EXHIBITS AND SCHEDULES
Form of Borrowing Base Certificate
Form of Covenant Compliance Certificate
Form of Intercreditor Agreement
Form of Intercompany Note
Form of Joinder Agreement
Credit Card Agreements
THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Third Amended and Restated Loan and Security Agreement dated June 12, 2013 (this “Agreement”) is entered into by and between FIVE BELOW, INC., a Pennsylvania corporation (the “Borrower”), FIVE BELOW MERCHANDISING, INC., a Pennsylvania corporation (the “Original Guarantor”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as successor by merger to Wachovia Bank, N.A. (the “Lender”).
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to that certain Second Amended and Restated Loan and Security Agreement dated May 16, 2012 (as amended from time to time, the “Original Loan Agreement”); and
WHEREAS, Borrower and Lender have agreed to modify the Original Loan Agreement in accordance with the terms referenced herein; and
WHEREAS, this Agreement shall be an amendment and restatement of and substitution for the Original Loan Agreement, but shall in no way be construed as a repayment, novation or satisfaction of the Obligations as defined in the Original Loan Agreement;
WHEREAS, the Obligations and all Collateral securing the Obligations under the Original Loan Agreement and this Agreement are and shall at all times be deemed to be continuous;
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Original Loan Agreement is hereby amended and restated in its entirety and the parties hereto agree as follows:
For purposes of this Agreement, the following terms shall have the respective meanings given to them below:
“ABL Priority Collateral” shall mean the “Revolving Facility First Lien Collateral” as defined in the Intercreditor Agreement.
“Accounts” shall mean all present and future rights of any Loan Party to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) consisting of Credit Card Receivables.
“Adjusted Borrowing Base” shall mean, at any time, the amount equal to the Borrowing Base minus the Minimum Excess Collateral Availability.
“Affiliate” shall mean, with respect to a specified Person, any other Person which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, and without limiting the generality of the foregoing, includes (a) any Person which beneficially owns or holds ten percent (10%) or more of any class of Voting Stock of such Person or other equity interests in such Person, and (b) any Person of which such Person beneficially owns or holds ten percent (10%) or more of any class of Voting Stock or in which such Person beneficially owns or holds ten percent (10%) or more of the equity interests. For the purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise.
“Applicable L/C Rate” shall mean, at any time, the rate equal to the LMIR Rate, plus the applicable percentage set forth in the definition of “Applicable Margin” for LMIR Rate Loans.
“Applicable Margin” shall mean, at any time, as to the Interest Rate for LMIR Rate Loans and the Interest Rate for Prime Rate Loans, the applicable percentage (on a per annum basis) set forth below if the Borrower’s Quarterly Average Excess Availability for the immediately preceding Fiscal Quarter is at or within the amounts indicated for such percentage as of the last day of the immediately preceding calendar quarter
Quarterly Average Excess Availability
Applicable Margin for LMIR Rate Loans
Applicable Margin for Prime Rate Loans
Availability: less than 33% of then effective Maximum Credit
Availability: less than 75% but greater than or equal to 33% of then effective Maximum Credit
Availability: greater than or equal to 75% of then effective Maximum Credit
, (i) the Applicable Margin shall be calculated and established once each calendar quarter and shall remain in effect until adjusted thereafter after the end of such calendar quarter, (ii) each adjustment of the Applicable Margin shall be effective as of the first day of a calendar quarter based on the Quarterly Average Excess Availability for the immediately preceding calendar quarter and (iii) notwithstanding anything herein to the contrary, the Applicable Margin beginning as of the Closing Date through the Fiscal Quarter ending July 31, 2013 shall be 1.75% for LMIR Rate Loans and 0.75% for Prime Rate Loans.
“Asset Sale” shall mean any Disposition of any property by any Loan Party. Notwithstanding the foregoing, none of the following shall constitute “Asset Sales”; (a) any Disposition of assets permitted by, or expressly referred to in, Section 9.7 (other than Section 9.7(b)(viii)); (b) so long as the Term Loan Agreement is in effect, any Disposition of the Term Priority Collateral; and (c) any Disposition of any property by any Loan Party for fair market value resulting in less than $250,000 in Net Cash Proceeds per Disposition (or series of related Dispositions) and less than $750,000 in Net Cash Proceeds in any Fiscal Year.
“Attributable Indebtedness” shall mean, when used with respect to any Sale and Leaseback Transaction by any Loan Party, as at the time of determination, the present value (discounted at a rate equivalent to such Loan Party’s then-current weighted average cost of funds for borrowed money as at the time of determination, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments (and substantially similar payments) during the remaining term of the lease included in any such Sale and Leaseback Transaction.
“Bank Product Provider” shall mean Lender, an Affiliate of Lender, or any other financial institution (but in the case of an Affiliate of Lender or any other financial institution, only to the extent approved by Lender) that provides any Bank Products to Borrower.
“Bank Products” shall mean any one or more of the following types or services or facilities provided to Borrower by a Bank Product Provider: (a) credit cards or stored value cards or (b) cash management or related services, including (i) the automated clearinghouse transfer of funds for the account of Borrower pursuant to agreement or overdraft for any accounts of Borrower maintained at any Bank Product Provider that are subject to the
control of Lender pursuant to any Deposit Account Control Agreement to which Lender or any Affiliate of Lender is a party, as applicable, and (ii) controlled disbursement services and (iii) Hedge Agreements if and to the extent permitted hereunder.
“Bankruptcy Code” means the United States Bankruptcy Code (11 U.S.C. § 101, et seq.), as amended, and any successor statute.
“Borrower” shall mean Five Below, Inc., a Pennsylvania corporation, in its capacity as Borrower under this Agreement.
“Borrowing Base” shall mean, at any time, the amount equal to: ninety percent (90%) of the Eligible Credit Card Receivables of Borrower, plus ninety percent (90%) of the Net Recovery Percentage of Eligible Inventory of Borrower multiplied by the Value thereof, minus Reserves attributable to Borrower.
“Borrowing Base Certificate” shall mean a certificate substantially in the form of Exhibit “A” hereto, as such form may from time to time be modified by Lender, which is duly completed (including all schedules thereto) and executed by the Senior Vice President of Finance or other chief financial officer of Borrower and delivered to Lender.
“Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the Commonwealth of Pennsylvania, and a day on which Lender is open for the transaction of business, except that if a determination of a Business Day shall relate to any LMIR Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable Eurodollar Rate market.
“Capital Expenditures” shall mean all expenditures for, or contracts for expenditures for, any fixed or capital assets or improvements, or for replacements, substitutions or additions thereto, which have a useful life of more than one (1) year, including, but not limited to, the direct or indirect acquisition of such assets by way of offset items or otherwise and shall include the principal amount of capitalized lease payments during the applicable period.
“Capital Leases” shall mean, with respect to any Person, any lease of (or any agreement conveying the right to use) any property by such person as lessee (whether real, personal or mixed) which in accordance with GAAP, is required to be reflected as a liability on such person’s balance sheet.
“Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock).
“Cash Dominion Event” shall mean the occurrence of either: (a) an Event of Default under this Agreement; or (b) the failure of the Borrower at any time during any Non-
Peak Period to maintain Excess Borrowing Availability greater than or equal to twenty percent (20%) of the then-effective Maximum Credit.
“Cash Dominion Period” shall mean, with respect to any Cash Dominion Event, the period beginning as of the occurrence of such Cash Dominion Event and ending after the Borrower has maintained ninety (90) consecutive days during which (a) Excess Borrowing Availability is greater than or equal to thirty-five percent (35%) of the then-effective Maximum Credit; and (b) no Event of Default has occurred or is continuing.
“Cash Equivalents” shall mean, as of any date of determination, as to any Person, any of the following: (a) securities issued, or directly, unconditionally and fully guaranteed or insured, by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than one year from the date of acquisition by such person, (b) time deposits and certificates of deposit or bankers’ acceptances of Lender or any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state or commonwealth thereof or the District of Columbia having, capital and surplus aggregating in excess of $250,000,000 and a rating of “A” (or such other similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act of 1933, as amended from time to time, and any successor statute) with maturities of not more than one year from the date of acquisition by such person, (c) commercial paper issued by any person meeting the qualifications specified in clause (b) above, or incorporated in the United States of America rated at least A-1 or the equivalent thereof by Standard & Poor’s Rating Service or Fitch Rating Limited or at least P-1 or the equivalent thereof by Moody’s Investors Service Inc., and in each case maturing not more than one year after the date of acquisition by such person, (d) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $1,000,000,000, (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within ninety (90) days or less from the date of acquisition; provided, that, the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985, (f) shares of any money market mutual fund that (i) has substantially all of its assets invested continuously in the types of investments referred to in clauses (a) through (e) above, and (ii) has the highest rating obtainable from either Standard & Poor’s Rating Service or Moody’s Investors Service Inc., and (e) demand deposit accounts maintained in the ordinary course of business.
“Casualty Event” shall mean any loss of title (other than through a consensual Disposition of such property in accordance with this Agreement) or any loss of or damage to or any destruction of, or any condemnation or other taking (including by any Governmental Authority) of, any property of any Loan Party. “Casualty Event” shall include any
taking of all or any part of any Real Property of any person or any part thereof, in or by condemnation or other eminent domain proceedings pursuant to any Legal Requirement, or by reason of the temporary requisition of the use or occupancy of all or any part of any Real Property of any person or any part thereof by any Governmental Authority, or any settlement in lieu thereof. Notwithstanding the foregoing, “Casualty Event” shall not include the loss of title or loss of or damage to or any destruction of, or any condemnation or other taking (including by any Governmental Authority) of, (a) any property of any Loan Party with a fair market value of less than $700,000 in Net Cash Proceeds per such event and less than $1,500,000 in Net Cash Proceeds in any Fiscal Year; and (b) so long as the Term Loan Agreement is in effect, the Term Priority Collateral.
“Change of Control” shall mean (a) the transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Borrower to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of Borrower or the adoption of a plan by the stockholders of Borrower relating to the dissolution or liquidation of Borrower; (c) any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than Permitted Investors shall have acquired beneficial ownership of more than 35 percent of the voting power of the outstanding Voting Stock of the Borrower; or (d) any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) other than Permitted Investors shall have acquired beneficial ownership of sufficient voting power of the outstanding Voting Stock such that such Person or group becomes entitled to name or replace a voting majority of the Board of Directors.
“Closing Date” shall mean June 12, 2013.
“Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.
“Collateral” shall have the meaning set forth in Section 5.1 hereof.
“Collateral Access Agreement” shall mean an agreement in writing, in form and substance satisfactory to Lender, from any lessor of premises to any Loan Party, or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, in favor of Lender with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, consignee or other person.
“Commitment” shall mean the Lender’s commitment to provide the Credit Facility.
“Credit Card Acknowledgments” shall mean, collectively, the agreements in favor of Lender, by Credit Card Issuers or Credit Card Processors who are parties to Credit Card Agreements, acknowledging Lender’s first priority security interest in the monies due and to become due to any Loan Party (including, without limitation, credits and reserves) under the Credit Card Agreements, and agreeing to transfer all such amounts to the Payment Account, as
the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
“Credit Card Agreements” shall mean all agreements now or hereafter entered into by any Loan Party with any Credit Card Issuer or any Credit Card Processor, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, including, but not limited to, the agreements listed on Schedule 1.30 hereto.
“Credit Card Issuer” shall mean any person (other than a Loan Party) who issues or whose members issue credit cards, including, without limitation, MasterCard or VISA bank credit or debit cards or other bank credit or debit cards issued through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa International and American Express, Discover, Diners Club, Carte Blanche and other non-bank credit or debit cards, including, without limitation, credit or debit cards issued by or through American Express Travel Related Services Company, Inc. or Novus Services, Inc.
“Credit Card Processor” shall mean any servicing or processing agent or any factor or financial intermediary who facilitates, services, processes or manages the credit authorization, billing transfer and/or payment procedures with respect to a Loan Party’s sales transactions involving credit card or debit card purchases by customers using credit cards or debit cards issued by any Credit Card Issuer.
“Credit Card Receivables” shall mean, collectively, (a) all present and future rights of Borrower to payment from any Credit Card Issuer, Credit Card Processor or other third party arising from sales of goods or rendition of services to customers who have purchased such goods or services using a credit or debit card and (b) all present and future rights of Borrower to payment from any Credit Card Issuer, Credit Card Processor or other third party in connection with the sale or transfer of Accounts arising pursuant to the sale of goods or rendition of services to customers who have purchased such goods or services using a credit card or a debit card, including, but not limited to, all amounts at any time due or to become due from any Credit Card Issuer or Credit Card Processor under the Credit Card Agreements or otherwise.
“Credit Facility” shall mean the Revolving Loans and Letters of Credit provided to or for the benefit of Borrower pursuant to Sections 2.1 and 2.2 hereof.
“Current Borrowing Base Report” shall have the meaning set forth in Section 7.1 (a)(i) hereof.
“Customs Broker” shall mean any person listed on Schedule 1.36 hereto or such other person selected by a Loan Party after written notice by Borrower to Lender who is reasonably acceptable to Lender to perform port of entry services to process Inventory imported by Borrower or one of its Subsidiaries from outside the United States of America and to supply facilities, labor and materials to Borrower or its Subsidiaries in connection therewith.
“DACA Account” shall mean any deposit or other bank account of any Loan Party subject to a Deposit Account Control Agreement.
“DACA Account Bank” shall mean a Non-Wells Fargo Account Bank with which any Loan Party and Lender have entered into a Deposit Account Control Agreement.
“Default” shall mean an act, condition or event which with notice or passage of time or both would constitute an Event of Default.
“Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance satisfactory to Lender, by and among Lender, any Loan Party and any bank at which such Loan Party maintains a deposit account, which provides that such bank will comply with instructions originated by Lender directing disposition of the funds in the deposit account without further consent by such Loan Party and has such other terms and conditions as Lender may reasonably require.
“Discretionary DACA Protocol Event” shall mean the Borrower’s maintenance of Excess Borrowing Availability at any time during any Non-Peak Period less than thirty-five percent (35%) but greater than or equal to twenty percent (20%) of the then-effective Maximum Credit.
“Disposition” shall mean, with respect to any property, any conveyance, sale, lease, sublease, assignment, transfer or other disposition of such property.
“Disregarded Domestic Person” shall mean any direct or indirect Domestic Subsidiary that is treated as a disregarded entity for United States federal income tax purposes if substantially all of its assets consist of the equity of one or more direct or indirect Foreign Subsidiaries.
“Distribution Center” shall mean the
approximately 600,000 square foot
distribution center located in Olive Branch, Mississippi leased by Borrower under a lease agreement expiring in 2022 with options to renew for three successive five-year periods.
“Domestic Subsidiary” shall mean any Subsidiary other than a Foreign Subsidiary.
“Eligible Credit Card Receivables” shall mean Credit Card Receivables of Borrower which are and continue to be acceptable to Lender, in each case based on the criteria set forth below as determined by Lender in good faith. Credit Card Receivables shall be Eligible Credit Card Receivables if:
such Credit Card Receivables arise from the actual and bona fide sale and delivery of goods or rendition of services by Borrower in the ordinary course of the business of Borrower which transactions are completed in accordance with the terms and provisions contained in any agreements binding on Borrower or the other party or parties related thereto;
such Credit Card Receivables are not past due (beyond any stated applicable grace period, if any, therefor) pursuant to the terms set forth in the Credit Card
Agreements with the Credit Card Issuer or Credit Card Processor of the credit card or debit card used in the purchase which give rise to such Credit Card Receivables;
such Credit Card Receivables are not unpaid more than five (5) Business Days after the date of the sale of Inventory giving rise to such Credit Card Receivables;
all material procedures required by the Credit Card Issuer or the Credit Card Processor of the credit card or debit card used in the purchase which gave rise to such Credit Card Receivables shall have been followed by Borrower and all documents required for the authorization and approval by such Credit Card Issuer or Credit Card Processor shall have been obtained in connection with the sale giving rise to such Credit Card Receivables;
the required authorization and approval by such Credit Card Issuer or Credit Card Processor shall have been obtained for the sale giving rise to such Credit Card Receivables;
Borrower shall have submitted all materials required by the Credit Card Issuer or Credit Card Processor obligated in respect of such Credit Card Receivables in order for Borrower to be entitled to payment in respect thereof;
the Credit Card Issuer or Credit Card Processor obligated in respect of such Credit Card Receivable has not failed to remit any monthly payment in respect of such Credit Card Receivable;
such Credit Card Receivables comply with the applicable terms and conditions contained in Section 7.2 of this Agreement;
the Credit Card Issuer or Credit Card Processor with respect to such Credit Card Receivables has not asserted a counterclaim, defense or dispute and does not have, and does not engage in transactions which may give rise to, any right of setoff against such Credit Card Receivables (other than setoffs to fees and chargebacks consistent with the practices of such Credit Card Issuer or Credit Card Processor with Borrower as of the date hereof or as such practices may change as a result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstance of Borrower);
the portion of the Credit Card Receivables owing by such Credit Card Issuer or Credit Card Processor in excess of the amount asserted to be owing or owing by Borrower to such Credit Card Issuer or Credit Card Processor pursuant to such setoffs, fees and chargebacks may be deemed Eligible Credit Card Receivables;
the Credit Card Issuer or Credit Card Processor with respect to such Credit Card Receivables has not set off against amounts otherwise payable by such Credit Card Issuer or Credit Card Processor to Borrower for the purpose of establishing a reserve or collateral for obligations of Borrower to such Credit Card Issuer or Credit Card Processor (notwithstanding that the Credit Card Issuer or Credit Card Processor may have setoffs for fees and chargebacks consistent with the practices of such Credit Card Issuer or Credit Card Processor with Borrower as of the date hereof or as such practices may hereafter change as a
result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstances of Borrower);
the portion of the Credit Card Receivables owing by such Credit Card Issuer or Credit Card Processor in excess of the amount set off by such Credit Card Issuer or Credit Card Processor to establish such reserves or collateral may be deemed Eligible Credit Card Receivables;
there are no facts, events or occurrences which would materially impair the validity, enforceability or collectability of such Credit Card Receivables or materially reduce the amount payable or materially delay payment thereunder (other than for setoffs for fees and chargebacks consistent with the practices of such Credit Card Issuer or Credit Card Processor with Borrower as of the date hereof or as such practices may hereafter change as a result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstances of Borrower);
such Credit Card Receivables are subject to the first priority, valid and perfected security interest and lien of Lender, in the sole discretion of Lender, and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any security interest or lien in favor of any person other than Lender except as otherwise permitted in this Agreement, in each case subject to and in accordance with the terms and conditions applicable hereunder to any such permitted security interest or lien;
there are no proceedings or actions which are pending or to the best of Borrower’s knowledge threatened, against the Credit Card Issuers or Credit Card Processors with respect to such Credit Card Receivables which would reasonably be expected to result in any material adverse change in the financial condition of any such Credit Card Issuer or Credit Card Processor;
such Credit Card Receivables are owed by Credit Card Issuers or Credit Card Processors deemed creditworthy at all times by Lender in good faith;
no event of default has occurred under the Credit Card Agreement of Borrower with the Credit Card Issuer or Credit Card Processor who has issued the credit card or debit card or handles payments under the credit card or debit card used in the sale which gave rise to such Credit Card Receivables which event of default gives such Credit Card Issuer or Credit Card Processor the right to cease or suspend payments to Borrower, except as may have been waived in writing by such Credit Card Issuer or Credit Card Processor, and the Credit Card Issuer or Credit Card Processor has not sent any written notice of default and/or notice of its intention to cease or suspend payments to Borrower in respect of such Credit Card Receivables, and such Credit Card Agreements are otherwise in full force and effect and constitute the legal, valid, binding and enforceable obligations of the parties thereto;
the terms of the sale giving rise to such Credit Card Receivables and all practices of Borrower with respect to such Credit Card Receivables comply in all material respects with applicable Federal, State, and local laws and regulations; and
the customer using the credit card or debit card giving rise to such Credit Card Receivable shall not have returned the merchandise purchased giving rise to such Credit Card Receivable.
General criteria for Eligible Credit Card Receivables may only be changed and any new criteria for Eligible Credit Card Receivables may only be established by Lender in good faith and in accordance with its customary practices for similarly situated borrowers, upon notice to Borrower, based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) existing on the date hereof to the extent Lender has no written notice thereof from Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Credit Card Receivables in the good faith determination of Lender. Any Credit Card Receivables which are not Eligible Credit Card Receivables shall nevertheless be part of the Collateral.
“Eligible In-Transit Inventory” shall mean all finished goods Inventory owned, prepaid or to be owned by Borrower that is not covered by a Letter of Credit and that is or will be in transit from outside of the United States to one of Borrower’s locations in the continental United States, and which (a) as of the date such Inventory becomes owned by Borrower (i) is fully insured, (ii) is subject to a first priority security interest in and lien upon such goods in favor of Lender (except for any possessory lien upon such goods in the possession of handlers, stores of goods, a freight carrier or shipping company securing only the freight charges for the transportation of such goods to Borrower), (iii) all documents, notices, instruments, statements and bills of lading relating thereto, if any, which Lender may deem necessary or desirable to evidence ownership by Borrower and/or to give effect to and protect the liens, security interests and other rights of Lender in connection therewith are delivered to Lender, and (iv) is subject to a Collateral Access Agreement when in the possession, custody or control of any Customs Broker; and (b) are and remain acceptable to Lender for lending purposes in its sole discretion.
“Eligible Inventory” shall mean Inventory (including Eligible L/C Inventory) consisting of finished goods held for resale in the ordinary course of the business of Borrower which are acceptable to Lender, in each case based on the criteria set forth below as determined by Lender in good faith. In general, Eligible Inventory shall not include (a) work-in-process; (b) raw materials; (c) spare parts for equipment; (d) packaging and shipping materials; (e) supplies used or consumed in Borrower’s business; (f) Inventory at premises which are not owned or not leased and controlled by Borrower; provided, that, Eligible Inventory shall include (i) Inventory at retail store locations in the United States of America which are leased by Borrower or owned and operated by a person other than Borrower, and (ii) Inventory at retail store locations outside the United States of America which are leased by Borrower or owned and operated by a person other than Borrower and at all other non-retail locations leased by Borrower or owned and operated by a person other than Borrower (both inside and outside of the United States of America), only to the extent that Lender has received a Collateral Access Agreement from the lessor or the owner or operator with respect to such location, and, if required by Lender in the case of this subclause (ii), (A) UCC financing statements (or, in the case of Inventory outside the United States, other evidence of perfection as determined in Lender’s reasonable
discretion) between the lessor or owner and operator, as consignee/bailee, and Borrower, as consignor/bailor, in form and substance satisfactory to Lender, which are duly assigned to Lender and (B) written notice of Lender’s first priority security interest in such Inventory to any lender to the lessor or owner and operator of such location; (g) Inventory which is in transit from outside of the United States to one of Borrower’s locations in the continental United States, other than Eligible In-Transit Inventory; provided, that, in no event shall the Eligible In-Transit Inventory component of Eligible Inventory exceed $500,000 at any one time; (h) Inventory subject to a security interest or lien in favor of any person other than Lender except those security interests or liens (i) permitted in this Agreement that are subordinate to the security interest of Lender pursuant to an intercreditor agreement in form and substance satisfactory to Lender between Lender and the holder of such other security interest or lien, and (ii) arising from time to time in favor of common carriers transporting Inventory from one Borrower location to another for a period of no greater than 5 Business Days; (i) bill and hold goods; (j) Slow Moving Inventory, other than Packaway Inventory; provided, that, (i) any item of Packaway Inventory shall only constitute Eligible Inventory from the date of Borrower’s acquisition of such Inventory until the conclusion of the second selling season to which such item relates and during which Borrower should reasonably hold such item out for sale, immediately following Borrower’s acquisition of such item, and (ii) in no event shall the Value of Packaway Inventory exceed five percent (5%) of Inventory at any one time; (k) Inventory which is not subject to the first priority, valid and perfected security interest of Lender, as determined in the sole discretion of Lender; (l) damaged and/or defective Inventory; (m) returned Inventory which is not held for sale in the ordinary course of business; and (n) Inventory purchased or sold on consignment.
General criteria for Eligible Inventory may only be changed and any new criteria for Eligible Inventory may only be established by Lender in good faith and in accordance with its customary practices for similarly situated borrowers, upon notice to Borrower, based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Lender has no written notice thereof from Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Inventory in the good faith determination of Lender. Any Inventory which is not Eligible Inventory shall nevertheless be part of the Collateral.
“Eligible LC Inventory” shall mean all finished goods Inventory owned or to be owned by Borrower and covered by a documentary Letter of Credit, and which finished goods Inventory is or will be in transit to one of Borrower’s locations in the continental United States, and which finished goods Inventory (a) as of the date such Inventory becomes owned by Borrower (i) is fully insured, (ii) is subject to a first priority security interest in and lien upon such goods in favor of Lender (except for any possessory lien upon such goods in the possession of handlers, storers of goods, a freight carrier or shipping company securing only the freight charges for the transportation of such goods to Borrower), and (iii) all documents, notices, instruments, statements and bills of lading relating thereto, if any, which Lender may deem necessary or desirable to evidence ownership by Borrower and/or to give effect to and protect the liens, security interests and other rights of Lender in connection therewith are delivered to Lender; and (b) are and remain acceptable to Lender for lending purposes in its sole discretion.
“Environmental Laws” shall mean all foreign, Federal, State and local laws (including common law), legislation, rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between any Loan Party and any Governmental Authority, (a) relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, (b) relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials. The term “Environmental Laws” includes (i) the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii) applicable state counterparts to such laws and (iii) any common law or equitable doctrine that may impose liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Materials.
“Equipment” shall mean, with respect to any Loan Party, all of such Loan Party’s now owned and hereafter acquired equipment, wherever located, including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, together with all rules, regulations and interpretations thereunder or related thereto.
“ERISA Affiliate” shall mean any person required to be aggregated with any Loan Party under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Pension Plan, other than events as to which the requirement of notice has been waived in regulations by the Pension Benefit Guaranty Corporation; (b) the adoption of any amendment to a Pension Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty
Corporation to terminate a Pension Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (f) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate in excess of $100,000
and (g) any other event or condition with respect to any Pension Plan maintained, or contributed to, by any ERISA Affiliate that could reasonably be expected to result in liability of any Loan Party in excess of $100,000.
“Event of Default” shall mean the occurrence or existence of any event or condition described in Section 10.1 hereof.
“Excess Borrowing Availability” shall mean the amount, as determined by Lender, calculated at any date, equal to: (a) the lesser of (i) the Adjusted Borrowing Base, or (ii) the Maximum Credit (in each case after giving effect to any Reserves then in effect); minus (b) the sum of: (i) the amount of all then outstanding and unpaid Obligations of Borrower, plus (ii) the amount of all then outstanding Letter of Credit Obligations.
“Excess Collateral Availability” shall mean the amount, as determined by Lender, calculated at any date, equal to: (a) the Borrowing Base (after giving effect to any Reserves then in effect) minus (b) the sum of: (i) the amount of all then outstanding and unpaid Obligations of Borrower, plus (ii) the amount of all then outstanding Letter of Credit Obligations.
“Exchange Act” shall mean the Securities Exchange Act of 1934, together with all rules, regulations and interpretations thereunder or related thereto.
“Excluded Accounts” shall mean (a) any bank accounts established by Borrower or its Subsidiaries used exclusively for payroll, payroll taxes or employee benefits, escrow, customs, insurance, or fiduciary purposes or compliance with legal requirements, to the extent such legal requirements prohibit the granting of a lien thereon, (b) any accounts for the purpose of maintaining cash and Cash Equivalents subject to Permitted Liens of the type described in Sections 9.8(f), (j) and (m); or (c) any other account (other than any deposit account that constitutes or contains proceeds of any ABL Priority Collateral) that is excluded from the collateral securing the Term Loan Agreement.
“Excluded Subsidiary” shall mean (a) any Subsidiary that is not a Wholly Owned Subsidiary, (b) any Immaterial Subsidiary, (c) any Subsidiary that is prohibited by applicable law, regulation or contractual obligation from guaranteeing the Obligations or that would require governmental (including regulatory) consent, approval, license or authorization in order to provide such guarantee or where the making of such guarantee would result in material adverse tax consequences (as reasonably determined by the Borrower), (d) any Domestic Subsidiary of the Borrower that is a Disregarded Domestic Person, (e) any direct or indirect Domestic Subsidiary of a direct or indirect Foreign Subsidiary of the Borrower, (f) any Foreign Subsidiary and (g) any other Subsidiary with respect to which, in the reasonable judgment of the
Lender and the Borrower, the burden or cost of providing a guarantee of the Obligations shall outweigh the benefits to be afforded thereby.
“Fee Letter” shall mean the letter agreement executed by Borrower and Lender as of May 16, 2012 regarding the payment of certain fees by Borrower to Lender in connection with and on account of the financial accommodations made to Borrower hereunder.
“Financing Agreements” shall mean, collectively, this Agreement, the Fee Letter, each Joinder Agreement, and all notes, guarantees, security agreements, deposit account control agreements, investment property control agreements, intercreditor agreements and all other agreements, documents and instruments now, prior to, or at any time hereafter executed and/or delivered by any Loan Party in connection with the credit obligations of the Loan Parties to Lender.
“Fiscal Quarter” shall mean each period of thirteen or fourteen weeks ending on or about April 30, July 31, October 31 and January 31.
“Fiscal Year” shall mean the 52/53 week period ending on the Saturday closest to January 31 of the following year.
“Foreign Subsidiary” shall mean (a) a Subsidiary that is organized under the laws of a jurisdiction other than the United States of America or any state thereof or the District of Columbia (and including a Subsidiary of such a Subsidiary) and (b) any direct or indirect Subsidiary that is (i) a “controlled foreign corporation” within the meaning of Section 957(a) of the Code and any Subsidiary of such controlled foreign corporation or (ii) a domestic corporation or domestic partnership for U.S. federal income tax purposes, all or substantially all of whose assets consist of Capital Stock in one or more entities described in clause (i) above.
“Funding Bank” shall have the meaning set forth in Section 3.3(a)
“GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied.
“Governmental Authority” shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
“Guarantor” shall mean the Original Guarantor and each Domestic Subsidiary of any Loan Party that is or becomes a party to this Agreement pursuant to Section 9.24; provided, however, that the Guarantors shall not include any Excluded Subsidiary.
“Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including any that are or become classified as hazardous or toxic under any Environmental Law).
“Hedge Agreement” shall mean an agreement between a Loan Party and a Bank Product Provider that is a rate swap agreement, basis swap, forward rate agreement, commodity swap, forward commodity contracts, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement rate, floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, any other similar agreement (including any option to enter into any of the foregoing or a master agreement for any the foregoing together with all supplements thereto) for the purpose of protecting against or managing exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices.
“Immaterial Subsidiaries” shall mean all Subsidiaries of the Borrower designated as such in writing by the Borrower to the Lender from time to time for which (a) the aggregate value of assets of any such Subsidiary does not exceed 2% of the consolidated total assets of the Borrower and its Subsidiaries, (b) the aggregate value of assets of all such Subsidiaries does not exceed 5% of the consolidated total assets of the Borrower and its Subsidiaries, (c) the gross revenue of such Subsidiary does not exceed 2% of the consolidated gross revenues of the Borrower and its Subsidiaries and (d) the aggregate gross revenues of all such Subsidiaries does not exceed 5% of the consolidated gross revenues of the Borrower and its Subsidiaries, in each case determined as of the last day of the most recent Fiscal Quarter or Fiscal Year for which financial statements have been delivered in accordance with Section 9.6. If, at any time and from time to time after the Closing Date, one or more Subsidiaries shall cease to qualify as “Immaterial Subsidiaries”, then the Borrower shall, on the date on which financial statements are in accordance with Section 9.6 for such Fiscal Quarter or Fiscal Year, as the case may be, delivered pursuant to this Agreement, designate in writing to the Lender one or more of such Subsidiaries (which shall cease to constitute “Immaterial Subsidiaries”) as may be necessary to ensure compliance with this definition.
“Indebtedness” shall mean, with respect to any Person, any liability, whether or not contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any property or services (other than an account payable to a trade creditor (whether or not an Affiliate) incurred in the ordinary course of business of such Person and payable in accordance with customary trade practices); (c) all obligations as lessee under leases which have been, or should be, in accordance with GAAP recorded as Capital Leases; (d)
any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including, without limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person (marked to market) arising under swap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such person against fluctuations in interest rates or currency or commodity values; (i) all obligations owed by such Person under License Agreements with respect to non-refundable, advance or minimum guarantee royalty payments; (j) indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer to the extent such Person is liable therefor as a result of such Person’s ownership interest in such entity, except to the extent that the terms of such indebtedness expressly provide that such Person is not liable therefor or such Person has no liability therefor as a matter of law and (k) the principal and interest portions of all rental obligations of such Person under any synthetic lease or similar off-balance sheet financing where such transaction is considered to be borrowed money for tax purposes but is classified as an operating lease in accordance with GAAP.
“Information Certificate” shall mean the Information Certificate of Borrower attached as Exhibit “B” hereto, containing material information with respect to Borrower and the Original Guarantor and their respective businesses and assets as of the date hereof, provided by or on behalf of Borrower and the Original Guarantor to Lender in connection with the preparation of this Agreement and the financing arrangements provided for herein.
“Intellectual Property” shall mean any Loan Party’s now owned and hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright applications, copyright registrations, trademarks, servicemarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing and all applications, registrations and recordings relating to any of the foregoing as may be filed in the United States Copyright Office, the United States Patent and Trademark Office, or in any similar office or agency of the United States of America, any State, any political subdivision thereof or in any other country or jurisdiction, together with all rights and privileges arising under applicable law with respect to such Loan Party’s use of any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-
in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or servicemark, or the license of any trademark or servicemark); customer and other lists in whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registration; software and contract rights relating to computer software programs, in whatever form created or maintained.
“Intercompany Note” shall mean an intercompany demand promissory note substantially in the form of Exhibit E.
“Intercreditor Agreement” shall mean that certain Lien Subordination and Intercreditor Agreement dated as of May 16, 2012 among the Lender, the Term Loan Agent and the Borrower substantially in the form attached as Exhibit “D” hereto, as the same may be amended, amended and restated, supplemented or otherwise modified in accordance with its terms.
“Interest Rate” shall mean,
as to Prime Rate Loans, a rate equal to the Prime Rate plus the Applicable Margin for Prime Rate Loans, and
as to LMIR Rate Loans, a rate equal to the LMIR Rate plus the Applicable Margin for LMIR Rate Loans.
Notwithstanding anything to the contrary contained in this definition, the Interest Rate shall mean the percentage per annum set forth above plus (in each case) two percent (2%) per annum, at Lender’s option, (i) for the period (A) from and after the effective date of termination or non-renewal hereof until such time as all Obligations are indefeasibly paid and satisfied in full in immediately available funds, or (B) from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing as determined by Lender and (ii) on Revolving Loans to Borrower at any time outstanding in excess of the Adjusted Borrowing Base or Maximum Credit (whether or not such excess(es) arise or are made with or without Lender’s knowledge or consent and whether made before or after an Event of Default).
“Inventory” shall mean all of Borrower’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by Borrower as lessor; (b) are held by Borrower for sale or lease or to be furnished under a contract of service; (c) are furnished by Borrower under a contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business.
“Investments” shall have the meaning set forth in Section 9.10.
“IPO” shall mean the underwritten primary public offering of the Borrower’s common Capital Stock on July 19, 2012 (and any subsequent secondary public offerings in respect of Borrower’s common Capital Stock) pursuant to an effective registration
statement filed with the Securities and Exchange Commission in accordance with the Securities Act.
“Joinder Agreement” shall mean a joinder agreement substantially in the form of Exhibit F or such other form as shall be approved by the Lender and the Borrower.
“Legal Requirements” shall mean, as to any Person, the organizational documents of such Person, and any treaty, law (including the common law), statute, ordinance, code, rule, regulation, guidelines, license, permit requirement, order or determination of an arbitrator or a court or other Governmental Authority, and the interpretation or administration thereof, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Lender” shall mean Wells Fargo Bank, National Association, as successor by merger to Wachovia Bank, N.A., and its successors and assigns.
“Letter of Credit Documents” shall mean, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk or (b) any collateral security for such obligations.
“Letter of Credit Limit” shall mean $5,000,000.
“Letter of Credit Obligations” shall mean, at any time, the aggregate undrawn amount of all Letters of Credit outstanding at such time.
“Letters of Credit” shall mean all letters of credit (whether documentary or stand-by and whether for the purchase of inventory, equipment or otherwise) issued by Lender for the account of the Borrower pursuant to this Agreement, and all amendments, renewals, extensions or replacements thereof.
“License Agreement” shall mean any agreement or other arrangement pursuant to which any Loan Party has a license or other right to use any trademarks, logos, designs, representations or other Intellectual Property owned by another Person and material to the conduct of the business of the Loan Parties, excluding commercially available off-the-shelf software.
“LMIR Rate”, for any day, shall mean the rate for one month U.S. dollar deposits as reported on the page of the Reuters Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being LIBOR01 page) as of 11:00 a.m., London time (rounded upwards, if necessary, to the nearest 1/100
of one percent (1%)), on such day, or if such day is not a London business day, then the immediately preceding London business day (or if not so reported, then as determined by Bank from another recognized source or interbank quotation).
“LMIR Rate Loan” means a Revolving Loan, or portion thereof, during any period in which it bears interest at an annual rate based upon the LMIR Rate. All LMIR Rate Loans shall be denominated in US Dollars.
“Loan Parties” shall mean the Borrower and the Guarantors.
“Material Adverse Effect” shall mean a material adverse effect on (a) the financial condition, business, performance or operations of Borrower and its Subsidiaries, taken as a whole; (b) the legality, validity or enforceability of this Agreement or any of the other Financing Agreements; (c) the legality, validity, enforceability, perfection or priority of the security interests and liens of Lender upon the Collateral; (d) the Collateral or its value taken as a whole; (e) the ability of Borrower and the Guarantors (taken as a whole) to repay the Obligations or of Borrower and the Guarantors (taken as a whole) to perform their obligations under this Agreement or any of the other Financing Agreements as and when to be performed; or (f) the ability of Lender to enforce the Obligations or realize upon the Collateral or otherwise with respect to the rights and remedies of Lender under this Agreement or any of the other Financing Agreements.
“Material Contract” shall mean any contract or other agreement (other than the Financing Agreements and the Term Loan Documents), whether written or oral, to which any Loan Party is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect, including, without limitation, any Credit Card Agreement. Material Contracts shall not include purchase orders for inventory or for furniture and fixtures in the ordinary course of business, and shall only include leases of real property to which a Loan Party is a party to the extent that the leased premises is any non-retail location.
“Maximum Credit” shall mean, at any time, the amount of $20,000,000, plus the amount of any Maximum Credit Incremental Increase then in effect in accordance with the provisions of Section 2.1(c) hereof.
“Maximum Credit Incremental Increase” shall have the meaning set forth in Section 2.1(c).
“Minimum Excess Collateral Availability” shall have the meaning set forth in Section 9.22 of this Agreement.
“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by any Loan Party or any ERISA Affiliate or with respect to which any Loan Party or any ERISA Affiliate may incur any liability.
“Net Cash Proceeds” shall mean, with respect to any sale, lease, transfer or other disposition of any asset, any Asset Sale, any Casualty Event, or the sale or issuance of any Indebtedness by Borrower or any of its Subsidiaries, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred
consideration) by or on behalf of Borrower or any of its Subsidiaries in connection with such transaction after deducting therefrom only (without duplication) (a) reasonable and customary brokerage commissions, underwriting fees and discounts, legal fees, accountant’s fees, investment banking fees, finder’s fees, other similar fees and commissions and reasonable out-of-pocket expenses, (b) the amount of taxes reasonably estimated by Borrower to be actually and reasonably attributable to such transaction, and (c) the amount of any Indebtedness secured by a security interest, lien or other encumbrance (other than a security interest, lien or other encumbrance created under any Financing Agreements) on such asset that, by the terms of such transaction, is required to be repaid upon such disposition, in each case to the extent, but only to the extent, that the amounts so deducted are actually paid to Borrower or any of its Subsidiaries.
“Net Recovery Percentage” shall mean the fraction, expressed as a percentage, (a) the numerator of which is the amount equal to the recovery on the aggregate amount of the Inventory at such time on a “going out of business sale” basis as set forth in the most recent appraisal of Inventory received by Lender in accordance with Section 7.4, net of operating expenses, liquidation expenses and commissions, and (b) the denominator of which is the applicable original cost of the aggregate amount of the Inventory subject to appraisal. The Net Recovery Percentage for Inventory used in Section 1.10 shall be based on the percentage in the most recent appraisal applicable to the time period for which the Borrowing Base is being calculated.
“Non-DACA Account” shall mean any deposit or other bank account of any Loan Party not subject to a current and effective Deposit Account Control Agreement.
“Non-Peak Period” shall mean all times during any calendar year other than the Peak Period.
“Non-Wells Fargo Account” shall mean any deposit or other bank account maintained by any Loan Party at any financial institution other than Wells Fargo Bank, National Association.
“Non-Wells Fargo Account Bank” shall mean any bank at which a Non-Wells Fargo Account is maintained.
“Obligations” shall mean (a) any and all Revolving Loans, Letter of Credit Obligations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower and the other Loan Parties to Lender and/or any of its Affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements or on account of any Letter of Credit and all other Letter of Credit Obligations, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to any Loan Party under the Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or
not due, primary or secondary, liquidated or unliquidated, or secured or unsecured; and (b) all obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower and the other Loan Parties to Lender or any Bank Product Provider arising under or pursuant to any Bank Products, whether now existing or hereafter arising.
“Original Guarantor” shall mean Five Below Merchandising, Inc., a Pennsylvania corporation, in its capacity as Guarantor under this Agreement.
“Other Taxes” shall have the meaning given to such term in Section 6.5(c).
“Packaway Inventory” means Inventory which is held by Borrower for sale only during certain selling seasons of the year, including, without limitation, holiday items.
“Payment Account” shall mean account no. 2079951067231 maintained by Lender and/or such other account or accounts maintained by Lender which Lender may from time to time designate to Borrower as the Payment Account for purposes of this Agreement and the other Financing Agreements.
“Peak Period” shall mean the period between October 1 through December 1 in any calendar year.
“Pension Plan” shall mean a “pension plan” (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which any Loan Party sponsors, maintains, or to which any Loan Party or any ERISA Affiliate makes, is making, or is obligated to make contributions, other than a Multiemployer Plan.
“Permits” shall have the meaning given to such term in Section 8.7(b).
“Permitted Investors” shall mean and include (i) any Person or group that was a stockholder of the Borrower on May 16, 2012 or his/her/its respective Affiliates, and (ii) equity investors that participated in the Borrower’s IPO.
“Permitted Investments” shall mean each of the following:
(i) accounts receivables owing to Borrower or any of its Subsidiaries if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms, (ii) investments in cash and Cash Equivalents, (iii) endorsement of instruments held for collection in the ordinary course of business, (iv) lease, utility and other similar deposits in the ordinary course of business and (v) accounts receivable and notes receivable from financially troubled counterparts in the ordinary course of business in order to prevent or limit loss;
loans and advances by Borrower or any of its Subsidiaries to directors, employees or officers of Borrower or such Subsidiary not to exceed the principal amounts set forth in Section 9.10 at any time;
obligations of account debtors to Borrower or any of its Subsidiaries arising from Accounts which are past due evidenced by a promissory note made by such account debtor payable to Borrower or such Subsidiary, the principal amount of which note shall not exceed $25,000 in any one case or $100,000 in the aggregate at any time outstanding;
, promptly upon the receipt by any Loan Party of the original of any such promissory note, such promissory note shall be endorsed to the order of Lender by such Loan Party and promptly delivered to Lender as so endorsed;
Investments outstanding on the date hereof;
Hedge Agreements permitted pursuant to Section 9.9(c) or Section 9.9(m);
Investments in securities of trade creditors or customers in the ordinary course of business that are received in settlement of bona fide disputes or pursuant to any plan of reorganization or liquidation or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;
Investments made as a result of consideration received in connection with a sale or other disposition made in compliance with Section 9.7(b);
Restricted Payments in compliance with Section 9.11;
other Investments in an aggregate amount not to exceed $3,500,000 on the date such Investments are made to the extent, and only to the extent: (A) at the time such Investments are made Excess Borrowing Availability is not less than $3,000,000; and (B) such Investments are not made with Revolving Loan Proceeds;
so long as no Default or Event of Default then exists or would result therefrom, the Borrower and its Subsidiaries may make Investments that are made in exchange for the substantially concurrent sale of Capital Stock of the Borrower permitted to be issued by it hereunder;
promissory notes or other obligations of directors, officers or other employees of the Borrower or any of its Domestic Subsidiaries in connection with such directors’, officers’ or employees’ purchase of Capital Stock of the Borrower or any direct or indirect parent thereof, so long as no cash is advanced by the Borrower or any of its Subsidiaries in connection with such Investment;
Investments that may arise as a result of the consummation of Sale and Leaseback Transactions permitted under Section 9.23;
Investments by (i) the Borrower in any Guarantor, (ii) the Borrower or any of its Subsidiaries in the Borrower or any Guarantor, (iii) a Subsidiary of the Borrower that is not a Loan Party in any other Subsidiary of the Borrower that is not a Loan Party, and (iv) the Borrower or any Guarantor in any Subsidiary of the Borrower that is not a
Guarantor in a maximum amount for all such Investments to all such Subsidiaries not to exceed $2,000,000 at any time outstanding; provided that any Investment in the form of a loan or advance shall be evidenced by an Intercompany Note (and shall be subject to the subordination provisions contained therein if made to a Subsidiary that is a Loan Party) and, in the case of a loan or advance by a Loan Party, pledged by such Loan Party as Collateral;
Investments of any person that becomes a Subsidiary on or after the Closing Date in an aggregate amount for all such Subsidiaries not to exceed $2,500,000 on the date such person becomes a Subsidiary; provided that (i) such Investments exist at the time such person is acquired, (ii) such Investments are not made in anticipation or contemplation of such person becoming a Subsidiary, and (iii) such Investments are not directly or indirectly recourse to the Borrower or any of its Subsidiaries or any of their respective assets, other than to the person that becomes a Subsidiary;
other Investments in an aggregate amount not to exceed $3,500,000 on the date such Investments are made; and
unsecured intercompany loans by any of the Subsidiaries of the Borrower to the Borrower evidenced by an Intercompany Note (and subject to the subordination provisions contained therein) for purposes and in amounts that would otherwise be permitted to be made as Restricted Payments to the Borrower.
“Permitted Liens” shall have the meaning given to such term in Section 9.8.
“Person” or “person” shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.
“Primary Non-Wells Fargo Account Bank” shall mean any bank or financial institution at which Non-Wells Fargo Accounts are maintained to the extent that such Non-Wells Fargo Accounts receive deposits from eight (8) or more of the Borrower’s retail locations.
“Prime Rate” shall mean the higher of (i) the rate from time to time publicly announced by Lender as its “prime rate,” whether or not such announced rate is the best rate available at Lender and subject to each increase or decrease in such “prime rate,” effective as of the first day of the month after any such increase or decrease occurs; and (ii) the rate which is the Federal Funds Rate in effect from time to time, plus one-half percent (.50%).
“Prime Rate Loans” shall mean any Revolving Loans or portion thereof on which interest is payable based on the Prime Rate in accordance with the terms thereof. All Prime Rate Loans shall be denominated in US Dollars.
“Quarterly Average Excess Availability” shall mean, at any time, the average of the daily Excess Borrowing Availability of Borrower for the immediately preceding Fiscal Quarter as calculated by Lender.
“Real Property” shall mean all now owned and hereafter acquired real property of any Loan Party, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located.
“Receivables” shall mean all of the following now owned or hereafter arising or acquired property of any Loan Party: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of any Loan Party; (d) letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued or payable to any Loan Party or otherwise in favor of or delivered to any Loan Party in connection with any Account or any Credit Card Receivables; and (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to any Loan Party, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by any Loan Party or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of such Loan Party) or otherwise associated with any Accounts, Inventory or general intangibles of any Loan Party (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to any Loan Party in connection with the termination of any Pension Plan or other employee benefit plan and any other amounts payable to any Loan Party from any Pension Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which any Loan Party is a beneficiary).
“Records” shall mean, with respect to any Loan Party, all of such Loan Party’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of such Loan Party with respect to the foregoing maintained with or by any other person).
“Reserves” shall mean as of any date of determination, such amounts as Lender may from time to time establish and revise in good faith in accordance with its customary practices for similarly situated borrowers, reducing the amount of Revolving Loans and Letters of Credit which would otherwise be available to Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks which adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) any of the Collateral of the types or categories included in the Borrowing Base or related thereto or its value or (ii) the assets
or business of Borrower or (iii) the security interests and other rights of Lender in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Lender’s good faith belief that any collateral report or financial information furnished by or on behalf of Borrower to Lender is or may have been incomplete, inaccurate or misleading in any material respect; or (c) to reflect outstanding Letter of Credit Obligations as provided in Section 2.2 hereof; or (d) on account of the aggregate amount of all then outstanding and unpaid trade payables and other obligations of Borrower which are outstanding more than sixty (60) days past due as of the end of the immediately preceding month, except for such trade payables and other obligations being disputed in good faith by Borrower; or (e) in respect of any state of facts which Lender determines in good faith constitutes a Default or an Event of Default. Notwithstanding the foregoing, to the extent that Lender establishes Reserves with respect to specific Collateral categories, the Value of any Collateral that becomes the subject of such a Reserve shall be included as a Reserve only once, irrespective of whether or not such Collateral Value could be included in more than one Reserve category.
Without limiting the generality of the foregoing, Reserves may be established to reflect any of the following: (a) that dilution with respect to the Credit Card Receivables (based on the ratio of the aggregate amount of non-cash reductions in Credit Card Receivables for any period to the aggregate dollar amount of the sales of Borrower giving rise to Credit Card Receivables for such period) as calculated by Lender for any period, is or is reasonably anticipated to be greater than five percent (5%), (b) inventory shrinkage, (c) reserves in respect of markdowns and cost variances (pursuant to discrepancies between the purchase order price of Inventory and the actual cost thereof), (d) any and all amounts in respect of sales, use and/or withholding taxes which are past due, (e) any and all rental payments, service changes or other amounts which are past due to lessors of personal property, (f) up to fifty percent (50%) of the aggregate amount of merchandise gift certificates and coupons as certified by the Borrower in its Financial Statements, (g) an increase in the number of days of the turnover of Inventory or a change in the mix of the Inventory that results in an overall decrease in the value thereof or a deterioration in its nature or quality (but only to the extent not addressed by the lending formulas in a manner satisfactory to Lender), (h) variances between the perpetual inventory records of Borrower and the results of any test counts of Inventory conducted by Lender with respect thereto, in excess of the percentage acceptable to Lender, (i) the aggregate amount of deposits, if any, received by Borrower from its retail customers in respect of unfilled orders for merchandise and the purchase price of layaway goods, (j) obligations, liabilities or indebtedness (contingent or otherwise) of Borrower to Lender, any Affiliate of Lender or any other financial institution acceptable to Lender (but in each case as to any Affiliate of Lender or other financial institution, only to the extent approved by Lender) arising under or in connection with any Hedge Agreement of Borrower with Lender, any Affiliate of Lender or any other financial institution acceptable to Lender, to the extent that such obligation, liabilities or indebtedness constitute Obligations as such term is defined herein or otherwise receive the benefit of the security interest of Lender in any Collateral, (k) any and all duty and freight charges in respect of Inventory in transit to the Borrower from outside the United States, (l) any and all rental payments, service charges or other amounts past due to lessors or owners and operators of real property at which any Inventory or Records are located, except to the extent such amounts are being disputed by Borrower in good faith, as determined by Lender in its sole discretion, (m) any and all rental payments, service
charges or other amounts to become due to any lessor or owner and operator of any retail location outside the United States or any non-retail location other than the Borrower’s corporate headquarters (whether inside or outside the United States) at which any Inventory or Records are located unless such lessor or owner and operator is a party to a Collateral Access Agreement with Lender;
, the Reserves established pursuant to this clause (m) shall not exceed at any time the aggregate of amounts payable for the next three (3) months to such lessor or owner and operator of such location;
, the foregoing limitation on the amount of the Reserves shall only apply so long as (i) no Event of Default shall exist or have occurred and be continuing, (ii) neither Borrower nor Lender shall have received notice of any event of default by the Borrower under the lease with respect to such location, and (iii) Borrower has not granted to such lessor or owner and operator a security interest or lien upon any assets of Borrower.
The amount of any Reserve established by Lender shall have a reasonable relationship to the event, condition or other matter which is the basis for such Reserve as determined by Lender in good faith. In the event that based on the calculation of the Borrowing Base or the Adjusted Borrowing Base by Lender at the time, the establishment of a Reserve at such time will result in there being no Excess Borrowing Availability at such time, Lender shall give Borrower one (1) Business Day’s notice prior to establishing such new Reserves. Promptly upon the receipt of such notice, Borrower shall take such action as may be required so that the event, condition or matters that is the basis for the Reserve no longer exists in a manner and to the extent reasonably satisfactory to Lender. In no event shall such notice and opportunity limit the right of Lender to establish such Reserve unless Lender shall have determined that the event, condition or other matter that is the basis for such new Reserve no longer exists or has otherwise been addressed in a manner and to the extent reasonably satisfactory to Lender so that Lender determines that such Reserve does not need to be established.
“Restricted Payment” shall mean (a) any cash dividend or other cash distribution, direct or indirect, on account of any shares of any class of Capital Stock of Borrower or any of its Subsidiaries, now or hereafter outstanding, (b) any redemption, retirement, sinking fund or similar payment on account of, or purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of Borrower or any of its Subsidiaries other than redemptions of existing Capital Stock funded from the proceeds of the issuance of new Capital Stock, (c) any cash payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire any shares of any class of Capital Stock of Borrower or any of its Subsidiaries now or hereafter outstanding other than such payments made with respect to required tax withholdings on the vesting, exercise and/or delivery of any outstanding warrants, options or other rights to acquire any shares of any class of Capital Stock or any employee or former employee of Borrower a