates that any report or financial information delivered to
the Agent or Lender by or on behalf of the Company is incomplete,
inaccurate, or misleading in any material manner or was not
prepared in accordance with the requirements of this Agreement.
3. Suggests a material increase in the likelihood that the Company
will become the subject of a bankruptcy or insolvency proceeding.
4. Constitute a material Default.
(b) In the exercise of such judgment, Agent or any Lender also may take
into account any of the following factors:
5. Those included in, or tested by, the definitions of
"Availability" and "Net Orderly Liquidation Value".
6. The current financial and business climate of the industry in
which the Company competes (having regard for the Company's
positions in that industry).
7. General macroeconomic conditions which have a material effect on
the Company's cost structure.
8. Material changes in or to the mix of the Company' Inventory.
9. Seasonality with respect to the Company's Inventory and patterns
of retail sales.
10. Such other factors as either Agent or any Lender determine, in
good faith, are likely to have a material bearing on credit risks
associated with the providing of loans and financial
accommodations to the Company.
10. Amendments to Section 13.
(a) The provisions of Sections 13.1, 13.2 and 13.6 shall apply only to
Tranche A Lenders and Tranche A Loans.,
(b) In Section 13.1, the provision regarding the circumstances in
which the Agent must obtain the Company's prior consent to admission of new
Lenders in the Financing Agreement shall only apply to the admission of Tranche
A Lenders and not to the addition of assignees or participants in the Tranche B
Loans.
(c) The provisions of Section 13.4 thereof shall only apply to the
distribution of interest and fees due to the Tranche A Lenders amongst the
Tranche A Lenders and the Agent shall promptly remit any interest and fees it
receives in respect to the Tranche B Loans to the Tranche B Lenders pursuant to
the Agency Agreement.
(d) The following additional Section 13.10 is hereby added to the
Financing Agreement:
Except as provided in this Section 13.10, the Tranche
B Lender shall obtain the prior written consent of the
Company and the Agent to the assignment of all or any portion
of the Tranche B Loans, which consent, in either instance,
shall not be unreasonably withheld or delayed. The foregoing
shall not prohibit or restrict the following transfers of all
or any portion of the Tranche B Loans or interests therein,
which may be made without prior notice to or the consent of
the Agent or the Company:
25
(i) Assignments of or transfers of Participation
Interests (defined below) in all or any portion of the
Tranche B Loans among affiliates of GB Retail Funding, LLC
("GB"), which affiliates shall include the following: (i) all
entities or persons under the direct or indirect control of
GB, (ii) all entities which directly or indirectly own at
least ten percent (10%) of the equity interests in GB,
("Parent Entities"), (iii) all entities of which a Parent
Entity directly or indirectly owns twenty percent (20%) or
more of the outstanding equity (including, but not limited
to, GB Palladin Fundings, LLC), and (iv) Fortress Drawbridge
Special Opportunities Fund ("Fortress") and funds managed by
or affiliated with the High Bridge fund group ("High Bridge")
and any other "fund partner" of GB's or another affiliate
which regularly invests in junior secured loans to retailers
arranged by GB or such other affiliate. (The Company and
Agent hereby acknowledge that GB intends to sell
participation interests in the Tranche B Loans to Fortress
and High Bridge promptly after the effective date of the
Sixth Amendment and agree that the consent of either of them
shall not be required for such sale).
(ii) The sale or other transfer of Participation
Interests (defined below) in the Tranche B Loans to any
person or entity:
(iii) Following the occurrence and during the
continuance of an Event of Default, the assignment or other
sale of a Participating Interest or other interest of all or
any portion of the Tranche B Loans.
The term "Participation Interest" shall mean an
undivided percentage interest in the Tranche B Loans in
respect to which the holder of the Tranche B Loans may take
any action with respect to the Tranche B Loans without
obtaining such participant's consent except for the
following:
(i) Any change in such participant's percentage
interest in the Tranche B Loans;
(ii) Any reduction in principal amount of the Tranche
B Loans (other than by virtue of payments received from or
for the account of, the Company).
(iii) Any postponement of the scheduled date for
payment of any principal, interest of fees on account of the
Tranche B Loans (including, without limitation, the Maturity
Date).
(iv) Any reduction of the interest rate or fees
payable in respect to the Tranche B Loans; or
(v) Release of any Collateral.
In the event that the Tranche B Lender assigns its
right under this Agreement or in respect to the Tranche B
Loans, the assignee shall thereupon succeed to all of the
rights, powers, privileges and duties of the Tranche B Lender
hereunder to the extent of the interest so assigned to it. In
the event that the Tranche B Lender, sells one or more
participation interests in the Tranche B Loans, such
Participant shall not be deemed to constitute a Lender
hereunder. The Company, Agent and each Tranche A Lender
hereby authorizes each Tranche B Lender to disclose to any
potential Participant or assignee, any and all financial or
other information such Tranche B Lenders may possess,
concerning the Company and its affiliates whether obtained
prior to or subsequent to the date of entry into this
Financing Agreement, provided that such potential Participant
or assignee agrees to maintain the confidentiality of such
information, and to not engage in any transaction involving
the Company's securities while in possession of, any material
nonpublic information relating to the Company.
26
(f) The following Section 13.11 is hereby added to the Financing
Agreement:
So long as the Agency Agreement is in effect any assignment
of the Tranche A Loans or Tranche B Loans shall only be
effective if the assignee has agreed in writing to be bound
to the Agency Agreement and that its interest in the loans is
subject to the provisions of the Agency Agreement.
11. Amendments to Section 14.
(a) Section 14 of the Financing Agreement is hereby deemed deleted in
its entirety in light of the entry of the Agent and Lenders into the Agency
Agreement on the date hereof provided, however, that the provisions of Section
14 shall be deemed to have been reinstated if the Agency Agreement shall cease
to be in effect.
12. General Provisions
12.1 Integration; Amendment; Waivers. This Sixth Amendment
and the Loan Documents set forth in full all of the terms of the
agreement between the parties and are intended as the full, complete
and exclusive contract governing the relationship between the parties,
superseding all other discussions, promises, representations,
warranties, agreements and the understandings between the parties with
respect thereto. No term of this Agreement or the Loan Documents may
be modified or amended, nor may any rights thereunder be waived,
except in a writing signed by the party against whom enforcement of
the modification, amendment or waiver is sought. Any waiver of any
condition in, or breach of, any of the foregoing in a particular
instance shall not operate as a waiver of other or subsequent
conditions or breaches of the same or a different kind. Any Agent's or
Lender's exercise or failure to exercise any rights under any of the
foregoing in a particular instance shall not operate as a waiver of
its right to exercise the same or different rights in subsequent
instances. Except as expressly provided to the contrary in this Sixth
Amendment, or in another written agreement, all the terms, conditions,
and provisions of the Loan Documents shall continue in full force and
effect.
12.2 Payment of Expenses. Without limiting the terms of the
Loan Documents, the Company shall pay all reasonable costs and
expenses incurred by or on behalf of Agent and each Lender (including
reasonable attorneys' fees and expenses) arising under or in
connection with this Sixth Amendment or the other Loan Documents,
including without limitation, in connection with (i) the negotiation,
preparation, execution and delivery of this Sixth Amendment and the
Loan Documents, and any and all consents, waivers or other documents
or instruments relating thereto, (ii) the filing and recording of any
Sixth Amendment or any Loan Document and any other documents or
instruments or further assurances filed or recorded in connection with
any Loan Document, (iii) any other action required in the course of
administration hereof, including, but not limited to, all reasonable
fees and expenses arising out of any audits, appraisals, and
inspections, and (iv) the defense or enforcement of the Loan
Documents, whether or not there is any litigation between the parties.
All reasonable costs and expenses shall be added to the Obligations,
as Agent shall determine, and shall earn interest at the highest rate
provided for under the Loan Documents.
12.3 No Third Party Beneficiaries. This Sixth Amendment does
not create, and shall not be construed as creating, any rights
enforceable by any Person not a party to this Sixth Amendment.
12.4 Separability. If any provision of this Sixth Amendment
is held by a court of competent jurisdiction to be invalid, illegal or
unenforceable, the remaining provisions of this Agreement shall
nevertheless remain in full force and effect.
12.5 Counterparts. This Sixth Amendment may be executed in
any number of counterparts, which together shall constitute one and
the same agreement.
12.6 Time of Essence. Time is of the essence with respect to
each of the Obligations of the Company with respect to all conditions
to be satisfied by the Company.
27
12.7 Statute of Limitations. The Company waives the benefit
of all statute(s) of limitations in any action or proceeding based
upon or arising out of the Financing Agreement or the other Loan
Documents.
12.8 Construction; Voluntary Agreement; Representation by
Counsel. This Sixth Amendment has been prepared through the joint
efforts of all the parties. Neither its provisions nor any alleged
ambiguity shall be interpreted or resolved against any party on the
ground that such party's counsel was the draftsman of this Sixth
Amendment. Each of the parties declares that such party has carefully
read this Agreement and the agreements, documents and instruments
being entered into in connection herewith and that such party knows
the contents thereof and signs the same freely and voluntarily. The
parties hereto acknowledge that they have been represented in
negotiations for and preparation of this Sixth Amendment and the
agreements, documents and instrument being entered into in connection
herewith by legal counsel of their own choosing, and that each of them
has read the same and had their contents fully explained by such
counsel and is fully aware of their contents and legal effect. This
Sixth Amendment shall not be construed against any Agent or any Lender
as a result of such Agent's or such Lender's involvement with its
preparation.
12.9 Further Assurances. Each party hereto agrees to take all
further actions and execute all further documents as any other party
hereto may from time to time reasonably request to carry out the
transactions contemplated by this Sixth Amendment including, without
limitation, (i) the Company's filing of any UCC financing statements
or taking other measures deemed reasonably necessary by the Agent to
perfect its lien on the Collateral and (ii) the Agent's filing of
UCC-3 termination statements as necessary to terminate all UCC
Financing Statements and take all actions necessary to terminate all
other security arrangements at such time as all of the Obligations
have been indefeasibly satisfied in full.
28
IN WITNESS HEREOF, the parties hereto have caused this Sixth Amendment
to Financing Agreement to be executed, agreed to, accepted and delivered by
their proper and duly authorized officers as administered under the seal as of
the dates set forth above.
COMPANY: FACTORY 2-U STORES, INC., a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxxxx
Print Name: Xxxxxxx X. Xxxxxxxxx
Title: Executive Vice President,
Chief Financial Officer
AGENT: THE CIT GROUP/BUSINESS CREDIT, INC., as Agent
By: /s/ Xxxx Xxxxxxx
Print Name: Xxxx Xxxxxxx
Title: Vice President
TRANCHE A LENDERS: THE CIT GROUP/BUSINESS CREDIT, INC.,
As a Tranche A Lender
By: /s/ Xxxx Xxxxxxx
Print Name: Xxxx Xxxxxxx
Title: Vice President
Tranche A Dollar Commitment
$50,000,000
Tranche A Percentage Commitment
100%
TRANCHE B LENDER: GB RETAIL FUNDING, LLC, Tranche B Lender
By: /s/ Xxxxxxxx X. Xxxxx
Print Name: Xxxxxxxx X. Xxxxx
Title: Managing Director
29
LIST OF EXHIBITS AND SCHEDULES
Schedule 1 - Existing Liens
Schedule 2 - Collateral Locations, Chief Executive Office and Trade Names,
Closed Stores
Schedule 3 - Litigation
Schedule 4 - Taxes
Schedule 5 - Depository Accounts
Schedule 6 - Fiscal 2003 Borrowing Base Certificate Delivery Dates
Schedule 7 - Reports
30
