UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 31, 1998
JUMBOSPORTS INC.
(Exact name of registrant as specified in charter)
Florida 001-13322 52-1643157
(State or Other Jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4701 W. Hillsborough Ave. Tampa, Florida 33614
(Adress of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (813) 886-9688
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events
Effective July 24, 1998, JumboSports Inc., a Florida corporation (the
"Company"), entered into a Loan and Security Agreement (the "Agreement") with
Foothill Capital Corporation and its affiliate Paragon Capital LLC (collectively
"Foothill"), Congress Financial Corporation ("Congress") and Foothill Partners
III, L.P. ("Partners"). The Agreement commits to JumboSports Inc. and as
applicable, each of its subsidiaries (collectively, the "Borrower"), a new $150
million five-year credit facility. A copy of the Loan and Security Agreement is
attached hereto as Exhibit 10.1.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(C) EXHIBITS
10.1 Loan and Security Agreement, dated July 24, 1998, among JumboSports,
Inc. and Foothill Capital Corporation, Paragon Capital LLC, Congress Financial
Corporation and Foothill Partners III, L.P.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
JumboSports Inc.
08/27/98 By: /s/ Raymond P. Springer
Date Executive Vice President and
Chief Financial Officer
$150,000,000
LOAN AND SECURITY AGREEMENT
among
JUMBOSPORTS INC.
as Borrower,
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders,
FOOTHILL CAPITAL CORPORATION,
as Agent
and
CONGRESS FINANCIAL CORPORATION,
as Co-Agent
as of July 24, 1998
<PAGE>
TABLE OF CONTENTS
Page(s)
1. DEFINITIONS AND CONSTRUCTION. ....................................1
1.1 Definitions.................................................1
1.2 Accounting Terms...........................................24
1.3 Code.......................................................24
1.4 Construction...............................................24
1.5 Schedules and Exhibits.....................................25
2. LOAN AND TERMS OF PAYMENT... ....................................25
2.1 Revolving Advances.........................................25
2.2 Letters of Credit..........................................33
2.3 Tranche A Term Loans.......................................37
2.4 Tranche B Term Loans.......................................38
2.5 Payments...................................................39
2.6 Overadvances...............................................42
2.7 Interest and Letter of Credit Fees:
Rates, Payments, and Calculations.........................42
2.8 Collection of Accounts.....................................44
2.9 Crediting Payments; Application of Collections. ...........45
2.10 Designated Account.........................................45
2.11 Maintenance of Loan Account; Statements of Obligations.....46
2.12 Fees.......................................................46
2.13 Eurodollar Rate Loans......................................48
2.14 Illegality.................................................49
2.15 Requirements of Law........................................50
2.16 Indemnity..................................................51
3. CONDITIONS; TERM OF AGREEMENT....................................52
3.1 Conditions Precedent to the Initial Advance,
Letter of Credit, and the Term Loans......................52
3.3 Condition Subsequent.......................................55
3.4 Term; Renewal..............................................56
3.5 Effect of Termination......................................57
3.6 Early Termination by Borrower..............................57
3.7 Termination Upon Event of Default..........................58
4. CREATION OF SECURITY INTEREST....................................58
4.1 Grant of Security Interest.................................58
4.2 Negotiable Collateral......................................58
4.3 Collection of Accounts, General Intangibles,
and Negotiable Collateral.................................58
4.4 Delivery of Additional Documentation Required..............59
4.5 Power of Attorney..........................................59
4.6 Right to Inspect...........................................59
5. REPRESENTATIONS AND WARRANTIES...................................60
5.1 No Encumbrances............................................60
5.2 Eligible Accounts..........................................60
5.3 Eligible Inventory.........................................60
5.4 Equipment..................................................61
5.5 Location of Inventory and Equipment........................61
5.6 Inventory Records..........................................61
5.7 Location of Chief Executive Office; FEIN...................61
5.8 Due Organization and Qualification; Subsidiaries...........61
5.9 Due Authorization; No Conflict.............................61
5.10 Litigation.................................................62
5.11 No Material Adverse Change. ...............................63
5.12 Solvency...................................................63
5.13 Employee Benefits..........................................63
5.14 Environmental Condition....................................63
5.15 Intellectual Property......................................64
5.16 Year 2000 Compliance.......................................64
<PAGE>
6. AFFIRMATIVE COVENANTS............................................64
6.1 Accounting System..........................................64
6.2 Collateral and Financial Reporting.........................64
6.3 [Intentionally Omitted.]...................................69
6.4 Tax Returns................................................69
6.5 Guarantor Reports..........................................69
6.6 Returns....................................................69
6.7 Title to Equipment.........................................70
6.8 Maintenance of Equipment...................................70
6.9 Taxes......................................................70
6.10 Insurance..................................................70
6.11 No Setoffs or Counterclaims................................72
6.12 Location of Inventory and Equipment........................72
6.13 Compliance with Laws.......................................72
6.14 Employee Benefits..........................................72
6.15 Leases.....................................................73
7. NEGATIVE COVENANTS...............................................73
7.1 Indebtedness...............................................73
7.2 Liens......................................................74
7.3 Restrictions on Fundamental Changes........................74
7.4 Disposal of Assets.........................................75
7.5 Change Name................................................75
7.6 Guarantee..................................................75
7.7 Nature of Business.........................................75
7.8 Prepayments and Amendments.................................75
7.9 Change of Control..........................................76
7.10 Consignments...............................................76
7.11 Distributions..............................................76
7.12 Accounting Methods.........................................76
7.13 Investments................................................76
7.14 Transactions with Affiliates...............................77
7.15 Suspension.................................................77
7.16 Compensation...............................................77
7.17 Use of Proceeds............................................77
7.18 Change in Location of Chief Executive Office;
Inventory and Equipment with Bailees......................77
7.19 No Prohibited Transactions Under ERISA.....................77
7.20 [Intentionally omitted.]...................................78
7.21 Capital Expenditures.......................................78
7.22 Accounts...................................................79
7.23 Retail Store Closings......................................79
8. EVENTS OF DEFAULT................................................79
9. THE LENDER GROUP'S RIGHTS AND REMEDIES...........................81
9.1 Rights and Remedies........................................81
9.2 Remedies Cumulative........................................83
10.TAXES AND EXPENSES...............................................84
11.WAIVERS; INDEMNIFICATION.........................................84
11.1 Demand; Protest; etc.......................................84
11.2 The Lender Group's Liability for Collateral................84
11.3 Indemnification............................................84
12.NOTICES..........................................................85
13.CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.......................87
14.DESTRUCTION OF BORROWER'S DOCUMENTS..............................88
15.ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.......................88
15.1 Assignments and Participations............................88
15.2 Successors................................................90
<PAGE>
16.AMENDMENTS; WAIVERS..............................................90
16.1 Amendments and Waivers....................................90
16.2 No Waivers; Cumulative Remedies...........................92
17.AGENT; THE LENDER GROUP..........................................92
17.1 Appointment and Authorization of Agent....................92
17.2 Delegation of Duties......................................93
17.3 Liability of Agent-Related Persons........................93
17.4 Reliance by Agent.........................................94
17.5 Notice of Default or Event of Default.....................94
17.6 Credit Decision...........................................95
17.7 Costs and Expenses; Indemnification.......................95
17.8 Agent in Individual Capacity..............................96
17.9 Successor Agent...........................................96
17.10 Withholding Tax...........................................97
17.11 Collateral Matters........................................98
17.12 Restrictions on Actions by Lenders; Sharing of Payments...99
17.13 Agency for Perfection....................................100
17.14 Payments by Agent to the Lenders.........................100
17.15 Concerning the Collateral and Related Loan Documents.....100
17.16 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information...100
17.17 Several Obligations; No Liability........................102
18.GENERAL PROVISIONS..............................................102
18.1 Effectiveness............................................102
18.2 Section Headings.........................................102
18.3 Interpretation...........................................102
18.4 Severability of Provisions...............................102
18.5 Counterparts; Telefacsimile Execution....................103
18.6 Revival and Reinstatement of Obligations.................103
18.7 Integration..............................................103
18.8 Time is of the Essence...................................103
SCHEDULES AND EXHIBITS
Schedule C-1 Commitments
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule R-1 Primary Real Estate
Schedule R-2 Secondary Real Estate
Schedule T-1 Real Estate Trusts
Schedule 2.6 Deposit and Investment Accounts
Schedule 3.1(k) Secondary Real Estate Mortgagees and
Mortgagee Waiver Locations
Schedule 5.8 Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.15 Intellectual Property
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Indebtedness
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Business Plan
Exhibit C-1 Form of Compliance Certificate
Exhibit 6.2 Form of Borrowing Base Certificate
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of
July 24, 1998, among JUMBOSPORTS INC., a Florida corporation ("Borrower"), with
its chief executive office located at 4701 W. Hillsborough Avenue, Tampa,
Florida 33614, on the one hand, and the financial institutions listed on the
signature pages hereof (such financial institutions, together with their
respective successors and assigns, are referred to hereinafter each individually
as a "Lender" and collectively as the "Lenders"), and FOOTHILL CAPITAL
CORPORATION, as Agent, and CONGRESS FINANCIAL CORPORATION, as Co-Agent, on the
other hand.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall have
the following definitions:
"Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods or the rendition of services by Borrower,
irrespective of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor. For purposes of the definition of
"Collateral", "Accounts" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
and to its Primary Subsidiaries arising out of the sale or lease of goods or the
rendition of services by Borrower and its Primary Subsidiaries, irrespective of
whether earned by performance, and any and all credit insurance, guaranties, or
security therefor.
"Adjusted EBITDA" means, for any period, the net income (or net loss) of
Borrower, for such period as determined in accordance with GAAP, (a) plus to the
extent reflected in the changes in the statement of net income for such period
the sum of, without duplication, the following for Borrower (i) interest
expense, (ii) depreciation and amortization expense, and (iii) extraordinary
losses, and (b) minus to the extent reflected in the changes in the statement of
net income for such period the sum of, without duplication, the following for
Borrower (i) extraordinary gains, (ii) cash capital expenditures made during
such period, and (iii) principal payments on Indebtedness for money borrowed.
"Adjusted Eurodollar Rate" means, with respect to each Interest Period for
any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to
the next 1/16%) determined by dividing (a) the Eurodollar Rate for such Interest
Period by (b) a percentage equal to (i) one hundred percent (100%) minus (ii)
the Reserve Percentage. The Adjusted Eurodollar Rate shall be adjusted on and as
of the effective day of any change in the Reserve Percentage.
"Adjusted Net Income" means, for any period, the net income (or loss) of
Borrower determined in accordance with GAAP, (a) plus, to the extent reflected
in the changes in the statement of net income for such period, extraordinary
losses, and (b) minus, to the extent reflected in the changes in the statement
of net income for such period, extraordinary gains.
"Advances" means, collectively, the Tranche A Advances and the Tranche B
Advances, and "Advance" means any Tranche A Advance or Tranche B Advance, as the
case may be.
<PAGE>
"Affiliate" means, as applied to any Person, any other Person who directly
or indirectly controls, is controlled by, is under common control with or is a
director or officer of such Person. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to vote ten percent
(10%) or more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a Person.
"Agent" means Foothill, solely in its capacity as agent for the Lenders,
and shall include any successor agent.
"Agent's Account" has the meaning set forth in Section 2.8.
"Agent Advance" has the meaning set forth in Section 2.1(h).
"Agent's Fee Letter" has the meaning set forth in Section 2.12(a)(iv).
"Agent Loan" has the meaning set forth in Section 2.1(g).
"Agent-Related Persons" means Agent, together with its Affiliates, and the
officers, directors, employees, counsel, agents, and attorneys-in-fact of Agent
and such Affiliates.
"Agreement" has the meaning set forth in the preamble hereto.
"Appraised Value" means with respect to Primary Real Estate, the appraised
value of each parcel of Real Property constituting Primary Real Estate as set
forth on Schedule R-1.
"Assignee" has the meaning set forth in Section 15.1.
"Assignment and Acceptance" has the meaning set forth in Section 15.1 (a)
and shall be in the form of Exhibit A-1.
"Assignment of Real Estate Trust Interests" means that certain Assignment
of Real Estate Trust Interests of even date herewith between Borrower and Agent,
in form and substance satisfactory to the Lender Group, pursuant to which
Borrower pledges its beneficial interests in the Real Estate Trusts.
"Authorized Person" means any officer or other employee of Borrower.
"Availability" means, as of the date of determination, the result (so long
as such result is a positive number) of (a) the lesser of the (i) the sum of
Tranche A Borrowing Base and the Tranche B Borrowing Base, or (ii) the sum of
the Maximum Tranche A Revolving Amount and the Maximum Tranche B Revolving
Amount, less (b) the Revolving Facility Usage.
"Availability Reserves" means such reserves as Agent from time to time
determines in its reasonable discretion as being appropriate to reflect the
impediments to the Lender Group's ability to realize upon the Collateral.
Without limiting the generality of the foregoing, Availability Reserves may
include (but are not limited to) reserves based upon the following:
(a) rent --
(i) based upon Borrower's or any Subsidiary of Borrower's past due
rent; and
(ii) based upon two months of rent payments in respect of Borrower's
leased locations in any Landlord Lien State or One Turn State with respect
to which an acceptable Collateral Access Agreement has not been obtained;
(b) in-store customer credits and gift certificates; and
(c) delinquent taxes and other delinquent governmental charges including
without limitation ad valorem, personal property, sales and other taxes which
may have priority over the security interests of the Lender Group in the
Collateral.
<PAGE>
"Average Unused Portion of the Maximum Tranche A Revolving Amount" means,
as of any date of determination, (a) the Maximum Tranche A Revolving Amount,
less (b) the sum of (i) the average Daily Balance of Tranche A Advances that
were outstanding during the immediately preceding month, plus (ii) the average
Daily Balance of the undrawn Letters of Credit that were outstanding during the
immediately preceding month.
"Average Unused Portion of the Maximum Tranche B Revolving Amount" means,
as of any date of determination, (a) the Maximum Tranche B Revolving Amount,
less (b) the average Daily Balance of Tranche B Advances that were outstanding
during the immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C. ' 101
et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined in Section 3(35)
of ERISA) for which Borrower, any Subsidiary of Borrower, or any ERISA Affiliate
has been an "employer" (as defined in Section 3(5) of ERISA) within the past six
years.
"Blocked Account" shall mean any deposit account established by Borrower,
including the Concentration Account, at a Blocked Account Bank pursuant to a
Blocked Account Agreement.
"Blocked Account Agreements" means that those certain Blocked Account
Agreements, in form and substance reasonably satisfactory to Agent, each of
which is among Borrower, Agent and a Blocked Account Bank, and each such Blocked
Account Agreement shall be referred to herein as a "Blocked Account Agreement".
"Blocked Account Bank" means any of Barnett Bank, N.A., NationsBank, N.A.
and/or any other bank mutually acceptable to Borrower and Foothill.
"Borrower" has the meaning set forth in the preamble to this Agreement.
"Borrower's Books" means all of Borrower's books and records including:
ledgers; records indicating, summarizing, or evidencing Borrower's properties or
assets (including the Collateral) or liabilities; all information relating to
Borrower's business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, or other computer prepared
information. For purposes of the definition of "Collateral", "Borrower's Books"
means all of Borrower's and its Primary Subsidiaries' books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
and its Primary Subsidiaries properties or assets (including the Collateral) or
liabilities; all information relating to Borrower's and its Primary Subsidiaries
business operations or financial condition; and all computer programs, disk or
tape files, printouts, runs, or other computer prepared information. "Borrowing"
means a borrowing hereunder consisting of Advances made on the same day by the
Lenders, or by Agent in the case of an Agent Loan or an Agent Advance.
"Business Day" means any day that is not a Saturday, Sunday, or other day
on which national banks are authorized or required to close and Agent and
Co-Agent are open.
"Business Plan" means Borrower's and its Subsidiaries' business plans
attached hereto as Schedule B-1, together with any amendment, modification or
revision to such business plan approved by Agent in its reasonable discretion.
"Butler Shoe" means H. Butler Footwear, Inc., a Florida corporation.
"Butler Shoe Warehouse" means that certain warehouse of Butler Shoe located
at 4597 15th Street East, Bradenton, Florida 34203.
"Change of Control" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of more than thirty percent (30%) of the total voting power of all classes of
stock then outstanding of Borrower entitled to vote in the election of
directors.
<PAGE>
"Closing Date" means the date of the first to occur of the making of the
initial Advance, the issuance of the initial Letter of Credit, or the funding of
the Term Loans.
"Co-Agent" means Congress Financial Corporation, a Delaware corporation.
"Code" means the Georgia Uniform Commercial Code.
"Collateral" means with respect to Borrower and its Primary Subsidiaries,
all real and personal property of Borrower and its Primary Subsidiaries, whether
now existing or hereafter arising, including without limitation each of the
following:
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(g) the Investment Property,
(h) the Real Property Collateral,
(i) any money, or other assets of Borrower that now or hereafter come
into the possession, custody, or control of the Lender Group, and
(j) the proceeds and products, whether tangible or intangible, of any
of the foregoing, including proceeds of insurance covering any or all
of the Collateral, and any and all Accounts, Borrower's Books,
Equipment, General Intangibles, Inventory, Negotiable Collateral,
Investment Property, the Primary Real Estate, money, deposit accounts,
or other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of any of the foregoing, or
any portion thereof or interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, mortgagee waiver,
bailee letter, or acknowledgment agreement of any warehouseman, processor,
lessor, consignee, or other Person in possession of, having a Lien upon, or
having rights or interests in the Equipment or Inventory, in each case, in form
and substance reasonably satisfactory to Agent.
"Collections" means all cash, checks, notes, instruments, and other items
of payment (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"Commitment" means, at any time with respect to a Lender, the principal
amount set forth beside such Lender's name under the heading "Commitment" on
Schedule C-1 or on Schedule 1 to the Assignment and Acceptance pursuant to which
such Lender became a Lender hereunder in accordance with the provisions of
Section 15.1, as such Commitment may be adjusted from time to time in accordance
with the provisions of Section 15.1, which amount is the aggregate amount of
such Lender's Tranche A Commitment and Tranche B Commitment, and "Commitments"
means, collectively, the aggregate amount of the Commitments of all Lenders.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit C-1 and delivered by the chief accounting officer of Borrower to Agent.
"Concentration Account" means account number 1408990342 of Borrower
maintained at Barnett Bank, N.A., or such other deposit account of Borrower
(located in the United States) into which cash received in the other Blocked
Accounts is wire transferred as provided in Section 2.8(b).
<PAGE>
"Concentration Account Agreement" means the Blocked Account Agreement among
Borrower, the Concentration Account Bank and Agent in form and substance
satisfactory to Agent applicable to the Concentration Account.
"Concentration Account Bank" means Barnett Bank, N.A., or such other bank
designated in writing by Agent and Borrower.
"Convertible Subordinated Notes" means those certain 43% Convertible
Subordinated Notes due 2000 in the original principal amount of $74,750,000
issued pursuant to that certain Indenture dated as of November 4, 1993, among
Borrower (as successor to Sports & Recreation, Inc., a Delaware corporation), as
issuer, and Barnett Banks Trust Company, National Association, as trustee, as
supplemented by that certain Supplemental Indenture Agreement dated as of
February 14, 1997.
"Cost" means the calculated cost of Inventory based on the RSL consistent
with Borrower's current and historical accounting practices. "Cost" does not
include any inventory capitalization costs inclusive of advertising, but does
include freight and may include other charges used in Borrower's determination
of costs of goods sold and bringing goods to market, all within Agent's sole
discretion and in accordance with GAAP.
"Credit Card Agreements" means those certain agreements between Agent and
the credit card processors of Borrower pursuant to which such credit card
processors agree to transfer on a daily basis all credit card receipts of
Borrower into the Concentration Account or other Blocked Account.
"Daily Balance" means the amount of an Obligation owed at the end of a
given day.
"deems itself insecure" as applied to any Person means that such Person in
good faith believes that the prospect of payment of the Obligations or
performance under the Loan Documents is materially impaired.
"Default" means an event, condition, or default that, with the giving of
notice, the passage of time, or both, would be an Event of Default.
"Defaulting Lender" has the meaning set forth in Section 2.1 (f)(ii).
"Defaulting Lenders Rate" means the Reference Rate for the first three days
from and after the date the relevant payment is due and thereafter at the
interest rate then applicable to Advances. "Designated Account" means account
number 1405140443 of Borrower maintained with Borrower's Designated Account
Bank, or such other deposit account of Borrower (located within the United
States) which has been designated, in writing and from time to time, by Borrower
to Agent.
"Designated Account Bank" means Barnett Bank, N.A., whose office is located
at Tampa, Florida, and whose ABA number is 063000047, or such other bank as
Agent and Borrower may designate from time to time.
"Dilution" means, in each case based upon the experience of the immediately
prior twelve (12) months, the result of dividing the Dollar amount of (a) bad
debt write-downs, discounts, advertising, returns, promotions, credits, or other
dilution with respect to the Accounts, by (b) Borrower's Collections (excluding
extraordinary items) plus the Dollar amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce the Lenders' advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of
five percent (5%).
"Disbursement Letter" means an instructional letter executed and delivered
by Borrower to Agent regarding the extensions of credit to be made on the
Closing Date, the form and substance of which shall be satisfactory to Agent.
"Distribution Center" means the leased distribution center of Borrower at
129 International Boulevard, LaVergne, Tennessee.
<PAGE>
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in Section 3.6.
"Eligible Accounts" means those third party credit card Accounts, net of
customary reserves created by Borrower in the ordinary course of business, that
arise out of Borrower's sale of goods or rendition of services, that strictly
comply with each and all of the representations and warranties respecting
Accounts made by Borrower to the Lender Group in the Loan Documents, and that
are and at all times continue to be acceptable to Agent in all respects;
provided, however, that standards of eligibility may be fixed and revised from
time to time by Agent in Agent's reasonable credit judgment.
"Eligible In-Transit Inventory" means those items of Inventory that do not
qualify as Eligible Landed Inventory solely because they are not in a location
set forth on Schedule E-1 but: (a) such Inventory is currently in-transit from a
location not set forth on Schedule E-1 to a location set forth on Schedule E-1,
(b) title to such Inventory has passed to Borrower, (c) documents of title with
respect to such Inventory have been delivered to Agent or its agent if requested
or otherwise required by the Agent; (d) such Inventory is insured against types
of loss, damage, hazards, and risks, and in amounts, satisfactory to Agent in
its discretion, and (e) such Inventory has been paid for or, if purchased under
an Inventory Letter of Credit, such Inventory Letter of Credit either has been
drawn upon in full and reimbursed, or expired undrawn; in each case, with
documentation therefor in form and substance satisfactory to Agent in its
discretion.
"Eligible Inventory" means the Eligible In-Transit Inventory and the
Eligible Landed Inventory, less Inventory Reserves.
"Eligible Landed Inventory" means Inventory consisting of first quality
finished goods held for sale in the ordinary course of Borrower's business and
raw materials for such finished goods, that are located at or in-transit between
Borrower's premises or between Borrower's premises and the Butler Shoe Warehouse
or its successors, if any, identified on Schedule E-1, that strictly comply with
each and all of the representations and warranties respecting Inventory made by
Borrower to the Lender Group in the Loan Documents, and that are and at all
times continue to be acceptable to the Lender Group in all respects; provided,
however, that standards of eligibility may be fixed and revised from time to
time by Agent in Agent's reasonable credit judgment. In determining the amount
to be so included, Inventory shall be valued at the lower of Cost or market on a
basis consistent with Borrower's current and historical accounting practices
based on the RSL. An item of Inventory shall not be included in Eligible Landed
Inventory if:
(b) it is not owned solely by Borrower or Borrower does not have good,
valid, and marketable title thereto;
(c) it is not located at one of the locations set forth on Schedule
E-1;
(d) it is not located on property owned or leased by Borrower or in a
contract warehouse, in each case, subject to a Collateral Access
Agreement executed by the mortgagee, lessor, the warehouseman, or
other third party, as the case may be, and segregated or otherwise
separately identifiable from goods of others, if any, stored on the
premises;
(e) it is not subject to a valid and perfected first priority security
interest in favor of the Agent, for itself and the Lender Group;
(f) it consists of goods returned by Borrower's customers or goods in
transit; and
<PAGE>
(g) it is obsolete or slow moving, a restrictive or custom item,
packaging and shipping materials, supplies used or consumed in
Borrower's business, Inventory subject to a Lien in favor of any third
Person, defective goods, "seconds," or Inventory acquired on
consignment. "Eligible Transferee" means (a) a commercial bank
organized under the laws of the United States, or any state thereof,
and having total assets in excess of $5,000,000,000, or the asset
based lending Affiliate of such bank, (b) a commercial bank organized
under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of any such country, and having total assets in excess of
$5,000,000,000 or the asset based lending Affiliate of such bank;
provided that such bank is acting through a branch or agency located
in the United States, (c) a finance company, insurance or other
financial institution, or fund that is engaged in making, purchasing,
or otherwise investing in commercial loans in the ordinary course of
its business and having total assets in excess of $500,000,000, (d)
any Affiliate (other than individuals) of an existing Lender, and (e)
any other Person approved by Agent and, so long as no Default or Event
of Default exists, approved by Borrower.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, goods (other
than consumer goods, farm products, or Inventory), wherever located, including,
(a) any interest of Borrower in any of the foregoing, and (b) all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing. For purposes of the definition of
"Collateral", "Equipment" means all of Borrower's and its Primary Subsidiaries
present and hereafter acquired machinery, machine tools, motors, equipment,
furniture, furnishings, fixtures, vehicles (including motor vehicles and
trailers), tools, parts, goods (other than consumer goods, farm products, or
Inventory of Borrower and its Primary Subsidiaries), wherever located,
including, (a) any interest of Borrower and its Primary Subsidiaries in any of
the foregoing, and (b) all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, 29
U.S.C. " 1000 et seq., amendments thereto, successor statutes, and regulations
or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to any Benefit Plan
or Multiemployer Plan, (b) the withdrawal of Borrower, any of its Subsidiaries
or ERISA Affiliates from a Benefit Plan during a plan year in which it was a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c) the
providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Borrower or its Subsidiaries or any of their ERISA
Affiliates.
<PAGE>
"Escrow Account" means that certain escrow account established by Agent and
Borrower pursuant to an escrow agreement in form and substance satisfactory to
Agent appointing an escrow agent satisfactory to Agent for the purpose of
holding in escrow for the benefit of the Lender Group the Net Proceeds of the
sale of Secondary Real Estate as described in Section 2.5(b)(iv).
"Eurodollar Rate" means, with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum at which United States dollar
deposits are offered to Norwest Bank Minnesota, National Association by major
banks in the London interbank market (or other Eurodollar Rate market selected
by Agent) on or about 2:00 p.m. (Atlanta, Georgia time) two (2) Business Days
prior to the commencement of such Interest Period in amounts comparable to the
amount of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
"Event of Default" has the meaning set forth in Section 8.
"Existing Lender" means NationsBank, N.A., as agent for a group of lenders.
"FEIN" means Federal Employer Identification Number.
"Foothill" means Foothill Capital Corporation, a California corporation,
with an office in Atlanta, Georgia.
"Foothill Partners" means Foothill Partners III, L.P., its successors and
assigns.
"Foothill Partners' Fee Letter" has the meaning set forth in Section
2.12(b)(iv).
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"Genco" means Genco I, Inc., a Delaware corporation.
"Genco Warehouse" means that certain warehouse of Genco at 1135 Heil Quaker
Street, LaVergne, Tennessee.
"General Intangibles" means all of Borrower's present and future general
intangibles and other personal property (including contract rights, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, literature, reports, catalogs,
deposit accounts, insurance premium rebates, tax refunds, tax refund claims, its
beneficial interests in the Real Estate Trusts, option contracts and contracts
for the sale of Primary Real Estate), other than goods, Accounts, and Negotiable
Collateral. For purposes of the definition of "Collateral", "General
Intangibles" means all of Borrower's and its Primary Subsidiaries' present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, tax refund
claims, Borrower's beneficial interests in the Real Estate Trusts, option
contracts and contracts for the sale of Primary Real Estate), other than goods,
Accounts of Borrower and its Primary Subsidiaries, and Negotiable Collateral of
Borrower and its Primary Subsidiaries.
<PAGE>
"GOB Appraised Value" means the estimated net amount, expressed as a
percentage of the Cost of Inventory, projected to be obtainable, over a finite
period, for Inventory sold in a going-out-of-business sale, determined on a
semi-annual basis by an appraiser satisfactory to Agent.
"Governing Documents" means the certificate or articles of incorporation,
by-laws, or other organizational or governing documents of any Person.
"Hazardous Materials" means (a) substances that are defined or listed in,
or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Indebtedness" means: (a) all obligations of Borrower for borrowed money,
(b) all obligations of Borrower evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations of Borrower in
respect of letters of credit, bankers acceptances, interest rate swaps, or other
financial products, (c) all obligations of Borrower under capital leases, (d)
all obligations or liabilities of others secured by a Lien on any property or
asset of Borrower, irrespective of whether such obligation or liability is
assumed, and (e) any obligation of Borrower guaranteeing or intended to
guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with
recourse to Borrower) any indebtedness, lease, dividend, letter of credit, or
other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other bankruptcy
or insolvency law, assignments for the benefit of creditors, compositions,
extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
"Interest Coverage Ratio" means, for any period, the ratio of Adjusted
EBITDA to cash interest expense of Borrower.
"Interest Period" means, for any Eurodollar Rate Loan, the period
commencing on the Business Day such Eurodollar Rate Loan is disbursed or
continued, or on the Business Day on which a Reference Rate Loan is converted to
such Eurodollar Rate Loan, and ending on the date one (1), two (2), or three (3)
months thereafter, as selected by Borrower and notified to Agent pursuant to
Section 2.13, but in no event ending after the Maturity Date of this Agreement.
"Inventory" means all present and future inventory in which Borrower has
any interest, including goods held for sale or lease or to be furnished under a
contract of service and all of Borrower's present and future raw materials, work
in process, finished goods, and packing and shipping materials, wherever
located. For purposes of the definition of "Collateral", "Inventory" means all
present and future inventory in which Borrower and its Primary Subsidiaries have
any interest, including goods held for sale or lease or to be furnished under a
contract of service and all of Borrower's and its Primary Subsidiaries' present
and future raw materials, work in process, finished goods, and packing and
shipping materials, wherever located. "Inventory Letter of Credit" means a
documentary Letter of Credit issued to support the purchase by Borrower of
Inventory prior to transit to a location set forth on Schedule E-1, that
provides that all draws thereunder must require presentation of customary
documentation (including, if applicable, commercial invoices, packing list,
certificate of origin, bill of lading or airwaybill, customs clearance
documents, quota statement, inspection certificate, beneficiaries statement, and
bill of exchange, bills of lading, dock warrants, dock receipts, warehouse
<PAGE>
receipts, or other documents of title) in form and substance satisfactory to
Agent and reflecting the passage to Borrower of title to first quality Inventory
conforming to Borrower's contract with the seller thereof. Any such Letter of
Credit shall cease to be an "Inventory Letter of Credit" at such time, if any,
as the goods purchased thereunder become Eligible Landed Inventory.
"Inventory Reserves" means such reserves as may be established from time to
time by Agent in Agent's reasonable discretion with respect to the determination
of the saleability, at retail, of the Eligible Inventory or which reflect such
other factors as affect the current retail or market value of the Eligible
Inventory. Without limiting the generality of the foregoing, Inventory Reserves
may include (but are not limited to) reserves based upon the following:
(a) Inventory held at Genco to the extent such Inventory is Eligible
Inventory;
(b) damaged Inventory to the extent such Inventory is included in the
RSL;
(c) variances between the ISL and the RSL to the extent the RSL
exceeds the ISL;
(d) estimated reclamation claims of unpaid sellers of Inventory sold
to Borrower;
(e) Inventory, as of any date of determination, in excess of one
hundred fifteen percent (115%) of the level of Inventory reflected on
the balance sheet contained in the Business Plan as of the month of
the date of determination;
(f) Inventory, as of any date of determination, at a level lower than
ninety percent (90%) of the level of Inventory reflected on the
balance sheet contained in the Business Plan as of the month of the
date of determination;
(g) actual shrinkage in excess of shrinkage accrual on Borrower's
Books;
(h) change in Inventory character, composition or mix; and
(i) trade discounts given by Borrower's vendors that have not
otherwise reduced Inventory.
"Investment Property" means all of Borrower's "investment property" as such
term is defined in the Code, now owned or hereafter acquired by Borrower and, in
any event, including without limitation all securities, whether certificated or
uncertificated, security entitlements, securities accounts, commodity contracts
and commodity accounts. For purposes of the definition of "Collateral",
"Investment Property" means all of Borrower's and its Primary Subsidiaries'
"investment property" as such term is defined in the Code, now owned or
hereafter acquired by Borrower and its Subsidiaries and, in any event, including
without limitation all securities, whether certificated or uncertificated,
security entitlements, securities accounts, commodity contracts and commodity
accounts.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"ISL" means the inventory stock ledger of Borrower.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"Landlord Lien State" means any state or jurisdiction under whose statutory
or common law the rights of a landlord in assets of that landlord's tenant, for
unpaid rent, may be senior to a perfected security interest in such assets.
<PAGE>
"Lender" and "Lenders" have the respective meanings set forth in the
preamble to this Agreement, and shall include any other Person made a party to
this Agreement in accordance with the provisions of Section 15.1.
"Lender Group" means, individually and collectively, each of the individual
Lenders and Agent.
"Lender Group Expenses" means all: costs or expenses (including taxes, and
insurance premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or incurred by the Lender Group; reasonable fees or
charges paid or incurred by the Lender Group in connection with the Lender
Group's transactions with Borrower, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches
(including tax lien, litigation, and UCC searches and including searches with
the patent and trademark office, the copyright office, or the department of
motor vehicles), filing, recording, publication, appraisal (including periodic
Personal Property Collateral or Real Property Collateral appraisals), real
estate surveys, real estate title policies and endorsements, and environmental
audits; costs and expenses incurred by Agent in the disbursement of funds to
Borrower (by wire transfer or otherwise); reasonable charges paid or incurred by
Agent resulting from the dishonor of checks; costs and expenses paid or incurred
by Agent to correct any default or enforce any provision of the Loan Documents,
or in gaining possession of, maintaining, handling, preserving, storing,
shipping, selling, preparing for sale, or advertising to sell the Personal
Property Collateral or the Real Property Collateral, or any portion thereof,
irrespective of whether a sale is consummated; costs and expenses paid or
incurred by the Lender Group in examining Borrower's Books; reasonable costs and
expenses of the Oversight Agent; costs and expenses of third party claims or any
other suit paid or incurred by the Lender Group in enforcing or defending the
Loan Documents or in connection with the transactions contemplated by the Loan
Documents or the Lender Group's relationship with Borrower or any guarantor; and
the Lender Group's reasonable attorneys fees and expenses incurred in advising,
structuring, drafting, reviewing, administering, amending, terminating,
enforcing (including attorneys fees and expenses incurred in connection with a
"workout," a "restructuring," or an Insolvency Proceeding concerning Borrower or
any guarantor of the Obligations), defending, or concerning the Loan Documents,
irrespective of whether suit is brought; provided, however, that prior to a
Default or Event of Default "Lender Group Expenses" shall not include any
attorneys fees and expenses of any member of the Lender Group other than Agent,
Co-Agent and Foothill Partners.
"Letter of Credit" means an L/C or an L/C Guaranty, as the context
requires.
"Lien" means any interest in property securing an obligation owed to, or a
claim by, any Person other than the owner of the property, whether such interest
shall be based on the common law, statute, or contract, whether such interest
shall be recorded or perfected, and whether such interest shall be contingent
upon the occurrence of some future event or events or the existence of some
future circumstance or circumstances, including the lien or security interest
arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation,
assignment, deposit arrangement, security agreement, adverse claim or charge,
conditional sale or trust receipt, or from a lease, consignment, or bailment for
security purposes and also including reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.11.
"Loan Documents" means this Agreement, the Disbursement Letter, the Letters
of Credit, the Credit Card Agreements, the Blocked Account Agreements, the
Oversight Agent Agreement, the Mortgages, the Stock Pledge Agreement, the
Subsidiary Guaranty Agreement, the Subsidiary Security Agreement, the Trademark
Security Agreement, the Assignment of Real Estate Trust Interests, the Agent's
Fee Letter, the Foothill Partners' Fee Letter, any note or notes executed by
Borrower and payable to the Lender Group, and any other agreement entered into,
now or in the future, in connection with this Agreement.
<PAGE>
"Margin" has the meaning set forth in Section 2.7(a).
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower or any Subsidiary of Borrower,
(b) the material impairment of Borrower's or any Subsidiary of Borrower's
ability to perform its obligations under the Loan Documents to which it is a
party or of the Lender Group to enforce the Obligations or realize upon the
Collateral, (c) a material adverse effect on the value of the Collateral, or (d)
a material impairment of the priority of the Lender Group's Liens with respect
to the Collateral.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolving Amount" means, collectively, the Maximum Tranche A
Revolving Amount and the Maximum Tranche B Revolving Amount.
"Maximum Tranche A Amount" means $125,000,000.
"Maximum Tranche A Revolving Amount" means, as of any date of
determination, $125,000,000, less the then outstanding principal balance of the
Tranche A Term Loans.
"Maximum Tranche B Amount" means $25,000,000.
"Maximum Tranche B Revolving Amount" means, as of any date of
determination, the lesser of (a) $15,000,000 or (b) the Maximum Tranche B
Amount, less the then outstanding principal balance of the Tranche B Term Loans.
"Mortgage" means any mortgage, deeds of trust, or deed to secure debt,
executed by Borrower or a Subsidiary of Borrower in favor of Agent, the form and
substance of which shall be satisfactory to the Lender Group.
"Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any ERISA
Affiliate has contributed, or was obligated to contribute, within the past six
years.
"Negotiable Collateral" means all of Borrower's present and future letters
of credit, notes, drafts, instruments, investment property, security
entitlements, securities (including the shares of stock of Subsidiaries of
Borrower), documents, personal property leases (wherein Borrower is the lessor),
chattel paper, and Borrower's Books relating to any of the foregoing. For
purposes of the definition of "Collateral", "Negotiable Collateral" means all of
Borrower's and its Primary Subsidiaries' present and future letters of credit,
notes, drafts, instruments, investment property, security entitlements,
securities (including the shares of stock of Subsidiaries of Borrower and its
Primary Subsidiaries), documents, personal property leases (wherein Borrower and
its Primary Subsidiaries are the lessor), chattel paper, and Borrower's Books
(of Borrower and its Primary Subsidiaries) relating to any of the foregoing.
"Net Proceeds" means (a) with respect to Primary Real Estate, the net cash
or cash equivalent proceeds from the sale of such Primary Real Estate after
payment of reasonable selling costs and expenses not to exceed ten percent (10%)
of the gross proceeds from such sale, and (b) with respect to Secondary Real
Estate, the net cash or cash equivalent proceeds from the sale of such Secondary
Real Estate after payment of reasonable selling costs and expenses not to exceed
ten percent (10%) of the gross proceeds from such sale and after satisfaction of
any mortgage or other Lien on such Secondary Real Estate.
"Obligations" means all loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent reimbursement obligations under any outstanding
Letters of Credit, premiums (including Early Termination Premiums), liabilities
(including all amounts charged to Borrower's Loan Account pursuant hereto),
obligations, or Lender Group Expenses (including any fees or expenses that, but
for the provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties owing by Borrower to the Lender Group of any
<PAGE>
kind and description (whether pursuant to or evidenced by the Loan Documents or
pursuant to any other agreement between the Lender Group and Borrower, and
irrespective of whether for the payment of money), whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including any debt, liability, or obligation owing from Borrower to others
that the Lender Group may have obtained by assignment or otherwise, and further
including all interest not paid when due and all Lender Group Expenses that
Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"One Turn State" means any state or other jurisdiction under whose
statutory or common law the relative priority of the rights of a landlord in
assets of that landlord's tenant, for unpaid rent, vis B vis the rights of the
holder of a perfected security interest therein is dependent upon whether such
security interest arose prior to or subsequent to the subject asset's coming
onto the demised premises.
"Originating Lender" has the meaning set forth in Section 15.1(e).
"Overadvance" has the meaning set forth in Section 2.6.
"Oversight Agent" means Paragon Capital LLC, a Delaware limited liability
company, or such other "Oversight Agent" designated by Agent.
"Oversight Agent Agreement" means that certain Oversight Agent Agreement of
even date herewith among the Oversight Agent and Agent.
"Participant" has the meaning set forth in Section 15.1(e).
"Pay-Off Letter" means a letter, in form and substance reasonably
satisfactory to Agent, from Existing Lender respecting the amount necessary to
repay in full all of the obligations of Borrower owing to Existing Lender and
other lenders for whom the Existing Lender is acting as agent and obtain a
termination or release of all of the Liens existing in favor of Existing Lender
in and to the properties or assets of Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation as defined in Title
IV of ERISA, or any successor thereto.
"Permitted Liens" means (a) Liens held by the Lender Group, (b) Liens for
unpaid taxes that either (i) are not yet due and payable or (ii) are the subject
of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the interests of
lessors under operating leases (e) purchase money security interests and Liens
of lessors under capital leases securing Indebtedness in an aggregate amount not
to exceed $10,000,000 at any time and so long as the Lien only attaches to the
asset purchased or acquired and only secures the purchase price of the asset,
(f) Liens arising by operation of law in favor of warehousemen, landlords,
carriers, mechanics, materialmen, laborers, or suppliers, incurred in the
ordinary course of business of Borrower and not in connection with the borrowing
of money, and which Liens either (i) are for sums not yet due and payable, or
(ii) are the subject of Permitted Protests, (g) Liens arising from deposits made
in connection with obtaining worker's compensation or other unemployment
insurance, (h) Liens or deposits to secure performance of bids, tenders, or
leases (to the extent permitted under this Agreement), incurred in the ordinary
course of business of Borrower and not in connection with the borrowing of
money, (i) Liens arising by reason of security for surety or appeal bonds in the
ordinary course of business of Borrower, (j) Liens of or resulting from any
judgment or award that would not cause a Material Adverse Change and as to which
the time for the appeal or petition for rehearing of which has not yet expired,
or in respect of which Borrower is in good faith prosecuting an appeal or
proceeding for a review, and in respect of which a stay of execution pending
such appeal or proceeding for review has been secured and is in effect, (k)
Liens with respect to the Real Property Collateral that are exceptions to the
commitments for title insurance issued in connection with the Mortgages, as
accepted by Agent, (l) with respect to any Real Property that is not part of the
Real Property Collateral, easements, rights of way, zoning and similar covenants
and restrictions, and similar encumbrances that customarily exist on properties
<PAGE>
of Persons engaged in similar activities and similarly situated and that in any
event do not materially interfere with or impair the use or operation of the
Collateral by Borrower or the value of the Lender Group's Lien thereon or
therein, or materially interfere with the ordinary conduct of the business of
Borrower, and (m) with respect to Secondary Real Estate, Liens of mortgagees
listed on Schedule 3.1(k).
"Permitted Protest" means the right of Borrower to protest any Lien (other
than any such Lien that secures the Obligations), tax (other than payroll taxes
or taxes that are the subject of a United States federal tax lien), or rental
payment, provided that (a) a reserve with respect to such obligation is
established on the books of Borrower in an amount that is reasonably
satisfactory to Agent, (b) any such protest is instituted and diligently
prosecuted by Borrower in good faith, and (c) Agent is satisfied that, while any
such protest is pending, there will be no impairment of the enforceability,
validity, or priority of any of the Liens of the Lender Group in and to the
Collateral.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than the Real
Property Collateral.
"Plan" means any employee benefit plan, program, or arrangement maintained
or contributed to by Borrower or with respect to which it may incur liability.
"Primary Real Estate" means the Real Property described on Schedule R-1 and
any other Real Property acquired by Borrower or any Subsidiary of Borrower after
the Closing Date.
"Primary Subsidiaries" means, with respect to Borrower, all of its
Subsidiaries other than Property Holdings and the Real Estate Trusts.
"Pro-Rata Share" means, with respect to a Lender, a fraction (expressed as
a percentage), the numerator of which is the amount of such Lender's Commitment
and the denominator of which is the aggregate amount of the Commitments.
"Property Holdings" means Property Holdings Company I, a Florida
corporation.
"Real Estate Trusts" means the business trusts listed on Schedule T-1 which
business trusts (a) own and hold all of the Secondary Real Estate, and (b) are
beneficially wholly-owned by Borrower.
"Real Property" means any estates or interests in real property now owned
or hereafter acquired by Borrower or any Subsidiary of Borrower.
"Real Property Collateral" means the Primary Real Estate.
"Reference Rate" means the variable rate of interest, per annum, most
recently announced by Norwest Bank Minnesota, National Association, or any
successor thereto, as its "base rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
"Reference Rate Loan" means any Advance or the Tranche A Term Loans (or any
portion thereof) made or outstanding hereunder during any period when interest
on such Advance or the Tranche A Term Loans (or portion thereof) is payable
based on the Reference Rate.
"Release Price" means, with respect to any of the Primary Real Estate,
ninety percent (90%) of the Appraised Value of such Primary Real Estate.
<PAGE>
"Reportable Event" means any of the events described in Section 4043(c) of
ERISA or the regulations thereunder other than a Reportable Event as to which
the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"Required Lenders" means, at any time, Lenders whose Pro-Rata Shares
aggregate sixty-six and two-thirds percent (66b%) or more of the Commitments.
"Requirement of Law" means, as to any Person: all (a) (i) statutes and
regulations and (ii) court orders and injunctions, arbitrators' decisions,
and/or similar rulings, in each instance by any governmental authority, or other
body which has jurisdiction over such Person, or any property of such Person, or
of any other Person whose conduct such Person would be responsible and (b) that
Person's organizational documents, by-laws and/or other instruments which deal
with corporate or similar governance, as applicable.
"Reserve Percentage" means and refers to, as of the date of determination
thereof, the maximum percentage (rounded upward, if necessary to the nearest
1/100th of one percent (1%)), as determined by Agent (or its Affiliates) in
accordance with its (or their ) usual procedures (which determination shall be
conclusive in the absence of manifest error), that is in effect on such date as
prescribed by the Federal Reserve Board for determining the reserve requirements
(including supplemental, marginal, and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as "eurocurrency
liabilities") by Norwest Bank Minnesota, National Association or its Affiliates.
"Retiree Health Plan" means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA that provides benefits to individuals after
termination of their employment, other than as required by Section 601 of ERISA.
"Revolving Facility Usage" means, as of any date of determination, the
aggregate amount of Advances and undrawn or unreimbursed Letters of Credit
outstanding.
"RSL" means the retail stock ledger of Borrower.
"Secondary Real Estate" means the Real Property described on Schedule R-2.
"Secondary Real Estate Indebtedness" means the Indebtedness secured by the
Secondary Real Estate as described on Schedule 7.1.
"Settlement" has the meaning set forth in Section 2.1(i)(i).
"Settlement Date" has the meaning set forth in Section 2.1(i)(i).
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
<PAGE>
"Stock Pledge Agreement" means that certain Stock Pledge Agreement of even
date herewith among Borrower and Agent, in form and substance satisfactory to
the Lender Group.
"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors (or appoint
other comparable managers) of such corporation, partnership, limited liability
company, or other entity and, with respect to Borrower, (a) shall be deemed to
include without limitation the Real Estate Trusts and, (b) shall include without
limitation Property Holdings, Sports & Recreation Holdings of PA, Inc., a
Delaware corporation, Guide Series, Inc., a Florida corporation, Construction
Resolution, Inc., a Florida corporation, and Sports & Recreation, Inc., a
Florida corporation.
"Subsidiary Guaranty Agreement" means that certain Guaranty Agreement of
even date herewith from Borrower's Primary Subsidiaries to Agent, in form and
substance satisfactory to the Lender Group.
"Subsidiary Security Agreement" means that certain Subsidiary Security
Agreement of even date herewith among Borrower's Primary Subsidiaries and Agent,
in form and substance satisfactory to the Lender Group.
"Term Loan Maturity Date" means the date three (3) years following the
Closing Date.
"Term Loans" means, collectively, the Tranche A Term Loans and the Tranche
B Term Loans.
"Trademark Security Agreement" means that certain Trademark Security
Agreement of even date herewith among Borrower, Guide Series, Inc., a Florida
corporation, and Agent, in form and substance satisfactory to the Lender Group.
"Tranche A Advance" has the meaning set forth in Section 2.1(a)(i).
"Tranche A Availability" means, as of the date of determination, the result
(so long as such result is a positive number) of (a) the lesser of (i) the
Tranche A Borrowing Base, less the amount of Availability Reserves or (ii) the
Maximum Tranche A Revolving Amount, less (b) Tranche A Revolving Facility Usage.
"Tranche A Borrowing Base" has the meaning set forth in Section 2.1(a)(i).
"Tranche A Commitment" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading "Tranche
A Commitment" on Schedule C-1 or on Schedule 1 to the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of Section 15.1, as such Tranche A Commitment may be adjusted from
time to time in accordance with the provisions of Section 15.1 and "Tranche A
Commitments" means, collectively, the aggregate amount of the Tranche A
Commitments of all Lenders.
"Tranche A Lender" means any Lender who has a Tranche A Commitment.
"Tranche A Pro-Rata Share" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Tranche A Commitment and the denominator of which is the aggregate
amount of the Tranche A Commitments. "Tranche A Revolving Facility Usage" means,
as of any date of determination, the aggregate amount of Tranche A Advances and
undrawn or unreimbursed Letters of Credit outstanding.
"Tranche A Term Loans" has the meaning set forth in Section 2.3(a).
"Tranche B Advances" has the meaning set forth in Section 2.1(a)(ii).
"Tranche B Availability" means, as of the date of determination, the result
(so long as such result is a positive number) of (a) the lesser of (i) the
Tranche B Borrowing Base, or (ii) the Maximum Tranche B Revolving Amount, less
(b) the aggregate amount of Tranche B Advances outstanding.
<PAGE>
"Tranche B Borrowing Base" has the meaning set forth in Section 2.1(a)(ii).
"Tranche B Commitment" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading "Tranche
B Commitment" on Schedule C-1 or on Schedule 1 to the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of Section 15.1, as such Tranche B Commitment may be adjusted from
time to time in accordance with the provisions of Section 15.1 and "Tranche B
Commitments" means, collectively, the aggregate amount of the Tranche B
Commitments of all Lenders.
"Tranche B Lender" means any Lender who has a Tranche B Commitment.
"Tranche B Pro-Rata Share" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Tranche B Commitment and the denominator of which is the aggregate
amount of the Tranche B Commitments.
"Tranche B Term Loans" has the meaning set forth in Section 2.4(a).
"Voidable Transfer" has the meaning set forth in Section 15.8.
1.2 Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower on a consolidated basis
unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 Contruction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. An Event of Default shall "continue"
or be "continuing" until such Event of Default has been waived in writing by the
requisite members of the Lender Group or by Agent upon the direction by the
requisite members of the Lender Group. Section, subsection, clause, schedule,
and exhibit references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement or any of
the Loan Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, and
supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Advances.
(a) (i) Subject to the terms and conditions of this Agreement, each Tranche
A Lender agrees to make advances ("Tranche A Advances") to Borrower in an amount
at any one time outstanding not to exceed such Tranche A Lender's Pro-Rata Share
of an amount equal to the lesser of (A) the Maximum Tranche A Revolving Amount,
less the outstanding balance of all undrawn or unreimbursed Letters of Credit,
or (B) the Tranche A Borrowing Base, less (x) the aggregate amount of all
undrawn or unreimbursed Letters of Credit (other than Inventory Letters of
Credit), less (y) the sum of (aa) thirty percent (30%) of the aggregate amount
of all undrawn or unreimbursed Inventory Letters of Credit, and (bb) freight and
duty charges applicable thereto, less (z) the aggregate amount of the
Availability Reserves. For purposes of this Agreement, "Tranche A Borrowing
Base", as of any date of determination, shall mean the result of:
<PAGE>
(I) the lesser of (i) $2,500,000 or (ii) eighty percent (80%) of Eligible
Accounts, less the amount, if any, of the Dilution Reserve, plus
(II) the lesser of (i) $125,000,000, less the amount of availability
created under subsection (I) above, less the outstanding principal balance of
the Tranche A Term Loans, (ii) seventy percent (70%) of the lower of Cost or
market value (determined based on the RSL) of Eligible Inventory, or (iii)
eighty-five percent (85%) of the most recently determined GOB Appraised Value of
the Cost (determined based on the RSL) of Inventory, minus
(III) the aggregate amount of reserves, if any, established by Agent under
Sections 2.1(b), 6.15 and 10.
(ii) Subject to the terms and conditions of this Agreement, at any time
that no Tranche A Availability exists, each Tranche B Lender agrees to make
advances ("Tranche B Advances") to Borrower in an amount at any one time
outstanding not to exceed such Tranche B Lender's Tranche B Pro-Rata Share of an
amount equal to the lesser of (A) the Maximum Tranche B Revolving Amount, or (B)
the Tranche B Borrowing Base. For purposes of this Agreement, "Tranche B
Borrowing Base," as of any date of determination, shall mean the result of:
(I) the lesser of (i) ten percent (10%) of the lower of Cost or market
value (determined based upon the RSL) of Eligible Inventory, or (ii) ten percent
(10%) of the most recently determined GOB Appraised Value of the Cost
(determined based on the RSL) of Inventory, minus
(II) the aggregate amount of reserves, if any, established by Agent under
Sections 2.1(b), 6.15 and 10.
(b) Anything to the contrary in Section 2.1(a) above notwithstanding, Agent
may create reserves against or reduce its advance rates based upon Eligible
Accounts or Eligible Inventory without declaring an Event of Default if it
determines that there has occurred a Default or a Material Adverse Change.
(c) Amounts borrowed pursuant to this Section 2.1 may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
(d) Procedure for Borrowing. Each Borrowing shall be made upon Borrower's
irrevocable request therefor delivered to Agent (which notice must be received
by Agent no later than 1:00 p.m. (Atlanta, Georgia time) on the Funding Date if
such advance is for $5,000,000 or less or no later than 1:00 p.m. (Atlanta,
Georgia time) on the Business Day immediately preceding the requested Funding
Date if such advance is for more than $5,000,000) specifying (i) the amount of
the Borrowing; and (ii) the requested Funding Date, which shall be a Business
Day.
(e) Agent's Election. Promptly after receipt of a request for a Borrowing
pursuant to Section 2.1(d) in excess of $5,000,000, Agent shall elect, in its
discretion, (i) to have the terms of Section 2.1(f) apply to such requested
Borrowing, or (ii) to make an Agent Loan pursuant to the terms of Section 2.1(g)
in the amount of the requested Borrowing. Any requested Borrowing of $5,000,000
or less shall be made as an Agent Loan pursuant to the terms of Section 2.1(g).
(f) Making of Advances.
(i) In the event that Agent shall elect to have the terms of this
Section 2.1(f) apply to a requested Borrowing in excess of $5,000,000 as
described in Section 2.1(e), then promptly after receipt of a request for a
Borrowing pursuant to Section 2.1(d), Agent shall notify the Lenders, not
later than 4:00 p.m. (Atlanta, Georgia time) on the Business Day
immediately preceding the Funding Date applicable thereto, by telephone and
promptly followed by telecopy, or other similar form of transmission, of
the requested Borrowing and whether and to the extent such Borrowing shall
be a Tranche A Advance or a Tranche B Advance, or both. Each Lender shall
make the amount of such Lender's Pro-Rata Share of the requested Borrowing
available to Agent in same day funds, to such account of Agent as Agent may
<PAGE>
designate, not later than 3:00 p.m. (Atlanta, Georgia time) on the Funding
Date applicable thereto. After Agent's receipt of the proceeds of such
Advances, upon satisfaction of the applicable conditions precedent set
forth in Sections 3.1 (with respect to the initial funding on the Closing
Date) and 3.2, Agent shall make the proceeds of such Advances available to
Borrower on the applicable Funding Date by transferring same day funds
equal to the proceeds of such Advances received by Agent to the Designated
Account; provided, however, that, subject to the provisions of Section
2.1(l), Agent shall not request any Lender to make, and no Lender shall
have the obligation to make, any Advance if Agent shall have received
written notice from any Lender, or otherwise has actual knowledge, that one
or more of the applicable conditions precedent set forth in Sections 3.1
(with respect to the initial funding on the Closing Date) or 3.2 will not
be satisfied on the requested Funding Date for the applicable Borrowing, or
(B) the requested Borrowing; provided further, however, that, subject to
the provisions of Section 2.1(l), Agent shall not request any Tranche A
Lender to make, and no Tranche A Lender shall have the obligation to make,
any Tranche A Advance if Agent shall have received written notice from any
Tranche A Lender, or otherwise has knowledge that the requested Tranche A
Advance would result in the outstanding Tranche A Advances and Letters of
Credit exceeding the Tranche A Availability on such Funding Date; provided
further, however, that, subject to the provisions of Section 2.1(l), Agent
shall not request any Tranche B Lender to make, and no Tranche B Lender
shall have the obligation to make, any Tranche B Advance if Agent shall
have received written notice from any Tranche B Lender, or otherwise has
knowledge that the requested Tranche B Advance would exceed the Tranche B
Availability on such Funding Date.
(ii) Unless Agent receives notice from a Lender with respect to any
Borrowing after the Closing Date, at least one Business Day prior to the
date of such Borrowing, that such Lender will not make available as and
when required hereunder to Agent for the account of Borrower the amount of
that Lender's Pro-Rata Share of the Borrowing as to Borrowings to which
this Section 2.1(f) applies, Agent may assume that each Lender has made or
will make such amount available to Agent in immediately available funds on
the Funding Date and Agent may (but shall not be so required), in reliance
upon such assumption, make available to Borrower on such date a
corresponding amount. If and to the extent any Lender shall not have made
its full amount available to Agent in immediately available funds and Agent
in such circumstances has made available to Borrower such amount, that
Lender shall on the Business Day following such Funding Date make such
amount available to Agent, together with interest at the Defaulting Lenders
Rate for each day during such period. A notice from Agent submitted to any
Lender with respect to amounts owing under this subsection shall be
conclusive, absent manifest error. If such amount is paid to Agent such
payment to Agent shall constitute such Lender's Advance on the date of
Borrowing for all purposes of this Agreement. If such amount is not paid to
Agent on the Business Day following the Funding Date, Agent will notify
Borrower of such failure to fund and, upon demand by Agent, Borrower shall
pay such amount to Agent for Agent's account, together with interest
thereon for each day elapsed since the date of such Borrowing, at a rate
per annum equal to the interest rate applicable at the time to the Advances
composing such Borrowing. The failure of any Lender to make any Advance on
any Funding Date shall not relieve any other Lender of any obligation
hereunder to make an Advance on such Funding Date, but no Lender shall be
responsible for the failure of any other Lender to make the Advance to be
made by such other Lender on any Funding Date. Any Lender that fails to
make any Advance that it is required to make hereunder on any Funding Date
and that has not cured such failure by making such Advance within one
Business Day after written demand upon it by Agent to do so, shall
constitute a "Defaulting Lender" for purposes of this Agreement until such
Advance is made.
(iii) Agent shall not be obligated to transfer to a Defaulting Lender
any payments made by Borrower to Agent for the Defaulting Lender's benefit;
nor shall a Defaulting Lender be entitled to the sharing of any payments
hereunder. Amounts payable to a Defaulting Lender shall instead be paid to
<PAGE>
or retained by Agent. Agent may hold and, in its discretion, re-lend to
Borrower the amount of all such payments received or retained by it for the
account of such Defaulting Lender. Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents and determining
Pro-Rata Shares, such Defaulting Lender shall be deemed not to be a
"Lender" and such Defaulting Lender's Commitment shall be deemed to be
zero. This section shall remain effective with respect to such Defaulting
Lender until (A) the Obligations under this Agreement shall have been
declared or shall have become immediately due and payable or (B) the
requisite non-Defaulting Lenders, Agent, and Borrower shall have waived
such Defaulting Lender's default in writing. The operation of this section
shall not be construed to increase or otherwise affect the Commitment of
any non-Defaulting Lender, or relieve or excuse the performance by Borrower
or its Subsidiaries or any guarantor of the Obligations of their duties and
obligations hereunder.
(g) Making of Agent Loans.
(i) In the event Agent shall elect to have the terms of this Section
2.1(g) apply to a requested Borrowing in excess of $5,000,000 as described
in Section 2.1(e) or in the event of any requested Borrowing of $5,000,000
or less, Agent shall make an Advance in the amount of such Borrowing (any
such Advance made solely by Agent pursuant to this Section 2.1(g) being
referred to as an "Agent Loan" and such Advances being referred to
collectively as "Agent Loans") available to Borrower on the Funding Date
applicable thereto by transferring same day funds to Borrower's Designated
Account. Each Agent Loan is an Advance hereunder and shall be subject to
all the terms and conditions applicable to other Advances, except that all
payments thereon shall be payable to Agent solely for its own account (and
for the account of the holder of any participation interest with respect to
such Advance). Subject to the provisions of Section 2.1(l), Agent shall not
make any Agent Loan if Agent shall have received written notice from any
Lender (a copy of which will be provided to Borrower), or otherwise has
actual knowledge, that (i) one or more of the applicable conditions
precedent set forth in Section 3.1 (with respect to the initial funding on
the Closing Date) or 3.2 will not be satisfied on the requested Funding
Date for the applicable Borrowing, or (ii) the requested Borrowing would
result in the Tranche A Advances and the Letters of Credit exceeding the
Tranche A Availability (with respect to any Agent Loan made in lieu of a
Tranche A Advance) or Tranche B Availability (with respect to any Agent
Loan made in lieu of a Tranche B Advance) on such Funding Date. Agent shall
not otherwise be required to determine whether the applicable conditions
precedent set forth in Section 3.1 or 3.2 have been satisfied on the
Funding Date applicable thereto prior to making, in its sole discretion,
any Agent Loan.
(ii) The Agent Loans shall be secured by the Collateral and shall
constitute Tranche A Advances (with respect to Agent Loans made in lieu of
Tranche A Advances), Tranche B Advances (with respect to Agent Loans made
in lieu of Tranche B Advances) and Obligations hereunder, and shall bear
interest at the rate applicable from time to time to Tranche A Advances
(with respect to Agent Loans made in lieu of Tranche A Advances) or Tranche
B Advances (with respect to Agent Loans made in lieu of Tranche B
Advances), as the case may be, pursuant to Section 2.7.
(h) Agent Advances.
(i) Agent hereby is authorized by Borrower and the Lenders, from time
to time in Agent's sole discretion, (1) after the occurrence of a Default
or an Event of Default (but without constituting a waiver of such Default
or Event of Default), or (2) at any time that any of the other applicable
conditions precedent set forth in Section 3.1 or 3.2 have not been
satisfied, or (3) at any time there is no Availability, to make Advances to
Borrower on behalf of the Lenders which Agent, in its reasonable business
judgment, deems necessary or desirable (A) to preserve or protect the
Collateral, or any portion thereof, (B) to enhance the likelihood of, or
maximize the amount of, repayment of the Obligations, or (C) to pay any
<PAGE>
other amount chargeable to Borrower pursuant to the terms of this
Agreement, including Lender Group Expenses and the costs, fees, and
expenses described in Section 10 (any of the Advances described in this
Section 2.1(h) being hereinafter referred to as "Agent Advances");
provided, that Agent shall not make any Agent Advances to Borrower without
the consent of the Required Lenders if the amount thereof would exceed
$3,000,000 in the aggregate at any one time.
(ii) Agent Advances shall be repayable on demand and secured by the
Collateral, shall constitute Advances and Obligations hereunder, and shall
bear interest at the rate applicable from time to time to the Obligations
pursuant to Section 2.7.
(i) Settlement. It is agreed that each Tranche A Lender's funded portion of
the Tranche A Advances is intended by the Tranche A Lenders to be equal at all
times to such Tranche A Lender's Tranche A Pro-Rata Share of the outstanding
Tranche A Advances and that each Tranche B Lender's funded portion of the
Tranche B Advances is intended by the Tranche B Lenders to be equal at all times
to such Tranche B Lender's Tranche B Pro-Rata Share of the outstanding Tranche B
Advances. Such agreement notwithstanding, Agent and the Lenders agree (which
agreement shall not be for the benefit of or enforceable by Borrower) that in
order to facilitate the administration of this Agreement and the other Loan
Documents, settlement among them as to the Advances, the Agent Loans, and the
Agent Advances shall take place on a periodic basis in accordance with the
following provisions:
(i) Agent shall request settlement ("Settlement") with the Lenders on
a weekly basis, or on a more frequent basis if so determined by Agent, (1)
for itself, with respect to each Agent Loan and Agent Advance, and (2) with
respect to Collections received, as to each by notifying the Lenders by
telephone and promptly followed by telecopy, or other similar form of
transmission, of such requested Settlement, no later than 4:00 p.m.
(Atlanta, Georgia time) on the Business Date immediately preceding the date
of such requested Settlement (the "Settlement Date"). Such notice of a
Settlement Date shall include a summary statement of the amount of
outstanding Advances, Term Loans, Agent Loans, and Agent Advances for the
period since the prior Settlement Date, the amount of repayments received
in such period, and the amounts allocated to each Lender of the principal,
interest, fees, and other charges for such period. Subject to the terms and
conditions contained herein (including Section 2.1(i)(ii)): (y) if (A) a
Tranche A Lender's balance of the Tranche A Advances, Tranche A Term Loans
and Agent Loans (made in lieu of Tranche A Advances) is less than such
Lender's Tranche A Pro-Rata Share of the Tranche A Advances, Tranche A Term
Loans and Agent Loans (made in lieu of Tranche A Advances), (B) a Tranche B
Lender's balance of the Tranche B Advances, Tranche B Term Loans and Agent
Loans (made in lieu of Tranche B Advances) is less than such Lender's
Tranche B Pro-Rata Share of the Tranche B Advances, Tranche B Term Loans
and Agent Loans (made in lieu of Tranche B Advances), or (C) a Lender's
balance of the Agent Advances is less than such Lender's Pro-Rata Share of
the Agent Advances, then such Lender shall by no later than 3:00 p.m.
(Atlanta, Georgia time) on the Settlement Date transfer in same day funds
to the account of Agent as Agent may designate, an amount such that each
Lender shall , upon receipt of such amount, have as of the Settlement Date,
its Tranche A Pro-Rata Share of all Tranche A Advances, Tranche A Term
Loans and Agent Loans (made in lieu of Tranche A Advances), Tranche B
Pro-Rata Share of all Tranche B Advances, Tranche B Term Loans and Agent
Loans (made in lieu of Tranche B Advances), and Pro-Rata Share of all Agent
Advances; and (z) if (A) a Tranche A Lender's balance of the Tranche A
Advances, Tranche A Term Loans and Agent Loans (made in lieu of Tranche A
Advances) exceeds such Lender's Tranche A Pro-Rata Share of the Tranche A
Advances, Tranche A Term Loans and Agent Loans (made in lieu of Tranche A
Advances), (B) a Tranche B Lender's balance of the Tranche B Advances,
Tranche B Term Loans and Agent Loans (made in lieu of Tranche B Advances)
exceeds such Lender's Tranche B Pro-Rata Share of the Tranche B Advances,
Tranche B Term Loans and Agent Loans (made in lieu of Tranche B Advances),
or (C) a Lender's balance of the Agent Advances exceeds such Lender's
Pro-Rata Share of the Agent Advances, then Agent shall by no later than
<PAGE>
4:00 p.m. (Atlanta, Georgia time) on the Settlement Date transfer in same
day funds to the account of such Lender as such Lender may designate, an
amount such that each Lender shall, upon receipt of such amount, have as of
the Settlement Date, its Tranche A Pro-Rata Share of all Tranche A
Advances, Tranche A Term Loans and Agent Loans (made in lieu of Tranche A
Advances), Tranche B Pro-Rata Share of all Tranche B Advances, Tranche B
Term Loans and Agent Loans (made in lieu of Tranche B Advances), and
Pro-Rata Share of all Agent Advances; provided, however, that Agent
Advances made on account of interest or fees specifically attributable to
the Tranche A Commitment, Tranche A Advances and Tranche A Term Loans shall
be allocated to the Tranche A Lenders based on their respective Tranche A
Pro-Rata Shares and Agent Advances made on account of interest or fees
specifically attributable to the Tranche B Commitment, Tranche B Advances
and Tranche B Term Loans shall be allocated to the Tranche B Lenders based
on their respective Tranche B Pro-Rata Shares. Such amounts made available
to Agent under clause (z) of the immediately preceding sentence shall be
applied against the amounts of the applicable Agent Loan or Agent Advance
and, together with the portion of such Agent Loan or Agent Advance
representing Foothill's Pro-Rata Share, Tranche A Pro-Rata Share or Tranche
B Pro-Rata Share, as the case may be, thereof, shall constitute Tranche A
Advances or Tranche B Advances, as the case may be, of such Lenders. If any
such amount is not made available to Agent by any Lender on the Settlement
Date applicable thereto to the extent required by the terms hereof, Agent
shall be entitled to recover for its account such amount on demand from
such Lender together with interest thereon at the Defaulting Lenders Rate.
(ii) In determining whether a Lender's balance of the Advances, Term
Loans, Agent Loans, and Agent Advances is less than, equal to, or greater
than such Lender's Pro-Rata Share, Tranche A Pro-Rata Share or Tranche B
Pro-Rata Share, as the case may be, of the Advances, Term Loans, Agent
Loans, and Agent Advances as of a Settlement Date, Agent shall, as part of
the relevant Settlement, apply to such balance the portion of payments
actually received by Agent with respect to principal, interest, fees
payable by Borrower and allocable to the Lenders hereunder, and proceeds of
Collateral. To the extent that a net amount is owed to any such Lender
after such application, such net amount shall be distributed by Agent to
that Lender as part of such Settlement; provided, however, that the closing
fee payable by Borrower under Section 2.12(a) shall be distributed to the
Lenders within three Business Days following the Closing Date without
regard to the netting of amounts owing to or owed by any Lender as part of
a Settlement.
(iii) Between Settlement Dates, Agent, to the extent no Agent Advances
or Agent Loans are outstanding, may pay over to Foothill any payments
received by Agent, which in accordance with the terms of the Agreement
would be applied to the reduction of the Advances, for application to
Foothill's Tranche A Pro-Rata Share of the Advances. If, as of any
Settlement Date, Collections received since the then immediately preceding
Settlement Date have been applied to Foothill's Tranche A Pro-Rata Share of
the Advances other than to Agent Loans or Agent Advances, as provided for
in the previous sentence, Foothill shall pay to Agent for the accounts of
the Lenders, and Agent shall pay to the Lenders, to be applied to the
outstanding Advances of such Lenders, an amount such that each Lender
shall, upon receipt of such amount, have, as of such Settlement Date, its
Tranche A Pro-Rata Share of the Tranche A Advances and its Tranche B
Pro-Rata Share of the Tranche B Advances. During the period between
Settlement Dates, Agent with respect to Agent Loans and Agent Advances, and
each Lender with respect to the Term Loans, and the Advances other than
Agent Loans and Agent Advances, shall be entitled to interest at the
applicable rate or rates payable under this Agreement on the daily amount
of funds employed by Agent or the Lenders, as applicable.
(j) Notation. Agent shall record on its books the principal amount of the
Term Loans, and the Advances owing to each Lender, including the Agent Loans and
Agent Advances owing to Agent, and the interests therein of each Lender, from
time to time. In addition, each Lender is authorized, at such Lender's option,
to note the date and amount of each payment or prepayment of principal of such
<PAGE>
Lender's Term Loan, and Advances in its books and records, including computer
records, such books and records constituting rebuttably presumptive evidence,
absent manifest error, of the accuracy of the information contained therein.
(k) Lenders' Failure to Perform. All Tranche A Advances (other than Agent
Loans and Agent Advances) shall be made by the Tranche A Lenders simultaneously
and in accordance with their Pro-Rata Shares and Tranche B Advances (other than
Agent Loans and Agent Advances) shall be made by the Tranche B Lenders
simultaneously and in accordance with their Tranche B Pro-Rata Shares. It is
understood that (i) no Lender shall be responsible for any failure by any other
Lender to perform its obligation to make any Advances hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any other Lender to perform its obligation to make any Advances hereunder, and
(ii) no failure by any Lender to perform its obligation to make any Advances
hereunder shall excuse any other Lender from its obligation to make any Advances
hereunder.
(l) Overadvances. (i) Agent may make voluntary Overadvances without the
written consent of the Required Lenders for amounts charged to the applicable
Loan Account for principal payments on the Term Loans, interest, fees or Lender
Group Expenses pursuant to Section 2.1(h)(i)(2)(C). If the conditions for
borrowing under Section 3.2(b) cannot be fulfilled, Agent may not knowingly and
intentionally continue to make Advances (including Agent Loans but excluding
Agent Advances pursuant to Section 2.1(h)) unless each of the following
conditions is satisfied: (1) after giving effect to any such Advances, the
Advances outstanding would not exceed the sum of the Tranche A Borrowing Base
and the Tranche B Borrowing Base by more than an amount proposed by Agent and
agreed to by the Lenders, (2) such Advances are made pursuant to a plan
(proposed by Agent and agreed to by the Lenders) for the elimination of the
Advances outstanding in excess of the Tranche A Borrowing Base and the Tranche B
Borrowing Base, (3) the outstanding Revolving Facility Usage (except for and
excluding amounts charged to the applicable Loan Account for interest, fees, or
Lender Group Expenses), does not exceed the Maximum Revolving Amount and (4)
Agent shall not make any such voluntary Overadvance more than sixty (60) days
after the date of the first Overadvance each time Agent shall make or provide
the same, provided, that, if at any time within any such sixty (60) day period
commencing on the date of the first such Overadvance, the Advances and the
outstanding Letters of Credit do not exceed the sum of the Tranche A Borrowing
Base and the Tranche B Borrowing Base for thirty (30) consecutive days, then
such sixty (60) day period shall cease and recommence upon the next time that
Agent may make such Overadvance. The foregoing provisions are for the sole and
exclusive benefit of Agent and the Lenders and are not intended to benefit
Borrower in any way. The Advances and Agent Loans, as applicable, that are made
pursuant to this Section 2.1(l) shall be subject to the same terms and
conditions as any other Agent Advance or Agent Loan, as applicable, except that
the rate of interest applicable thereto shall be the rates set forth in Section
2.7(c)(i) without regard to the presence or absence of a Default or Event of
Default and (except for Advances for interest and fees specifically attributable
to the Tranche A Commitment, Tranche A Advances and Tranche A Term Loans or the
Tranche B Commitment, Tranche B Advances and Tranche B Term Loans which shall be
allocated based upon the applicable Lender's Tranche A Pro-Rata Share or Tranche
B Pro-Rata Share, as the case may be) such Overadvances shall be allocated to
the Lenders based on their Pro-Rata Share; provided, that the Required Lenders
may, at any time, revoke Agent's authorization contained in this Section 2.1(l)
to make Overadvances (except for and excluding amounts charged to the applicable
Loan Account for interest, fees, or Lender Group Expenses), any such revocation
to be in writing and to become effective upon Agent's receipt thereof; provided
further, however, that the making of such Overadvances shall not constitute a
waiver of such Event of Default arising therefrom.
(ii) In the event Agent obtains actual knowledge that Revolving
Facility Usage exceeds the amount permitted by the preceding paragraph,
regardless of the amount of or reason for such excess, Agent shall notify
Lenders as soon as practicable (and prior to making any (or any further)
intentional Overadvances (except for and excluding amounts charged to the
applicable Loan Account for interest, fees, or Lender Group Expenses)
unless Agent determines that prior notice would result in imminent harm to
<PAGE>
the Collateral or its value), and Lenders thereupon shall, together with
Agent, jointly determine the terms of arrangements that shall be
implemented with Borrower intended to reduce, within a reasonable time, the
outstanding principal amount of the Advances to Borrower to an amount
permitted by the preceding paragraph. In the event any Lender disagrees
over the terms of reduction and/or repayment of any Overadvance, the terms
of reduction and/or repayment thereof shall be implemented according to the
determination of the Required Lenders.
(iii) Each Lender shall be obligated to settle with Agent as provided
in Section 2.1(i) and Section 2.1(l)(ii) for the amount of such Lender's
Pro-Rata Share Tranche A Pro-Rata Share or Tranche B Pro-Rata Share, as the
case may be, of any unintentional Overadvances by Agent reported to such
Lender, any intentional Overadvances made as permitted under this Section
2.1(l), and any Overadvances resulting from the charging to the applicable
Loan Account of interest, fees, or Lender Group Expenses.
(m) Effect of Bankruptcy. If a case is commenced by or against any Borrower
under the Bankruptcy Code, or other statute providing for debtor relief, then,
without the approval of Required Lenders the Lender Group shall not make
additional loans or provide additional financial accommodations under the Loan
Documents to such Borrower as debtor or debtor-in-possession, or to any trustee
for such Borrower, nor consent to the use of cash collateral (provided that the
applicable Loan Account shall continue to be charged, to the fullest extent
permitted by law, for accruing interest, fees, and Lender Group Expenses).
2.2 Letters of Credit.
(a) Agreement to Cause Issuance; Amounts; Outside Expiration Date. Subject
to the terms and conditions of this Agreement, Agent agrees to issue letters of
credit for the account of Borrower (each, an "L/C") or to issue guarantees of
payment (each such guaranty, an "L/C Guaranty") with respect to letters of
credit issued by an issuing bank for the account of Borrower. Agent shall have
no obligation to issue a Letter of Credit if any of the following would result:
(i) the sum of thirty percent (30%) of the aggregate amount of all
undrawn and unreimbursed Inventory Letters of Credit, plus freight and duty
charges applicable thereto, plus one hundred percent (100%) of the
aggregate amount of all other types of undrawn and unreimbursed Letters of
Credit, would exceed the Tranche A Borrowing Base less the amount of
outstanding Tranche A Advances (including any Agent Advances and Agent
Loans other than Agent Loans made in lieu of Tranche B Advances and Agent
Advances made on account of interest and fees specifically attributable to
the Tranche B Commitment, the Tranche B Advances or the Tranche B Term
Loans) less the aggregate amount of Availability Reserves and reserves
established under Section 2.1(b); or
(ii) the aggregate amount of all undrawn or unreimbursed Letters of
Credit (including Inventory Letters of Credit) would exceed the lower of:
(x) the Maximum Tranche A Revolving Amount less the amount of outstanding
Tranche A Advances (including any Agent Advances and Agent Loans other than
Agent Loans made in lieu of Tranche B Advances and Agent Advances made on
account of interest and fees specifically attributable to the Tranche B
Commitment, the Tranche B Advances or the Tranche B Term Loans) less the
aggregate amount of Availability Reserves and reserves established under
Section 2.1(b); or (y) $10,000,000; or
(iii) the outstanding Obligations (other than under the Term Loans or
the Tranche B Advances) would exceed the Maximum Tranche A Revolving
Amount.
Borrower expressly understands and agrees that Agent shall have no obligation to
arrange for the issuance by issuing banks of the letters of credit that are to
be the subject of L/C Guarantees. Borrower and the Lender Group acknowledge and
agree that certain of the letters of credit that are to be the subject of L/C
<PAGE>
Guarantees may be outstanding on the Closing Date. Each Letter of Credit shall
have an expiry date no later than the date on which this Agreement is scheduled
to terminate under Section 3.4 (without regard to any potential renewal term)
and all such Letters of Credit shall be in form and substance acceptable to
Agent in its sole discretion. If the Tranche A Lenders are obligated to advance
funds under a Letter of Credit, Borrower immediately shall reimburse such amount
to Agent and, in the absence of such reimbursement, the amount so advanced
immediately and automatically shall be deemed to be a Tranche A Advance
hereunder and, thereafter, shall bear interest at the rate then applicable to
Tranche A Advances under Section 2.7.
(b) Indemnification. Borrower hereby agrees to indemnify, save, defend, and
hold the Tranche A Lenders harmless from any loss, cost, expense, or liability,
including payments made by the Tranche A Lenders, expenses, and reasonable
attorneys fees incurred by the Tranche A Lenders arising out of or in connection
with any Letter of Credit. Borrower agrees to be bound by the issuing bank's
regulations and interpretations of any letters of credit guarantied by the
Tranche A Lenders and opened to or for Borrower's account or by Agent's
interpretations of any Letter of Credit issued by Agent to or for Borrower's
account, even though this interpretation may be different from Borrower's own,
and Borrower understands and agrees that the Tranche A Lenders shall not be
liable for any error, negligence, or mistake, whether of omission or commission,
in following Borrower's instructions or those contained in the Letter of Credit
or any modifications, amendments, or supplements thereto. Borrower understands
that the L/C Guarantees may require the Tranche A Lenders to indemnify the
issuing bank for certain costs or liabilities arising out of claims by Borrower
against such issuing bank. Borrower hereby agrees to indemnify, save, defend,
and hold the Tranche A Lenders harmless with respect to any loss, cost, expense
(including reasonable attorneys fees), or liability incurred by the Tranche A
Lenders under any L/C Guaranty as a result of the Tranche A Lenders'
indemnification of any such issuing bank.
(c) Supporting Materials. Borrower hereby authorizes and directs any bank
that issues a letter of credit guaranteed by an L/C Guaranty to deliver to Agent
all instruments, documents, and other writings and property received by the
issuing bank pursuant to such letter of credit, and to accept and rely upon
Agent's instructions and agreements with respect to all matters arising in
connection with such letter of credit and the related application. Borrower may
or may not be the "applicant" or "account party" with respect to such letter of
credit.
(d) Costs of Letters of Credit. Any and all charges, commissions, fees, and
costs incurred by Agent relating to the letters of credit guaranteed by an L/C
Guaranty shall be considered Lender Group Expenses for purposes of this
Agreement and immediately shall be reimbursable by Borrower to Agent. (e) Cash
Collateral. Immediately upon the termination of this Agreement, Borrower agrees
to either (i) provide cash collateral to be held by Agent in an amount equal to
102% of the maximum amount of the Tranche A Lenders' obligations under Letters
of Credit, or (ii) cause to be delivered to Agent releases of all of the Tranche
A Lenders' obligations under outstanding Letters of Credit. At Agent's
discretion, any proceeds of Collateral received by Agent after the occurrence
and during the continuation of an Event of Default may be held as the cash
collateral required by this Section 2.2(e).
(f) Increased Costs. If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
by any governmental authority of any such applicable law, treaty, rule, or
regulation, or (ii) compliance by the issuing bank or the Tranche A Lenders with
any direction, request, or requirement (irrespective of whether having the force
of law) of any governmental authority or monetary authority including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve System
as from time to time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is or shall be
imposed or modified in respect of any Letters of Credit issued hereunder,
or
<PAGE>
(ii) there shall be imposed on the issuing bank or the Tranche A
Lenders any other condition regarding any letter of credit, or Letter of
Credit, as applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or the Tranche A Lenders of issuing, making, guaranteeing,
or maintaining any letter of credit, or Letter of Credit, as applicable, or to
reduce the amount receivable in respect thereof by such issuing bank or the
Tranche A Lenders, then, and in any such case, Agent may, at any time within a
reasonable period after the additional cost is incurred or the amount received
is reduced, notify Borrower, and Borrower shall pay on demand such amounts as
the issuing bank or Agent may specify to be necessary to compensate the issuing
bank or Agent for such additional cost or reduced receipt, together with
interest on such amount from the date of such demand until payment in full
thereof at the rate set forth in Section 2.7(a) or (c)(i), as applicable. The
determination by the issuing bank or Agent, as the case may be, of any amount
due pursuant to this Section 2.2(f), as set forth in a certificate setting forth
the calculation thereof in reasonable detail, and delivered to Borrower upon
completion thereof, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
(g) Participations.
(i) Purchase of Participations. Immediately upon issuance of any
Letter of Credit in accordance with this Section 2.2, each Tranche A Lender
shall be deemed to have irrevocably and unconditionally purchased and
received without recourse or warranty, an undivided interest and
participation in the credit support or enhancement provided through Agent
to such issuer in connection with the issuance of such Letter of Credit,
equal to such Tranche A Lenders' Pro-Rata Share of the face amount of such
Letter of Credit (including, without limitation, all obligations of
Borrower with respect thereto, and any security therefor or guaranty
pertaining thereto).
(ii) Documentation. Upon the request of any Tranche A Lender, Agent
shall furnish to such Lender copies of any Letter of Credit, reimbursement
agreements executed in connection therewith, application for any Letter of
Credit and credit support or enhancement provided through Agent in
connection with the issuance of any Letter of Credit, and such other
documentation as may reasonably by requested by such Lender.
(iii) Obligations Irrevocable. The obligations of each Tranche A
Lender to make payments to Agent with respect to any Letter of Credit or
with respect to any credit support or enhancement provided through Agent
with respect to a Letter of Credit, and the obligations of Borrower to make
payments to Agent, for the account of the Tranche A Lenders, shall be
irrevocable, not subject to any qualification or exception whatsoever,
including, without limitation, any of the following circumstances:
(A) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(B) the existence of any claim, setoff, defense, or other right
which any Borrower may have at any time against a beneficiary named in
a Letter of Credit or any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), any Lender, Agent,
the issuer of such Letter of Credit, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transactions between such Borrower or any other Person and
the beneficiary named in any Letter of Credit);
(C) any draft, certificate, or any other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid, or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
<PAGE>
(D) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents; or
(E) the occurrence of any Default or Event of Default.
2.3 Tranche A Term Loans
(a) Several Tranche A Term Loans. Subject to the terms and conditions of
this Agreement, each Tranche A Lender severally agrees to make a term loan (each
a "Tranche A Term Loan" and collectively the "Tranche A Term Loans") to Borrower
on the Closing Date, in an amount equal to each such Tranche A Lender's Tranche
A Pro-Rata Share of $20,455,000. Each Tranche A Lender shall make the amount of
such Tranche A Lender's Tranche A Term Loan available to Agent in same day
funds, not later than 12:00 noon. (Atlanta, Georgia time), on the Closing Date.
After Agent's receipt of the proceeds of such Tranche A Term Loans, upon
satisfaction of the applicable conditions precedent set forth in Sections 3.1
and 3.2, Agent shall make the proceeds of such Tranche A Term Loans available to
Borrower on the Closing Date by transferring same day funds equal to the
proceeds of such Tranche A Term Loans received by Agent to the Designated
Account. All amounts outstanding under the Tranche A Term Loans shall constitute
Obligations.
(b) Amortization. The Tranche A Term Loan of each Lender shall be repaid in
monthly installments of principal in the amount of such Tranche A Lender's
Tranche A Pro-Rata Share of $340,916.67. Each such installment shall be due and
payable on the first day of each month commencing on October 1, 1998 and
continuing on the first day of each succeeding month. The outstanding principal
balance of the Tranche A Term Loans, together with all accrued and unpaid
interest and fees thereon, shall be due and payable on the earlier of the Term
Loan Maturity Date or the date of termination of this Agreement, whether by its
terms, by prepayment, by acceleration, or otherwise.
(c) Mandatory and Optional Prepayments of Tranche A Term Loans. Borrower
shall prepay the Tranche A Term Loans, without premium or penalty, from the Net
Proceeds from the sale of the Real Property Collateral pursuant to the
allocation of such Net Proceeds provided for in Section 2.5(b). The unpaid
principal balance of the Tranche A Term Loans may be prepaid in whole or in part
without penalty or premium (except as provided in Section 2.16) at any time
during the term of this Agreement upon thirty (30) days prior written notice by
Borrower to Agent. All partial prepayments of principal on the Tranche A Term
Loans will be applied ratably to installments due on each such Tranche A Term
Loan in the order of their maturity.
2.4 Tranche B Term Loans.
(a) Several Tranche B Term Loans. Subject to the terms and conditions of
this Agreement, each Tranche B Lender severally agrees to make a term loan (each
a "Tranche B Term Loan" and collectively the "Tranche B Term Loans") to Borrower
on the Closing Date, in an amount equal to each such Tranche B Lender's Tranche
B Pro-Rata Share of $10,227,500. Each Tranche B Lender shall make the amount of
such Tranche B Lender's Tranche B Term Loan available to Agent in same day
funds, not later than 12:00 Noon (Atlanta, Georgia time), on the Closing Date.
After Agent's receipt of the proceeds of such Tranche B Term Loans, upon
satisfaction of the applicable conditions precedent set forth in Sections 3.1
and 3.2, Agent shall make the proceeds of such Tranche B Term Loans available to
Borrower on the Closing Date by transferring same day funds equal to the
proceeds of such Tranche B Term Loans received by Agent to the Designated
Account. All amounts outstanding under the Tranche B Term Loans shall constitute
Obligations.
(b) Amortization. The Tranche B Term Loan of each Lender shall be repaid in
monthly installments of principal in the amount of such Tranche B Lender's
Tranche B Pro-Rata Share of $170,458.34. Each such installment shall be due and
payable on the first day of each month commencing on October 1, 1998 and
continuing on the first day of each succeeding month. The outstanding principal
<PAGE>
balance of the Tranche B Term Loans, together with all accrued and unpaid
interest and fees thereon, shall be due and payable on the earlier of the Term
Loan Maturity Date or the date of termination of this Agreement, whether by its
terms, by prepayment, by acceleration, or otherwise.
(c) Mandatory and Optional Prepayments of Tranche B Term Loans. Borrower
shall prepay the Tranche B Term Loans, without premium or penalty, from the Net
Proceeds from the sale of the Real Property Collateral pursuant to the
allocation of such Net Proceeds provided for in Section 2.5(b). So long as the
Tranche A Term Loans have been repaid in full or a proportionate amount of the
Tranche A Term Loans will be repaid at the time of prepayment of the Tranche B
Term Loans, the unpaid principal balance of the Tranche B Term Loans may be
prepaid in whole or in part without penalty or premium (except as provided in
Section 2.16) at any time during the term of this Agreement upon thirty (30)
days prior written notice by Borrower to Agent. All partial prepayments of
principal on the Tranche B Term Loans will be applied ratably to installments
due on each such Tranche B Term Loan in the order of their maturity.
2.5 Payments
(a) Payments by Borrower.
(i) All payments to be made by Borrower shall be made without set-off,
recoupment, deduction, or counterclaim, except as otherwise required by
law. Except as otherwise expressly provided herein, all payments by
Borrower shall be made to Agent for the account of the Lenders or Agent, as
the case may be, at Agent's address set forth in Section 12, and shall be
made in immediately available funds, no later than 2:00 p.m. (Atlanta,
Georgia time) on the date specified herein. Any payment received by Agent
later than 2:00 p.m. (Atlanta, Georgia time), at the option of Agent, shall
be deemed to have been received on the following Business Day and any
applicable interest or fee shall continue to accrue until such following
Business Day.
(ii) Whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(iii) Unless Agent receives notice from Borrower prior to the date on
which any payment is due to the Lenders that Borrower will not make such
payment in full as and when required, Agent may assume that Borrower has
made such payment in full to Agent on such date in immediately available
funds and Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to
the amount then due such Lender. If and to the extent Borrower has not made
such payment in full to Agent, each Lender shall repay to Agent on demand
such amount distributed to such Lender, together with interest thereon at
the Reference Rate for each day from the date such amount is distributed to
such Lender until the date repaid.
(b) Apportionment and Application of Payments.
(i) Except as otherwise provided with respect to Defaulting Lenders,
aggregate principal and interest payments shall be apportioned ratably
among the Lenders (according to the unpaid principal balance of the
Advances or Term Loans to which such payments relate held by each Lender)
and, payments of the fees (other than fees designated for Agent's separate
account and except as specifically provided in Section 2.12) shall, as
applicable, be apportioned ratably among the Lenders. All payments shall be
remitted to Agent.
(ii) Except upon the occurrence and during the continuance of an Event
of Default, all payments (other than payments specifically relating to
principal or interest on the Term Loans or specific Advances and payments
of specific fees to be applied to specific Term Loans or Advances, and
<PAGE>
other than payments from the Net Proceeds of Primary Real Estate and
Secondary Real Estate which shall be applied to the Obligations as set
forth below) shall be applied, first, to pay any fees or expense
reimbursements then due to Agent from Borrower; second, to pay any fees or
expense reimbursements then due to the Lenders from Borrower; third, to pay
interest due in respect of all Advances, including Agent Loans and Agent
Advances; fourth, to pay or prepay principal of Agent Loans and Agent
Advances; fifth, ratably to pay principal of the Tranche B Advances; sixth,
ratably to pay principal of Tranche A Advances and unreimbursed obligations
in respect of Letters of Credit; seventh, to cash collateralize any issued
and outstanding Letters of Credit; and eighth, ratably to pay any other
Obligations due to Agent or any Lender by Borrower.
(iii) Except upon the occurrence and during the continuance of an
Event of Default, Net Proceeds of the Primary Real Estate shall be applied
as follows: first, Net Proceeds of the Primary Real Estate representing
fifty percent (50%) of the Appraised Value of such Primary Real Estate sold
shall be applied to the principal and accrued and unpaid interest and fees
on the Tranche A Term Loans; second, Net Proceeds of the Primary Real
Estate representing twenty-five percent (25%) of the Appraised Value of
such Primary Real Estate sold shall be applied to the principal and accrued
and unpaid interest and fees on the Tranche B Term Loans; third, with
respect to any remaining Net Proceeds, seventy-five percent (75%) thereof
shall be applied to the principal of and accrued and unpaid interest and
fees on the Tranche B Term Loans and twenty-five percent (25%) thereof
shall be applied to the principal of and accrued and unpaid interest and
fees on the Tranche A Term Loans; and fourth, after payment in full of the
principal and accrued and unpaid interest and fees on the Term Loans, in
the order set forth in Section 2.5(b)(ii) above.
(iv) Except upon the occurrence and during the continuance of an Event
of Default, Net Proceeds of the Secondary Real Estate distributed to
Borrower and paid to Agent pursuant to Section 7.4 shall be applied as
follows: first, to the principal of and accrued and unpaid interest and
fees on the Tranche B Term Loans; second, to the principal of and accrued
and unpaid interest and fees on the Tranche A Term Loans; and third, in the
order set forth in Section 2.5(b)(ii) above; provided, however, that
notwithstanding the foregoing, except upon the occurrence and during the
continuance of an Event of Default, until seventy-five percent (75%) of the
original principal amount of the Tranche B Term Loans have been repaid from
regularly scheduled principal payments and payments on account of the sale
of Primary Real Estate under Section 2.5(b)(iii) hereof, the Net Proceeds
from the sale of Secondary Real Estate shall be held in the Escrow Account
and the Liens in favor of the Lender Group shall attach to such Net
Proceeds in the Escrow Account. Upon reduction of the principal balance of
the Tranche B Term Loans by seventy-five percent (75%) of the original
principal amount of the Tranche B Term Loans (to twenty-five percent (25%)
of the original principal amount of the Tranche B Term Loans) from the
proceeds of regularly scheduled principal payments and payments on account
of the sale of Primary Real Estate under Section 2.5(b)(iii) hereof, so
long as no Event of Default has occurred and is continuing and so long as
the amount of the Net Proceeds in the Escrow Account, plus the Net Proceeds
of any remaining Secondary Real Estate to be sold as of the date of
determination, is equal to or exceeds $20,000,000, Borrower may, at its
option, use such Net Proceeds either to reduce the principal balance of the
Term Loans or to repurchase Borrower's Convertible Subordinated Notes. If
the amount of Net Proceeds in the Escrow Account, plus the Net Proceeds of
all remaining Secondary Real Estate to be sold as of any date of
determination, does not exceed $20,000,000, such Net Proceeds shall be
released from the Escrow Account to Agent and applied to the Obligations in
the manner set forth in the first sentence of this subsection.
(v) Upon the occurrence and during the continuance of an Event of
Default, all payments (except for payments from the Net Proceeds of Primary
Real Estate and Secondary Real Estate which shall be applied to the
Obligations as set forth in Section 2.5(b)(vi) below) shall be applied,
<PAGE>
first, to pay any fees or expense reimbursements then due to Agent from
Borrower; second, to pay any fees (other than fees set forth in Section
2.12(b)) or expense reimbursements then due to the Lenders from Borrower;
third, to pay interest due in respect of all Tranche A Advances, including
Agent Loans and Agent Advances (other than Agent Loans made in lieu of
Tranche B Advances and Agent Advances made on account of interest and fees
in respect of the Tranche B Commitment, Tranche B Advances and Tranche B
Term Loans); fourth, to pay interest due in respect of all Tranche A Term
Loans; fifth, to cash collateralize issued and outstanding Letters of
Credit; sixth, to pay or prepay principal of Agent Loans and Agent Advances
(other than Agent Loans made in lieu of Tranche B Advances and Agent
Advances made on account of interest and fees in respect of the Tranche B
Commitment, Tranche B Advances and Tranche B Term Loans); seventh, ratably
to pay principal of the Tranche A Advances; eighth, ratably to pay
principal of the Tranche A Term Loans; ninth, to pay fees set forth in
Section 2.12(b); tenth, to pay interest due in respect of all Tranche B
Advances, including Agent Loans made in lieu of Tranche B Advances and
Agent Advances made on account of interest and fees in respect of the
Tranche B Commitment, Tranche B Advances and Tranche B Term Loans;
eleventh, to pay interest on Tranche B Term Loans; twelfth, to pay
principal on of the Agent Loans made in lieu of Tranche B Advances and
Agent Advances made on account of interest and fees in respect of the
Tranche B Commitment, Tranche B Advances and Tranche B Term Loans;
thirteenth, ratably to pay principal of Tranche B Advances; fourteenth,
ratably to pay principal of Tranche B Term Loans and fifteenth, ratably to
pay any other Obligations due to Agent or any Lender by Borrower.
(vi) Upon the occurrence and during the continuance of an Event of
Default, Net Proceeds of the Primary Real Estate and Secondary Real Estate
shall be applied as follows: first, to the principal and accrued and unpaid
interest and fees on the Tranche A Term Loans; second, to the principal and
accrued and unpaid interest and fees of the Tranche A Advances, including
Agent Loans and Agent Advances (other than Agent Loans made in lieu of
Tranche B Advances and Agent Advances made on account of interest and fees
in respect of the Tranche B Commitment, Tranche B Advances and Tranche B
Term Loans); third, to pay the principal and accrued and unpaid interest
and fees on the Tranche B Term Loans; fourth, to the principal and accrued
and unpaid interest and fees on the Tranche B Advances including Agent
Loans made in lieu of Tranche B Advances and Agent Advances made on account
of interest and fees in respect of the Tranche B Commitment, Tranche B
Advances and Tranche B Term Loans; and fifth, in the order set forth in
Section 2.5(b)(v) above.
(vii) Agent shall promptly distribute to each Lender, pursuant to the
applicable wire transfer instructions received from each Lender in writing,
such funds as it may be entitled to receive, subject to a Settlement delay
as provided for in Section 2.1(i).
(c) Promise to Pay. Borrower hereby promises to pay in United States
Dollars in full to Agent, for the benefit of the Lender Group, the Obligations,
including, without limitation, the principal amount of all Advances and Term
Loans, and all accrued and unpaid interest and fees thereon, all in accordance
with the terms of this Agreement.
2.6 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to the Lender Group pursuant to Sections 2.1, 2.2
and 2.4 is greater than either the Dollar or percentage limitations set forth in
Sections 2.1, 2.2 or 2.4 (an "Overadvance"), Borrower immediately shall pay to
Agent, in cash, the amount of such excess to be used by Agent to reduce the
Obligations pursuant to the terms of Section 2.5(b). Notwithstanding the
foregoing, no Overadvances shall be outstanding for greater than a sixty- day
(60) period at any one time.
2.7 Interest and Letter of Credit Fees: Rates, Payments, and Calculations.
(a) Interest Rate. Except as provided in clause (c) below, (i) all
<PAGE>
Eurodollar Rate Loans shall bear interest at a per annum rate equal to the
Adjusted Eurodollar Rate plus the applicable margin (as calculated below) (the
"Margin") in effect with respect to Eurodollar Rate Loans from time to time
outstanding, (ii) Reference Rate Loans shall bear interest at a per annum rate
equal to the Reference Rate plus the Margin in effect with respect to the type
(i.e. Tranche A Advance, Tranche A Term Loan or Tranche B Advance) of Reference
Rate Loans from time to time outstanding, (iii) Tranche B Term Loans shall bear
interest at the per annum rate of twelve and one-half percent (12.50%), and (iv)
all other Obligations shall bear interest at the per annum rate equal to the
Reference Rate plus the Margin in effect with respect to Tranche A Advances that
are Reference Rate Loans. As of the Closing Date and through and including the
date of termination of this Agreement, the Margin shall be the applicable per
annum rate set forth in the table below;
<TABLE>
<CAPTION>
Margin Margin
for for
Type of Obligation: Reference Rate Loans: Eurodollar Rate Loans:
- ------------------- --------------------- ----------------------
<S> <C> <C>
Tranche A Advances 0.50% 2.50%
Tranche A Term Loans 1.50% Not Available
Tranche B Advances 3.00% Not Available
</TABLE>
provided, however, that on the day following the date (the "Audited Financials
Delivery Date") the financial statements of Borrower are delivered to Foothill
pursuant to Section 6.2(e) for the fiscal year ending on or about January 31,
1999, and on the day following each Audited Financials Delivery Date thereafter,
the Margin with respect Eurodollar Rate Loans and Reference Rate Loans that are
Tranche A Advances shall be adjusted based upon the Interest Coverage Ratio and,
at any time that the Interest Coverage Ratio is equal to or greater than
2.0:1.0, also based upon Adjusted Net Income, each calculated for the most
recently ended twelve (12) month period, as reflected in such financial
statements. Such Margin, as adjusted, expressed as a per annum rate of interest,
shall be as follows:
<TABLE>
<CAPTION>
If the Interest Coverage and Adjusted Net Then the Margin for Then the Margin for Reference
Ratio for the twelve (12) Income is: Eurodollar Rate Loans Rate Loans that are Tranche A
month period most recently shall be: Advances shall be:
ended is:
<S> <C> <C> <C>
Equal to or greater than greater than zero (0) 2.00% 0.00%
2.0 to 1.0
Equal to or greater than NA 2.25% 0.25%
1.50 to 1.0 but less than
2.0 to 1.0
</TABLE>
In the event that Borrower fails to provide the financial statements referred to
above in accordance with terms of Section 6.2(d), and without prejudice to any
additional rights under Section 9.1 and Section 2.7(c), the Margin shall be
0.50% per annum with respect to Reference Rate Loans that are Tranche A Advances
and 2.50% per annum with respect to Eurodollar Rate Loans until two (2) Business
Days after the actual delivery of such statements.
(b) Letter of Credit Fee. Borrower shall pay Agent, for the ratable benefit
of the Tranche A Lenders based on the Tranche A Pro-Rata Share, a fee (in
addition to the charges, commissions, fees, and costs set forth in Section
2.2(d)) equal to one and one-half percent (1.5%) per annum times the aggregate
undrawn amount of all outstanding Letters of Credit.
<PAGE>
(c) Default Rate. Upon the occurrence and during the continuation of an
Event of Default, (i) all Obligations (except for undrawn Letters of Credit,
shall bear interest at a per annum rate equal to three percentage points above
the rate otherwise applicable to such Obligations, and (ii) the Letter of Credit
fee provided in Section 2.7(b) shall be increased to four and one-half percent
(4.5%) per annum times the amount of the aggregate undrawn amount of all
outstanding Letters of Credit.
(d) [Intentionally Omitted.]
(e) Payments. Interest and Letter of Credit fees payable hereunder shall be
due and payable, in arrears, on the first day of each month during the term
hereof. Borrower hereby authorizes Agent, at its option, without prior notice to
Borrower, to charge such interest and Letter of Credit fees, all Lender Group
Expenses (as and when incurred), the charges, commissions, fees, and costs
provided for in Section 2.2(d) (as and when accrued or incurred), the fees and
charges provided for in Section 2.12, 2.15 and 2.16 (as and when accrued or
incurred), and all installments or other payments due under the Term Loans, or
any Loan Document to the applicable Loan Account, which amounts thereafter shall
accrue interest at the rate then applicable to Tranche A Advances hereunder. Any
interest not paid when due shall be compounded and shall thereafter accrue
interest at the rate then applicable to Tranche A Advances hereunder.
(f) Computation. The Reference Rate as of the date of this Agreement is
eight and one-half percent (8.5%) per annum. In the event the Reference Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Reference Rate. All interest and fees chargeable under the
Loan Documents shall be computed on the basis of a 360 day year for the actual
number of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the
interest rate or rates payable under this Agreement, plus any other amounts paid
in connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Borrower and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto as
of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.8 Collection of Accounts
(a) Borrower shall, immediately after the Closing Date, instruct all
Account Debtors to remit all Collections directly to the Concentration Account
via electronic funds transfer (including, but not limited to ACH transfers) on
each Business Day. Borrower shall cause all cash received by Borrower at any
retail store location to be deposited on a daily basis into any Blocked Account
or, at Agent's option, any other bank account to be deposited to or sent by
electronic funds transfer (including, but not limited to, ACH transfers) on each
Business Day to the Concentration Account. In addition, Borrower agrees that all
other Collections and other amounts received directly by Borrower from any
Account Debtor or any other source immediately upon receipt shall be deposited
into any Blocked Account. With respect to such bank accounts that are Blocked
Accounts, Borrower, Agent and the Blocked Account Banks shall enter into Blocked
Account Agreements, which, among other things, with respect to all Blocked
Accounts (other than the Concentration Account) will provide for all cash
deposited into a Blocked Account to be sent by electronic funds transfer
(including, but not limited to, ACH transfers) each Business Day to the
Concentration Account. With respect to each account (other than Blocked
Accounts) into which Collections are deposited, Borrower shall irrevocably
authorize and direct in writing, in form and substance satisfactory to Agent,
<PAGE>
each such bank to send via wire transfer (including, but not limited to, ACH
transfers) each Business Day all funds deposited into each such account to the
Concentration Account and each such bank shall agree to do so. No Blocked
Account Agreement or other arrangement contemplated in this Section 2.8(a) shall
be modified by Borrower without the prior written consent of Agent. Upon the
terms and subject to the conditions set forth in the Blocked Account Agreement
applicable to the Concentration Account, all amounts received in the
Concentration Account shall be wired each Business Day into an account (the
"Agent's Account") maintained by Agent at a depositary selected by Agent.
(b) Borrower shall not, and shall not permit any of its Subsidiaries to,
open or maintain any deposit account or investment account with any bank or
other financial institution other than the Designated Account, the Blocked
Accounts and the other accounts listed on Schedule 2.8. All deposit accounts and
investment accounts of Borrower and its Subsidiaries are listed on Schedule 2.8.
2.9 Crediting Payments; Application of Collections. The receipt of any
Collections by Agent (whether from transfers to Agent by the Concentration
Account Bank pursuant to the Concentration Account Agreement or otherwise)
immediately shall be applied provisionally to reduce the Obligations outstanding
under Section 2.1, but shall not be considered a payment on account unless such
Collection item is a wire transfer of immediately available federal funds and is
made to the Agent's Account or unless and until such Collection item is honored
when presented for payment. From and after the Closing Date, Agent (for its sole
account) shall be entitled to charge Borrower for one (1) Business Days of
"clearance" or "float" at the rate set forth in Section 2.7(a)(ii) or Section
2.7(c)(i), as applicable, on all Collections that are received by Agent
(regardless of whether forwarded by the Concentration Account Bank to Agent,
whether provisionally applied to reduce the Obligations under Section 2.1, or
otherwise). This across-the-board one (1) Business Day clearance or float charge
on all Collections is acknowledged by the parties to constitute an integral
aspect of the pricing of the financing of Borrower, and shall apply irrespective
of the characterization of whether receipts are owned by Borrower or Agent, and
whether or not there are any outstanding Advances, the effect of such clearance
or float charge being the equivalent of charging one (1) Business Day of
interest on such Collections. Should any Collection item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment, and interest shall be recalculated accordingly. Anything to the
contrary contained herein notwithstanding, any Collection item shall be deemed
received by Agent only if it is received into the Agent's Account on a Business
Day on or before 2:00 p.m. (Atlanta, Georgia time). If any Collection item is
received into the Agent's Account on a non-Business Day or after 2:00 p.m.
(Atlanta, Georgia time) on a Business Day, it shall be deemed to have been
received by Agent as of the opening of business on the immediately following
Business Day.
2.10 Designated Account. Agent and the Lender Group are authorized to make
the Advances, the Letters of Credit, and the Term Loans under this Agreement
based upon telephonic or other instructions received from anyone purporting to
be an Authorized Person, or without instructions if pursuant to Section 2.7(e).
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrower and made by the Lender Group hereunder. Unless
otherwise agreed by Agent and Borrower, any Advance requested by Borrower and
made by the Lender Group hereunder shall be made to the Designated Account.
2.11 Maintenance of Loan Account; Statements of Obligations. Agent shall
maintain an account on its books in the name of Borrower (the "Loan Account") on
which Borrower will be charged with all Advances, and the Term Loans made by the
Lender Group to Borrower or for Borrower's account, including, accrued interest,
Lender Group Expenses, and any other payment Obligations of Borrower. In
accordance with Section 2.9, the Loan Account will be credited with all payments
received by Agent from Borrower or for Borrower's account, including all amounts
received in the Agent's Account from the Concentration Account Bank. Agent shall
render statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting the Lender Group Expenses owing, and such statements shall be
<PAGE>
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and the Lender Group unless, within thirty (30) days
after receipt thereof by Borrower, Borrower shall deliver to Agent written
objection thereto describing the error or errors contained in any such
statements.
2.12 Fees. Borrower shall pay to Agent (except where otherwise indicated)
for the ratable benefit of the Lender Group (except where otherwise indicated)
the following fees:
(a) Tranche A Fees.
(i) Tranche A Commitment Fee. A commitment fee of $468,750 payable to
Agent for the ratable benefit of the Tranche A Lenders, $125,000 of which
was earned and paid prior to the Closing Date, $110,000 of which was earned
prior to the Closing Date and is due and payable on the Closing Date and
$233,750 which is fully earned and due and payable on the Closing Date;
(ii) Unused Line Fee. On the first day of each month for the
immediately preceding month during the term of this Agreement, an unused
line fee in an amount equal to one-quarter of one percent (0.25%) per annum
times the Average Unused Portion of the Maximum Tranche A Revolving Amount
payable to Agent for the ratable benefit of the Tranche A Lenders.
(iii) Annual Facility Fee. On the Closing Date and on each anniversary
of the Closing Date, an annual facility fee in an amount equal to
one-eighth of one percent (0.125%) of the Maximum Tranche A Amount payable
to Agent for the ratable benefit of the Tranche A Lenders which fee in the
total amount of $156,250 (excluding any additional fee which shall be
earned as of the applicable renewal date, if any, of this Agreement as set
forth in Section 3.4) shall be fully earned on the Closing Date; and
(iv) Agent's Fee Letter. The fees set forth in that certain fee letter
of even date herewith between Borrower and Agent (the "Agent's Fee
Letter"), payable to Agent for its own account;
(b) Tranche B Fees.
(i) Tranche B Commitment Fee. A commitment fee of $250,000 payable to
Agent for the ratable benefit of the Tranche B Lenders, $75,000 of which
was earned and paid prior to the Closing Date, $50,000 of which was earned
prior to the Closing Date and is due and payable on the Closing Date and
$125,000 which is fully earned and due and payable on the Closing Date;
(ii) Unused Line Fee. On the first day of each month for the
immediately preceding month during the term of this Agreement, an unused
line fee in an amount equal to one-quarter of one percent (0.25%) per annum
times the Average Unused Portion of the Maximum Tranche B Revolving Amount
payable to Agent for the ratable benefit of the Tranche B Lenders.
(iii) Annual Facility Fee. On the Closing Date and on each anniversary
of the Closing Date, an annual facility fee in an amount equal to $150,000,
plus one percent (1.00%) of the Tranche B Term Loans outstanding on each
such anniversary of the Closing Date, payable to Agent for the ratable
benefit of the Tranche B Lenders, which fees shall be fully earned on the
Closing Date; and
(iv) Foothill Partners' Fee Letter. The fees set forth in that certain
fee letter of even date herewith between Borrower and Foothill Partners
(the "Foothill Partners' Fee Letter"), payable to Foothill Partners for its
own account; and
(c) Financial Examination, Documentation, and Appraisal Fees. For each of
the respective sole accounts of Agent and, to the extent a Lender accompanies
Agent under Section 4.6, such Lender: (i) fee of $650 per day per examiner, plus
out-of-pocket expenses for each financial analysis and examination (i.e.,
audits) of Borrower performed by personnel employed by Agent and any such
<PAGE>
Lender; (ii) an appraisal fee of $1,500 per day per appraiser, plus
out-of-pocket expenses for each appraisal of the Collateral performed by
personnel employed by Agent and any such Lender; (iii) the actual charges paid
or incurred by Agent if it elects to employ the services of one or more third
Persons to perform such financial analyses and examinations (i.e., audits) of
Borrower; and (iv) the actual charges paid or incurred by Agent if it elects to
employ the services of one or more third Persons to appraise the Collateral;
provided, however, that so long as no Default or Event of Default has occurred,
the fees owed by Borrower pursuant to Section 2.12(c)(i) and (iii) shall not
exceed $35,000 per annum, plus out-of-pocket expenses as otherwise provided for
in Section 2.12(c)(i).
(d) Miscellaneous. Except as specifically provided herein, the fees set
forth herein shall be fully earned when due, non-refundable when paid and, if
applicable, computed on the basis of a 360 day year for the actual number of
days elapsed.
2.13 Eurodollar Rate Loans. Any other provisions herein to the contrary
notwithstanding, the following provisions shall govern with respect to
Eurodollar Rate Loans as to the matters covered:
(a) Borrowing; Conversion; Continuation. Borrower may from time to time, on
or after the Closing Date, request in writing to Agent: (i) Tranche A Advances
to constitute Eurodollar Rate Loans; (ii) that Reference Rate Loans that are
Tranche A Advances be converted into Eurodollar Rate Loans; or (iii) that
existing Eurodollar Rate Loans continue for an additional Interest Period. Any
such request shall specify the aggregate amount of the requested Eurodollar Rate
Loans, the proposed funding date therefor (which shall be a Business Day, and
with respect to continued Eurodollar Rate Loans shall be the last day of the
Interest Period of the existing Eurodollar Rate Loans being continued), and the
proposed Interest Period, in each case subject to the limitations set forth
below. Eurodollar Rate Loans may only be made, continued, or extended if, as of
the proposed funding date therefor each of the following conditions is
satisfied:
(v) no Event of Default exists;
(w) no more than five (5) Eurodollar Rate Loans may be in effect at
any one time;
(x) the amount of each Eurodollar Rate Loan borrowed, converted, or
continued must be in an amount not less than $1,000,000 and integral
multiples of $500,000 in excess thereof;
(y) Agent shall have determined that the Interest Period or Adjusted
Eurodollar Rate is available to the Tranche A Lenders and can be readily
determined as of the date of the request for such Eurodollar Rate Loan by
Borrower; and
(z) Agent shall have received such request at least two (2) Business
Days prior to the proposed funding date therefor.
Any request by Borrower to borrow Eurodollar Rate Loans, to convert Reference
Rate Loans to Eurodollar Rate Loans, or to continue any existing Eurodollar Rate
Loans shall be irrevocable, except to the extent that Agent shall determine
under Sections 2.13(a), 2.14 or 2.15 that such Eurodollar Rate Loans cannot be
made or continued.
(b) Determination of Interest Period. By giving notice as set forth in
Section 2.13(a), Borrower shall have the option of selecting a one (1), two (2),
or three (3) month Interest Period for such Eurodollar Rate Loan. The
determination of Interest Periods shall be subject to the following provisions:
(i) in the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the next
preceding Interest Period expires;
<PAGE>
(ii) if any Interest Period would otherwise expire on a day which is
not a Business Day, the Interest Period shall be extended to expire on the
next succeeding Business Day; provided, however, that if the next
succeeding Business Day occurs in the following calendar month, then such
Interest Period shall end on the last Business Day of the calendar month at
the end of such Interest Period;
(iii) if any Interest Period begins on the last Business Day of a
month or on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period, then the Interest
Period shall end on the last Business Day of the calendar month at the end
of such Interest Period; and
(iv) Borrower may not select an Interest Period which expires later
than the Maturity Date.
(c) Automatic Conversion: Optional Conversion by Agent. Any Eurodollar Rate
Loan shall automatically convert to a Reference Rate Loan upon the last day of
the applicable Interest Period, unless Agent has received a request to continue
such Eurodollar Rate Loan at least two (2) Business Days prior to the end of
such Interest Period in accordance with the terms of Section 2.13 (a). Any
Eurodollar Rate Loan shall, at the Lender Group's option, upon notice to
Borrower, convert to a Reference Rate Loan in the event that (i) an Event of
Default shall have occurred and be continuing as of the last day of the Interest
Period for such Eurodollar Rate Loan, or (ii) this Agreement is terminated, and
Borrower shall pay to Agent for the benefit of the Tranche A Lenders any amounts
required by Section 2.16 as a result thereof.
2.14 Illegality. Any other provision herein to the contrary
notwithstanding, if the adoption of or any change in any Requirement of Law or
in the interpretation or application thereof shall make it unlawful for any
Tranche A Lender to make or maintain Eurodollar Rate Loans as contemplated by
this Agreement, (a) the obligation of the Tranche A Lenders hereunder to make
Eurodollar Rate Loans, continue Eurodollar Rate Loans as such, and convert
Reference Rate Loans to Eurodollar Rate Loans shall forthwith be suspended and
(b) the then outstanding Eurodollar Rate Loans, if any, shall be converted
automatically to Reference Rate Loans on the respective last days of the then
current Interest Periods with respect thereto or within such earlier period as
required by law; provided, however, that before making any such demand, each
Tranche A Lender agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions and so long as such efforts would
not be disadvantageous to it, in its reasonable discretion, in any legal,
economic, or regulatory manner) to designate a different lending office if the
making of such a designation would allow such Tranche A Lender or its lending
office to continue to perform its obligations to make Eurodollar Rate Loans. If
any such conversion of a Eurodollar Rate Loan occurs on a day which is not the
last day of the then current Interest Period with respect thereto, Borrower
shall pay to Agent for the benefit of the Tranche A Lenders such amounts, if
any, as may be required pursuant to Section 2.16. If circumstances subsequently
change so that the Tranche A Lenders shall determine that they are no longer so
affected, the Tranche A Lenders promptly will notify Agent and Agent will
promptly notify Borrower, and upon receipt of such notice, the obligations of
the Tranche A Lenders to make or continue Eurodollar Rate Loans or to convert
Reference Rate Loans into Eurodollar Rate Loans shall be reinstated.
2.15 Requirements of Law.
(a) If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof or compliance by the Tranche A Lenders
with any request or directive (whether or not having the force of law) from any
central bank or other Governmental authority made subsequent to the date hereof:
(i) shall subject any Tranche A Lender to any tax, levy, charge, fee,
reduction, or withholding of any kind whatsoever with respect to this
Agreement or any Advance, or change the basis of taxation of payments to
any Tranche A Lender in respect thereof (except for the establishment of a
tax based on the net income of such Tranche A Lender or changes in the rate
of tax on the net income of such Tranche A Lender);
<PAGE>
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan, or similar requirement against assets held by,
deposits or other liabilities in or for the account of, loans or other
extensions of credit by, or any other acquisition of funds by, any office
of any Tranche A Lender; or (iii) shall impose on any Tranche A Lender any
other condition with respect to this Agreement or any Advance or the Term
Loan;
and the result of any of the foregoing is to increase the cost to any Tranche A
Lender of making, converting into, continuing, or maintaining Eurodollar Rate
Loans or to reduce any amount receivable hereunder in respect of Eurodollar Rate
Loans, or to forego any other sum payable thereunder or make any payment on
account thereof, then, in any such case, Borrower shall promptly pay such
Tranche A Lender, upon its demand, any additional amounts necessary to
compensate such Tranche A Lender for such increased cost or reduced amount
receivable; provided, however, that before making any such demand, each Tranche
A Lender agrees to use reasonable efforts (consistent with its internal policy
and legal and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, in its reasonable discretion, in any legal, economic, or
regulatory manner) to designate a different Eurodollar lending office if the
making of such designation would allow such Tranche A Lender or its Eurodollar
lending office to continue to perform its obligations to make Eurodollar Rate
Loans or to continue to fund or maintain Eurodollar Rate Loans and avoid the
need for, or materially reduce the amount of, such increased cost. If a Tranche
A Lender becomes entitled to claim any additional amounts pursuant to this
Section 2.15, such Tranche A Lender shall notify Agent and Borrower of the event
by reason of which it has become so entitled. A certificate as to any additional
amounts payable pursuant to this Section 2.15 submitted by a Tranche A Lender to
Agent and Borrower shall be conclusive in the absence of manifest error. If
Borrower so notifies any such Tranche A Lender within five (5) Business Days
after such Tranche A Lender notifies Borrower of any increased cost pursuant to
the foregoing provisions of this Section 2.15 and reimburses such for any cost
in accordance with Section 2.16., Borrower may convert all affected Eurodollar
Rate Loans then outstanding into Reference Rate Loans in accordance with Section
2.13.
(b) If any Tranche A Lender shall have determined that the adoption of or
any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Tranche A Lender or
any Person controlling such Tranche A Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
Governmental authority made subsequent to the date hereof does or shall have the
effect of increasing the amount of capital required to be maintained or reducing
the rate of return on such Tranche A Lender's or such Person's capital as a
consequence of its obligations hereunder to a level below that which such
Tranche A Lender or such Person could have achieved but for such change or
compliance (taking into consideration such Tranche A Lender's or such Person's
policies with respect to capital adequacy) by an amount deemed by such Tranche A
Lender to be material, then from time to time, after submission by such Tranche
A Lender to Agent and Borrower of a prompt written request therefor, Borrower
shall pay to such Tranche A Lender such additional amount or amounts as will
compensate such Tranche A Lender or such Person for such reduction. This
covenant shall survive the termination of this Agreement and the payment of the
Obligations.
2.16 Indemnity. Borrower agrees to indemnify each Tranche A Lender and to
hold each Tranche A Lender harmless from any loss or expense which such Tranche
A Lender may sustain or incur as a consequence of (a) a default by Borrower in
payment when due of the principal amount of or interest on any Eurodollar Rate
Loan, (b) a default by Borrower in making a borrowing of, conversion into, or
continuation of Eurodollar Rate Loans after Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement, (c) a
default by Borrower in making any prepayment after Borrower has given a notice
thereof in accordance with the provisions of this Agreement, or (d) the making
of a prepayment of Eurodollar Rate Loans on a day which is not the last day of
an Interest Period with respect thereto (whether due to the termination of this
<PAGE>
Agreement upon an Event of Default or otherwise), including, in each case, any
such loss or expenses arising from the re-employment of funds obtained by it or
from fees payable to terminate the deposits from which such funds were obtained.
Calculation of all amounts payable to the Tranche A Lenders under this Section
2.16 shall be made as though the Tranche A Lenders had actually funded the
relevant Eurodollar Rate Loan through the purchase of a deposit bearing interest
at the Adjusted Eurodollar Rate in an amount equal to the amount of such
Eurodollar Rate Loan and having a maturity comparable to the relevant Interest
Period; provided, however, that any Tranche A Lender may fund each of the
Eurodollar Rate Loans in a manner it sees fit, and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this Section
2.16. This covenant shall survive the termination of this Agreement and the
payment of the Obligations.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Advance, Letter of Credit, and the
Term Loans. The obligation of the Lender Group to make the initial Advance, to
issue the initial Letter of Credit, or to make the Term Loans is subject to the
fulfillment, to the satisfaction of Agent and its counsel, of each of the
following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before July 31, 1998;
(b) Agent shall have received searches reflecting the filing of its
financing statements and fixture filings;
(c) Agent shall have received each of the following documents, duly
executed, and each such document shall be in full force and effect:
a. the Blocked Account Agreements;
b. the Credit Card Agreements;
c. the Oversight Agent Agreement;
d. the Disbursement Letter;
e. the Pay-Off Letter, together with UCC termination statements
and other documentation evidencing the termination by Existing Lender
of its Liens in and to the properties and assets of Borrower;
f. the Mortgages;
g. the Stock Pledge Agreement;
h. the Subsidiary Guaranty Agreement;
i. the Subsidiary Security Agreement;
j. the Trademark Security Agreement;
k. the Assignment of Real Estate Trust Interests;
l. the Agent's Fee Letter; and
m. the Foothill Partners' Fee Letter;
(d) Agent shall have received a certificate from the Secretary of
Borrower attesting to the resolutions of Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and
the other Loan Documents to which Borrower is a party and authorizing
specific officers of Borrower to execute the same;
(e) Agent shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of Borrower;
<PAGE>
(f) Agent shall have received a certificate of status with respect to
Borrower, dated within ten (10) days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization
of Borrower, which certificate shall indicate that Borrower is in good
standing in such jurisdiction;
(g) Agent shall have received certificates of status with respect to
Borrower, each dated within fifteen (15) days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions
in which its failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that Borrower is
in good standing in such jurisdictions;
(h) Agent shall have received a certificate of insurance, together
with the endorsements thereto, as are required by Section 6.10, the form
and substance of which shall be satisfactory to Agent and its counsel;
(i) Agent shall have received duly executed certificates of title with
respect to that portion of the Collateral that is subject to certificates
of title;
(j) Agent shall have received Collateral Access Agreements (x) from
the landlords of Borrower's premises at (A) 4543 W. Hillsborough Avenue,
Tampa, Florida, (B) 4701 W. Hillsborough Avenue, Tampa, Florida, (C) 6401-A
Harney Road, Tampa, Florida, and (D) the Distribution Center, and (E) from
Butler Shoe with respect to the Butler Shoe Warehouse. In addition,
Borrower shall use its best efforts to obtain Collateral Access Agreements
from landlords of all other leased real property of Borrower and its
Subsidiaries and Borrower acknowledges and agrees that the failure to
obtain any such agreements will result in the creation of a reserve to the
extent set forth in the definition of "Availability Reserves."
(k) Agent shall have received a mortgagee waiver agreement with
respect to all real property securing loans to financial or other
institutions as set forth on Schedule 3.1 (k) on which Inventory is
located, in form and substance satisfactory to Agent;
(l) Agent shall have received an opinion of Borrower's counsel and
local counsel (covering the laws of each jurisdiction in which Primary Real
Estate is located), in form and substance satisfactory to Agent in its sole
discretion;
(m) Agent shall have received (i) appraisals of the Real Property
Collateral satisfactory to Agent, and (ii) mortgagee title insurance
policies (or marked commitments to issue the same) for the Real Property
Collateral issued by Fidelity National Title Insurance Company (or its
affiliated companies) (each a "Mortgage Policy" and, collectively, the
"Mortgage Policies") in amounts satisfactory to Agent assuring Agent that
the Mortgages on such Real Property Collateral are valid and enforceable
first priority mortgage Liens on such Real Property Collateral free and
clear of all defects and encumbrances except Permitted Liens, and the
Mortgage Policies shall otherwise be in form and substance reasonably
satisfactory to Agent;
(n) Agent shall have received existing Phase-I environmental reports
and existing real estate surveys completed with respect to the Real
Property Collateral; the environmental consultants and surveyors retained
for such reports or surveys, the scope of the reports or surveys, and the
results thereof shall be acceptable to Agent in its sole discretion;
(o) Agent shall have received satisfactory evidence that all tax
returns required to be filed by Borrower have been timely filed and all
taxes upon Borrower or its properties, assets, income, and franchises
(including real property taxes and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest;
<PAGE>
(p) Agent shall have received evidence satisfactory to it that, after
making the initial Advance, the issuance of any Letters of Credit on the
Closing Date and the funding of the Term Loans hereunder, Borrower shall
have unrestricted cash on hand and Availability, less the increase, if any,
in Borrower's accounts payable over sixty (60) days past due since Agents
prospect audit, in an amount equal to or greater than $7,500,000;
(q) Agent shall have received satisfactory reference checks on key
management;
(r) Agent shall have completed a satisfactory field audit; and
(s) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to
Agent and its counsel.
3.2 Conditions Precedent to all Advances, all Letters of Credit and the
Term Loans. The following shall be conditions precedent to all Advances, all
Letters of Credit and the Term Loans hereunder:
(a) the representations and warranties contained in this Agreement and
the other Loan Documents shall be true and correct in all respects on and
as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties
relate solely to an earlier date);
(b) with respect to any Tranche B Advance, there shall be no Tranche A
Availability as of the date of the proposed Tranche B Advance;
(c) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result
from the making thereof; and
(d) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority
against Borrower, the Lender Group or any of their Affiliates.
3.3 Condition Subsequent. As a condition subsequent to initial closing
hereunder, Borrower shall perform or cause to be performed the following (the
failure by Borrower to so perform or cause to be performed constituting an Event
of Default):
(a) within thirty (30) days of the Closing Date, deliver to Agent the
certified copies of the policies of insurance, together with the
endorsements thereto, as are required by Section 6.10, the form and
substance of which shall be satisfactory to Agent and its counsel;
(b) within thirty (30) days of the Closing Date, deliver to Agent a
letter with respect to each Real Estate Trust in form and substance
satisfactory to Agent, acknowledged by an authorized signatory of the
applicable Real Estate Trust confirming that the security interest of Agent
in the beneficial interests in such Real Estate Trust has been recorded in
the trust books of such Real Estate Trust;
(c) within thirty (30) days of the Closing Date, deliver to Agent
evidence satisfactory to Agent that Borrower has requested in writing that
the United States Patent and Trademark Office accurately reflect on the
public record that the trademark "Guide Series" (U.S. Registration Number
2,113,011) has been assigned by Borrower to Guide Series, Inc., a Florida
corporation;
<PAGE>
(d) within thirty (30) days of the Closing Date, deliver to Agent such
UCC-3 amendments to the US Bancorp Leasing & Financial and MetLife Capital
Corporation UCC-1 financing statements listed on Schedule P-1 in form and
substance satisfactory to Agent and as Agent requires, to clarify that the
liens granted to such creditors are limited to property specifically leased
or financed by such creditors;
(e) within thirty (30) days of the Closing Date, deliver to Agent
evidence satisfactory to Agent that (i) the tax liens filed in the records
of Baton Rouge, Louisiana as tax lien numbers 795-10323, 336-10459 and
658-10757 and (ii) the judgment liens filed in the records of Rankin
County, Mississippi at book 6, page 119, and book 10, page 528 have been
satisfied or removed;
(f) within thirty (30) days of the Closing Date, deliver to Agent a
Collateral Access Agreement for Borrower's premises at 4701 W. Hillsborough
Avenue, Tampa, Florida; and
(g) on or before July 31, 1998, deliver to Agent a mortgagee waiver
agreement in form and substance satisfactory to Agent with respect to each
of the following Real Estate Trusts of Borrower: JSI 5 Delaware Business
Trust; JSI 12 Delaware Business Trust; JSI 13 Delaware Business Trust; JSI
19 Delaware Business Trust; JSI 28 Delaware Business Trust; JSI 32 Delaware
Business Trust; JSI 39 Delaware Business Trust; JSI 63 Delaware Business
Trust; JSI 71 Delaware Business Trust; and JSI 80 Delaware Business Trust.
3.4 Term; Renewal. This Agreement shall become effective upon the execution
and delivery hereof by Borrower and the Lender Group and shall continue in full
force and effect for a term ending on the date (the "Maturity Date") that is
five (5) years from the Closing Date and may be renewed for successive one (1)
year periods thereafter, unless sooner terminated pursuant to the terms hereof.
Notwithstanding the foregoing, all principal of, and accrued and unpaid interest
and fees on, the Term Loans shall be due and payable on the Term Loan Maturity
Date, unless sooner terminated pursuant to the terms hereof. Subject to the
rights of Agent or any Lender to terminate this Agreement as provided in Article
9 hereof, if the Borrower desires to renew this Agreement for a successive one
(1) year period, it must provide Agent and the Lenders with written notice
thereof on or before the date one (1) year prior to the then existing scheduled
Maturity Date. On or before the date sixty (60) days following the date Agent
and the Lenders receive such notice, the Lenders and Agent shall give written
notice to Borrower consenting to or rejecting, in their sole discretion, such
requested renewal.
3.5 Effect of Termination. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrower with
respect to any outstanding Letters of Credit) immediately shall become due and
payable without notice or demand. No termination of this Agreement, however,
shall relieve or discharge Borrower of Borrower's duties, Obligations, or
covenants hereunder, and the Lender Group's continuing security interests in the
Collateral shall remain in effect until all Obligations have been fully and
finally discharged and the Lender Group's obligation to provide additional
credit hereunder is terminated. If Borrower has sent a notice of termination
pursuant to the provisions of Section 3.4, but fails to pay the Obligations in
full on the date set forth in said notice, then Agent (on behalf of the Lender
Group) may, but shall not be required to, renew this Agreement for an additional
term of one (1) year.
3.6 Early Termination by Borrower. The provisions of Section 3.4 that allow
termination of this Agreement by Borrower only on the Maturity Date and certain
anniversaries thereof notwithstanding, Borrower has the option, at any time upon
ninety (90) days prior written notice to Agent, to terminate this Agreement by
paying to Agent (for the ratable benefit of the Lender Group), in cash, the
Obligations (including an amount equal to 102% of the undrawn amount of the
Letters of Credit and any amount which may be due pursuant to Section
2.12(a)(iii) of this Agreement), in full, together with a premium (the "Early
<PAGE>
Termination Premium") equal to: (a) if the Obligations are paid in full and the
Agreement is terminated prior to the date one (1) year following the Closing
Date, $3,750,000; (b) if the Obligations are paid in full and the Agreement is
terminated on or after the date one (1) year following the Closing Date and
prior to the date three (3) years following the Closing Date, $2,500,000; and
(c) if the Obligations are paid in full and the Agreement is terminated on or
after the date three (3) years following the Closing Date and prior to the later
of the date five (5) years following the Closing Date or, if this Agreement is
renewed pursuant to Section 3.4, the date on the last one (1) year anniversary
of the Maturity Date applicable to any renewal period of the Agreement pursuant
to Section 3.4, $1,250,000; provided, however, that no Default or Event of
Default then exists and is continuing and if all or substantially all of
Borrower's and its Subsidiaries' assets, or all or substantially all of
Borrower's stock, are sold resulting in the early repayment of the Obligations
hereunder and termination of this Agreement, the "Early Termination Premium"
shall be $1,250,000, if the Obligations are repaid and this Agreement is
terminated on or before the first anniversary of the Closing Date and $625,000
if the Obligations are repaid and this Agreement is terminated after the first
anniversary of the Closing Date and prior to the later of the Maturity Date or,
if this Agreement is renewed pursuant to Section 3.4, the date on the last one
(1) year anniversary of the Maturity Date applicable to any renewal period of
the Agreement pursuant to Section 3.4. If a Default or Event of Default exists
and is continuing at the time of a sale of all or substantially all of
Borrower's and its Subsidiaries' assets or all or substantially all of
Borrower's stock (specifically including a sale of assets or stock pursuant to
Section 363 of the Bankruptcy Code) which results in the early repayment of the
Obligations hereunder and termination of this Agreement, then the Early
Termination Premium shall be calculated as provided by subclauses (a), (b) and
(c) of this Section 3.6. Notwithstanding anything herein to the contrary,
Borrower may terminate the Tranche B Lenders' Commitments to make Tranche B
Advances and prepay the principal of and accrued and unpaid interest on the
Tranche B Advances without penalty or premium (except as provided in Section
2.16) so long as the Tranche B Term Loans and the Tranche A Term Loans have been
repaid or concurrently will be repaid in full.
3.7 Termination Upon Event of Default. If the Lender Group terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of the Lender
Group's lost profits as a result thereof, Borrower shall pay to Agent (for the
ratable benefit of the Lender Group) upon the effective date of such
termination, a premium in an amount equal to the Early Termination Premium. The
Early Termination Premium shall be presumed to be the amount of damages
sustained by the Lender Group as the result of the early termination and
Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7 shall
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants to Agent for the
benefit of the Lender Group a continuing security interest in all of its
currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all Obligations and in
order to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents. The security interests of Agent for the benefit
of the Lender Group in Borrower's Personal Property Collateral shall attach to
all of Borrower's Personal Property Collateral without further act on the part
of the Lender Group or Borrower. Anything contained in this Agreement or any
other Loan Document to the contrary notwithstanding, except as permitted by
Section 7.4, Borrower has no authority, express or implied, to dispose of any
item or portion of the Personal Property Collateral, the Real Property
Collateral, or the Secondary Real Estate.
<PAGE>
4.2 Negotiable Collateral. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrower,
immediately upon the request of Agent, shall endorse and deliver physical
possession of such Negotiable Collateral to Agent.
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral.
At any time, Agent or Agent's designee may (a) notify customers or Account
Debtors of Borrower that the Accounts, General Intangibles, or Negotiable
Collateral have been assigned to Agent for the benefit of the Lender Group or
that Agent for the benefit of the Lender Group has a security interest therein,
and (b) upon a Default or Event of Default or if the Lender Group deems itself
insecure, collect the Accounts, General Intangibles, and Negotiable Collateral
directly and charge the collection costs and expenses to the Loan Account.
Borrower agrees that it will hold in trust for the Lender Group, as the Lender
Group's trustee, any Collections that it receives and immediately will deliver
said Collections to Agent in their original form as received by Borrower.
4.4 Delivery of Additional Documentation Required. At any time upon the
request of Agent, Borrower shall execute and deliver to Agent all financing
statements, continuation financing statements, fixture filings, security
agreements, pledges, assignments, endorsements of certificates of title,
applications for title, affidavits, reports, notices, schedules of accounts,
letters of authority, and all other documents that Agent reasonably may request,
in form satisfactory to Agent, to perfect and continue perfected the Liens of
the Lender Group in the Collateral pledged by Borrower, and in order to fully
consummate all of the transactions contemplated hereby and under the other the
Loan Documents.
4.5 Power of Attorney. Borrower hereby irrevocably makes, constitutes, and
appoints Agent (and any of Agent's officers, employees, or agents designated by
Agent) as Borrower's true and lawful attorney, with power to (a) if Borrower
refuses to, or fails timely to execute and deliver any of the documents
described in Section 4.4, sign the name of Borrower on any of the documents
described in Section 4.4, (b) at any time that an Event of Default has occurred
and is continuing or the Lender Group deems itself insecure, sign Borrower's
name on any invoice or bill of lading relating to any Account, drafts against
Account Debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to Account Debtors, (c) send requests for verification of
Accounts, (d) endorse Borrower's name on any Collection item that may come into
the Lender Group's possession, (e) at any time that (x) an Event of Default has
occurred and is continuing or the Lender Group deems itself insecure and (y) the
Lender Group has asserted or implemented any rights or remedies under Article 9
hereof, notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Agent, to receive and open all mail
addressed to Borrower, and to retain all mail relating to the Collateral pledged
by Borrower and immediately return all other mail to Borrower, (f) at any time
that an Event of Default has occurred and is continuing or the Lender Group
deems itself insecure, make, settle, and adjust all claims under Borrower's
policies of insurance and make all determinations and decisions with respect to
such policies of insurance, and (g) at any time that an Event of Default has
occurred and is continuing or Agent deems itself insecure, settle and adjust
disputes and claims respecting the Accounts directly with Account Debtors, for
amounts and upon terms that Agent determines to be reasonable, and Agent may
cause to be executed and delivered any documents and releases that Agent
determines to be necessary. The appointment of Agent as Borrower's attorney, and
each and every one of Agent's rights and powers, being coupled with an interest,
is irrevocable until all of the Obligations have been fully and finally repaid
and performed and the Lender Group's obligation to extend credit hereunder is
terminated.
4.6 Right to Inspect. Agent (through any of its officers, employees, or
agents), and together with any Lender that so elects, shall have the right, from
time to time hereafter (and, so long as no Default or Event of Default has
occurred and is continuing, during regular business hours) to inspect Borrower's
Books and to check, test, and appraise the Collateral in order to verify
Borrower's financial condition or the amount, quality, value, condition of, or
<PAGE>
any other matter relating to, the Collateral. Unless and until a Default or
Event of Default occurs, Agent intends to conduct appraisals on the Personal
Property Collateral no more frequently than semi-annually; provided, however,
that, at all times, Agent shall be entitled to conduct appraisals of the
Collateral in its sole discretion. Agent, from time to time (in all events, at
Borrower's expense), may undertake "mystery shopping" (so-called) visits to all
or any of Borrower's business premises. Agent shall provide Borrower with a copy
of any non-company confidential results of such mystery shopping upon completion
thereof.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement, Borrower
makes the following representations and warranties which shall be true, correct,
and complete in all respects as of the date hereof, and shall be true, correct,
and complete in all respects as of the Closing Date, and at and as of the date
of the making of each Advance and the issuance of each Letter of Credit
thereafter, as though made on and as of the date of such Advance or issuance of
such Letter of Credit (except to the extent that such representations and
warranties relate solely to an earlier date) and such representations and
warranties shall survive the execution and delivery of this Agreement:
5.1 No Encumbrances. Borrower and its Subsidiaries have good and
indefeasible title to the Collateral, free and clear of Liens except for
Permitted Liens.
5.2 Eligible Accounts. The Eligible Accounts are bona fide existing
obligations created by the sale and delivery of Inventory or the rendition of
services to Account Debtors in the ordinary course of Borrower's business,
unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. The property giving rise to
such Eligible Accounts has been delivered to the Account Debtor, or to the
Account Debtor's agent for immediate shipment to and unconditional acceptance by
the Account Debtor. Eligible Accounts do not consist of any Accounts with
respect to which goods are placed on consignment, guaranteed sale, sale or
return, sale on approval, bill and hold, or other terms by reason of which the
payment by the Account Debtor may be conditional. Eligible Accounts do not
consist of Accounts with respect to which the goods giving rise to such Accounts
have not been shipped and billed to the Account Debtor, the services giving rise
to such Accounts have not been performed and accepted by the Account Debtor, or
Accounts that otherwise do not represent final sales. Eligible Accounts do not
consist of Accounts that represent progress payments or other advance billings
that are due prior to the completion of performance by Borrower of the subject
contract for goods or services. Borrower has not received notice of bankruptcy,
insolvency, or material impairment of the financial condition of any Account
Debtor regarding any Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory is of good and merchantable
quality, free from defects.
5.4 Equipment. All of the Equipment is used or held for use in Borrower's
business and is fit for such purposes.
5.5 Location of Inventory and Equipment Except with respect to Inventory
stored at the Butler Shoe Warehouse and at the Genco Warehouse, the Inventory
and Equipment are not stored with a bailee, warehouseman, or similar party
(without Agent's prior written consent) and are located only at the locations
identified on Schedule 6.12 or otherwise permitted by Section 6.12.
5.6 Inventory Records. Borrower keeps correct and accurate records
itemizing and describing the kind, type, quality, and quantity of the Inventory,
and Borrower's Cost therefor.
5.7 Location of Chief Executive Office: FEIN. The chief executive office of
Borrower is located at the address indicated in the preamble to this Agreement
and Borrower's FEIN is 52-1643157.
5.8 Due Organization and Qualification; Subsidiaries.
<PAGE>
(a) Each of Borrower and each Subsidiary of Borrower is duly organized
and existing and in good standing under the laws of the jurisdiction of its
incorporation and qualified and licensed to do business in, and in good
standing in, any state where the failure to be so licensed or qualified
reasonably could be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8, is a complete and accurate list of
Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction
of their incorporation; (ii) the number of shares of each class of common
and preferred stock authorized for each of such Subsidiaries; and (iii) the
number and the percentage of the outstanding shares of each such class
owned directly or indirectly by Borrower. All of the outstanding capital
stock of each such Subsidiary has been validly issued and is fully paid and
non-assessable.
(c) Except as set forth on Schedule 5.8, no capital stock (or any
securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible
into or exercisable for capital stock) of any direct or indirect Subsidiary
of Borrower is subject to the issuance of any security, instrument,
warrant, option, purchase right, conversion or exchange right, call,
commitment or claim of any right, title, or interest therein or thereto.
5.9 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Borrower and each
Subsidiary of Borrower, as applicable, of this Agreement and the Loan
Documents to which Borrower or any such Subsidiary is a party have been
duly authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Borrower and each
Subsidiary of Borrower, as applicable, of this Agreement and the Loan
Documents to which Borrower or any such Subsidiary is a party do not and
will not (i) violate any provision of federal, state, or local law or
regulation (including Regulations T, U, and X of the Federal Reserve Board)
applicable to Borrower or any such Subsidiary, as applicable, the Governing
Documents of Borrower or any such Subsidiary, as applicable, or any order,
judgment, or decree of any court or other Governmental Authority binding on
Borrower or any such Subsidiary, as applicable, (ii) result in a breach of,
or constitute (with due notice or lapse of time or both) a default under
any material contractual obligation or material lease of Borrower or any
such Subsidiary, as applicable, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or
assets of Borrower or any such Subsidiary of Borrower other than Permitted
Liens, or (iv) require any approval of stockholders or any approval or
consent of any Person under any material contractual obligation of Borrower
or any such Subsidiary of Borrower.
(c) Other than the filing of appropriate financing statements, fixture
filings, and mortgages, the execution, delivery, and performance by
Borrower and each Subsidiary of Borrower of this Agreement and the Loan
Documents to which Borrower or any Subsidiary, as applicable, is a party do
not and will not require any registration with, consent, or approval of, or
notice to, or other action with or by, any federal, state, foreign, or
other Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which Borrower and each
Subsidiary of Borrower is a party, and all other documents contemplated
hereby and thereby, when executed and delivered by Borrower or any such
Subsidiary, as applicable, will be the legally valid and binding
obligations of Borrower or such Subsidiary, as applicable, enforceable
against Borrower or such Subsidiary, as applicable, in accordance with
their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or
similar laws relating to or limiting creditors' rights generally.
<PAGE>
(e) The Liens granted by Borrower and each Subsidiary of Borrower to
Agent (for the benefit of the Lender Group) in and to Borrower's and its
Subsidiaries' properties and assets pursuant to this Agreement and the
other Loan Documents are validly created, perfected, and first priority
Liens, subject only to Permitted Liens.
5.10 Litigation. There are no actions or proceedings pending by or against
Borrower or any Subsidiary of Borrower before any court or administrative agency
and Borrower does not have knowledge or belief of any pending, threatened, or
imminent litigation, governmental investigations, or claims, complaints,
actions, or prosecutions involving Borrower, any Subsidiary of Borrower, or any
guarantor of the Obligations, except for: (a) ongoing collection matters in
which Borrower is the plaintiff; (b) matters disclosed on Schedule 5.10; and (c)
matters arising after the date hereof that, if decided adversely to Borrower or
any Subsidiary of Borrower, would not result in a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating to
Borrower, any Subsidiary of Borrower or any guarantor of the Obligations that
have been delivered by Borrower to the Lender Group have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
fairly present Borrower's (or such Subsidiary's or guarantor's, as applicable)
financial condition as of the date thereof and Borrower's (or such Subsidiary's
or guarantor's, as applicable) results of operations for the period then ended.
There has not been a Material Adverse Change with respect to Borrower (or such
Subsidiary or guarantor, as applicable) since the date of the latest financial
statements submitted to the Lender Group on or before the Closing Date.
5.12 Solvency. Borrower and each Subsidiary of Borrower is Solvent. No
transfer of property is being made by Borrower or any Subsidiary of Borrower and
no obligation is being incurred by Borrower or any Subsidiary of Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrower or any Subsidiary of Borrower.
5.13 Employee Benefits. None of Borrower, any Subsidiary of Borrower, or
any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on Schedule 5.13. Borrower, each Subsidiary of Borrower
and each ERISA Affiliate have satisfied the minimum funding standards of ERISA
and the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. None of Borrower or any Subsidiary of Borrower, any
ERISA Affiliate, or any fiduciary of any Plan is subject to any direct or
indirect liability with respect to any Plan under any applicable law, treaty,
rule, regulation, or agreement except for liability for contributions incurred
in the normal operation and administration of the Plan or Plans. None of
Borrower or any Subsidiary of Borrower or any ERISA Affiliate is required to
provide security to any Plan under Section 401(a)(29) of the IRC.
5.14 Environmental Condition. To the best of Borrower's and each
Subsidiary's knowledge, after due and reasonable inquiry, none of Borrower's or
any Subsidiary of Borrower's properties or assets has ever been used by Borrower
or any Subsidiary of Borrower or, to the best of Borrower's knowledge, by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any Hazardous Materials, except in compliance with
all applicable laws. None of Borrower's or any Subsidiary of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a Hazardous Materials
disposal site, or a candidate for closure pursuant to any environmental
protection statute. No Lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by Borrower or any Subsidiary of Borrower. Borrower has not received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning any action or
omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
<PAGE>
5.15 Intellectual Property. Neither Borrower nor any Subsidiary of Borrower
owns, licenses or has any rights to or interest in any patents, trade names,
trademarks, servicemarks, registered copyrights, or any application for the
registration of any of the foregoing, except as set forth on Schedule 5.15.
5.16 Year 2000 Compliance. Borrower and its Subsidiaries are in the process
of implementing a comprehensive program to address the "year 2000 problem" (that
is, the risk that computer applications may not be able to properly perform
date-sensitive functions after December 31, 1999) and shall resolve on or before
March 31, 1999 any material "year 2000 problem." Borrower has also made
reasonable inquiry of its major suppliers and vendors that, if unable to sell
Inventory or provide services to Borrower, as the case may be, would result in a
Material Adverse Change, with respect to the "year 2000 problem." On the basis
of the inquiry, Borrower has no reason to believe that each such supplier and
vendor of Borrower will not resolve any material "year 2000 problem" on a timely
basis.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, Borrower shall
do all of the following:
6.1 Accounting System. Maintain a standard and modern system of accounting
that enables Borrower and each Subsidiary of Borrower to produce financial
statements in accordance with GAAP, and maintain records pertaining to the
Collateral that contain information as from time to time may be requested by
Agent. Borrower also shall keep a modern inventory reporting system that shows
all additions, sales, claims, returns, and allowances with respect to the
Inventory.
6.2 Collateral and Financial Reporting. Provide Agent, or such other party
as Agent shall designate (including, without limitation, the Oversight Agent)
with the following documents at the following times in form satisfactory to
Agent:
(a) Borrowing Base Certificate. Borrower shall provide to Agent,
weekly, a Borrowing Base Certificate (in the form of Exhibit 6.2 hereto, as
such form may be revised from time to time by Agent). Such Certificate may
be sent to Agent by facsimile transmission, provided that, upon request by
Agent, the original thereof is forwarded to Agent on the date of such
transmission. No adjustments to the Borrowing Base Certificate may be made
without supporting documentation and such other documentation as may be
requested by Agent from time to time.
(b) Weekly Reports. Weekly, not later than Wednesday for the
immediately preceding fiscal week:
(i) sales audit report (Borrower's format in use on the Closing
Date is acceptable);
(ii) collateral activity summary (the so-called "roll forward
inventory report"); and
(iii) "flash sales" by geographical market (Borrower's format in
use on the Closing Date is acceptable).
(c) Monthly Reports.
(i) Monthly, Borrower shall provide to Agent original
counterparts of (each in such form as Agent from time to time may
specify):
(A) Within twenty (20) days of the end of each month for the
immediately preceding:
(1) RSL total company inventory report by department;
<PAGE>
(2) RSL total company inventory report for Borrower;
(3) ISL report;
(4) purchase and accounts payable aging report; and
(5) rent, tax and insurance compliance certificate.
(B) Within thirty (30) days of the end of each month for the
immediately preceding month:
(1) reconciliation of gross margin and cost of sales
from RSL to general ledger;
(2) RSL inventory report reconciliation to Availability
and to ISL;
(3) financial statements including balance sheet,
income statement (consolidated and by store), cash flow
report and comparison of same store sales;
(4) gift certificates/merchandise credits report at
month-end; and
(5) officer's compliance certificate.
(ii) For purposes of Section 6.2(c)(i)(A), above, the first
"preceding month" in respect of which the items required by that
Section shall be provided shall be July, 1998 and for purposes of
Section 6.2(c)(i)(B) above, the first "preceding month" in respect of
which the items required by that Section shall be provided shall be
July, 1998.
(d) Quarterly Reports. Quarterly, within forty five (45) days following the
end of each of Borrower's fiscal quarters, Borrower shall provide to Agent an
original counterpart of a management prepared financial statement of Borrower
and its Subsidiaries, on a consolidated and consolidating basis, for the period
from the beginning of Borrower's and its Subsidiaries' then current fiscal year
through the end of the subject quarter, with comparative information for the
same period of the previous fiscal year, which statement shall include, at a
minimum, a balance sheet, income statement (on a store specific and on a
"consolidated" basis), statement of changes in shareholders' equity, and cash
flow report and comparisons for the corresponding quarter of the then
immediately previous year, as well as to the Business Plan.
(e) Annual Reports.
(i) In addition to the monthly reports required under this
Section 6.2, annually, within one hundred twenty (120) days following
the end of Borrower's and its Subsidiaries' fiscal year, Borrower
shall deliver to Agent an original signed counterpart of Borrower's
and its Subsidiaries' annual financial statement, on a consolidated
basis, which statement shall have been audited by, and bear the
unqualified opinion of Borrower's independent certified public
accountants reasonably acceptable to Agent (i.e. said statement shall
be "certified" by such accountants) certifying that such statements
have been prepared in accordance with GAAP and without any explanatory
paragraphs or other qualifying paragraphs, together with (x) a
certificate of such accountants addressed to Agent stating that such
accountants do not have knowledge of the existence of any Default or
Event of Default, and (y) a copy of such accountant's letter to
management. Such annual statement shall include, at a minium (with
comparative information for the then prior fiscal year) a balance
sheet, profit and loss statement, income statement, statement of
changes in shareholders' equity, and cash flows. Borrower shall
provide an interim draft of such financial statements within sixty
<PAGE>
(60) days after year-end, inclusive of subsequent periods, until the
year-end statements are finalized. Together with the above, Borrower
also shall deliver to Agent Borrower's Form 10-Q Quarterly Reports,
Form 10-K Annual Reports, and Form 8-K Current Reports, and any other
filings made by Borrower with the Securities and Exchange Commission,
if any, as soon as the same are filed, any press releases of Borrower,
and any other information that is provided by Borrower to its
shareholders, and any other report reasonably requested by Agent
relating to the financial condition of Borrower and its Subsidiaries.
Prior to the Closing Date, Borrower shall have issued written
instructions to its independent certified public accountants
authorizing them to communicate with Agent and to release to Agent
whatever financial information concerning Borrower that Agent may
request. Borrower hereby irrevocably authorizes and directs all
auditors, accountants, or other third parties to deliver to Agent, at
Borrower's expense, copies of Borrower's and its Subsidiaries'
financial statements, papers related thereto, and other accounting
records of any nature in their possession and to disclose to Agent any
information they may have regarding Borrower's and its Subsidiaries'
business affairs and financial condition.
(ii) Each annual statement shall be accompanied by such
accountant's certificate indicating that to the best knowledge of such
accountant, no event has occurred which is or which, solely with the
passage of time or the giving of notice (or both) would be, an Event
of Default.
(iii) Borrower hereby acknowledges that the Lender Group relied
upon Borrower's audited financial statements for the fiscal year ended
January 30, 1998 in extending credit to Borrower.
(f) Officers' Certificates. Borrower shall cause Borrower's chief financial
officer to provide such Person's certificate with those monthly, quarterly, and
annual statements to be furnished pursuant to this Agreement, which certificate
shall:
(i) Indicate that the subject statement was prepared in
accordance with GAAP consistently applied, and presents fairly the
financial condition of Borrower and its Subsidiaries at the close of,
and the results of Borrower's and its Subsidiaries' operations and
cash flows for, the period(s) covered, subject, however (with the
exception of the certificate which accompanies such annual statement)
to usual year end adjustments;
(ii) Indicate either that (i) no Default or Event of Default has
occurred or (ii) if such an event has occurred, its nature (in
reasonable detail) and the steps (if any) being taken or contemplated
by Borrower to be taken on account thereof;
(iii) Include calculations concerning Borrower's compliance (or
failure to comply) at the date of the subject statement with the
covenant included in Section 7.21 below;
(iv) Indicate that all taxes have been paid or if not paid
exceptions to be broken down by type and taxing authority;
(v) Indicate that all rent and additional rent has been paid or
if not paid exceptions to be broken down by store location; and
(vi) Indicate that premiums for insurance required under Section
6.10 hereof have or have not been paid.
(g) Inventories, Appraisals and Audits.
(i) Agent, at the expense of Borrower, may participate in and/or
observe each physical count and/or inventory of so much of the
Collateral as consists of Inventory which is undertaken on behalf of
Borrower.
<PAGE>
(ii) Upon Agent's request from time to time, Borrower shall
obtain, or shall permit Agent to obtain financial or SKU based
physical counts and/or inventories of the Collateral, conducted by
such inventory takers as are satisfactory to Agent and following such
methodology as may be required by Agent, each of which physical counts
and/or financial or SKU based inventories shall be observed by
Borrower's accountants. For each fiscal year in which this Agreement
is in effect, Borrower shall perform (at its expense) one (1) full
physical inventory as of fiscal year end for all locations. Commencing
in September, 1998, Borrower shall engage a third party acceptable to
Agent to conduct each month a full physical inventory of at least one
(1) retail store location per geographic region of Borrower's retail
store locations; provided, however, that no such inventories are
required to be done in February, November or December for any given
fiscal year of Borrower; provided further, however, that, with respect
to such inventories required in the months of March and April of any
year, so long as the final results of Borrower's full physical
inventory as of the preceding fiscal year end of Borrower are
delivered within the time period required below, no such inventories
are required to be done in March or April of any given fiscal year of
Borrower. The results of each such physical inventory shall be
provided to Agent no later than the fifteenth day of each month for
the prior month when an inventory is completed. The draft or unaudited
results of all inventories or counts shall be furnished to Lender
within fifteen (15) business days of the taking of such inventories or
counts and, with respect to the final results of the full physical
inventory as of each fiscal year end of Borrower, the results of each
such inventory shall be delivered to Agent no later than the date
forty-five (45) days following the date of Borrower's fiscal year end.
(h) Additional Financial Information.
(i) In addition to all other information required to be provided
pursuant to this Section 6.2, Borrower promptly shall provide to Agent
such other and additional information concerning Borrower, any
Subsidiary of Borrower, and any guarantor of the Obligations, the
Collateral (and other collateral securing repayment of the
Obligations), the operation of Borrower's and its Subsidiaries'
business, and Borrower's and its Subsidiaries' financial condition,
including original counterparts of financial reports and statements,
as Agent or Co-Agent may from time to time reasonably request from
Borrower.
(ii) Borrower may provide Agent, from time to time hereafter,
with updated Business Plans. In all events, Borrower, not later than
sixty (60) days prior to the end of each of Borrower's fiscal years,
shall deliver to Agent an updated and extended Business Plan which
shall go out at least through the end of the then next fiscal year and
the final Business Plan within fifteen (15) days of the end of
Borrower's fiscal year. In each event, such updated and extended
Business Plans shall be provided in the same form as that provided to
and approved by Borrower's Board of Directors and reasonably
satisfactory to Agent.
(i) Financial Performance Covenants. Borrower shall observe and comply with
the covenant set forth in Section 7.21 which covenant is based on the Business
Plan set forth on Exhibit B-1 hereto.
(j) Electronic Reporting. At Agent's option, all information and reports
required to be submitted to Agent by Borrower shall be transmitted
electronically pursuant to an electronic transmitting reporting system and shall
be in a record layout format designated by Agent from time to time.
6.3 [Intentionally Omitted.]
<PAGE>
6.4 Tax Returns Deliver to Agent copies of each of Borrower's and each
Subsidiary of Borrower's future federal income tax returns, and any amendments
thereto, within thirty (30) days of the filing thereof with the Internal Revenue
Service.
6.5 Guarantor Reports. Cause any guarantor of any of the Obligations to
deliver its annual financial statements at the time when Borrower provides its
audited financial statements to Agent and copies of all federal income tax
returns as soon as the same are available and in any event no later than thirty
(30) days after the same are required to be filed by law.
6.6 Returns. Cause returns and allowances, if any, as between Borrower and
its Account Debtors to be on the same basis and in accordance with the usual and
customary practices of Borrower, as they exist at the time of the execution and
delivery of this Agreement. If, at a time when no Event of Default has occurred
and is continuing, any Account Debtor returns any Inventory to Borrower,
Borrower promptly shall determine the reason for such return and, if Borrower
accepts such return, issue a credit memorandum (with a copy to be sent to Agent)
in the appropriate amount to such Account Debtor. If, at a time when an Event of
Default has occurred and is continuing, any Account Debtor returns any Inventory
to Borrower, Borrower promptly shall determine the reason for such return and,
if Agent consents (which consent shall not be unreasonably withheld), issue a
credit memorandum (with a copy to be sent to Agent) in the appropriate amount to
such Account Debtor.
6.7 Title ot Equipment. Upon Agent's request, Borrower immediately shall
deliver to Agent, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for title to any items of Equipment.
6.8 Maintenance of Equipment. Maintain the Equipment in good operating
condition and repair (ordinary wear and tear and damage by casualty excepted),
and make all necessary replacements thereto so that the value and operating
efficiency thereof shall at all times be maintained and preserved. Other than
those items of Equipment that constitute fixtures on the Closing Date, Borrower
shall not permit any item of Equipment to become a fixture to real estate or an
accession to other property, and such Equipment shall at all times remain
personal property.
6.9 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower,
any Subsidiary of Borrower or any of their respective properties to be paid in
full, before delinquency or before the expiration of any extension period,
except to the extent that the validity of such assessment or tax shall be the
subject of a Permitted Protest. Borrower shall, and shall cause its Subsidiaries
to, make due and timely payment or deposit of all such federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Agent, on demand, appropriate certificates attesting to the payment
thereof or deposit with respect thereto. Borrower will, and will cause each of
its Subsidiaries to, make timely payment or deposit of all tax payments and
withholding taxes required of them by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Agent with proof satisfactory to
Agent indicating that Borrower and each Subsidiary of Borrower has made such
payments or deposits.
6.10 Insurance.
(a) At its expense, keep the Personal Property Collateral insured against
loss or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as are ordinarily insured against by other owners in
similar businesses. Borrower also shall maintain business interruption, public
liability, product liability, and property damage insurance relating to
Borrower's ownership and use of the Personal Property Collateral, as well as
insurance against larceny, embezzlement, and criminal misappropriation.
<PAGE>
(b) At its expense, obtain and maintain (i) insurance of the type necessary
to insure the Improvements (as such term is defined in the Mortgages), for the
full replacement cost thereof, against any loss by fire, lightning, windstorm,
hail, explosion, aircraft, smoke damage, vehicle damage, earthquakes, elevator
collision, and other risks from time to time included under "extended coverage"
policies, in such amounts as Agent may require, but in any event in amounts
sufficient to prevent Borrower or any Subsidiary of Borrower from becoming a
co-insurer under such policies, (ii) combined single limit bodily injury, and
property damages insurance against any loss, liability, or damages on, about, or
relating to each parcel of Real Property Collateral, in a total amount of not
less than $102,000,000; (iii) business rental insurance covering annual receipts
for a twelve (12) month period for each parcel of Real Property Collateral; and
(iv) insurance for such other risks as Agent may require. Replacement costs, at
Agent's option, may be redetermined by an insurance appraiser, satisfactory to
Agent, not more frequently than once every twelve (12) months at Borrower's
cost.
(c) [Intentionally Omitted.]
(d) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to Agent. All
insurance required herein shall be written by companies which are authorized to
do insurance business in the State of California. All hazard insurance and such
other insurance as Agent shall specify, shall contain a California Form 438BFU
(NS) mortgagee endorsement, or an equivalent endorsement satisfactory to Agent,
showing Agent (for the ratable benefit of the Lenders) as sole loss payee
thereof, and shall contain a waiver of warranties. Every policy of insurance
referred to in this Section 6.10 shall contain an agreement by the insurer that
it will not cancel such policy except after thirty (30) days prior written
notice to Agent (for the ratable benefit of the Lenders) and that any loss
payable thereunder shall be payable notwithstanding any act or negligence of
Borrower or the Lender Group which might, absent such agreement, result in a
forfeiture of all or a part of such insurance payment and notwithstanding (i)
occupancy or use of the Real Property Collateral for purposes more hazardous
than permitted by the terms of such policy, (ii) any foreclosure or other action
or proceeding taken by the Lender Group pursuant to the Mortgages upon the
happening of an Event of Default, or (iii) any change in title or ownership of
the Real Property Collateral. Borrower shall deliver to Agent copies of such
policies of insurance and evidence of the payment of all premiums therefor.
(e) Original policies or certificates thereof satisfactory to Agent
evidencing such insurance shall be delivered to Agent at least thirty (30) days
prior to the expiration of the existing or preceding policies. Borrower shall
give Agent prompt notice of any loss covered by such insurance, and, except to
the extent prohibited by any mortgagee with respect to the Secondary Real
Estate, Agent shall have the right to adjust any loss. Except to the extent
prohibited by any mortgagee with respect to the Secondary Real Estate, Agent
shall have the exclusive right to adjust all losses payable under any such
insurance policies without any liability to Borrower or any Subsidiary of
Borrower whatsoever in respect of such adjustments. Unless the Required Lenders
otherwise consent, any monies received as payment for any loss under any
insurance policy including the insurance policies mentioned above, shall be paid
over to Agent (for the ratable benefit of Lenders) to be applied at the option
of Agent either to the prepayment of the Obligations without premium, in such
order or manner as Agent may elect, or shall be disbursed to Borrower or any
Subsidiary of Borrower, as applicable, under stage payment terms satisfactory to
Agent for application to the cost of repairs, replacements, or restorations. All
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed prior to such damage or destruction. Upon the occurrence of
an Event of Default, Agent shall have the right to apply all prepaid premiums to
the payment of the Obligations in such order or form as Agent shall determine.
(f) Borrower shall not, and shall not permit any Subsidiary to, take out
separate insurance concurrent in form or contributing in the event of loss with
that required to be maintained under this Section 6.10, unless Agent is included
<PAGE>
thereon as named insured with the loss payable to Agent (for the ratable benefit
of Lenders) under a standard California 438BFU (NS) Mortgagee endorsement, or
its local equivalent. Borrower immediately shall notify Agent whenever such
separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and originals of such
policies immediately shall be provided to Agent.
6.11 No Setoffs or Conunterclaims. Make payments hereunder and under the
other Loan Documents by or on behalf of Borrower without setoff or counterclaim
and free and clear of, and without deduction or withholding for or on account
of, any federal, state, or local taxes.
6.12 Location of Inventory and Equipment. Except for Eligible In-Transit
Inventory, keep the Inventory and Equipment only at the locations identified on
Schedule 6.12; provided, however, that Borrower may amend Schedule 6.12 so long
as such amendment occurs by written notice to Agent not less than thirty (30)
days prior to the date on which the Inventory or Equipment is moved to such new
location, so long as such new location is within the continental United States,
and so long as, at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected (the Lien of Agent for the benefit of the Lender Group), security
interests in such assets and also provides to Agent a Collateral Access
Agreement.
6.13 Compliance with Laws. Comply, and cause each of its Subsidiaries to
comply, in all material respects, with the requirements of all applicable laws,
rules, regulations, and orders of any governmental authority, including the Fair
Labor Standards Act and the Americans With Disabilities Act, other than laws,
rules, regulations, and orders the non-compliance with which, individually or in
the aggregate, would not have and could not reasonably be expected to cause a
Material Adverse Change.
6.14 Employee Benefits.
(a) Deliver to Agent: (i) Promptly, and in any event within ten (10)
Business Days after Borrower or any of its Subsidiaries knows or has reason to
know that an ERISA Event has occurred that reasonably could be expected to
result in a Material Adverse Change, a written statement of the chief financial
officer of Borrower describing such ERISA Event and any action that is being
taking with respect thereto by Borrower, any such Subsidiary or ERISA Affiliate,
and any action taken or threatened by the IRS, Department of Labor, or PBGC.
Borrower or such Subsidiary, as applicable, shall be deemed to know all facts
known by the administrator of any Benefit Plan of which it is the plan sponsor,
(ii) promptly, and in any event within three (3) Business Days after the filing
thereof with the IRS, a copy of each funding waiver request filed with respect
to any Benefit Plan and all communications received by Borrower, any of its
Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate with respect
to such request, and (iii) promptly, and in any event within three (3) Business
Days after receipt by Borrower, any of its Subsidiaries or, to the knowledge of
Borrower, any ERISA Affiliate, of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, copies of each
such notice.
(b) Cause to be delivered to Agent, upon Agent's request, each of the
following: (i) a copy of each Plan (or, where any such plan is not in writing,
complete description thereof) (and if applicable, related trust agreements or
other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three (3) most recent plan years, annual reports on
Form 5500 Series required to be filed with any governmental agency for each
Benefit Plan; (iv) all actuarial reports prepared for the last three (3) plan
years for each Benefit Plan; (v) a listing of all Multiemployer Plans, with the
aggregate amount of the most recent annual contributions required to be made by
Borrower or any ERISA Affiliate to each such plan and copies of the collective
<PAGE>
bargaining agreements requiring such contributions; (vi) any information that
has been provided to Borrower or any ERISA Affiliate regarding withdrawal
liability under any Multiemployer Plan; and (vii) the aggregate amount of the
most recent annual payments made to former employees of Borrower or its
Subsidiaries under any Retiree Health Plan.
6.15 Leases. Pay, and cause each Subsidiary to pay, when due all rents and
other amounts payable under any leases to which Borrower or any Subsidiary of
Borrower is a party or by which Borrower's or any Subsidiary of Borrower's
properties and assets are bound, unless such payments are the subject of a
Permitted Protest. To the extent that Borrower or any Subsidiary of Borrower
fails timely on or before the expiration of any applicable cure periods to make
payment of such rents and other amounts payable when due under its leases, Agent
shall be entitled, in its discretion, to reserve an amount equal to such unpaid
amounts against the Tranche A Borrowing Base and the Tranche B Borrowing Base.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, Borrower will
not, and will not permit any Subsidiary to, do any of the following:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with Indebtedness to
issuers of letters of credit that are the subject of L/C Guarantees;
(b) Indebtedness set forth on Schedule 7.1;
(c) Indebtedness (other than Secondary Real Estate Indebtedness) secured by
Permitted Liens;
(d) refinancings, renewals, or extensions of Indebtedness permitted under
clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not materially impair the
prospects of repayment of the Obligations by Borrower, (ii) the net cash
proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to the Lender Group as those
applicable to the refinanced Indebtedness;
(e) Indebtedness evidenced by the Convertible Subordinated Note; and
(f) the Secondary Real Estate Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(d) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness).
7.3 Restrictions on Fundamental Changes. Subject to Required Lenders
consenting to otherwise or except as permitted by Section 7.4, enter into any
merger, consolidation, reorganization, or recapitalization, or reclassify its
capital stock, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign, lease, transfer, or
<PAGE>
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its property or assets; provided, however, that any Primary
Subsidiary may merge into any other Primary Subsidiary or Borrower and Borrower
may liquidate or otherwise dissolve Sports & Recreation Holdings of PA, Inc., a
Delaware corporation, Construction Resolution, Inc., a Florida corporation and
Sports & Recreation, Inc., a Florida corporation.
7.4 Disposal of Assets. Except as permitted by Section 7.23, sell, lease,
assign, transfer, or otherwise dispose of any of Borrower's properties or assets
other than (a) sales of Inventory to buyers in the ordinary course of Borrower's
business as currently conducted, (b) the sale of any parcel of Primary Real
Estate listed on Schedule R-1 so long as (i) no Default or Event of Default
exists, (ii) the gross cash proceeds (inclusive of selling costs and expenses)
from such sale are equal to or exceed the Release Price for such parcel sold,
and (iii) the Net Proceeds are paid to Agent to be applied to the Obligations as
set forth in Section 2.5(b), and (c) any parcel of Secondary Real Estate at a
price acceptable to Agent and so long as (i) no Default or Event of Default
exists, (ii) the Net Proceeds from such sale are distributed to Borrower, and
(iii) pursuant to the terms of Section 2.5(b), the Net Proceeds are paid to
Agent to be applied to the Obligations or deposited into the Escrow Account and
the Lien of the Lender Group attaches to such Net Proceeds.
7.5 Change Name. Change Borrower's or any Subsidiary of Borrower's name,
FEIN, corporate structure (within the meaning of Section 9-402(7) of the Code),
or identity, or add any new fictitious name; provided, however, that so long as
Borrower provides Agent with thirty (30) days prior written notice thereof, any
Subsidiary of Borrower may change its name.
7.6 Guarantee. Guarantee or otherwise become in any way liable with respect
to the obligations of any third Person except by endorsement of instruments or
items of payment for deposit to the account of Borrower or which are transmitted
or turned over to Agent; provided, however, that each Subsidiary of Borrower may
guarantee payment of the Obligations as set forth in the Subsidiary Guaranty
Agreement..
7.7 Nature of Business. Make any change in the principal nature of
Borrower's or any Subsidiary of Borrower's business.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section 7.1(d),
prepay, redeem, retire, decease, purchase, or otherwise acquire any Indebtedness
owing to any third Person, other than the Obligations in accordance with this
Agreement; provided, however, that (i) Borrower or any Subsidiary of Borrower
may prepay Secondary Real Estate Indebtedness secured by any parcel of Secondary
Real Estate sold pursuant to Section 7.4(c) solely from the proceeds of such
sale; (ii) Borrower may prepay the Convertible Subordinated Notes to the extent
Net Proceeds from the sale of Secondary Real Estate are permitted to be used for
such purpose pursuant to Section 2.5(b) hereof; and (iii) Borrower may prepay
real estate leases and equipment leases to cancel the respective leases with
respect to closed retail stores so long as the aggregate amount of such
prepayments do not exceed $2,500,000 within the first year of this Agreement and
$1,000,000 during each year thereafter during the term of this Agreement; or
(b) Directly or indirectly, amend, modify, alter, increase, or change any
of the terms or conditions of any agreement, instrument, document, indenture, or
other writing evidencing or concerning Indebtedness permitted under Sections
7.1(b), (c), or (d); or
(c) change its fiscal year from the Friday closest to January 31; or
(d) without the prior written consent of the Lenders, directly or
indirectly amend, modify, alter, or change (i) the articles of incorporation or
by-laws of Property Holdings, or (ii) any document evidencing or securing any
Indebtedness of Property Holdings.
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
<PAGE>
7.10 Consignments. Consign any Inventory or sell any Inventory on bill and
hold, sale or return, sale on approval, or other conditional terms of sale.
7.11 Distributions. Make any distribution or declare or pay any dividends
(in cash or other property, other than capital stock) on, or purchase, acquire,
redeem, or retire any of Borrower's capital stock, of any class, whether now or
hereafter outstanding; provided, however, that any Subsidiary of Borrower may
make any distribution or declare or pay any dividend to Borrower; provided
further, however, that Borrower may redeem shares of its capital stock in an
amount not to exceed $200,000 in the aggregate. Borrower shall not permit any
Subsidiary of Borrower to enter into any agreement with any third party
restricting such Subsidiary's ability to make distributions to Borrower.
7.12 Accounting Methods. Modify or change its method of accounting or enter
into, modify, or terminate any agreement currently existing, or at any time
hereafter entered into with any third party accounting firm or service bureau
for the preparation or storage of Borrower's or any Subsidiary of Borrower's
accounting records without said accounting firm or service bureau agreeing to
provide Agent information regarding the Collateral or Borrower's or any
Subsidiary of Borrower's financial condition. Borrower waives, and will cause
each of its Subsidiaries to waive, the right to assert a confidential
relationship, if any, it may have with any accounting firm or service bureau in
connection with any information requested by Agent pursuant to or in accordance
with this Agreement, and agrees that Agent may contact directly any such
accounting firm or service bureau in order to obtain such information.
7.13 Investments. Except to the extent permitted by Section 7.4 and 2.5(b),
directly or indirectly make, acquire, or incur any liabilities (including
contingent obligations) for or in connection with (a) the acquisition of the
securities (whether debt or equity) of, or other interests in, a Person, (b)
loans, advances, capital contributions, or transfers of property to a Person, or
(c) the acquisition of all or substantially all of the properties or assets of a
Person; provided, however, that Borrower may make loans to employees to finance
such employees' relocation expenses in an amount not to exceed $500,000 in the
aggregate and $150,000 per employee; provided further, however, that
notwithstanding anything herein which may be construed to the contrary Borrower
shall not permit Property Holdings (i) to acquire any assets after the Closing
Date, or (ii) to hold any assets other than the Secondary Real Estate and the
improvements thereon that are owned by Property Holdings on the Closing Date.
7.14 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms, that are fully disclosed to Agent, and that are no
less favorable to Borrower than would be obtained in an arm's length transaction
with a non-Affiliate.
7.15 Suspension. Except as permitted by Section 7.4, suspend or go out of a
substantial portion of its business.
7.16 Compensation. Increase the annual fee or per-meeting fees paid to
directors during any year by more than 15% over the prior year; pay or accrue
total cash compensation, during any year, to officers and senior management
employees in an aggregate amount in excess of 115% of that paid or accrued in
the prior year; provided, however, that notwithstanding the foregoing, Borrower
may make payments under that certain Jumbosports Inc. Performance Incentive
Bonus Program as it exists on the date hereof.
7.17 Use of Proceeds. Use the proceeds of the Advances and the Term Loans
for any purpose other than (a) on the Closing Date, (i) to repay in full the
outstanding principal, accrued interest, and accrued fees and expenses owing to
Existing Lender, and (ii) to pay transactional costs and expenses incurred in
connection with this Agreement, and (b) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted corporate purposes.
7.18 Change in Location of Chief Executive Office; Inventory and Equipment
<PAGE>
with Bailees. 7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. Relocate its chief executive office to a new location
without providing thirty (30) days prior written notification thereof to Agent
and so long as, at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Lien of Agent (for the benefit of the Lender Group) and also
provides to Agent a Collateral Access Agreement with respect to such new
location. The Inventory and Equipment shall not at any time now or hereafter be
stored with a bailee, warehouseman, or similar party other than Butler Shoes at
the Butler Shoe Warehouse and, Genco at the Genco Warehouse without Agent's
prior written consent.
7.19 No Prohibited Transactions Under ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage, in any
prohibited transaction which is reasonably likely to result in a civil penalty
or excise tax described in Sections 406 of ERISA or 4975 of the IRC for which a
statutory or class exemption is not available or a private exemption has not
been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any accumulated
funding deficiency (as defined in Sections 302 of ERISA and 412 of the IRC),
whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to pay timely
required contributions or annual installments due with respect to any waived
funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to terminate, any
Benefit Plan where such event would result in any liability of Borrower, any of
its Subsidiaries or any ERISA Affiliate under Title IV of ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to make any
required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to pay any required
installment or any other payment required under Section 412 of the IRC on or
before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a Plan resulting
in an increase in current liability for the plan year such that either of
Borrower, any Subsidiary of Borrower or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the IRC; or
(h) withdraw, or permit any Subsidiary of Borrower to withdraw, from any
Multiemployer Plan where such withdrawal is reasonably likely to result in any
liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $100,000.
7.20 [Intentionally omitted.]
7.21 Capital Expenditures. Make cash capital expenditures in excess of (a)
$6,500,000 with respect to Borrower's fiscal year ended January 29, 1999; and
(b) a minimum of $5,000,000 but with such amount not to exceed Borrower's
EBITDA, less cash interest payments and principal payments on the Term Loans,
less taxes on income paid in cash with respect to any fiscal year thereafter.
7.22 Accounts. Create or permit to be created any Account other than (a)
third party credit card Accounts and (b) Accounts that are not credit card
Accounts in an aggregate amount not to exceed $5,000,000 at any time.
<PAGE>
7.23 Retail Store Closings. Commit to close, or close, any retail store
location at which Borrower maintains, offers for sale, or stores any of the
Personal Property Collateral, without the prior approval by Borrower's board of
directors and the Required Lenders; except and provided, however, that Borrower
may close up to three (3) retail store locations upon thirty (30) days prior
written notice to Agent and approval only by Agent of Borrower's liquidation
plan for Inventory and Equipment at such retail store locations.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared due and
payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due the Lender Group,
reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);
8.2 (a) If Borrower fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in Sections 6.2
(Collateral and Financial Reporting), 6.4 (Tax Returns), 6.7 (Title to
Equipment), 6.12 (Location of Inventory and Equipment), 6.13 (Compliance with
Laws), 6.14 (Employee Benefits), or 6.15 (Leases) of this Agreement and such
failure continues for a period of five (5) Business Days; (b) if Borrower fails
or neglects to perform, keep, or observe any term, provision, condition,
covenant, or agreement contained in Sections 6.1 (Accounting System) or 6.8
(Maintenance of Equipment) of this Agreement and such failure continues for a
period of fifteen (15) Business Days; or (c) if Borrower or any Subsidiary of
Borrower fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant, or agreement contained in this Agreement, or in
any of the other Loan Documents (giving effect to any grace periods, if any,
expressly provided for in such Loan Documents); in each case, other than any
such term, provision, condition, covenant, or agreement that is the subject of
another provision of this Section 8, (in which event such other provision of
this Section 8 shall govern); provided that, during any period of time that any
such failure or neglect of Borrower or any Subsidiary of Borrower referred to in
this paragraph exists, even if such failure or neglect is not yet an Event of
Default by virtue of the existence of a grace period, if any, Lenders shall not
be required during such period to make Advances to Borrower;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of Borrower's or any Subsidiary of Borrower's
properties or assets is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower or any Subsidiary
of Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower or any
Subsidiary of Borrower and any of the following events occur: (a) Borrower
consents to the institution of the Insolvency Proceeding against it; (b) the
petition commencing the Insolvency Proceeding is not timely controverted; (c)
the petition commencing the Insolvency Proceeding is not dismissed within
forty-five (45) calendar days of the date of the filing thereof; provided,
however, that, during the pendency of such period, the Lender Group shall be
relieved of its obligation to extend credit hereunder; (d) an interim trustee is
appointed to take possession of all or a substantial portion of the properties
or assets of, or to operate all or any substantial portion of the business of,
Borrower or any Subsidiary of Borrower; or (e) an order for relief shall have
been issued or entered therein;
8.7 If Borrower or any Subsidiary of Borrower is enjoined, restrained, or
in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
<PAGE>
8.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any of Borrower's or any Subsidiary of Borrower's properties or
assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency, or if any taxes or debts owing at any time hereafter to any one or more
of such entities becomes a Lien, whether choate or otherwise, upon any of
Borrower's or any Subsidiary of Borrower's properties or assets and the same is
not paid on the payment date thereof or a bond for the full amount thereof is
not obtained by Borrower;
8.9 If a judgment or other claim in an amount equal to or exceeding
$100,000 becomes a Lien or encumbrance upon any material portion of Borrower's
or any Subsidiary of Borrower's properties or assets;
8.10 If there is a default in any material agreement to which Borrower or
any Subsidiary of Borrower is a party with one or more third Persons and such
default (a) occurs at the final maturity of the obligations thereunder, or (b)
results in a right by such third Person(s), irrespective of whether exercised,
to accelerate the maturity of Borrower's obligations thereunder;
8.11 If there is a default under the Convertible Subordinated Notes or the
Secondary Real Estate Indebtedness;
8.12 If Borrower or any Subsidiary of Borrower makes any payment on account
of Indebtedness that has been contractually subordinated in right of payment to
the payment of the Obligations, except to the extent such payment is permitted
by the terms of the subordination provisions applicable to such Indebtedness;
8.13 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to the
Lender Group by Borrower or any Subsidiary of Borrower or any officer, employee,
agent, or director of Borrower or any Subsidiary of Borrower, or if any such
warranty or representation is withdrawn; or
8.14 If the obligation of any guarantor under its guaranty or other third
Person under any Loan Document is limited or terminated by operation of law or
by the guarantor or other third Person thereunder, or any such guarantor or
other third Person becomes the subject of an Insolvency Proceeding.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the continuation,
of an Event of Default Agent may, pursuant to Sections 17.4 and 17.5, and shall
upon the direction of the Required Lenders, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of
the other Loan Documents, or otherwise, immediately due and payable and
terminate the Commitments; provided, however, that, notwithstanding anything
herein to the contrary, upon an Event of Default described in Section 8.5 or
Section 8.6, the Commitments shall be terminated and all Obligations immediately
shall be due and payable;
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrower and the Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents as to any
future liability or obligation of the Lender Group, but without affecting the
Lender Group's rights and security interests in the Personal Property Collateral
or the Real Property Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account Debtors for
amounts and upon terms which Agent considers advisable, and in such cases, Agent
will credit Borrower's Loan Account with only the net amounts received by Agent
<PAGE>
in payment of such disputed Accounts after deducting all Lender Group Expenses
incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for the Lender
Group, segregate all returned Inventory from all other property of Borrower or
in Borrower's possession and conspicuously label said returned Inventory as the
property of the Lender Group;
(f) Without notice to or demand upon Borrower or any guarantor, make such
payments and do such acts as Agent considers necessary or reasonable to protect
its security interests in the Collateral. Borrower agrees to assemble the
Personal Property Collateral if Agent so requires, and to make the Personal
Property Collateral available to Agent as Agent may designate. Borrower
authorizes Agent to enter the premises where the Personal Property Collateral is
located, to take and maintain possession of the Personal Property Collateral, or
any part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or Lien that in Agent's determination appears to conflict with the Liens
of Agent (for the benefit of the Lender Group) in the Collateral and to pay all
expenses incurred in connection therewith. With respect to any of Borrower's
owned or leased premises, Borrower hereby grants Agent a license to enter into
possession of such premises and to occupy the same, without charge, for up to
120 days in order to exercise any of the Lender Group's rights or remedies
provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly waived), and
without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of Section 9-505 of the Code), set off and apply
to the Obligations any and all (i) balances and deposits of Borrower held by the
Lender Group (including any amounts received in the Blocked Accounts), or (ii)
indebtedness at any time owing to or for the credit or the account of Borrower
held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and deposits of Borrower
held by the Lender Group, and any amounts received in the Blocked Accounts, to
secure the full and final repayment of all of the Obligations;
(i) Seek the appointment of a receiver or keeper to take possession of the
Collateral and to enforce any of Agent's remedies with respect to such
appointment without prior notice or hearing;
(j) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell (in the manner provided for herein) the
Personal Property Collateral. Agent is hereby granted a license or other right
to use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Personal
Property Collateral, in completing production of, advertising for sale, and
selling any Personal Property Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to the Lender Group's benefit;
(k) Sell the Personal Property Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Agent determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
(l) Agent shall give notice of the disposition of the Personal Property
Collateral as follows:
(A) Agent shall give Borrower and each holder of a security interest
in the Personal Property Collateral who has filed with Agent a written
request for notice, a notice in writing of the time and place of public
sale, or, if the sale is a private sale or some other disposition other
than a public sale is to be made of the Personal Property Collateral, then
the time on or after which the private sale or other disposition is to be
made;
<PAGE>
(B) The notice shall be hand-delivered to an officer of Borrower, or
mailed, postage prepaid, to Borrower as provided in Section 12, at least
five (5) days before the date fixed for the sale, or at least five (5) days
before the date on or after which the private sale or other disposition is
to be made; no notice needs to be given prior to the disposition of any
portion of the Personal Property Collateral that is perishable or threatens
to decline speedily in value or that is of a type customarily sold on a
recognized market. Notice to Persons other than Borrower claiming an
interest in the Personal Property Collateral shall be sent to such
addresses as they have furnished to Agent; (C) If the sale is to be a
public sale, Agent also shall give notice of the time and place by
publishing a notice one time at least five (5) days before the date of the
sale in a newspaper of general circulation in the county in which the sale
is to be held;
(m) Agent may credit bid and purchase at any public sale; and
(n) Any deficiency that exists after disposition of the Personal Property
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Agent to Borrower.
9.2 Remedies Cumulative. The Lender Group's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative. The
Lender Group shall have all other rights and remedies not inconsistent herewith
as provided under the Code, by law, or in equity. No exercise by the Lender
Group of one right or remedy shall be deemed an election, and no waiver by the
Lender Group of any Event of Default shall be deemed a continuing waiver. No
delay by the Lender Group shall constitute a waiver, election, or acquiescence
by it.
10. TAXES AND EXPENSES
If Borrower fails to pay any monies (whether taxes, assessments, insurance
premiums, or, in the case of leased properties or assets, rents or other amounts
payable under such leases) due to third Persons, or fails to make any deposits
or furnish any required proof of payment or deposit, all as required under the
terms of this Agreement, then, to the extent that Agent determines that such
failure by Borrower could result in a Material Adverse Change and such failure
is not deemed to be a Permitted Protest, in its discretion and without prior
notice to Borrower, Agent may do any or all of the following: (a) make payment
of the same or any part thereof; (b) set up such reserves in Borrower's Loan
Account as Agent deems necessary to protect the Lender Group from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type described in Section 6.10, and take any action with respect to such
policies as Agent deems prudent. Any such amounts paid by Agent shall constitute
Lender Group Expenses. Any such payments made by Agent shall not constitute an
agreement by the Lender Group to make similar payments in the future or a waiver
by the Lender Group of any Event of Default under this Agreement. Agent need not
inquire as to, or contest the validity of, any such expense, tax, or Lien and
the receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by the Lender Group on which Borrower may in any way be liable.
11.2 The Lender Group's Liability for Collateral. So long as the Lender
Group complies with its obligations, if any, under Section 9-207 of the Code,
the Lender Group shall not in any way or manner be liable or responsible for:
(a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring
<PAGE>
or arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person. All risk of loss, damage, or destruction of
the Collateral shall be borne by Borrower.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and hold
Agent, each Agent-Related Person, the Co-Agent, each Lender, each Participant,
and each of their respective officers, directors, employees, counsel, agents,
and attorneys-in-fact (each, an "Indemnified Person") harmless (to the fullest
extent permitted by law) from and against any and all claims, demands, suits,
actions, investigations, proceedings, and damages, and all reasonable attorneys
fees and disbursements and other costs and expenses actually incurred in
connection therewith (as and when they are incurred and irrespective of whether
suit is brought), at any time asserted against, imposed upon, or incurred by any
of them in connection with or as a result of or related to the execution,
delivery, enforcement, performance, and administration of this Agreement and any
other Loan Documents or the transactions contemplated herein, and with respect
to any investigation, litigation, or proceeding related to this Agreement, any
other Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). Borrower shall have no
obligation to any Indemnified Person under this Section 11.3 with respect to any
Indemnified Liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such
Indemnified Person. This provision shall survive the termination of this
Agreement and the repayment of the Obligations.
12. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other Loan Document shall be in writing
and (except for financial statements and other informational documents which may
be sent by first-class mail, postage prepaid) shall be hand-delivered (with hand
deliveries to Borrower, Agent, the Co-Agent and Foothill Partners to be to an
officer thereof) or sent by registered or certified mail (postage prepaid,
return receipt requested), overnight courier, or telefacsimile to Borrower, to
Agent, to Co-Agent or to Foothill Partners, as the case may be, at its address
set forth below:
If to Borrower: JUMBOSPORTS INC.
4701 W. Hillsborough Avenue
Tampa, Florida 33614
Attn: Chief Financial Officer
Fax No. (813) 885-8642
with copies to: Louis J. Timchak, Jr., Esq.
General Counsel and Corporate Secretary
JumboSports, Inc.
4701 W. Hillsborough Avenue
Tampa, Florida 33614
Fax No. (813) 885-8642
with copies to: FOWLER, WHITE, GILLEN, BOGGS,
VILLAREAL AND BANKER, P.A.
Jeffrey C. Shannon, Esq.
Suite 1700
501 East Kennedy Boulevard
Tampa, Florida 33601
Fax No. (813) 229-8313
If to Agent or the FOOTHILL CAPITAL CORPORATION
Lender Group in case 11111 Santa Monica Blvd.
of Agent: Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. (310) 478-9788
<PAGE>
with copies to: FOOTHILL CAPITAL CORPORATION
60 State Street, Suite 1150
Boston, MA 02109
Attn: Account Executive
Fax No. (617) 722-9493
with copies to: PAUL, HASTINGS, JANOFSKY & WALKER LLP
600 Peachtree Street, N.E., Suite 2400
Atlanta, Georgia 30308
Attn: Jesse H. Austin, III, Esq.
Fax No. (404) 815-2424
If to Co-Agent: CONGRESS FINANCIAL CORPORATION
1133 Avenue of the Americas
New York, New York 10036
Attn: Mr. Edward J. Leski
Fax No. (212) 545-4555
If to
Foothill Partners: FOOTHILL PARTNERS III, L.P.
c/o Foothill Capital Corporation
11111 Santa Monica Blvd.
Suite 1500
Los Angeles, California
Attn: Mr. Michael Bohannon
Fax No. (310) 479-0461
with copies to: BUCHALTER, NEMER, FIELDS & YOUNGER
24th Floor
601 South Figueroa Street
Los Angeles, California 90017
Attn: Robert C. Colton, Esq.
Fax No. (213) 896-0400
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12, other
than notices by Agent in connection with Sections 9-504 or 9-505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) days after the deposit thereof in the mail. Borrower acknowledges and agrees
that notices sent by Agent in connection with Sections 9-504 or 9-505 of the
Code shall be deemed sent when deposited in the mail or hand-delivered, or,
where permitted by law, transmitted telefacsimile or other similar method set
forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA. THE PARTIES
AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF FULTON, STATE OF GEORGIA OR, AT THE SOLE
OPTION OF THE LENDER GROUP, IN ANY OTHER COURT IN WHICH THE LENDER GROUP SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND EACH MEMBER OF
THE LENDER GROUP WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
13. EACH OF BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVES THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
<PAGE>
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF BORROWER AND EACH MEMBER OF THE
LENDER GROUP REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, schedules, invoices, agings, or other papers delivered to
Agent may be destroyed or otherwise disposed of by Agent four (4) months after
they are delivered to or received by Agent, unless Borrower requests, in
writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS
15.1 Assignments and Participations.
(a) Any Lender may, with the written consent of Agent, assign and delegate
to one or more Eligible Transferees (each an "Assignee") all, or any ratable
part, of the Obligations, the Commitments, and the other rights and obligations
of such Lender hereunder and under the other Loan Documents, in a minimum amount
of $5,000,000; provided, however, that Borrower and Agent may continue to deal
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses, and related information with respect to the
Assignee, shall have been given to Borrower and Agent by such Lender and the
Assignee; (ii) such Lender and its Assignee shall have delivered to Borrower and
Agent a fully executed Assignment and Acceptance ("Assignment and Acceptance")
in the form of Exhibit A-1; and (iii) the assignor Lender or Assignee has paid
to Agent for Agent's sole and separate account a processing fee in the amount of
$2,500 (other than assignments by the members of the Lender Group who are
signatories hereto to other members of the Lender Group who are signatories
hereto). Anything contained herein to the contrary notwithstanding, the consent
of Agent shall not be required (and payment of any fees shall not be required)
if such assignment is in connection with any merger, consolidation, sale,
transfer, or other disposition of all or any substantial portion of the business
or loan portfolio of such Lender or is to an Affiliate of a Lender.
(b) From and after the date that Agent notifies the assignor Lender that it
has received a fully executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Lender under the Loan Documents, and (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement and the other Loan Documents, such Lender shall cease to be a party
hereto and thereto), and such assignment shall effect a novation between
Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the Assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (1) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties, or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency, or
value of this Agreement or any other Loan Document furnished pursuant hereto;
(2) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower or any
guarantor or the performance or observance by Borrower or any guarantor of any
of its obligations under this Agreement or any other Loan Document furnished
<PAGE>
pursuant hereto; (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (4) such Assignee will, independently and without
reliance upon Agent, such assigning Lender, or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (5) such Assignee appoints and authorizes Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (6) such Assignee agrees that it will perform
in accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments of the Assignor
and Assignee arising therefrom. The Commitment allocated to each Assignee shall
reduce such Commitment of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of Agent, which
consent shall not be unreasonably withheld, sell to one or more Persons (a
"Participant") participating interests in the Obligations, the Commitment, and
the other rights and interests of that Lender (the "Originating Lender")
hereunder and under the other Loan Documents; provided, however, that (i) the
Originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the Originating Lender shall remain solely responsible for the performance
of such obligations, (iii) Borrower and Agent shall continue to deal solely and
directly with the Originating Lender in connection with the Originating Lender's
rights and obligations under this Agreement and the other Loan Documents, (iv)
no Originating Lender shall transfer or grant any participating interest under
which the Participant has the sole and exclusive right to approve any amendment
to, or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment to, or consent or waiver with
respect to this Agreement or of any other Loan Document would (A) extend the
final maturity date of the Obligations hereunder in which such participant is
participating; (B) reduce the interest rate applicable to the Obligations
hereunder in which such Participant is participating; (C) release all or a
material portion of the Collateral (except to the extent expressly provided
herein or in any of the Loan Documents) supporting the Obligations hereunder in
which such Participant is participating; (D) postpone the payment of, or reduce
the amount of, the interest or fees hereunder in which such Participant is
participating; or (E) change the amount or due dates of scheduled principal
repayments or prepayments or premiums in respect of the Obligations hereunder in
which such Participant is participating; and (v) all amounts payable by Borrower
hereunder shall be determined as if such Originating Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement; provided, however, that no Participant may exercise any such right of
setoff without the notice to and consent of Agent. The rights of any Participant
shall only be derivative through the Originating Lender with whom such
Participant participates and no Participant shall have any direct rights as to
the other Lenders, Agent, Borrower, the Collections, the Collateral, or
otherwise in respect of the Advances, the Letters of Credit or the Term Loans.
No Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves. The provisions of this Section
15.1(e) are solely for the benefit of the Lender Group, and Borrower shall have
no rights as a third party beneficiary of any of such provisions.
<PAGE>
(f) In connection with any such assignment or participation or proposed
assignment or participation, a Lender may disclose to a third party all
documents and information which it now or hereafter may have relating to
Borrower or Borrower's business.
(g) Notwithstanding any other provision in this Agreement, any Lender may
at any time create a security interest in, or pledge, all or any portion of its
rights under and interest in this Agreement in favor of any Federal Reserve Bank
in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR
'203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.
15.2 Successors. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrower may not assign this Agreement or any rights or duties hereunder
without the Lenders' prior written consent and any prohibited assignment shall
be absolutely void. No consent to assignment by the Lenders shall release
Borrower from its Obligations. A Lender may assign this Agreement and its rights
and duties hereunder pursuant to Section 15.1 and, except as expressly required
pursuant to Section 15.1, no consent or approval by Borrower is required in
connection with any such assignment.
16. AMENDMENTS; WAIVERS
16.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent or forbearance with
respect to any departure by Borrower therefrom, shall be effective unless the
same shall be in writing and signed by the Required Lenders (or by Agent at the
written request of the Required Lenders) and Borrower and then any such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment, or
consent shall, unless in writing and signed by all the Lenders and Borrower and
acknowledged by Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees, or other amounts due to
the Lenders (or any of them) hereunder or under any other Loan Document;
(c) reduce, forgive, compromise, cancel or waive payment of the principal
of, or the rate of interest specified herein on, any Advance or Term Loan, or
any fees or other amounts payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Advances and Term Loans, which is required for the
Lenders or any of them to take any action hereunder;
(e) increase the advance rate with respect to Advances (except for the
restoration of an advance rate after the prior reduction thereof), or change
Section 2.1(b);
(f) amend or modify in any manner Section 2.1(l);
(g) amend or modify in any manner Section 2.5(b);
(h) amend this Section or any provision of the Agreement providing for
consent or other action by all Lenders;
(i) release Collateral other than as permitted by Section 17.11;
(j) subordinate the lien of Agent in any of the Collateral or any of the
Obligations (except to the extent permitted herein);
(k) change the definition of "Required Lenders";
<PAGE>
(l) release Borrower from any Obligation for the payment of money; or
(m) amend any of the provisions of Article 17.
and, provided further, that no amendment, waiver or consent shall, unless in
writing and signed by Agent, affect the rights or duties of Agent under this
Agreement or any other Loan Document; and, provided further, that the limitation
contained in clause (e) above shall not be deemed to limit the ability of Agent
to make Advances or Agent Loans, as applicable, in accordance with the
provisions of Sections 2.1(g), (h), or (l). The foregoing notwithstanding, any
amendment, modification, waiver, consent, termination, or release of or with
respect to any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrower, shall not require consent
by or the agreement of Borrower.
16.2 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
exercise any right, remedy, or option under this Agreement, any other Loan
Document, or any present or future supplement hereto or thereto, or in any other
agreement between or among Borrower and Agent and/or any Lender, or delay by
Agent or any Lender in exercising the same, will operate as a waiver thereof. No
waiver by Agent or any Lender will be effective unless it is in writing, and
then only to the extent specifically stated. No waiver by Agent or the Lenders
on any occasion shall affect or diminish Agent's and each Lender's rights
thereafter to require strict performance by Borrower of any provision of this
Agreement. Agent's and each Lender's rights under this Agreement and the other
Loan Documents will be cumulative and not exclusive of any other right or remedy
which Agent or any Lender may have.
17. AGENT; THE LENDER GROUP
17.1 Appointment and Authorization of Agent. Each Lender hereby designates
and appoints Foothill as its Agent under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Agent agrees to
act as such on the express conditions contained in this Article 17. The
provisions of this Article 17 are solely for the benefit of Agent and the
Lenders, and Borrower shall not have any rights as a third party beneficiary of
any of the provisions contained herein; provided, however, that the provisions
of Sections 17.10, 17.11, and 17.16(d) also shall be for the benefit of
Borrower. Any provision to the contrary contained elsewhere in this Agreement or
in any other Loan Document notwithstanding, Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall Agent have
or be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations, or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist
against Agent. Except as expressly otherwise provided in this Agreement, Agent
shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions which Agent is expressly entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents, including making the
determinations contemplated by Section 2.1(b). The identification of Congress
Financial Corporation as Co-Agent hereunder shall not create any rights in favor
of it, nor subject it to any duties or obligations in such capacity except as
otherwise expressly provided herein. Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides rights
or powers to Agent, Lenders agree that Agent shall have the right to exercise
the following powers as long as this Agreement remains in effect: (a) maintain,
in accordance with its customary business practices, ledgers and records
reflecting the status of the Advances, the Term Loans, the Collateral, the
Collections, and related matters; (b) execute and/or file any and all financing
or similar statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim for Lenders, notices and other written agreements
<PAGE>
with respect to the Loan Documents; (c) make Advances for itself or on behalf of
Lenders as provided in the Loan Documents; (d) exclusively receive, apply, and
distribute the Collections as provided in the Loan Documents; (e) open and
maintain such bank accounts and lock boxes as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections; (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrower, the Advances, the Term Loans, the Collateral, the Collections, or
otherwise related to any of same as provided in the Loan Documents; and (g)
incur and pay such Lender Group Expenses as Agent may deem necessary or
appropriate for the performance and fulfillment of its functions and powers
pursuant to the Loan Documents.
17.2 Delegation of Duties. Except as otherwise provided in this Section,
Agent may execute any of its duties under this Agreement or any other Loan
Document by or through agents, employees, or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects as long as such selection was made in
compliance with this Section and without gross negligence or willful misconduct.
The foregoing notwithstanding, Agent shall not make any material delegation of
duties to subagents or non-employee delegees without the prior written consent
of Required Lenders (it being understood that routine delegation of such
administrative matters as filing financing statements, or conducting appraisals
or audits, is not viewed as a material delegation that requires prior Required
Lender approval). Notwithstanding anything herein which may be construed to the
contrary, the Lenders and Borrower acknowledge and agree that Agent may engage
the Oversight Agent pursuant to the Oversight Agent Agreement, as it may be
modified and amended from time to time and the Oversight Agent may carry out its
duties as set forth in such agreement.
17.3 Lliability of Agent-Related Persons. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or, (ii) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by Borrower, or any
Subsidiary or Affiliate of Borrower, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement, or other document referred to or provided for
in, or received by Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of Borrower or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books, or records of
Borrower, or any of Borrower's Subsidiaries or Affiliates.
17.4 Reliance by Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex, or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to Borrower or counsel to any Lender), independent accountants, and other
experts selected by Agent. Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Required Lenders or all
Lenders, as applicable, and until such instructions are received, Agent shall
act, or refrain from acting, as it deems advisable so long as it is not grossly
negligent or guilty of wilful misconduct. If Agent so requests, it shall first
be indemnified to its reasonable satisfaction by Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Required Lenders or all
Lenders, as applicable, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
<PAGE>
17.5 Notice of Default or Event of Default. Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of Agent or the Lenders or
the delivery of information to Agent hereunder, except with respect to actual
knowledge of the existence of an Overadvance, and except with respect to
Defaults and Events of Default of which Agent has actual knowledge, unless Agent
shall have received written notice from a Lender or Borrower referring to this
Agreement, describing such Default or Event of Default, and stating that such
notice is a "notice of default." Agent promptly will notify the Lenders of its
receipt of any such notice or of any Event of Default of which Agent has, or is
deemed to have, actual knowledge. If any Lender obtains actual knowledge of any
Event of Default, such Lender promptly shall notify the other Lenders and Agent
of such Event of Default. Each Lender shall be solely responsible for giving any
notices to its Participants, if any. Copies of any such notices shall also be
provided by Borrower. Subject to Section 17.4, Agent shall take such action, or
refrain from taking any action, with respect to such Default or Event of Default
as may be requested by the Required Lenders; provided, however, that:
(a) At all times, Agent may propose and, with the consent of Required
Lenders (which shall not be unreasonably withheld and which shall be deemed to
have been given by a Lender unless such Lender has notified Agent to the
contrary in writing within three days of notification of such proposed actions
by Agent) exercise, any remedies on behalf of the Lender Group; and
(b) At all times, once Required Lenders or all Lenders, as the case may be,
have approved the exercise of a particular remedy or pursuit of a course of
action, Agent may, but shall not be obligated to, make all administrative
decisions in connection therewith or take all other actions reasonably
incidental thereto (for example, if the Required Lenders approve the foreclosure
of certain Collateral, Agent shall not be required to seek consent for the
administrative aspects of conducting such sale or handling of such Collateral).
17.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrower
and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition, and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrower. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals, and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition, and
creditworthiness of Borrower, and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition, or creditworthiness of Borrower, and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
17.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender
Group Expenses to the extent Agent deems reasonably necessary or appropriate for
the performance and fulfillment of its functions, powers, and obligations
pursuant to the Loan Documents, including without limiting the generality of the
foregoing, but subject to any requirements of the Loan Documents that it obtain
<PAGE>
any applicable consents or engage in any required consultation, court costs,
reasonable attorneys fees and expenses, costs of collection by outside
collection agencies and auctioneer fees and costs of security guards or
insurance premiums paid to maintain the Collateral, whether or not Borrower are
obligated to reimburse Agent or Lenders for such expenses pursuant to the Loan
Agreement or otherwise. Agent is authorized and directed to deduct and retain
sufficient amounts from Collections to reimburse Agent for such out-of-pocket
costs and expenses prior to the distribution of any amounts to Lenders. In the
event Agent is not reimbursed for such costs and expenses from Collections, each
Lender hereby agrees that it is and shall be obligated to pay to or reimburse
Agent for the amount of such Lender's Pro-Rata Share thereof. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of Borrower and without limiting the obligation of Borrower to do so),
according to their Pro-Rata Shares, from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall be liable for the payment
to the Agent-Related Persons of any portion of such Indemnified Liabilities
resulting solely from such Person's gross negligence, bad faith, or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including attorney fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrower. The undertaking in this Section 17.7 shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.
17.8 Agent in Individual Capacity. Foothill and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests, in and generally engage in any kind of banking, trust,
financial advisory, underwriting, or other business with Borrower and its
Subsidiaries and Affiliates and any other Person party to any Loan Documents as
though Foothill were not Agent hereunder without notice to or consent of the
Lenders. The Lenders acknowledge that, pursuant to such activities, Foothill and
its Affiliates may receive information regarding Borrower or their Affiliates
and any other Person party to any Loan Documents that is subject to
confidentiality obligations in favor of Borrower or such other Person and that
prohibit the disclosure of such information to the Lenders, and the Lenders
acknowledge that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver Agent will use its reasonable best
efforts to obtain), Agent shall be under no obligation to provide such
information to them. With respect to the Agent Loans and Agent Advances,
Foothill shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not Agent, and the terms
"Lender" and "Lenders" include Foothill in its individual capacity.
17.9 Successor Agent. Agent may resign as Agent upon forty-five (45) days'
notice to the Lenders and Borrower. If Agent resigns under this Agreement,
Co-Agent shall have the option to become the successor Agent. If Co-Agent elects
not to exercise its option to become a successor Agent, the Required Lenders
shall appoint any Lender or Eligible Transferee as successor Agent for the
Lenders. If no successor Agent is appointed prior to the effective date of the
resignation of Agent, Agent may appoint a successor Agent, after consulting with
the Lenders and Borrower. Agent may be removed and replaced by Co-Agent as
successor Agent upon Agent's breach or failure to perform any material provision
of this Agreement or as provided under applicable law. In the event Co-Agent
does not exercise the foregoing right to remove and replace Agent, and if Agent
has breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and replace
Agent with a successor Agent from among the Lenders. In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor Agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
<PAGE>
Agent's resignation hereunder as Agent, the provisions of this Section 17 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is forty-five (45) days following a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Lenders appoint a
successor Agent as provided for above.
17.10 Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership or trust" within
the meaning of the IRC and such Lender claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees
with and in favor of Agent and Borrower, to deliver to Agent and Borrower:
(i) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W-8 before the payment of any interest in the first calendar
year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this Agreement is
exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two
properly completed and executed copies of IRS Form 4224 before the payment
of any interest is due in the first taxable year of such Lender and in each
succeeding taxable year of such Lender during which interest may be paid
under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the IRC or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees to promptly notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of, withholding tax
under a United States tax treaty by providing IRS Form 1001 and such Lender
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of Borrower, such Lender agrees to notify Agent and Borrower of
the percentage amount in which it is no longer the beneficial owner of
Obligations of Borrower to such Lender. To the extent of such percentage amount,
Agent and Borrower will treat such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States withholding tax by
filing IRS Form 4224 with Agent sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of Borrower to such Lender,
such Lender agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the IRC. (d)
If any Lender is entitled to a reduction in the applicable withholding tax,
Agent may withhold from any interest payment to such Lender an amount equivalent
to the applicable withholding tax after taking into account such reduction. If
the forms or other documentation required by subsection (a) of this Section are
not delivered to Agent, then Agent may withhold from any interest payment to
such Lender not providing such forms or other documentation an amount equivalent
to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that Agent or Borrower did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent and Borrower of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Lender shall indemnify Agent and Borrower fully for
<PAGE>
all amounts paid, directly or indirectly, by Agent or Borrower as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to Agent or Borrower under this Section,
together with all costs and expenses (including attorneys fees and expenses).
The obligation of the Lenders under this subsection shall survive the payment of
all Obligations and the resignation of Agent.
17.11 Collateral Matters.
(a) The Lenders hereby irrevocably authorize Agent, to release any Lien on
any Collateral, (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrower of all Obligations; and upon such termination
and payment Agent shall deliver to Borrower, at Borrower's sole cost and
expense, all UCC termination statements and any other documents necessary to
terminate the Loan Documents and release the Liens with respect to the
Collateral; (ii) constituting property being sold or disposed of if a release is
required or desirable in connection therewith and if Borrower certifies to Agent
that the sale or disposition is permitted under Section 7.4 of this Agreement or
the other Loan Documents (and Agent may rely conclusively on any such
certificate, without further inquiry); (iii) constituting property in which
neither Borrower nor any Subsidiary of Borrower owned an interest at the time
the Lien was granted or at any time thereafter; or (iv) constituting property
leased to Borrower or any Subsidiary of Borrower under a lease that has expired
or been terminated in a transaction permitted under this Agreement. Except as
provided above, Agent will not release any Lien on any Collateral without the
prior written authorization of the Lenders. Upon request by Agent or Borrower at
any time, the Lenders will confirm in writing Agent's authority to release any
such Liens on particular types or items of Collateral pursuant to this Section
17.11; provided, however, that (i) Agent shall not be required to execute any
document necessary to evidence such release on terms that, in Agent's opinion,
would expose Agent to liability or create any obligation or entail any
consequence other than the release of such Lien without recourse,
representation, or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens (other than those
expressly being released), upon (or obligations of Borrower in respect of) all
interests retained by Borrower or any Subsidiary of Borrower, including, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
(b) Agent shall have no obligation whatsoever to any of the Lenders to
assure that the Collateral exists or is owned by Borrower or a Subsidiary of
Borrower, as the case may be, is cared for, protected, or insured or has been
encumbered, or that the Liens of Agent (for the benefit of the Lender Group)
have been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure, or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral or any act, omission or event
related thereto, subject to the terms and conditions contained herein, Agent may
act in any manner it may deem appropriate, in its sole discretion given Agent's
own interest in such Collateral in its capacity as one of the Lenders and that
Agent shall have no other duty or liability whatsoever to any Lender as to any
of the foregoing, except as otherwise provided herein.
17.12 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the express
consent of Agent, and that it shall, to the extent it is lawfully entitled to do
so, upon the request of Agent, set off against the Obligations any amounts owing
by such Lender to Borrower or any accounts of Borrower now or hereafter
maintained with such Lender. Each of the Lenders further agrees that it shall
not, unless specifically requested to do so by Agent, take or cause to be taken
any action, including the commencement of any legal or equitable proceedings, to
foreclose any Lien on, or otherwise enforce any security interest in, any of the
Collateral the purpose of which is, or could be, to give such Lender any
preference or priority against the other Lenders with respect to the Collateral.
<PAGE>
(b) Subject to Section 17.8, if, at any time or times any Lender shall
receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of
Collateral or any payments with respect to the Obligations of Borrower to such
Lender arising under, or relating to, this Agreement or the other Loan
Documents, except for any such proceeds or payments received by such Lender from
Agent pursuant to the terms of this Agreement, or (ii) payments from Agent in
excess of such Lender's Pro-Rata Share, Tranche A Pro-Rata Share or Tranche B
Pro-Rata Share, as the case may be, of all such distributions by Agent, such
Lender shall promptly (1) turn the same over to Agent, in kind, and with such
endorsements as may be required to negotiate the same to Agent, or in same day
funds, as applicable, for the account of all of the Lenders and for application
to the Obligations in accordance with the applicable provisions of this
Agreement, or (2) purchase, without recourse or warranty, an undivided interest
and participation in the Obligations owed to the other Lenders so that such
excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro- Rata Shares, Tranche A Pro-Rata Shares or Tranche B
Pro-Rata Shares, as the case may be; provided, however, that if all or part of
such excess payment received by the purchasing party is thereafter recovered
from it, those purchases of participations shall be rescinded in whole or in
part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest except
to the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
17.13 Agency for Perfection. Agent and each Lender hereby appoints each
other Lender as agent for the purpose of perfecting the Liens of the Lender
Group in assets which, in accordance with Article 9 of the UCC can be perfected
only by possession. Should any Lender obtain possession of any such Collateral,
such Lender shall notify Agent thereof, and, promptly upon Agent's request
therefor shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
17.14 Payments by Agent to the Lenders. All payments to be made by Agent to
the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds pursuant to the instructions set forth on Schedule
C-1, or pursuant to such other wire transfer instructions as each party may
designate for itself by written notice to Agent. Concurrently with each such
payment, Agent shall identify whether such payment (or any portion thereof)
represents principal, premium or interest on revolving advances or otherwise.
17.15 Concerning the Collateral and Related Loan Documents. Each member of
the Lender Group authorizes and directs Agent to enter into this Agreement and
the other Loan Documents relating to the Collateral, for the benefit of the
Lender Group. Each member of the Lender Group agrees that any action taken by
Agent, Required Lenders, or all Lenders, as applicable, in accordance with the
terms of this Agreement or the other Loan Documents relating to the Collateral
and the exercise by Agent, Required Lenders, or all Lenders, as applicable, of
their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of the
Lenders.
17.16 Field Audits and Examination Reports; Confidentiality; Disclaimers by
Lenders; Other Reports and By signing this Agreement, each Lender;
(a) is deemed to have requested that Agent furnish such Lender, promptly
after it becomes available, a copy of each field audit or examination report
(each a "Report" and collectively, "Reports") prepared by Agent, and Agent shall
so furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that Agent (i) does not make any
representation or warranty as to the accuracy of any Report, and (ii) shall not
be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrower
and will rely significantly upon Borrower's books and records, as well as on
representations of Borrower's personnel;
<PAGE>
(d) agrees to keep all Reports and other material information obtained by
it pursuant to the requirements of this Agreement in accordance with its
reasonable customary procedures for handling confidential information; it being
understood and agreed by Borrower that in any event such Lender may make
disclosures (i) reasonably required by any bona fide potential or actual
Assignee, transferee, or Participant in connection with any contemplated or
actual assignment or transfer by such Lender of an interest herein or any
participation interest in such Lender's rights hereunder, (ii) of information
that has become public by disclosures made by Persons other than such Lender,
its Affiliates, assignees, transferees, or participants, or (iii) as required or
requested by any court, governmental or administrative agency, pursuant to any
subpoena or other legal process, or by any law, statute, regulation, or court
order; provided, however, that, unless prohibited by applicable law, statute,
regulation, or court order, such Lender shall notify Borrower of any request by
any court, governmental or administrative agency, or pursuant to any subpoena or
other legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold Agent and any such other Lender
preparing a Report harmless from any action the indemnifying Lender may take or
conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
Lender has made or may make to Borrower, or the indemnifying Lender's
participation in, or the indemnifying Lender's purchase of, a loan or loans of
Borrower; and (ii) to pay and protect, and indemnify, defend, and hold Agent and
any such other Lender preparing a Report harmless from and against, the claims,
actions, proceedings, damages, costs, expenses and other amounts (including,
attorney costs) incurred by Agent and any such other Lender preparing a Report
as the direct or indirect result of any third parties who might obtain all or
part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower to Agent, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender promptly upon receipt thereof; (y)
to the extent that Agent is entitled, under any provision of the Loan Documents,
to request additional reports or information from Borrower, any Lender may, from
time to time, reasonably request Agent to exercise such right as specified in
such Lender's notice to Agent, whereupon Agent promptly shall request of
Borrower the additional reports or information specified by such Lender, and,
upon receipt thereof, Agent promptly shall provide a copy of same to such
Lender; and (z) any time that Agent renders to Borrower a statement regarding
the Loan Account, Agent shall send a copy of such statement to each Lender.
17.17 Several Obligations; No Liability. Notwithstanding that certain of
the Loan Documents now or hereafter may have been or will be executed only by or
in favor of Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of Agent (if any) to make any
Advances shall constitute the several (and not joint) obligations of the
respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such Advances not to exceed, in principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing contained herein shall confer upon any Lender any interest in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no Lender shall
have any obligation, duty, or liability to any Participant of any other Lender.
Except as provided in Section 17.7, no member of the Lender Group shall have any
liability for the acts of any other member of the Lender Group. No Lender shall
be responsible to Borrower or any other Person for any failure by any other
Lender to fulfill its obligations to make Advances, nor to advance for it or on
its behalf in connection with its Commitment, nor to take any other action on
its behalf hereunder or in connection with the financing contemplated herein.
18. GENERAL PROVISIONS
<PAGE>
18.1 Effectiveness. This Agreement shall be binding and deemed effective
when executed by Borrower and the Lender Group.
18.2 Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Agreement.
18.3 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
18.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
18.5 Counterparts; Telefacsimile Execution. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
18.6 Revival and Reinstatement of Obligations. If the incurrence or payment
of the Obligations by Borrower or any guarantor of the Obligations or the
transfer by any or all of such parties to the Lender Group of any property of
either or both of such parties should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if the Lender
Group is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that the Lender Group is
required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrower or such guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
18.7 Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
18.8 Time is of the Essence. Time is of the essence of this Agreement.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Atlanta, Georgia on the date first above written.
JUMBOSPORTS INC.,
a Florida corporation
By /s/ R. P. Springer
Title: Executive Vice President
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent
and as a Tranche A Lender
By /s/ Christopher O'Connor
Title: Vice President
CONGRESS FINANCIAL CORPORATION,
a Delaware corporation, as Co-Agent
and as a Tranche A Lender
By /s/ Barry Kaftner
Title: Executive Vice President
FOOTHILL PARTNERS III, L.P., a Delaware
limited partnership, as a
Tranche B Lender
By /s/ Jeff Nikora
Title: Managing General Partner
<PAGE>
Schedule C-1
Commitments on Closing Date
<TABLE>
<CAPTION>
Tranche A Tranche A Tranche B Tranche B Total Pro-Rata
Lender: Commitment: Pro-Rata Share: Commitment: Share: Commitment: Share:
- --------------- ----------- --------------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Foothill Capital $62,500,000 50% NA NA $62,500,000 41.6667%
Corporation
Congress Financial $62,500,000 50% NA NA $62,500,000 41.6667%
Corporation
Foothill Partners NA NA $25,000,000 100% $25,000,000 16.6666%
III, L.P.
Total $125,000,000 $25,000,000 $150,000,000 100.0%
</TABLE>
