<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1999
REGISTRATION NO. 333-18397
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
POST-EFFECTIVE AMENDMENT
NO. 6 ON FORM S-2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
TRUSERV CORPORATION (PRIOR TO JULY 1, 1997 KNOWN AS COTTER & COMPANY)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
5072
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
36-2099896
(I.R.S. EMPLOYER IDENTIFICATION NO.)
8600 WEST BRYN MAWR AVENUE
CHICAGO, IL 60631-3505
(773) 695-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DANIEL A. COTTER
CHIEF EXECUTIVE OFFICER
TRUSERV CORPORATION
8600 WEST BRYN MAWR AVENUE
CHICAGO, IL 60631-3505
(773) 695-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
DANIEL T. BURNS, ESQ.
TRUSERV CORPORATION
8600 WEST BRYN MAWR AVENUE
CHICAGO, IL 60631-3505
(773) 695-6601
(773) 695-5465 (FAX)
GEOFFREY R. MORGAN, ESQ.
MICHAEL, BEST & FRIEDRICH
100 E. WISCONSIN AVENUE
MILWAUKEE, WI 53202
(414) 271-6560
(414) 277-0656 (FAX)
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. / X /
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<PAGE> 2
TRUSERV CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501 OF REGULATION S-K
<TABLE>
<CAPTION>
S-2 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
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<S> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.................................... Facing Page of Registration Statement; Cross-Reference
Sheet; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................................. Inside Front Cover Page; Available Information;
Incorporation of Certain Documents by Reference;
Outside Back Cover Page
3. Summary Information and Risk Factors ............................ Summary; Risk Factors
4. Use of Proceeds.................................................. Use of Proceeds
5. Determination of Offering Price.................................. Outside Front Cover Page of Prospectus
and Plan of Distribution
6. Dilution......................................................... Not Applicable
7. Selling Security Holders......................................... Not Applicable
8. Plan of Distribution............................................. Plan of Distribution
9. Description of Securities to be Registered....................... Description of Common Stock
10. Interests of Named Experts and Counsel........................... Not Applicable
11. Information with Respect to the Registrant....................... Summary, Available Information; Dividends; Selected
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business of TruServ; Distribution of
Patronage Dividends; Management; Index to Consolidated
Financial Statements
12. Incorporation of Certain Information by Reference................ Incorporation of Documents By Reference
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities................................... Not Applicable
</TABLE>
<PAGE> 3
PROSPECTUS
TRUSERV CORPORATION
95,228 SHARES CLASS A COMMON STOCK, $100 PAR VALUE
(IN UNITS OF SIXTY SHARES)
THE COMMON STOCK OFFERED HEREUNDER IS OFFERED EXCLUSIVELY TO RETAILERS AND
RENTERS OF HARDWARE, LUMBER AND RELATED PRODUCTS, IN CONNECTION WITH BECOMING
MEMBERS OF THE COMPANY. (SEE "PLAN OF DISTRIBUTION" HEREIN.)
THE COMMON STOCK OFFERED HEREUNDER IS LIMITED AS TO TRANSFERABILITY BY ITS
TERMS. THE COMPANY RETAINS AN AUTOMATIC LIEN AGAINST SUCH COMMON STOCK, AND
DIVIDENDS ACCRUING THEREON, FOR ANY INDEBTEDNESS DUE THE COMPANY. (SEE
"DESCRIPTION OF COMMON STOCK" HEREIN.)
THERE IS NO EXISTING MARKET FOR THE COMMON STOCK OFFERED HEREUNDER AND
THERE IS NO EXPECTATION THAT ANY MARKET WILL DEVELOP.
THIS PROSPECTUS RELATES TO SHARES OF THE CLASS A COMMON STOCK, PAR VALUE
$100 PER SHARE ("CLASS A COMMON STOCK" OR THE "SHARES"), OF TRUSERV CORPORATION,
A DELAWARE CORPORATION ("TRUSERV" OR THE "COMPANY"), FORMERLY KNOWN AS COTTER &
COMPANY ("COTTER"), TO BE ACQUIRED, IN UNITS OF 60 SHARES EACH (SUBJECT TO A
MAXIMUM OF FIVE UNITS PER PERSON), BY PERSONS BECOMING MEMBERS OF TRUSERV. SEE
"SUMMARY," "RISK FACTORS" AND "BUSINESS OF TRUSERV" HEREIN FOR FURTHER
INFORMATION.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY ANY PERSON CONTEMPLATING BECOMING A MEMBER OF TRUSERV AND
ACQUIRING ANY OF THE SHARES.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
UNIT OF 60 SHARES OF PRICE TO DISCOUNTS AND PROCEEDS TO
CLASS A COMMON STOCK PUBLIC COMMISSIONS COMPANY
<S> <C> <C> <C>
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Per Unit(1)............................... $6,000 See (2) Below $6,000(3)
Total..................................... $9,522,800 See (2) Below $9,522,800(3)
</TABLE>
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(1) The shares will be offered only in units of 60 Shares and no stockholder may
purchase more than five such units.
(2) There will be no underwriters. The subject stock will be sold directly by
TruServ at par value.
(3) There is no firm commitment for the sale of the securities offered
hereunder; they will be sold from time to time by TruServ. However, assuming
the sale of all securities offered hereunder, and before deduction of
approximately $50,000 for estimated expenses in connection with this
offering, the total proceeds will be as shown above.
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THE DATE OF THIS PROSPECTUS IS .
<PAGE> 4
AVAILABLE INFORMATION
TruServ (known as Cotter & Company prior to July 1, 1997) has filed with
the Securities and Exchange Commission (the "Commission") a Registration
Statement on Form S-4 (including all amendments, exhibits, annexes and schedules
thereto, the "Registration Statement"), pursuant to the Securities Act of 1933,
as amended (the "Securities Act"), and the rules and regulations promulgated
thereunder, covering the TruServ Class A common stock. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement. Statements made in this Prospectus as to the contents of
any contract, agreement or other document are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement or incorporated by reference herein, reference is
made to the exhibit for a more complete description of the matters involved, and
each such statement shall be deemed qualified in its entirety by such reference.
The Registration Statement, including exhibits filed as a part thereof, is
available at the Commission for inspection and copying as set forth below.
TruServ is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Such reports
and other information may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of
the Commission: Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; and New York Regional Office,
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
materials can be obtained at prescribed rates from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Such reports and other information may also be obtained from the
Commission's Web site which is maintained at http://www.sec.gov.
REPORTS TO SECURITY HOLDERS
Each year TruServ distributes to its Members an annual report containing
consolidated financial statements reported upon by a firm of independent
auditors. TruServ may, from time to time, also furnish to its Members interim
reports, as determined by management.
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS RELATING TO TRUSERV
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. TRUSERV WILL PROVIDE
WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, INCLUDING ANY
BENEFICIAL OWNER OF THE SHARES, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY OF ANY OR ALL SUCH DOCUMENTS RELATING TO TRUSERV (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY INCORPORATED HEREIN BY REFERENCE).
WRITTEN REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO KERRY J. KIRBY,
EXECUTIVE VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER, TRUSERV
CORPORATION, 8600 WEST BRYN MAWR AVENUE, CHICAGO, ILLINOIS 60631-3505; AND
TELEPHONE REQUESTS MAY BE MADE TO MR. KIRBY AT 773-695-5000. COPIES OF DOCUMENTS
SO REQUESTED WILL BE SENT BY FIRST CLASS MAIL, POSTAGE PAID, WITHIN ONE BUSINESS
DAY OF THE RECEIPT OF SUCH REQUEST.
ANNUAL REPORT ON FORM 10-K
This Prospectus is accompanied by a copy of TruServ's Annual Report on Form
10-K for the fiscal year ended December 31, 1998.
i
<PAGE> 5
INCORPORATION OF DOCUMENTS BY REFERENCE
The TruServ Annual Report on Form 10-K for the year ended December 31,
1998, previously filed by TruServ with the Commission pursuant to the Exchange
Act, is hereby incorporated by reference into this Prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROSPECTUS OTHER
THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH RESPECT TO SUCH MATTERS NOT
CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
TRUSERV. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES, IN ANY JURISDICTION TO OR FROM ANY PERSON TO OR
FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF TRUSERV SINCE THE DATE HEREOF OR THAT THE
INFORMATION IN THE PROSPECTUS OR IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATES HEREOF OR THEREOF.
-------------------------
ii
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION................... i
REPORTS TO SECURITY HOLDERS............. i
ANNUAL REPORT ON FORM 10-K.............. i
INCORPORATION OF DOCUMENTS BY
REFERENCE............................. ii
SUMMARY................................. 1
The Company........................... 1
Common Stock.......................... 2
Risk Factors.......................... 2
Retail Member Agreement............... 2
Franchises and Licenses............... 2
Retail Conversion Funds Agreement..... 3
Comparative Per Share Prices and
Dividend Policies.................. 3
Comparative Per Share Data............ 3
Selected Financial Data............... 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................ 5
RISK FACTORS............................ 6
Uncertainties Associated with the
Integration of Cotter and SCC...... 6
Uncertain Impact of Growth............ 6
Impact of Increasing Competition and
Market Changes..................... 6
Potential Loss of Members............. 6
Volatility of Merchandise and
Inventory Prices................... 6
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Difficulties in Integrating
Information Management and
Technology
Systems............................ 7
Impact of Environmental Issues........ 7
Difficulties of Combining Distribution
Facilities and Systems
Operations......................... 7
Regional Variations in Marketing
Opportunities...................... 7
Commonization......................... 7
Impact of Franchising and Licensing
Laws............................... 7
USE OF PROCEEDS......................... 8
PLAN OF DISTRIBUTION.................... 8
DIVIDENDS............................... 8
BUSINESS OF TRUSERV..................... 8
DISTRIBUTION OF PATRONAGE DIVIDENDS..... 8
MANAGEMENT.............................. 9
DESCRIPTION OF COMMON STOCK............. 9
Dividend Rights....................... 9
Voting Rights......................... 9
Liquidation Rights.................... 9
Preemptive Rights..................... 9
Redemption Provisions................. 9
Stockholders.......................... 9
Other Restrictions and Rights......... 9
LEGAL MATTERS........................... 10
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS............................ 11
</TABLE>
iii
<PAGE> 7
SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus, the Exhibits hereto and documents incorporated by reference
herein. This summary does not contain a complete statement of any material
information relating to TruServ and the other matters discussed herein and is
subject to, and is qualified in its entirety by, the more detailed information
and financial statements contained or incorporated by reference in this
Prospectus. Prospective Members of TruServ should read carefully this Prospectus
in its entirety. Certain capitalized terms used in this summary are defined
elsewhere in this Prospectus.
This Prospectus and the documents incorporated herein by reference contain
forward-looking statements about future results that are subject to risks and
uncertainties. TruServ's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
On April 1, 1997, the stockholders of Cotter and the shareholders of
ServiStar Coast to Coast Corporation ("SCC") agreed to merge the two companies
pursuant to an Agreement and Plan of Merger (the "Merger Agreement"). The Merger
was completed on July 1, 1997. Following completion of the Merger, the Company
was renamed TruServ.
THE COMPANY
TruServ Corporation. TruServ was organized as Cotter & Company, a Delaware
corporation in 1953. Upon its organization, it succeeded to the business of
Cotter & Company, an Illinois corporation organized in 1948. TruServ's principal
executive offices are located at 8600 West Bryn Mawr Avenue, Chicago, Illinois,
60631-3505. The telephone number is (773) 695-5000. TruServ is a Member-owned
wholesaler of hardware, lumber/building materials and related merchandise. It
was historically and is now the largest cooperative wholesaler of hardware and
related merchandise in the United States. The Company manufactures paint and
paint applicators. For reporting purposes, the Company operates in a single
industry as a Member-owned wholesaler cooperative.
The Company serves approximately 9,800 Coast to Coast(R), ServiStar(R) and
True Value(R) Hardware Stores throughout the United States. Primary
concentrations of Members exist in New York (approximately 8%), Pennsylvania
(approximately 7%), California and Texas (approximately 5% each) and Illinois,
Michigan and Ohio (approximately 4% each).
TruServ's Class A common stock, $100.00 par value per share ("Class A
common stock"), being offered hereby is exclusively offered to retailers of
hardware, lumber/building and related merchandise, in connection with becoming
Members of TruServ. The Class A common stock (which is the sole voting stock) is
offered only in sixty (60) share units and no party may acquire more than five
units (at the rate of one unit per store). Sales of Class A common stock are
made for cash.
TruServ Class B nonvoting common stock, par value $100 per share ("Class B
nonvoting common stock"), which is non-voting stock, is issuable only in
connection with the Members' patronage dividends (see "Distribution of Patronage
Dividends" below).
Membership, depending on the terms of the Member's Retail Member Agreement
with TruServ (the "Retail Member Agreement"), entitles TruServ Members to use
certain TruServ trademarks and trade names, including the federally registered
Coast to Coast(R), ServiStar(R) and True Value(R) trademarks, service marks and
collective membership marks. Generally speaking, former Cotter Members and
former SCC Members will continue to conduct their businesses under the same
retail banners as before the Merger, except to the extent permitted by TruServ
on a case by case basis. As soon as permitted by anticipated operating
synergies, those Members and new Members joining TruServ after the Merger will
have access to all private labels, except with respect to paint, mower and
outdoor power equipment, the private labels of which will be limited to use by
their respective retail organizations. Membership also entitles the Member to
receive annual patronage dividends based upon the Member's purchases from
TruServ. In accordance with TruServ's By-Laws and Retail Member Agreement, the
annual patronage dividend is paid to Members out of the gross
1
<PAGE> 8
margins from operations and other patronage source income, after deduction for
expenses, reserves and provisions authorized by the Board of Directors.
COMMON STOCK
The Class A common stock being offered hereby is limited as to
transferability in that TruServ has a ninety (90) day right of first refusal to
repurchase, at par value, a Member's stock before such stock can otherwise be
disposed of. Historically, the Company has always exercised the right to
repurchase. Additionally, TruServ retains an automatic lien on the Class A
common stock, and dividends accruing thereon, for any indebtedness due TruServ.
TruServ is obligated to repurchase a Member's Class A common stock and the
Member is obligated to sell such stock, at par value, in accordance with the
terms and conditions set forth in TruServ's By-Laws upon termination of the
Retail Member Agreement. The Agreement may be terminated by either TruServ or
the Member upon sixty (60) day's written notice. Termination of a Retail Member
Agreement by TruServ requires approval by a two-thirds vote of the Board of
Directors, except in the following circumstances where TruServ has the right to
immediately terminate the Agreement: the Member becomes insolvent, commits any
act of bankruptcy, files a voluntary petition in bankruptcy, is adjudicated as
bankrupt, or commits a breach of any obligation under the Agreement, which
breach is not cured within ten (10) days after written notice to the Member by
TruServ.
There is no existing market for the Class A common stock offered hereunder
and there is no expectation that any market will develop.
TruServ intends to use the proceeds of this offering primarily for general
working capital purposes, including the purchase of merchandise for resale to
Members.
RISK FACTORS
The business of TruServ is subject to a number of risks, including: the
uncertainties associated with the integration of the business of SCC and Cotter;
the uncertain impact of the growth in the hardware, lumber/building materials,
home center, do-it-yourself, rental and industrial/commercial industries; the
impact of increasingly intense competition and market changes; the potential
impact of future litigation; the impact of various environmental issues; the
volatility of merchandise and inventory prices; the failure to achieve
anticipated economies of scale and operating efficiencies of the post-Merger
Company; difficulties in integrating merchandise ordering and purchasing
systems, difficulties in integrating wholesale technology and technical support,
the difficulties of combining logistic/distribution facilities and systems
operations; regional variations in marketing opportunities; the combination of
disparate pricing strategies and the potential impact of franchising and
licensing laws on TruServ's operations.
RETAIL MEMBER AGREEMENT
All TruServ Members who were previously Cotter Members, TruServ Members
joining TruServ after the Merger, and those SCC Members who voted in favor of
the Merger, will be governed by the then current form of TruServ Retail Member
Agreement. Such Retail Member Agreement is an amendment and restatement of the
existing Cotter Retail Member Agreement. The SCC Membership Agreement of each
SCC Member voting against the Merger, or abstaining with respect thereto,
together with any related license or franchise agreements, has been assigned by
SCC to TruServ without further action.
FRANCHISES AND LICENSES
TruServ is continuing to review any retail activities which continue to be
carried out as franchises. TruServ-supported rental outlets that are franchises
include Taylor Rental Centers ("Taylor Rental") and Grand Rental Stations
("Grand Rental"). It is anticipated that additional licenses may be entered into
periodically with respect to the Taylor Rental Centers and Grand Rental
Stations. It is less likely that any additional franchise or license agreements
will be entered into with respect to the other retail programs operated as
franchises by SCC prior to the Merger. These programs will initially be operated
as part of the cooperative activities of TruServ.
2
<PAGE> 9
RETAIL CONVERSION FUNDS AGREEMENT
In connection with the Merger, TruServ agreed to make available to those
Members who were Members at the time of Merger an aggregate amount of
$40,000,000 to assist those store owners in defraying various conversion costs
associated with the Merger, and costs associated with certain upgrades and
expansions of stores. Of this aggregate amount, $14,000,000 has been made
available to former SCC Members to assist in defraying the costs of converting
to certain TruServ wholesale ordering and retail systems. In addition, the
amount of $10,000,000 was made available to former Cotter Members and former SCC
Members (one-half thereof to each such group) to assist in defraying a portion
of the costs of software consolidation of the businesses. Finally, the amount of
$16,000,000 was made available to former Cotter Members and former SCC Members
(one-half thereof to each such group) to assist in defraying a portion of the
costs of certain retrofitting and expansion projects at stores which are
preapproved by TruServ. Members requesting disbursements from these Funds must
agree to remain Members in good standing of TruServ for a period of five years,
without material reductions in purchases, and, should they fail to do so, a
prorated portion of any disbursement from the funds must be repaid by the Member
to TruServ. As of December 31, 1998, TruServ payouts to Members from these Funds
totaled $14,824,000.
COMPARATIVE PER SHARE PRICES AND DIVIDEND POLICIES
TruServ Class A common stock is not listed or traded on any national
securities exchange or on Nasdaq. It is offered exclusively to retailers or
renters of hardware, lumber and related products, in connection with becoming
Members of TruServ, at a purchase price equal to its par value. The TruServ
Class A common stock is restricted as to transferability and no public market
for such stock exists or is anticipated to develop in the future. TruServ does
not pay dividends with respect to its Class A common stock. For information with
respect to payment of patronage dividends, see "Distribution of Patronage
Dividends" below.
COMPARATIVE PER SHARE DATA
Because of the absence of any public market for TruServ stock, and the sale
or issuance thereof at its par value and any repurchase thereof at par, earnings
per share is inapplicable.
The following table sets forth certain book value per share data for
TruServ on a historical basis.
<TABLE>
<CAPTION>
HISTORICAL
----------
<S> <C>
Book value per share as of:
December 31, 1998......................................... $ 94.29
December 31, 1997......................................... $100.40
</TABLE>
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(1) The book value per share of the Company's Class A common stock and Class B
nonvoting common stock is the value, determined in accordance with generally
accepted accounting principles, of such shares as shown by the respective
year-end consolidated balance sheets of the Company.
3
<PAGE> 10
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS
--------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues.................................... $4,328,238 $3,331,686 $2,441,707 $2,437,002 $2,574,445
Gross margins............................... 298,135 241,020 196,636 202,068 223,331
Net margins(a).............................. 20,480 42,716 52,410 59,037 60,318
Patronage dividends......................... 35,024 43,782 53,320 60,140 60,421
Total assets................................ 1,600,764 1,438,913 853,985 819,576 868,785
Long-term debt.............................. 316,959 169,209 80,145 79,213 75,756
Promissory (subordinated) and instalment
notes payable............................. 124,422 172,579 185,366 186,335 199,099
Redeemable Class A common stock............. 49,880 47,423 4,876 5,294 6,370
Redeemable Class B nonvoting common stock... 195,643 187,259 114,053 113,062 116,663
Book value per share of Class A common stock
and Class B nonvoting common stock(b)..... 94.29 100.40 101.89 102.68 103.57
</TABLE>
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(a) The net margin for Fiscal Years 1998 and 1997 includes a deduction of
$20,034,000 and $13,650,000, respectively for non-recurring Merger
integration costs.
(b) The book value per share of the Company's Class A common stock and Class B
nonvoting common stock is the value, determined in accordance with generally
accepted accounting principles, of such shares as shown by the respective
year-end consolidated balance sheets of the Company.
4
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information relating to Management's Discussion and Analysis of Financial
Condition and Results of Operations is included in the TruServ Annual Report on
Form 10-K for the year ended December 31, 1998 in Part II, Item 7 and is hereby
incorporated by reference.
5
<PAGE> 12
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. TruServ's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed below. Such
factors, together with the other information in this Prospectus, should be
considered carefully.
UNCERTAINTIES ASSOCIATED WITH THE INTEGRATION OF COTTER AND SCC
The Merger involves the integration of SCC and Cotter's business
activities. Among the factors considered by the Cotter Board of Directors and
SCC Board of Directors in connection with their approval of the Merger Agreement
were the opportunities for operating efficiencies that they expect will
ultimately result from the Merger. The integration of TruServ's operations will
require the dedication of management resources in order to achieve the
anticipated operating efficiencies of the Merger. No assurance can be given that
difficulties encountered in integrating TruServ's on-going operations will be
overcome or that the benefits expected from such integration will be realized.
The difficulties of combining the SCC operations and Cotter's are increased by
the necessity of coordinating geographically separated organizations,
integrating personnel with disparate business backgrounds and combining
different corporate cultures. Difficulties encountered in connection with the
Merger and the integration of the operations of SCC and Cotter could have an
adverse effect on the business, results of operations or financial condition of
TruServ. Loss of key employees may also adversely affect TruServ.
UNCERTAIN IMPACT OF GROWTH
TruServ is unable to predict the impact of anticipated growth in the
hardware, Do It Yourself ("DIY") and rental industries on its future business
activities. While TruServ believes such growth will be beneficial to the
cooperative and its Members, no assurances can be given as to whether, when or
at what cost these benefits may be achieved.
IMPACT OF INCREASING COMPETITION AND MARKET CHANGES
In recent years, the hardware, DIY and rental businesses have become
increasingly competitive. TruServ will continue to experience intense
competition from so-called "Big Box" stores such as Home Depot, Menards,
Builders Square and Lowes, as well as from additional emphasis on directly
competitive lines of business by diversified retailers such as Sears. In many
instances, these competitors have greater resources, larger market shares and
more widespread presence than TruServ has. While TruServ believes that because
of its structure as a cooperative, it represents the best opportunity for its
Members to compete with the Big Boxes and general retailers, no assurances can
be given that such competition will be successful in any individual case or as a
whole.
POTENTIAL LOSS OF MEMBERS
If either a significant number of Members or Members representing a
disproportionate amount of the Members' aggregate purchases choose to terminate
their memberships as a result of dissatisfaction with the Merger, the effect on
TruServ could be adverse. TruServ has not experienced any material loss of
former Members due to the Merger. TruServ believes that various competing
cooperative organizations will continue to attempt to persuade former Members of
SCC and Cotter to terminate their relationships and become members of such
competing organizations. To the extent these recruitment efforts are successful,
the effect on TruServ and its Members could be adverse.
VOLATILITY OF MERCHANDISE AND INVENTORY PRICES
Merchandise and inventory prices in the lumber and building material
businesses can change rapidly and as a result of such fluctuations may have
periodic adverse effects on TruServ's profit margins and competitive abilities.
Generally speaking, prices for goods are higher when purchased in smaller lots.
While TruServ believes its cooperative structure presents the best opportunity
for Members to maximize their purchasing
6
<PAGE> 13
power and acquire merchandise for their Members at lower prices, no assurances
can be given that such will be the case for any individual Member or as a whole.
DIFFICULTIES IN INTEGRATING INFORMATION MANAGEMENT AND TECHNOLOGY SYSTEMS
The Management Information Systems and other technological aspects of the
pre-Merger businesses of Cotter and SCC, such as ordering systems, differing
types of SKU's, and Member communication systems, among others, are not
compatible. TruServ expects to integrate these systems as rapidly as possible,
but it is possible that currently unanticipated delays in time and increased
costs in achieving such systems integration may be encountered as the business
of TruServ goes forward.
IMPACT OF ENVIRONMENTAL ISSUES
Certain aspects of TruServ's business activities, such as the manufacture
of paint and related products, are carried on in environmentally sensitive
areas. TruServ is unable to predict whether, or to what extent, such business
activities may result in future costs or liabilities which are not currently
known. In addition, the environmental area is under constant review and scrutiny
by governmental authorities at the federal, state and local levels. No
assurances can be given that such governmental scrutiny may not have a material
adverse effect on TruServ.
DIFFICULTIES OF COMBINING DISTRIBUTION FACILITIES AND SYSTEMS OPERATIONS
Because of the disparate nature of existing distribution facilities and
methods, TruServ expects to spend significant time, effort and funds in
commonizing those activities. While TruServ has no reason to expect that such
commonization will not be achieved over time, the cost of doing so may be
material.
REGIONAL VARIATIONS IN MARKETING OPPORTUNITIES
Because TruServ will transact business nationwide, there may from time to
time be significant variations in marketing opportunities available to its
Members depending on economic conditions in the specific geographic region in
which that Member conducts his or her primary business. To the extent that
specific geographic regions experience more favorable or unfavorable economic
conditions than other areas of the country, the business of Members in those
regions would be affected accordingly. TruServ is not able to predict whether
the effect of such regional variations might be material to any individual
Member.
COMMONIZATION
Prior to the Merger, Members of SCC and Cotter utilized different pricing
strategies in the conduct of their separate businesses, disparate merchandise
assortments and merchandise identification systems, procurement and distribution
methods, vendor selection rationales, and stock keeping unit systems. These
various items will be commonized over time for all Members. TruServ is not
currently able to predict the costs of such commonization, which may be
material, or the effect on anticipated operating synergies resulting from the
Merger.
IMPACT OF FRANCHISING AND LICENSING LAWS
Prior to the Merger, SCC conducted a portion of its business in the form of
franchise and license arrangements with Members. As part of this process, SCC
complied with various franchise registration and related laws in approximately
fifteen states. Cotter did not conduct any portion of its business as a
franchise prior to the Merger. To the extent that additional business activities
of TruServ are required to comply with various franchise or licensing laws,
rules or regulations, additional costs would be incurred. TruServ cannot
currently quantify the potential cost of such compliance. Furthermore, such
franchise and license compliance issues could adversely impact the relationship
between TruServ and its Members, as well as the manner in which TruServ is
expected to conduct its operations, and lead to loss of management flexibility
and related synergies.
7
<PAGE> 14
USE OF PROCEEDS
The proceeds to be received from this offering of Class A common stock will
be used by TruServ primarily for general working capital purposes, including the
purchase of merchandise for resale to Members and the maintenance of adequate
inventory levels. Until used as provided herein, the net proceeds of the sale of
the Class A common stock may be invested in short-term commercial paper, bank
certificates of deposit, government securities, repurchase agreements, or other
similar short-term investments.
TruServ will use its best efforts to sell the Class A common stock being
offered hereunder but can give no assurances that all such Class A common stock
will be sold. As a result, TruServ may not receive the entire amount of
estimated proceeds from the sale of said Class A common stock.
PLAN OF DISTRIBUTION
TruServ's Class A common stock being offered hereby is offered exclusively
to retailers of hardware, lumber and related merchandise, in connection with
becoming Members of TruServ. Each independent retailer who applies to become a
stockholder-Member must subscribe for sixty (60) shares of TruServ's Class A
common stock, $100 par value, having a total purchase price of $6,000, for each
retail store (up to a maximum of 300 shares at $30,000 for five or more stores).
All sales of the Class A common stock will be made for cash.
Sales of Class A common stock are primarily made through TruServ's
registered securities agent(s) but only after the executive officers of TruServ
approve the admission of a new Member. Neither TruServ executive officers nor
its agent(s) receive any special or separate compensation or commission in
connection with the admission of new Members and concomitant sales of Class A
common stock. Although TruServ's retail support representatives frequently are
TruServ's initial contact with potential new Members, they do not, and are not
empowered to, admit new Members to TruServ.
DIVIDENDS
Other than the payment of patronage dividends, including the redemption of
some nonqualified written notices of allocation, TruServ has not paid dividends
on its Class A common stock or Class B nonvoting common stock. The Board of
Directors does not plan to pay dividends on either class of stock. Dividends
(other than patronage dividends) on the Class A common stock and Class B
nonvoting common stock, subject to the provisions of the Company's Certificate
of Incorporation, may be declared out of gross margins of TruServ, other than
gross margins from operations with or for Members and other patronage source
income, after deduction for expenses, reserves and provisions authorized by the
Board of Directors. Dividends may be paid in cash, in property, or in shares of
the common stock, subject to the provisions of the Certificate of Incorporation.
See "Distribution of Patronage Dividends" and "Description of Common Stock".
BUSINESS OF TRUSERV
Information relating to Business of TruServ is included in the TruServ
Annual Report on Form 10-K for the year ended December 31, 1998 in Part I, Item
1 and is hereby incorporated by reference.
DISTRIBUTION OF PATRONAGE DIVIDENDS
Information relating to Distribution of Patronage Dividends is included in
the TruServ Annual Report on Form 10-K for the year ended December 31, 1998 in
Part I, Item 1 and is hereby incorporated by reference.
8
<PAGE> 15
MANAGEMENT
Information relating to Management is included in the TruServ Annual Report
on Form 10-K for the year ended December 31, 1998 in Part III, Item 10 and is
hereby incorporated by reference.
DESCRIPTION OF COMMON STOCK
DIVIDEND RIGHTS. Dividends (other than patronage dividends) upon the Class
A common stock and Class B nonvoting common stock, subject to the provisions of
TruServ's Certificate of Incorporation, may be declared out of gross margins of
TruServ, other than gross margins from operations with or for Members and other
patronage source income, after deduction for expenses, reserves and provisions
authorized by the Board of Directors. Dividends may be paid in cash, in
property, or in shares of the common stock, subject to the provisions of the
Certificate of Incorporation (See "Dividends").
VOTING RIGHTS. The Class A common stock, which is the sole voting stock, is
offered only in sixty (60) share units, and no party may acquire more than five
units. The holders of Class A common stock have the exclusive voting power upon
all questions submitted to stockholders (including the election of Directors),
being entitled to one vote per share. Pursuant to the Certificate of
Incorporation and By-Laws of TruServ, the Board of Directors consists of
directors who are elected for staggered three-year terms.
LIQUIDATION RIGHTS. Upon dissolution, liquidation or winding up of the
Company, voluntary or involuntary, the assets are to be divided among and
distributed ratably to the holders of shares of Class A common stock and Class B
nonvoting common stock pro rata in accordance with their holdings and without
preference as between the classes.
PREEMPTIVE RIGHTS. Each shareholder has the right to purchase, and must
purchase when he becomes a stockholder-Member, sixty (60) shares of Class A
common stock per store, up to a maximum of 300 shares for five or more stores.
No shares of Class A common stock shall be issued or sold except in such units
and under such circumstances. No shares of Class B nonvoting common stock shall
be issued or sold except to parties who are, at the time of issuance, holders of
shares of Class A common stock.
REDEMPTION PROVISIONS. The Retail Member Agreement (the "Agreement") may be
terminated by either TruServ or the Member on sixty (60) days' written notice.
Termination by TruServ requires approval by a two-thirds vote of the Board of
Directors, except in the following circumstances where TruServ has the right to
immediately terminate the Agreement: the Member becomes insolvent, commits any
act of bankruptcy, files a voluntary petition in bankruptcy, is adjudicated as
bankrupt, or commits a breach of any obligation under the Agreement, which
breach is not cured within sixty (60) days after written notice to the Member by
TruServ. In the event the Agreement is terminated, TruServ undertakes to
purchase and the Member is required to sell all of his Class A common stock and
Class B nonvoting common stock at a price equal to the par value thereof.
Payment for the Class A common stock will be in cash. Payment for the Class B
nonvoting common stock will be a note payable in five equal annual instalments
which bears interest at a rate per annum as determined by the Board of
Directors.
STOCKHOLDERS. As of February 27, 1999, there were approximately 8,178
stockholders of Class A common stock and approximately 8,173 stockholders of
Class B nonvoting common stock.
OTHER RESTRICTIONS AND RIGHTS. (a) There are no conversion rights, sinking
fund provisions, or liability to further calls or assessment by TruServ in
regard to the Class A common stock.
(b) TruServ is given an automatic lien to secure the payment of any
indebtedness due TruServ from any stockholder of record upon the Class A common
stock and Class B nonvoting common stock shares of such stockholder and upon any
declared and unpaid dividends thereon.
(c) There is no existing market for the Class A common stock being offered
hereby. Whenever any stockholder may desire to dispose in any manner, by sale,
gift or otherwise, of all or any part of his shares of either class of common
stock, and whenever any stockholder dies or suffers any other event giving rise
to voluntary or involuntary transfer, by operation of law or otherwise, of all
or part of his said shares, TruServ is
9
<PAGE> 16
given the option, exercisable within ninety (90) days following the date upon
which it receives written notice from the stockholder, his heirs, executors,
personal representatives or other party in interest, as the case may be, of the
intended disposition or of the death of the stockholder or other event giving
rise to voluntary or involuntary transfer of the shares, to repurchase all
shares referred to in the notice. The option price in the case of either class
of common stock is the par value thereof. Any disposition or attempted
disposition or transfer, voluntary or involuntary, of common stock of TruServ is
null and void and confers no rights upon the transferee unless and until TruServ
has been given the required notice and has failed to exercise its option to
purchase within the specified time. The above restrictions do not apply, in the
case of a pledge by a stockholder of any of his shares in a bona fide
transaction as security for a debt, until the pledge or lienholder forecloses
the pledge or lien. The above restrictions do not apply at all in the case of a
Class B nonvoting common stock disposition to a person who is the owner of
shares of Class A common stock of TruServ.
LEGAL MATTERS
The legality of the issuance of the Class A common stock offered hereby has
been passed upon for TruServ by Messrs. Michael, Best & Friedrich, 100 E.
Wisconsin Ave., Milwaukee, Wisconsin 53202.
10
<PAGE> 17
ITEM 14(A). INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.
Information relating to the Consolidated Financial Statements is included
in the TruServ Annual Report on Form 10-K for the year ended December 31, 1998
in Part IV, Item 14 and is hereby incorporated by reference.
11
<PAGE> 18
---------------------------------------------------------
---------------------------------------------------------
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT, AND THE EXHIBITS AND SCHEDULES RELATING THERETO, WHICH
THE COMPANY HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON,
D. C. UNDER THE SECURITIES ACT OF 1933 AND TO WHICH REFERENCE IS HEREBY MADE FOR
FURTHER INFORMATION WITH RESPECT TO THE COMPANY AND THE SECURITIES OFFERED
HEREBY.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Available Information.................... i
Reports to Security Holders.............. i
Annual Report on Form 10-K............... i
Incorporation of Documents by
Reference.............................. ii
Summary.................................. 1
Selected Financial Data.................. 4
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 5
Risk Factors............................. 6
Use of Proceeds.......................... 8
Plan of Distribution..................... 8
Dividends................................ 8
Business of TruServ...................... 8
Distribution of Patronage Dividends...... 8
Management............................... 9
Description of Common Stock.............. 9
Legal Matters............................ 10
Index to Consolidated Financial
Statements............................. 11
</TABLE>
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY.
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
TRUSERV CORPORATION
95,228 SHARES
CLASS A COMMON STOCK
$100 PAR VALUE
(IN UNITS OF 60 SHARES)
------------------
PROSPECTUS
------------------
DATED
---------------------------------------------------------
---------------------------------------------------------
<PAGE> 19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the actual or estimated expenses in connection with the
issuance and distribution of the Class A common stock being registered:
<TABLE>
<S> <C>
Registration Fee............................................ $ 0
Printing of Registration Statement and Prospectus........... 15,000
Accounting Fees and Expenses................................ 10,000
Legal Fees.................................................. 10,000
Fees and Expenses for Qualifying Securities under "Blue Sky"
Laws of
Various States............................................ 15,000
-------
Total....................................................... $50,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
TruServ's Certificate of Incorporation, as amended, provides that TruServ
shall indemnify, in accordance with and to the full extent permitted by the
Delaware General Corporation Law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, an action by or in the right of TruServ), by
reason of the fact that such person is or was a director, officer, employee or
agent of TruServ, or is or was serving at the request of TruServ as a director,
officer, employee or agent of another company, partnership, joint venture, trust
or other enterprise, against any liability or expense actually and reasonably
incurred by such person in respect thereof. Such indemnification is not
exclusive of any other right of such director, officer, or employee to
indemnification provided by law or otherwise.
Additionally, pursuant to Section 145(a)-(g) of the Delaware General
Corporation Law which empowers a corporation to indemnify its directors,
officers, employees and agents, on July 23, 1973 the Board of Directors adopted
a By-Law (Article XIII, Indemnification of Directors, Officers and
Employees--Exhibit 2-A to Registration Statement on Form S-4 (No. 333-18397) and
incorporated herein by reference) providing for such indemnification. The
following is a summary of the most significant provisions of said By-Law:
As against third parties, TruServ shall indemnify any director, officer,
employee or agent for any expenses (including attorneys' fees, judgments, fines
and amounts paid in settlement) actually and reasonably incurred in defending
any threatened, pending or completed suit or proceeding, whether civil,
criminal, administrative or investigative brought against such person by reason
of the fact that he was or is a director, officer, employee or agent, if such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interest of TruServ, and with respect to any criminal
action or proceeding if he had no reasonable cause to believe his conduct
unlawful.
In any action or suit by or in the right of TruServ, TruServ shall
indemnify any director, officer, employee or agent who is or was a party or
threatened to be made a party to such threatened, pending or completed action or
suit, for expenses (including attorney's fees and amounts paid in settlement)
reasonably and actually incurred in connection with the defense or settlement of
such suit or action, if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of TruServ,
except that no indemnification shall be made if such person has been adjudged to
be liable for negligence or misconduct in the performance of his duty to TruServ
unless and only to the extent that the Court of Chancery of Delaware or the
court where the suit was brought finds that in view of all the circumstances of
the case, such person is entitled to indemnification.
Any indemnification, unless ordered by a court, shall be made by TruServ
only as authorized in the specific case upon a determination that
indemnification is proper in the circumstances because the party to be
II-1
<PAGE> 20
indemnified has met the applicable standard of conduct. Such determination shall
be made by the Board of Directors by a majority vote of a quorum, consisting of
directors who were not parties of such action, suit or proceeding, or if such a
quorum is not obtainable, or even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or by
the stockholders.
Additionally, the stockholders of TruServ have approved an amendment to the
Certificate of Incorporation to eliminate personal liability of directors for
monetary damages for breach of fiduciary duty of care. The amendment provides
that a director of TruServ shall not be liable to TruServ or its stockholders
for monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Law as the same exists or may hereafter
be amended.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 is concerned, see Item 17 "Undertakings" below.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2-A Agreement and Plan of Merger dated as of December 9, 1996
between the Company and ServiStar Coast to Coast Corporation
("SCC"). Incorporated by reference on Exhibit 2-A to
Registration Statement on Form S-4 (No. 333-18397)
4-A Amended and Restated Certificate of Incorporation of the
Company, effective July 1, 1997. Incorporated by reference
-- Exhibit 2-A to Registration Statement on Form S-4 (No.
333-18397).
4-B By-laws of the Company, effective July 1, 1997. Incorporated
by reference -- Exhibit 2-A to Registration Statement on
Form S-4 (No. 333-18397).
4-C Specimen certificate of Class A common stock. Incorporated
by reference--Exhibit 4-A to Registration Statement on Form
S-2 (No. 2-82836).
4-D Specimen certificate of Class B common stock. Incorporated
by reference--Exhibit 4-B to Registration Statement on Form
S-2 (No. 2-82836).
4-E Promissory (subordinated) note form effective for the
year-ending December 31, 1986 and thereafter. Incorporated
by reference--Exhibit 4-H to Registration Statement on Form
S-2 (No. 33-20960).
4-F Instalment note form. Incorporated by reference--Exhibit 4-F
to Registration Statement on Form S-2 (No. 2-82836).
4-G Copy of Note Agreement with Prudential Insurance Company of
America dated April 13, 1992 securing 8.60% Senior Notes in
the principal sum of $50,000,000 with a maturity date of
April 1, 2007. Incorporated by reference--Exhibit 4-J to
Post-Effective Amendment No. 2 to Registration Statement on
Form S-2 (No. 33-39477).
4-H Cotter & Company $50,000,000 Private Shelf Agreement with
Prudential Insurance Company of America dated December 29,
1995 incorporating amendment on existing Note Agreement with
Prudential Insurance Company of America dated April 13, 1992
securing 8.60% Senior Notes in the principal sum of
$50,000,000 with a maturity date of April 1, 2007.
Incorporated by reference--Exhibit 4-H to Post-Effective
Amendment No. 5 to Registration Statement on Form S-2 (No.
33-39477).
4-I Trust Indenture between Cotter & Company and First Trust of
Illinois (formerly Bank of America). Incorporated by
reference--Exhibit T3C to Cotter & Company Form T-3 (No.
22-26210).
4-J Credit Agreement dated July 1, 1997 for $300,000,000
Revolving credit between TruServ Corporation, various
financial institutions, and Bank of America. Incorporated by
reference--Exhibit 4-J to Post-Effective Amendment No. 5 to
Registration Statement on Form S-2 to Form S-4 (No.
333-18397)
</TABLE>
II-2
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4-K Amended and Restated Private Shelf Agreement between TruServ
Corporation and Prudential Insurance Company of America
dated November 13, 1997 for $150,000,000. Incorporated by
reference--Exhibit 4-K to Post-Effective Amendment No. 5 to
Registration Statement on Form S-2 to Form S-4 (No.
333-18397)
4-L Credit Agreement dated September 10, 1998 for $105,000,000
Note Purchase Agreement between TruServ Corporation and
various Purchasers.*
4-M Participation Agreement dated April 30, 1998 for $40,000,000
between TruServ Corporation, various Financial institutions
and Bank of Montreal.*
4-N Credit Agreement dated September 30, 1998 for $100,000,000
Revolving Credit between TruServ Corporation, various
Financial institutions, and Bank of America.*
5 Opinion of Daniel T. Burns, Esq.*
10-A Current Form of Retail Member Agreement with TruServ
Corporation between the Company and its Members that offer
primarily hardware and related items. Incorporated by
reference--Exhibit 2-A to the Company's Registration
Statement on Form S-4 (No. 333-18397).
10-B Form of Subscription to Shares of TruServ Corporation.
Incorporated by reference--Exhibit 10-B to Post-Effective
Amendment No. 5 to Registration Statement on Form S-2 to
Form S-4 (No. 333-18397)
10-C Cotter & Company Defined Lump Sum Pension Plan (As Amended
and Restated Effective As Of January 1, 1996). Incorporated
by reference--Exhibit 10-C to Post-Effective Amendment No. 5
to Registration Statement on Form S-2 (No. 33-39477).
10-D Cotter & Company Employees' Savings and Compensation
Deferral Plan (As Amended and Restated Effective April 1,
1994). Incorporated by reference--Exhibit 10-D to Post-
Effective Amendment No. 4 to Registration Statement on Form
S-2 (No. 33-39477).
10-E Cotter & Company Supplemental Retirement Plan between Cotter
& Company and selected executives of the Company (As Amended
and Restated January 2, 1996 Effective As Of January 1,
1996). Incorporated by reference--Exhibit 10-E to
Post-Effective Amendment No. 5 to Registration Statement on
Form S-2 (No. 33-39477).
10-F Annual Incentive Compensation Program and Long-Term
Incentive Compensation Program between Cotter & Company and
selected executives of the Company. Incorporated by
reference--filed as Exhibits A and B to Exhibit 10-N to
Registration Statement on Form S-2 (No. 33-39477).
10-G Cotter & Company Long-Term Incentive Compensation Program
for Executive Management (Amended) dated November 7, 1994.
Incorporated by reference--Exhibit 10-I to Post-Effective
Amendment No. 4 to Registration Statement on Form S-2 (No.
33-39477).
10-H Employment Agreement between Cotter & Company and Daniel A.
Cotter dated October 15, 1984. Incorporated by
reference--Exhibit 10-N to Post-Effective Amendment No. 2 to
Registration Statement on Form S-2 (No. 2-82836).
10-I Amendment No. 1 to Employment Agreement between Cotter &
Company and Daniel A. Cotter dated October 15, 1984
effective January 1, 1991. Incorporated by reference--
Exhibit 10-N to Registration Statement on Form S-2 (No.
33-39477).
10-J Contract between Daniel T. Burns and the Company.
Incorporated by reference--Exhibit 10-J to Post-Effective
No. 5 to Registration Statement in Form S-2 (No. 33-39477).
10-K Contract between Kerry J. Kirby and the Company.
Incorporated by reference--Exhibit 10-K to Post-Effective
No. 5 to Registration Statement on Form S-2 (No. 33-39477).
10-L Retail Conversion Funds Agreement dated as of December 9,
1996 between the Company and SCC. Incorporated by
reference--Exhibit 10-L to Registration Statement on Form
S-4 (No. 333-18397).
23-A Consent of Daniel T. Burns, Esq. (included in Exhibit 5).*
23-B Consent of Ernst & Young LLP (included on page II-7).*
</TABLE>
* Filed herewith.
II-3
<PAGE> 22
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions described in Item 15, or otherwise,
the Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 23
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS POST-EFFECTIVE
AMENDMENT NO. 6 ON FORM S-2 TO REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
CHICAGO, STATE OF ILLINOIS, ON THE 30TH DAY OF MARCH, 1999.
TRUSERV CORPORATION
By: /s/ DANIEL A. COTTER
------------------------------------
Daniel A. Cotter
Chairman, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW, CONSTITUTES AND APPOINTS DANIEL A. COTTER, KERRY J. KIRBY AND DANIEL T.
BURNS, JOINTLY AND SEVERALLY, ATTORNEYS-IN-FACT AND AGENTS, EACH WITH FULL
POWERS OF SUBSTITUTION, FOR HIM OR HER IN ANY AND ALL CAPACITIES TO SIGN ANY AND
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT, AND TO FILE THE SAME, AND ALL EXHIBITS THERETO, AND OTHER DOCUMENTS
IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, HEREBY
SATISFYING AND CONFIRMING ALL THAT EACH OF SAID ATTORNEYS-IN-FACT AND AGENTS, OR
HIS OR THEIR SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
ANNUAL REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DANIEL A. COTTER Chairman of the Board, March 30, 1999
- ----------------------------------------------------- Chief Executive Officer and
Daniel A. Cotter Director
/s/ DONALD J. HOYE President, Chief Operating March 30, 1999
- ----------------------------------------------------- Officer and Director
Donald J. Hoye
/s/ KERRY J. KIRBY Executive Vice President and March 30, 1999
- ----------------------------------------------------- Chief Financial Officer
Kerry J. Kirby
/s/ JOE W. BLAGG Director March 30, 1999
- -----------------------------------------------------
Joe W. Blagg
/s/ JAMES D. BURNETT Director March 30, 1999
- -----------------------------------------------------
James D. Burnett
/s/ WILLIAM M. CLAYPOOL, III Director March 30, 1999
- -----------------------------------------------------
William M. Claypool, III
/s/ JAY B. FEINSOD Director March 30, 1999
- -----------------------------------------------------
Jay B. Feinsod
/s/ WILLIAM M. HALTERMAN Director March 30, 1999
- -----------------------------------------------------
William M. Halterman
</TABLE>
II-5
<PAGE> 24
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ WILLIAM H. HOOD Director March 30, 1999
- -----------------------------------------------------
William H. Hood
/s/ JAMES D. HOWENSTINE Director March 30, 1999
- -----------------------------------------------------
James Howenstine
/s/ JERRALD T. KABELIN Director March 30, 1999
- -----------------------------------------------------
Jerrald T. Kabelin
/s/ PETER G. KELLY Director March 30, 1999
- -----------------------------------------------------
Peter G. Kelly
/s/ ROBERT J. LADNER Director March 30, 1999
- -----------------------------------------------------
Robert J. Ladner
/s/ GEORGE V. SHEFFER Director March 30, 1999
- -----------------------------------------------------
George V. Sheffer
/s/ DENNIS A. SWANSON Director March 30, 1999
- -----------------------------------------------------
Dennis A. Swanson
/s/ JOHN B. WAKE, JR. Director March 30, 1999
- -----------------------------------------------------
John B. Wake, Jr.
/s/ JOHN M. WEST, JR. Director March 30, 1999
- -----------------------------------------------------
John M. West, Jr.
/s/ BARBARA B. WILKERSON Director March 30, 1999
- -----------------------------------------------------
Barbara B. Wilkerson
</TABLE>
II-6
<PAGE> 25
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment
No. 6 on Form S-2 to the Registration Statement on Form S-4 (File No. 333-18397)
and related Prospectus of TruServ Corporation (Cotter & Company prior to July 1,
1997) for the registration of 95,228 shares of Class A common stock of our
report dated March 25, 1999 with respect to the consolidated financial
statements of TruServ Corporation included in its Annual Report (Form 10-K) for
the year ended December 31, 1998, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
March 30, 1999
II-7
<PAGE> 26
INDEX TO EXHIBITS FILED
TO POST EFFECTIVE AMENDMENT NO. 6 TO REGISTRATION STATEMENT ON
FORM S-4 OF TRUSERV CORPORATION
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <S>
4-L Credit Agreement dated September 10, 1998 for $105,000,000
Note Purchase Agreement between TruServ Corporation and
various Purchasers.*
4-M Participation Agreement dated April 30, 1998 for $40,000,000
between TruServ Corporation, various Financial institutions
and Bank of Montreal.*
4-N Credit Agreement dated September 30, 1998 for $100,000,000
Revolving Credit between TruServ Corporation, various
Financial institutions, and Bank of America.*
5 Opinion of Daniel T. Burns, Esq.
23-A Consent of Daniel T. Burns, Esq. (included in Exhibit 5).*
23-B Consent of Ernst & Young LLP (included on page II-7).
</TABLE>
Exhibits incorporated by reference are listed on Pages II-2 and II-3 of
Post-Effective Amendment No. 6 to this Registration Statement on Form S-4 of
TruServ Corporation.
Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Act by Registrants which have not Registered Securities
Pursuant to Section 12 of the Act.
As of the date of the foregoing Report, no annual report for the
Registrant's year ended December 31, 1998 has been sent to security holders.
Copies of such Annual Report and proxy soliciting materials will subsequently be
sent to security holders and furnished to the Securities and Exchange
Commission.
II-8
<PAGE> 1
EXHIBIT 4-L
TRUSERV CORPORATION
$105,000,000
6.85% SENIOR NOTES DUE 2008
----------
NOTE PURCHASE AGREEMENT
----------
DATED SEPTEMBER 10, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. AUTHORIZATION 1
2. PURCHASE AND SALE OF NOTES 1
3. CLOSING 2
3A. Certain Documents 2
3B. Opinion of Purchaser's Special Counsel 3
3C. Representations and Warranties; Performance No Default 3
3D. Purchase Permitted by Applicable Laws 3
3E. Payment of Fees 4
3F. Sale of Other Notes 4
3G. Private Placement Number 4
3H. Changes in Corporate Structure 4
3I. Proceedings and Documents 4
4. PREPAYMENTS 4
4A. Required Prepayments 4
4B. Optional Prepayments with Make-Whole Amount 5
4C. Allocation of Partial Prepayments 5
4D. Maturity; Surrender, etc. 5
4E. Purchase of Notes 5
4F. Make-Whole Amount 5
5. AFFIRMATIVE COVENANTS 7
5A. Financial Statements 7
5B. Inspection 9
5C. Maintenance of Properties 9
5D. Maintenance of Insurance 10
5E. Cooperative Status 10
5F. Compliance with Laws 10
5G. Payment of Taxes and Claims 10
5H. Corporate Existence, etc. 11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
6. NEGATIVE COVENANTS 11
6A. Lien, Debt and Other Restrictions 11
6A(1). Liens 11
6A(2). Debt 13
6A(3)(i). Sale of Assets 13
6A(3)(ii). Merger 13
6A(4). Restrictions on Transactions with Affiliates and Stockholders 15
6B. Restricted Investments 15
6C. Restricted Payments 15
6D. Compliance with ERISA 16
6E. No Change in Subordination Terms, etc. 16
6F. Nature of Business 16
6G. Minimum Asset Coverage 16
7. EVENTS OF DEFAULT 17
7A. Acceleration 17
7B. Rescission of Acceleration 20
7C. Notice of Acceleration or Rescission 20
7D. Other Remedies 20
8. REPRESENTATIONS, COVENANTS AND WARRANTIES 20
8A. Organization; Qualifications; Corporate Power 20
8B. Authorization, etc. 21
8C. Disclosure 21
8D. Organization and Ownership of Shares of Subsidiaries; Affiliates 21
8E. Financial Statements 22
8F. Actions Pending 22
8G. Outstanding Debt 22
8H. Title to Properties 23
8I. Taxes 23
8J. Conflicting Agreements and Other Matters 23
8K. Offering of Notes 23
8L. Use of Proceeds 24
8M. ERISA 24
8N. Governmental Consent 24
8O. Environmental Compliance 24
8P. Section 144A 25
8Q. Status under Certain Statutes 25
8R. Priority of Notes 25
8S. Licenses, Permits, etc. 25
9. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 25
9A. Purchase for Investment 25
9B. Source of Funds 26
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
10. DEFINITIONS; ACCOUNTING MATTERS 27
10A. Defined Terms 27
10B. Accounting Principles, Terms and Determinations 33
11. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES 34
11A. Registration of Notes 34
11B. Transfer and Exchange of Notes 34
11C. Replacement of Notes 34
12. PAYMENTS ON NOTES 35
12A. Place of Payment 35
12B. Home Office Payment 35
13. EXPENSES, ETC. 35
13A. Transaction Expenses 36
13B. Survival 36
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT 36
15. AMENDMENT AND WAIVER 36
15A. Requirements 36
15B. Solicitation of Holders of Notes 37
15C. Binding Effect, etc. 37
15D. Notes Held by Company, etc. 37
16. NOTICES 37
17. REPRODUCTION OF DOCUMENTS 38
18. CONFIDENTIAL INFORMATION 38
19. SUBSTITUTION OF PURCHASER 39
20. MISCELLANEOUS 40
20A. Successors and Assigns 40
20B. Payments Due on Non-Business Days 40
20C. Severability 40
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
20D. Construction 40
20E. Counterparts 40
20F. Governing Law 40
20G. Submission to Jurisdiction 40
20H. WAIVER OF JURY TRIAL 41
</TABLE>
Exhibit A Form of Note
Exhibit B Form of Opinion of Daniel T. Burns
Exhibit C Form of Opinion of Michael Best & Friedrich LLP
Exhibit D Form of Promissory Notes
Exhibit E Form of Subordination Provisions
<PAGE> 6
TRUSERV CORPORATION
8600 West Bryn Mawr Avenue
Chicago, Illinois 60631
September 10, 1998
To Each of the Purchasers
Listed in the Attached Schedule 1
Ladies and Gentlemen:
The undersigned, TRUSERV CORPORATION, a Delaware corporation formerly
known as Cotter & Company (herein called the "COMPANY"), hereby agrees with you
as set forth below. Reference is made to paragraph 10 hereof for definitions of
capitalized terms used herein and not otherwise defined herein; references to a
"paragraph," a "Schedule" or an "Exhibit" are, unless otherwise specified, to a
paragraph of this Agreement or to a Schedule or an Exhibit attached to this
Agreement.
1. AUTHORIZATION.
The Company will authorize the issue and sale of $105,000,000 aggregate
principal amount of its 6.85% Senior Notes due 2008 (the "Notes," such term to
include any such notes issued in substitution therefor pursuant to paragraph 11
of this Agreement or the Other Agreements (as hereinafter defined)). The Notes
shall be substantially in the form of Exhibit A attached hereto, with such
changes therefrom, if any, as may be approved by you and the Company.
2. PURCHASE AND SALE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount specified opposite your
name in Schedule I at the purchase price of 100% of the principal amount
thereof. Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (the "OTHER AGREEMENTS")
identical with this Agreement with each of the other purchasers named in
Schedule I (the "OTHER PURCHASERS"), providing for the sale at such Closing to
each of the Other Purchasers of Notes in the principal amount specified opposite
its name in Schedule I. Your obligation hereunder and the obligations of the
Other Purchasers under the Other Agreements are several and not joint
obligations and you shall have no obligation under any Other Agreement and no
liability to any Person for the performance or non-performance by any Other
Purchaser thereunder.
-2-
<PAGE> 7
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Howard, Smith & Levin LLP, 1330 Avenue
of the Americas, New York, New York, at 10:00 a.m., New York time, at a closing
(the "CLOSING") on September 10, 1998 or on such other Business Day thereafter
on or prior to September 25, 1998 as may be agreed upon by the Company and you
and the Other Purchasers. At the Closing the Company will deliver to you the
Notes to be purchased by you in the form of a single Note (or such greater
number of Notes in denominations of at least $100,000 as you may request) dated
the date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to account number
8666-0-00846 at Bank of America, 231 South LaSalle Street, Chicago, Illinois
60607, ABA number 071000039. If at the Closing the Company shall fail to tender
such Notes to you as provided above in this Section 3, or any of the conditions
specified in this paragraph 3 shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment. Your obligation to
purchase and pay for the Notes to be sold to you is subject to the fulfillment
to your satisfaction, prior to or at the Closing, of the following conditions:
3A. CERTAIN DOCUMENTS. You shall have received the following, each
dated the date of the Closing:
(i) The Note(s) to be purchased by you.
(ii) Certified copies of the resolutions of the Board of Directors
of the Company authorizing the execution and delivery of this Agreement and the
issuance of the Notes, and of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Agreement and
the Notes.
(iii) A certificate of the Secretary or an Assistant Secretary,
dated the date of the Closing, certifying the names and true signatures of the
officers of the Company authorized to sign this Agreement and the Notes and the
other documents to be delivered hereunder and certifying as to the resolutions
attached to such certificate and other corporate proceedings relating to the
authorization, execution and delivery of the Notes and this Agreement.
(iv) A certificate of an officer of the Company, dated the date of
the Closing, certifying that the conditions specified in paragraphs 3C and 3H
have been fulfilled.
(v) Certified copies of the Certificate of Incorporation and
By-laws of the Company.
-3-
<PAGE> 8
(vi) A favorable opinion of Daniel T. Burns, general counsel of
the Company (or such other counsel designated by the Company and acceptable to
you) satisfactory to you and substantially in the form of Exhibit B attached
hereto, and as to such other matters as you may reasonably request. A favorable
opinion of Michael Best & Friedrich LLP satisfactory to you and substantially in
the form of Exhibit C attached hereto, and as to such other matters as you may
reasonably request. The Company hereby directs such counsel to deliver such
opinions, agrees that the issuance and sale of any Notes will constitute a
reconfirmation of such directions, and understands and agrees that you upon
receipt of such opinions will and hereby are authorized to rely on such
opinions.
(vii) Good standing certificates for the Company from the
Secretaries of State of Delaware and Illinois dated of a recent date and such
other evidence of the status of the Company as you may reasonably request.
(viii) Additional documents or certificates with respect to legal
matters or corporate or other proceedings related to the transactions
contemplated hereby as may be reasonably requested by you.
3B. OPINION OF PURCHASER'S SPECIAL COUNSEL. You shall have
received from Howard, Smith & Levin LLP, a favorable opinion satisfactory to you
as to such matters incident to the matters herein contemplated as you may
reasonably request.
3C. REPRESENTATIONS AND WARRANTIES; PERFORMANCE; NO DEFAULT. The
representations and warranties contained in paragraph 8 shall be true when made
and at the time of the Closing. The Company shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to or at the Closing and after giving
effect to the issue and sale of the Notes (and the application of the proceeds
thereof as contemplated by paragraph 8L) no Default or Event of Default shall
have occurred and be continuing. Neither the Company nor any Subsidiary shall
have entered into any transaction since the date of the Memorandum that would
have been prohibited by paragraph 6 had such paragraph applied since such date.
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Notes to be purchased by you on the terms and conditions herein
provided (including the use of the proceeds of such Notes by the Company) shall
(i) be permitted by the laws and regulations of each jurisdiction to which you
are subject, without recourse to provisions (such as Section 1405(a)(8) of the
New York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (ii) not
violate any applicable law or regulation (including, without limitation, Section
5 of the Securities Act or Regulation T, U or X of the Board of Governors of the
Federal Reserve System) and (iii) not subject you to any tax, penalty, liability
or other onerous condition under or pursuant to any applicable law or
regulation, and you shall have received such certificates or other evidence as
you may request to establish compliance with this condition.
-4-
<PAGE> 9
3E. PAYMENT OF FEES. Without limiting the provisions of paragraph
13, the Company shall have paid to you the fees, charges and disbursements of
your special counsel referred to in paragraph 3B to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
3F. SALE OF OTHER NOTES. Contemporaneously with the Closing, the
Company shall sell to the Other Purchasers and the Other Purchasers shall
purchase the Notes to be purchased by them at the Closing as specified in
Schedule I.
3G. PRIVATE PLACEMENT NUMBER. A Private Placement number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for the Notes.
3H. CHANGES IN CORPORATE STRUCTURE. Except as specified in
Schedule 3H, the Company shall not have changed its jurisdiction of
incorporation or been a party to any merger or consolidation and shall not have
succeeded to all or any substantial part of the liabilities of any other entity,
at any time following the date of the most recent financial statements referred
to in Schedule 8E.
3I. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory to
you and your special counsel, and you and your special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as you or they may reasonably request.
4. PREPAYMENTS.
4A. REQUIRED PREPAYMENTS. On July 1, 2002, the Company will prepay
$10,500,000 principal amount (or such lesser principal amount as shall then be
outstanding) of the Notes, and on July 1, 2003 and on each July 1 thereafter to
and including July 1, 2007 the Company will prepay $15,750,000 principal amount
(or such lesser principal amount as shall then be outstanding) of the Notes,
each such prepayment to be at par and without payment of the Make-Whole Amount
or any premium, provided that upon any partial prepayment of the Notes pursuant
to paragraph 4B or purchase of the Notes permitted by paragraph 4E the principal
amount of each required prepayment of the Notes becoming due under this
paragraph 4A on and after the date of such prepayment or purchase shall be
reduced in the same proportion as the aggregate unpaid principal amount of the
Notes is reduced as a result of such prepayment or purchase.
4B. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT. The Company may,
at its option, upon notice as provided below, prepay at any time all, or from
time to time any part of, the Notes, in an amount not less than 10% of the
aggregate principal amount of the Notes then outstanding in the case of a
partial prepayment, at 100% of the principal amount so prepaid, together with
interest on such principal amount so prepaid accrued to the prepayment date plus
the Make-Whole
-5-
<PAGE> 10
Amount determined for the prepayment date with respect to such principal amount.
The Company will give each holder of Notes written notice of each optional
prepayment under this paragraph 4B not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
such date, the aggregate principal amount of the Notes to be prepaid on such
date, the principal amount of each Note held by such holder to be prepaid
(determined in accordance with paragraph 4C), and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid, and shall
be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment (calculated
as if the date of such notice were the date of the prepayment), setting forth
the details of such computation. Two Business Days prior to such prepayment, the
Company shall deliver to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.
4C. ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each partial
prepayment of the Notes, the principal amount of the Notes to be prepaid shall
be allocated among all of the Notes at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore called for prepayment.
4D. MATURITY; SURRENDER, ETC. In the case of each prepayment of
Notes pursuant to this paragraph 4, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such date
and the applicable Make-Whole Amount, if any. From and after such date, unless
the Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and canceled and shall not be reissued, and
no Note shall be reissued in lieu of any prepaid principal amount of any Note.
4E. PURCHASE OF NOTES. The Company will not and will not permit
any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment or prepayment
of the Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provisions of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.
4F. MAKE-WHOLE AMOUNT. The term "MAKE-WHOLE AMOUNT" means, with
respect to any Note, an amount equal to the excess, if any, of the Discounted
Value of the Remaining Scheduled Payments with respect to the Called Principal
of such Note over the amount of such Called Principal, provided that the
Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amount, the following terms have the following
meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4B or has become or is
declared to be immediately due and payable pursuant to paragraph 7A, as the
context requires.
-6-
<PAGE> 11
"DISCOUNTED VALUE" means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal
of any Note, 0.50% over the yield to maturity implied by (i) the yields
reported, as of 11:00 A.M. (New York City time) on the second Business Day
preceding the Settlement Date with respect to such Called Principal, on page
"USD" of the Bloomberg Financial Markets Services Screen (or, if not available,
any other nationally recognized trading screen reporting on-line intraday
trading in United States government securities) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or (ii) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported, for the
latest day for which such yields have been so reported as of the second Business
Day preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a constant
maturity equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield will be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond-equivalent yields in accordance
with accepted financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to and greater
than the Remaining Average Life and (2) the actively traded U.S. Treasury
security with the duration closest to and less than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining Scheduled
Payment with respect to such Called Principal by (b) the number of years
(calculated to the nearest one-twelfth year) that will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such Called
Principal if no payment of such Called Principal were made prior to its
scheduled due date, provided that if such Settlement Date is not a date on which
interest payments are due to be made under the terms of the Notes, then the
amount of the next succeeding scheduled interest payment will be reduced by the
amount of interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to paragraph 4B or 7A.
"SETTLEMENT DATE" means, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or has become or is declared to be immediately due and payable
pursuant to paragraph 7A, as the context requires.
-7-
<PAGE> 12
5. AFFIRMATIVE COVENANTS. The Company covenants that so long as
any Note is outstanding:
5A. FINANCIAL STATEMENTS. The Company covenants that it will
deliver to each holder of Notes that is an Institutional Investor:
(i) as soon as practicable and in any event within 60 days after
the end of each quarterly period (other than the last quarterly period) in
each fiscal year, consolidated statements of operations and cash flows of
the Company and its Subsidiaries for the period from the beginning of the
current fiscal year to the end of such quarterly period, and a consolidated
balance sheet of the Company and its Subsidiaries as at the end of such
quarterly period, setting forth in each case in comparative form figures
for the corresponding period in the preceding fiscal year, all in
reasonable detail, prepared in accordance with GAAP and satisfactory in
form to the Required Holder(s) and certified by a Senior Financial Officer
of the Company, subject to changes resulting from year-end adjustments;
(ii) as soon as practicable and in any event within 120 days after
the end of each fiscal year, consolidated statements of operations, capital
stock and retained earnings and cash flows of the Company and its
Subsidiaries for such year, and a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such year, setting forth in each case
in comparative form corresponding consolidated figures from the preceding
fiscal year, all in reasonable detail and satisfactory in scope to the
Required Holder(s) and, as to such consolidated statements, certified by
Ernst & Young LLP (or any independent public accountants of recognized
national standing) whose certificate shall be in scope and substance
satisfactory to the Required Holder(s) accompanied by an additional
certificate of such accountants stating that they have reviewed this
Agreement and stating further whether, in making their audit, they have
become aware of any condition or event that then constitutes a Default or
an Event of Default, and, if they are aware that any such condition or
event then exists, specifying the nature and period of the existence
thereof (it being understood that such accountants shall not be liable,
directly or indirectly, for any failure to obtain knowledge of any Default
or Event of Default unless such accountants should have obtained knowledge
thereof in making an audit in accordance with generally accepted auditing
standards or did not make such an audit);
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its stockholders and copies of all registration statements (without
exhibits) and all reports which it files with the Securities and Exchange
Commission (or any governmental body or agency succeeding to the functions
of the Securities and Exchange Commission);
-8-
<PAGE> 13
(iv) promptly, and in any event within ten days after a
Responsible Officer becoming aware of any of the following, a written
notice setting forth the nature thereof and the action, if any, that the
Company or an ERISA Affiliate proposes to take with respect thereto:
(a) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations thereunder,
for which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof if such reportable event
could reasonably be expected to have a Material Adverse Effect; or
(b) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or
(c) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title 1 or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of
the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then existing,
could reasonably be expected to have a Material Adverse Effect;
(v) promptly, and in any event within 30 days of receipt thereof,
copies of any notice to be Company or any Subsidiary from any Federal or
state Governmental Authority relating to any order, ruling, statute or
other law or regulation that could reasonably be expected to have a
Material Adverse Effect; and
(vi) with reasonable promptness, such other data and information
relating to the business, operations, affairs, financial condition, assets
or properties of the Company or any of its Subsidiaries or relating to the
ability of the Company to perform its obligations hereunder and under the
Notes as from time to time may be reasonably requested by any such holder
of Notes.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each such holder an Officer's
Certificate executed by a Responsible Officer demonstrating (with computations
in reasonable detail) compliance by the Company and its Subsidiaries with the
provisions of paragraph 6 and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the nature
and period of existence thereof and what action the Company proposes to take
with respect thereto. The Company also covenants that immediately after any
Responsible Officer obtains knowledge of an Event of Default or Default, and in
any event within
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<PAGE> 14
five Business Days of the date that such Responsible Officer obtains such
knowledge, it will deliver to each holder of Notes an Officer's Certificate
executed by a Responsible Officer specifying the nature and period of existence
thereof and what action the Company proposes to take with respect thereto.
5B. INSPECTION. The Company shall, and shall cause each
Subsidiary to, maintain proper books of record and account, in which full, true
and correct entries in conformity with GAAP consistently applied shall be made
of all financial transactions and matters involving the assets and business of
the Company and such Subsidiary. The Company shall permit the representatives of
each holder of Notes that is an Institutional Investor:
(i) No Default. If no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its
independent public accountants, and (with the consent of the Company,
which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in
writing; and
(ii) Default. If a Default or Event of Default then exists,
at the expense of the Company to visit and inspect any of the offices
or properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to
make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and
accounts of the Company and its Subsidiaries), all at such times and
as often as may be requested.
5C. MAINTENANCE OF PROPERTIES. The Company will and will cause
each of its Subsidiaries to maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business carried on in
connection therewith may be properly conducted at all times and shall make all
repairs, replacements, additions and betterments as needed so that the
efficiency of such properties shall be maintained, provided that this paragraph
5C shall not prevent the Company or any Subsidiary from discontinuing the
operation and the maintenance of any of its properties if such discontinuance is
desirable in the conduct of its business and such discontinuance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5D. MAINTENANCE OF INSURANCE. The Company covenants that it and
each Subsidiary will maintain, with financially sound and reputable insurers,
insurance in such amounts and against such liabilities and hazards as are
customarily maintained by companies in businesses similar to the businesses of
the Company and each such Subsidiary and owning properties similar to the
properties owned by the Company and each such Subsidiary; provided, however,
that such insurance is commercially available; and provided further that the
Company and its Subsidiaries may maintain a system of self insurance against
such liabilities and hazards if such system is comparable to the self-insurance
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<PAGE> 15
systems customarily maintained by companies in businesses similar to the
Company's business and owning properties similar to the Company's properties.
Together with each delivery of financial statements under clause (ii) of
paragraph 5A, the Company will, upon the request of any Holder that is an
Institutional Investor, deliver an Officer's Certificate specifying the details
of such insurance in effect.
5E. COOPERATIVE STATUS. The Company covenants that it will at
all times maintain its status as a cooperative for purposes of Subchapter T of
the Code; provided, however, in the event that the Code or other applicable law
is modified after the date hereof and as a result of such modification the
Company is unable to satisfy its obligations under this paragraph, then the
Required Holders and the Company shall agree, or in good faith negotiate to
agree, to amend the covenants contained in this Agreement so that the
application of such covenants (following such modification of the Code or other
applicable law and the effect thereof on the Company) will be substantially the
same as prior thereto.
5F. COMPLIANCE WITH LAWS. The Company covenants that it
shall,and shall cause each Subsidiary to, comply with all applicable laws,
rules, regulations, decrees and orders of all federal, state, local or foreign
courts or governmental agencies, authorities, instrumentalities or regulatory
bodies (including, without limitation, Environmental Laws) the noncompliance
with which could be reasonably expected to result in a Material Adverse Effect.
5G. PAYMENT OF TAXES AND CLAIMS. The Company will and will
cause each of its Subsidiaries to file all tax returns required to be filed in
any jurisdiction and to pay and discharge all taxes shown to be due and payable
on such returns and all other taxes, assessments, governmental charges, or
levies imposed on them or any of their respective properties, assets, income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent and all claims (including, without
limitation, claims for labor, materials and supplies) for which sums have become
due and payable that have or might become a Lien on properties or assets of the
Company or any Restricted Subsidiary, provided that neither the Company nor any
Subsidiary need pay any such tax or assessment or claims if the amount,
applicability or validity thereof is contested by the Company or such Subsidiary
on a timely basis in good faith and in appropriate proceedings, and the Company
or such Subsidiary has established adequate reserves therefor in accordance with
GAAP on the books of the Company or such Subsidiary.
5H. CORPORATE EXISTENCE, ETC. The Company will at all times
preserve and keep in full force and effect its corporate existence. Subject to
paragraph 6A(3)(ii), the Company will at all times preserve and keep in full
force and effect the corporate existence of each of its Subsidiaries (unless
merged into the Company or a Subsidiary) and all rights and franchises of the
Company and its Subsidiaries unless, in the good faith judgment of the Company,
the termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.
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<PAGE> 16
6. NEGATIVE COVENANTS.
6A. LIEN, DEBT AND OTHER RESTRICTIONS. The Company covenants
that it will not and will not permit any Subsidiary to:
6A(1). LIENS. Create, assume or suffer to exist any Lien upon
any of its property or assets, whether now owned or hereafter acquired, except:
(i) Liens for taxes, assessments, governmental charges or
levies, statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary
course of business for sums not yet due or which are being
actively contested in good faith by appropriate proceedings;
(ii) Liens arising out of judgments or awards against the
Company or any Subsidiary which are being actively contested in
good faith by appropriate proceedings;
(iii) Liens incidental to the conduct of its business or
the ownership of its properties and assets (including attorneys'
Liens and Liens in connection with worker's compensation,
unemployment insurance and other like laws, but excluding any
Lien imposed by ERISA) and Liens to secure the performance of
bids, tenders or trade contracts, or to secure statutory
obligations, surety or appeal bonds or other Liens of like
general nature, all of which were not incurred in connection with
the borrowing of money or the obtaining of advances or credit;
provided in each case, the obligation secured is not overdue, or,
if overdue, is being actively contested in good faith by
appropriate proceedings;
(iv) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for rights-of-way,
utilities and other similar purposes, or zoning or other
restrictions as to the use of real property that are necessary
for the conduct of the operations of the Company and its
Subsidiaries or that customarily exist on properties of
corporations engaged in similar businesses and are similarly
situated and that do not in any event materially impair their use
in the operations of the Company and its Subsidiaries;
(v) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or another
Subsidiary;
(vi) Liens in existence on the date hereof described on
Schedule 6A;
(vii) after the date hereof, Liens (A) consisting of
Capitalized Lease Obligations, or (B) existing prior to the time
of acquisition upon any property acquired by the Company or any
Subsidiary through purchase, merger or consolidation or
otherwise, whether or not expressly assumed by the Company
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<PAGE> 17
or such Subsidiary, or (C) placed on property at the time of
acquisition by the Company or any Subsidiary to secure all or a
portion of (or to secure Debt incurred to pay all or a portion
of) the purchase price thereof, provided that (1) in the case of
(B), any such Lien shall not have been created, incurred or
assumed in contemplation of such purchase, merger, consolidation
or other event in (B), (2) all of such property is not or shall
not thereby become encumbered in any amount in excess of the
lesser of 100% of the cost thereof or fair market value thereof
(as determined in good faith by the board of directors of the
Company), (3) in the case of (B) and (C), any such Lien shall be
confined solely to the item(s) of property so acquired, (4) in
the case of (C), any such Lien shall have been created or
incurred concurrently with the acquisition of such property, and
(5) any Debt secured by such Lien is permitted by the provisions
of paragraph 6A(2). Notwithstanding the terms of this clause
(vii) of paragraph 6(A)(1), the Company or any Subsidiary may not
dispose of assets to a third party and repurchase them with Debt
secured in whole or in part by Liens placed on such assets;
however, this subparagraph is not intended to limit the Company's
ability to sell assets and lease such assets back under operating
leases;
(viii) Liens renewing or extending any Lien permitted by
clauses (vi) and (vii) of this paragraph 6(A)(1), provided that
(A) such Lien is not extended to other property of the Company or
any Subsidiary, (B) the principal amount of Debt secured by such
Lien does not exceed the principal amount outstanding at the time
of such renewal or extension, and (C) no Default or Event of
Default shall exist or result therefrom;
(ix) Liens securing non-recourse Debt of Subsidiaries
relating to accounts receivable securitization transactions,
provided that the total amount of accounts receivable subject to
accounts receivable securitization transactions does not exceed
at any time more than fifteen percent (15%) of gross receivables
of the Company and its Subsidiaries, and further provided that
any such Debt shall have no claim against any other asset of the
Company or its Subsidiaries; and
(x) other Liens securing Funded Debt (other than Funded
Debt that constitutes Subordinated Debt); provided, however, that
(a) such Funded Debt is permitted by the provisions of paragraph
6A(2) and (b) the aggregate amount of all Secured Funded Debt
outstanding together with all Funded Debt of any Subsidiary
(other than as permitted by clause (i) of paragraph 6A(2)) does
not at any time exceed an amount equal to ten percent (10%) of
Consolidated Total Assets.
6A(2). DEBT. Create, incur, assume or suffer to exist any Debt,
except:
(i) Funded Debt of any Subsidiary to the Company or any
other wholly-owned Subsidiary;
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<PAGE> 18
(ii) Subordinated Funded Debt;
(iii) Senior Funded Debt of the Company and its
Subsidiaries, so long as (a) the aggregate principal amount of
consolidated Senior Funded Debt does not exceed at any time (i)
through December 31, 1998 an amount equal to sixty percent (60%)
of Consolidated Capitalization, (ii) through September 30, 1999
an amount equal to fifty-five percent (55%) of Consolidated
Capitalization and (iii) after September 30, 1999 an amount equal
to fifty percent (50%) of Consolidated Capitalization and (b) the
aggregate amount of all Funded Debt of Subsidiaries (excluding
that permitted by clause (i) of this paragraph 6A(2)), together
with all Secured Funded Debt does not exceed 10% of Consolidated
Total Assets (it being understood that for purposes of this
clause (iii) Consolidated Capitalization and Consolidated Total
Assets shall be measured as of the later of (x) the end of the
Company's most recent quarterly period and (y) any other date as
of which the Company has prepared and delivered to each holder of
the Notes that is an Institutional Investor a consolidated
balance sheet of the Company and its Subsidiaries).
(iv) non-recourse Debt of Subsidiaries relating to
accounts receivable securitization transactions, provided that
the total amount of accounts receivable subject to accounts
receivable securitization transactions does not exceed at any
time more than fifteen percent (15%) of gross receivables
outstanding for the Company and its Subsidiaries and, further
provided that any such Debt shall have no claim against any other
asset of the Company or its Subsidiaries; and
(v) Current Debt of the Company provided that commencing
on September 1, 1998 and at all times thereafter there shall have
been a period of at least thirty (30) consecutive days within the
twelve month period immediately preceding the date of
determination during which the average aggregate principal amount
of Current Debt of the Company outstanding during such 30-day
period did not exceed at any time during such 30-day period an
amount equal to the minimum amount of Funded Debt which would
have been permitted as additional Senior Funded Debt under clause
(iii) of this paragraph 6A(2) at any time during such 30-day
period, it being understood and agreed that to the extent Current
Debt is treated as Senior Funded Debt for purposes of this
paragraph 6A(2)(v), it shall also be included in Consolidated
Capitalization.
6A(3)(i). SALE OF ASSETS. Sell, lease, transfer or otherwise
dispose of any assets of the Company or any Subsidiary (such sale, lease,
transfer or other disposition shall include (A) the sale and/or issuance of
stock of any Subsidiary to Persons other than the Company or any wholly-owned
Subsidiary and (B) any dilution of ownership arising from a merger or
consolidation of Subsidiaries as permitted by paragraph 6A(3)(ii)), other than
in the ordinary course of business, unless all such assets sold, leased or
otherwise disposed of outside of the ordinary course of business during the most
recent
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<PAGE> 19
36-month rolling period when added together, without duplication, with any
assets then proposed to be sold outside of the ordinary course of business, do
not constitute more than ten percent (10%) of the Consolidated Total Assets.
Excluded from the foregoing limitation are the disposition of assets (x)
relating to accounts receivable securitization transactions, provided that the
total amount of accounts receivable subject to accounts receivable
securitization transactions does not exceed at any time more than fifteen
percent (15%) of gross receivables of the Company and its Subsidiaries and,
further provided that the transferee of such assets shall have no claim against
any other asset of the Company or its Subsidiaries relating to such transfer,
and finally provided that such assets have been transferred for fair market
value, (y) the proceeds of which are, within 180 days of such disposition,
either (i) reinvested in property or assets for use in the existing business of
the Company and its Subsidiaries, or (ii) applied on a pro rata basis to prepay
Senior Funded Debt, including, without limitation, the Notes pursuant to
paragraph 4B hereof, including the Make-Whole Amount provided for in said
paragraph 4B and (z) consisting of Designated Permitted Asset Sales.
6A(3)(ii). MERGER. Merge or consolidate with any other Person,
except that (a) Subsidiaries may be merged into the Company or any other
Subsidiary, (b) the Company may merge with another Person, provided that the
Company is the surviving corporation, and no Event of Default or Default shall
exist either immediately before or after such merger and (c) any Subsidiary may
merge with another Person (other than the Company unless permitted by clauses
(a) and (b) above) so long as no Event of Default or Default shall exist
immediately before or after such merger.
6A(4). RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES AND
STOCKHOLDERS. Directly or indirectly, purchase, acquire or lease any property
from, or sell, transfer or lease any property (other than shares of stock of
Company) to, or otherwise deal with (i) any Affiliate or Substantial
Stockholder, or (ii) any corporation in which an Affiliate, Substantial
Stockholder or the Company (either directly or through Subsidiaries) owns 5% or
more of the outstanding voting stock, except that (a) any such Affiliate or
Substantial Stockholder may be a director, officer or employee of the Company or
any Subsidiary and may be paid reasonable compensation in connection therewith,
(b) the Company and its Subsidiaries may perform or engage in any of the
foregoing in the ordinary course of business upon terms no less favorable to the
Company or such Subsidiary (as the case may be) than if no such relationship
described in clauses (i) and (ii) above existed and (c) the Company may sell or
purchase from any such Person shares of the Company's stock subject to the
provisions of paragraphs 6B and 6C.
6B. RESTRICTED INVESTMENTS. The Company will not, and will not
permit any Subsidiary to, make or permit a Subsidiary to make any Investment
except the Company and any Subsidiary may:
(a) make or permit to remain outstanding loans or advances to any
wholly-owned Subsidiary;
(b) own, purchase or acquire stock, obligations or securities of
a Subsidiary or of a corporation which immediately after such purchase or
acquisition will be a Subsidiary;
(c) acquire and own stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing to
the Company or any Subsidiary;
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<PAGE> 20
(c) own, purchase or acquire prime commercial paper, banker's
acceptances and certificates of deposit in United States and Canadian
commercial banks (having combined capital and surplus of not less than
U.S. $100,000,000) and repurchase agreements with respect to the
foregoing, in each case due within one year from the date of purchase
and payable in the United States in United States dollars, obligations
of the government of the United States or any agency thereof, and
obligations guaranteed by the government of the United States;
(d) make or permit to remain outstanding travel and other similar
advances to officers and employees in the ordinary course of business;
(e) permit to remain outstanding Investments existing on the
Closing Date and described on Schedule 6B; and
(f) to the extent applicable, make Investments permitted under
paragraph 6C below.
6C. RESTRICTED PAYMENTS. The Company will not, and will not
permit any Subsidiary to, pay or declare cash dividends, cash patronage
dividends or dividends on any class of its stock (other than dividends in kind)
or redeem, purchase or otherwise acquire, or make any redemptions, purchase, or
other acquisition of any of its stock or apply miscellaneous deductions in lieu
of patronage dividends, or make or permit any Subsidiary to make any Restricted
Investment (each a "RESTRICTED PAYMENT") except to the extent that the aggregate
amount of all such Restricted Payments made after December 28, 1996 shall not
exceed an amount equal to the sum of (i) $25,000,000 plus (ii) 100% (or minus
100% in the case of a deficit) of Consolidated Net Earnings for the period
(taken as one accounting period) commencing on December 29, 1996 and terminating
at the end of the last fiscal quarter preceding the date of any proposed
Restricted Payment.
6D. COMPLIANCE WITH ERISA. The Company will not, and will not
permit any Subsidiary to, engage in any transaction in connection with which the
Company or any Subsidiary could be subject to either a civil penalty assessed
pursuant to section 502(i) of ERISA or a tax imposed by section 4975 of the
Code, terminate or withdraw from any Plan in a manner, or take any other action
with respect to any such Plan (including, without limitation, a substantial
cessation of operations within the meaning of section 4062(e) of ERISA), which
could result in any liability of the Company or any Subsidiary under Title IV of
ERISA to any Person (including the PBGC or a trustee appointed under section
4042(b) or (c) of ERISA), fail to make full payment when due of all amounts
which, under the provisions of any Plan, the Company or any Subsidiary is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency, whether or not waived, with respect to any Plan (other than
a Multiemployer Plan), if, in any such case, such penalty or tax or such
liability, or the failure to make such payment, or the existence of such
deficiency, as the case may be, could be reasonably expected to have a Material
Adverse Effect.
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<PAGE> 21
6E. NO CHANGE IN SUBORDINATION TERMS, ETC. The Company will not,
and will not permit any Subsidiary to, amend, alter or otherwise change any
provision of any of the subordinated promissory notes now or hereafter issued by
the Company or take any other action (or refrain from taking an action) which
would have the effect of eliminating or altering in any way the effect of the
subordination language appearing in such subordinated promissory notes or the
rights of the holders of the Notes arising as a result thereof.
6F. NATURE OF BUSINESS. The Company will not, and will not permit
any Subsidiary to, engage in the business of underwriting risks for insurance
purposes, or in any other aspect of insurance related business other than in the
ordinary course of business in accordance with its practices as of the closing
date; or purchase and sell real estate (other than on an agency basis) for
purposes other than those relating directly to its principal business except for
purchases and sales of store locations in the ordinary course of business.
6G. MINIMUM ASSET COVERAGE. The Company will not permit the
ratio, as of the last day of any fiscal quarter, of (a) the daily average of all
accounts receivables owed to the Company and to each of its Subsidiaries during
the last 30 days of such fiscal quarter (the "Measurement Period") minus all
Subordinated Debt payable to members of the Company as of the last day of such
fiscal quarter to (b) the daily average of all Debt (other than Subordinated
Debt) outstanding during such Measurement Period to be less than the applicable
ratio set forth in the table below:
<TABLE>
<CAPTION>
Quarter Ended Ratio
------------- -----
<S> <C>
October 3, 1998 .60 to 1
December 31, 1998
April 3, 1999 and
July 3, 1999 .75 to 1
after July 3, 1999 .80 to 1
</TABLE>
Notwithstanding the foregoing, the Company shall not be required to comply with
this paragraph 6G as of the last day of any fiscal quarter after September 30,
1999 if no Default or Event of Default exists at any time during the period from
the date of this Agreement to September 30, 1999.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and
be continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, payable with respect to any Note when the same
shall become due, either by the terms thereof or otherwise as herein
provided (including, without limitation, paragraph 4A); or
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<PAGE> 22
(ii) the Company defaults in the payment of any interest on
any Note payable with respect to any Note for more than 10 days after the
date due; or
(iii) the Company or any Subsidiary defaults (whether as
primary obligor or as guarantor or other surety) in any payment of
principal of or premium or make-whole amount or interest on any other
obligation for money borrowed (or any Capitalized Lease Obligation, any
obligation under a conditional sale or other title retention agreement, any
obligation issued or assumed as full or partial payment for property
whether or not secured by a purchase money mortgage or any obligation under
notes payable or drafts accepted representing extensions of credit) beyond
any period of grace provided with respect thereto, or the Company or any
Subsidiary fails to perform or observe any other agreement, term or
condition contained in any agreement under which any such obligation is
created (or if any other event thereunder or under any such agreement shall
occur and be continuing) and the effect of such failure or other event is
to cause, or to permit the holder or holders of such obligation (or a
trustee on behalf of such holder or holders) to cause, such obligation to
become due (or to be repurchased by the Company or any Subsidiary) prior to
any stated maturity, provided that the aggregate amount of all obligations
(other than any such obligation for money borrowed which is payable solely
out of the property or assets of a partnership, joint venture or similar
entity of which the Company or any Subsidiary is an equity participant or
is secured by a Lien on property or assets owned or held by such an entity
without further recourse to or liability of the Company or any Subsidiary)
as to which such a payment default shall occur and be continuing or such a
failure or other event causing or permitting acceleration (or resale to the
Company or any Subsidiary) shall occur and be continuing exceeds
$7,000,000; or
(iv) any representation or warranty made by the Company
herein or by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement shall be false in any
material respect on the date as of which made; or
(v) the Company fails to perform or observe any agreement
contained in paragraph 6; or
(vi) the Company fails to perform or observe any other
agreement, term or condition contained herein and such failure shall not be
remedied within 30 days after the earlier of (a) the actual knowledge
thereof by any Responsible Officer and (b) written notice thereof to the
Company by any holder of any of the Notes; or
(vii) the Company or any Subsidiary makes an assignment for
the benefit of creditors or is generally not paying its debts as such debts
become due; or
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<PAGE> 23
(viii) any decree or order for relief in respect of the
Company or any Subsidiary is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law, whether now or hereafter in effect (herein
called the "BANKRUPTCY LAW"), of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to
any tribunal for, or consents to, the appointment of, or taking possession
by, a trustee, receiver, custodian, liquidator or similar official of the
Company or any Subsidiary, or of any substantial part of the assets of the
Company or any Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Company or any Subsidiary under the Bankruptcy Law of any
other jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and the
Company or such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian, liquidator or
similar official, or approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in effect for more than
60 days; or
(xi) any order, judgment or decree is entered in any
proceedings against the Company decreeing the dissolution of the Company
and such order, judgment or decree remains unstayed and in effect for more
than 60 days; or
(xii) any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a split-up of
the Company or such Subsidiary which requires the divestiture of assets
representing a substantial part, or the divestiture of the stock of a
Subsidiary whose assets represent a substantial part, of the Consolidated
Total Assets or which requires the divestiture of assets, or stock of a
Subsidiary, which shall have contributed a substantial part of the
Consolidated Net Earnings of the Company and its Subsidiaries for any of
the three fiscal years then most recently ended, and such order, judgment
or decree remains unstayed and in effect for more than 60 days; or
(xiii) a final judgment or judgments in an aggregate amount
in excess of $7,000,000 is or are rendered against the Company and/or any
Subsidiaries and, within 60 days after entry thereof, such judgment or
judgments are not discharged or execution thereof stayed pending appeal, or
within 60 days after the expiration of any such stay, such judgment or
judgments are not discharged;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, any holder of any Note may at its option during the
continuance of such Event of Default, by notice in writing to the Company,
declare all of the Notes held by such holder to be, and all of the Notes held by
such holder shall thereupon be and become, immediately due and payable at par
together with interest
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<PAGE> 24
accrued thereon and together with, to the full extent permitted by applicable
law, the Make-Whole Amount, if any, with respect to such Notes, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company, (b) if such event is an Event of Default specified in
clause (vii), (viii), (ix), (x) or (xi) of this paragraph 7A with respect to the
Company, all of the Notes at the time outstanding shall automatically become
immediately due and payable together with interest accrued thereon and together
with, to the full extent permitted by applicable law, the Make-Whol Amount, if
any, with respect to each Note, without presentment, demand, protest or notice
of any kind, all of which are hereby waived by the Company, and (c) with respect
to any other event constituting an Event of Default, the Majority Holder(s) of
the Notes may at its or their option during the continuance of such Event of
Default, by notice in writing to the Company, declare all of the Notes to be,
and all of the Notes shall thereupon be and become, immediately due and payable
together with interest accrued thereon and together with, to the full extent
permitted by applicable law, the Make-Whole Amount, if any, with respect to each
Note, without presentment, demand, protest or notice of any kind, all of which
are hereby waived by the Company. The Company acknowledges, and the parties
hereto agree, that each holder of a Note has the right to maintain its
investment in the Notes free from repayment by the Company (except as herein
specifically provided for) and that the provision for payment of a Make Whole
Amount by the Company in the event that the Notes are prepaid or are accelerated
as a result of an Event of Default, is intended to provide compensation for the
deprivation of such right under such circumstances.
7B. RESCISSION OF ACCELERATION. At any time after any or all of
the Notes shall have been declared immediately due and payable pursuant to
paragraph 7A(a) or (c), the Majority Holder(s) of the Notes may, by notice in
writing to the Company, rescind and annul such declaration and its consequences
if (i) the Company shall have paid all overdue interest on the Notes, the
principal of and Make-Whole Amount, if any, payable with respect to any Notes
which have become due otherwise than by reason of such declaration, and interest
on such overdue interest and overdue principal and Make-Whole Amount at the rate
specified in the Notes, (ii) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to paragraph 15, and (iv) no judgment or decree shall have been entered for the
payment of any amounts due pursuant to the Notes or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall
be declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall
occur and be continuing, the holder of any Note may proceed to protect and
enforce its rights under this Agreement and such Note by exercising such
remedies as are available to such holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for specific
performance of any covenant or other agreement contained in this Agreement or in
aid of the exercise of any power granted in this Agreement. No remedy conferred
in this Agreement upon the holder of any Note is
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intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy conferred
herein or now or hereafter existing at law or in equity or by statute or
otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants as follows:
8A. ORGANIZATION; QUALIFICATIONS; CORPORATE POWER. The Company is
a corporation duly organized and existing in good standing under the laws of the
State of Delaware, each Subsidiary is duly organized and existing in good
standing under the laws of the jurisdiction in which it is incorporated and the
Company and each of its Subsidiaries is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions in which the failure to be so
qualified could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Company has and each Subsidiary has the
corporate power to own their respective properties and to carry on their
respective businesses as now being conducted. No Subsidiary has outstanding any
shares of stock of a class which has priority over any other class as to
dividends or in liquidation (except as otherwise disclosed on Schedule 8A). The
Company has the corporate power and authority to execute and deliver this
Agreement, the Other Agreements and the Notes and to perform the provisions
hereof and thereof.
8B. AUTHORIZATION, ETC. This Agreement and the Other Agreements
and the Notes have been duly authorized by all necessary corporate action on the
part of the Company, and this Agreement constitutes, and upon execution and
delivery thereof each Note will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
8C. DISCLOSURE. The Company, through its agent, William Blair &
Company, has delivered to you and each Other Purchaser a copy of a Private
Placement Memorandum, dated July 1998 (the "MEMORANDUM"), relating to the
transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. The Memo randum, the documents,
certificates or other writings delivered to you by or on behalf of the Company
in connection with the transactions contemplated hereby and the financial
statements provided pursuant to paragraph 8E, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 8C, or in one of the documents,
certificates or other writings identified therein, or in the financial
statements provided pursuant to paragraph 8E, since December 31, 1997, there has
been no change in the financial condition, operations, business, properties or
prospects of the Company or any Subsidiary except changes that individually or
in the aggregate could not reasonably be expected to have a Material Adverse
Effect. There is no fact known to the Company that could reasonably be expected
to have a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
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<PAGE> 26
8D ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES;
AFFILIATES. (a) Schedule 8D contains complete and correct lists (i) of the
Company's Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, the percentage of shares of each
class of its capital stock or similar equity interests outstanding owned by the
Company and each other Subsidiary, (ii) of the Company's Affiliates, other than
Subsidiaries, and (iii) of the Company's directors and senior officers.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 8D as being owned by the
Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and clear
of any Lien (except as otherwise disclosed in Schedule 8D).
(c) No Subsidiary is a party to, or otherwise subject to any
legal restriction or any agreement (other than this Agreement, the agreements
listed on Schedule 8D and customary limitations imposed by corporate law
statutes) restricting the ability of such Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the Company or any
of its Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Subsidiary.
8E. FINANCIAL STATEMENTS. The Company has furnished you and each
Other Purchaser of any Note with the following financial statements, identified
by a Senior Financial Officer of the Company: (i) a consolidated balance sheet
of the Company and its Subsidiaries as at fiscal year end in each of the three
fiscal years of the Company most recently completed prior to the date as of
which this representation is made or repeated to such Purchaser (other than
fiscal years completed within 90 days prior to such date for which audited
financial statements have not been released) and consolidated statements of
operations and cash flows and a consolidated statement of capital stock and
retained earnings of the Company and its Subsidiaries for each such year, all
reported on by Ernst & Young (or any independent public accounting firm of
recognized national standing) and (ii) a consolidated balance sheet of the
Company and its Subsidiaries as at the end of the quarterly period (if any) most
recently completed prior to such date and after the end of such fiscal year
(other than quarterly periods completed within 60 days prior to such date for
which financial statements have not been released) and the comparable quarterly
period in the preceding fiscal year and consolidated statements of operations
and cash flows and a consolidated statement of capital stock and retained
earnings for the periods from the beginning of the fiscal years in which such
quarterly periods are included to the end of such quarterly periods, prepared by
the Company. Such financial statements (including any related schedules and/or
notes) are true and correct in all material respects (subject, as to interim
statements, to changes resulting from audits and year-end adjustments), have
been prepared in accordance with GAAP consistently followed throughout the
periods involved and show all liabilities, direct and contingent, of the Company
and its Subsidiaries required to be shown in accordance with such principles.
The balance sheets fairly present the condition of the Company and its
Subsidiaries as at the dates thereof, and the statements of operations, capital
stock and retained earnings and cash flows fairly present the results of the
operations of the Company and its Subsidiaries and their cash flows for the
periods indicated. There has been no material adverse change in the business,
operations, condition (financial or otherwise),
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<PAGE> 27
assets, properties or prospects of the Company and its Subsidiaries taken as a
whole since the end of the most recent fiscal year for which such audited
financial statements have been furnished.
8F. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which could be reasonably expected to have a Material
Adverse Effect.
8G. OUTSTANDING DEBT. Neither the Company nor any of its
Subsidiaries has outstanding any Debt except as permitted by paragraph 6A(2).
There exists no default under the provisions of any instrument evidencing Debt
of the Company or any of its Subsidiaries in an amount greater than $250,000 or
of any agreement relating thereto. All outstanding Funded Debt of the Company
and its Subsidiaries is listed on Schedule 8G.
8H. TITLE TO PROPERTIES. The Company has and each of its
Subsidiaries has good and indefeasible title to its respective real properties
(other than properties which it leases) and good title to all of its other
respective properties and assets, including the properties and assets reflected
in the most recent audited balance sheet referred to in paragraph 8E (other than
properties and assets disposed of in the ordinary course of business), subject
to no Lien of any kind except Liens permitted by paragraph 6A(1). All leases
necessary in any material respect for the conduct of the respective businesses
of the Company and its Subsidiaries are valid and subsisting and are in full
force and effect.
8I. TAXES. The Company has and each of its Subsidiaries has filed
all federal, state and other tax returns which are required to be filed, and
each has paid all taxes as shown on such returns and on all assessments received
by it to the extent that such taxes have become due, except such unfiled returns
and unpaid taxes (i) as are being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with
GAAP or (ii) the non-filing or non-payment of which (a) could not be reasonably
expected to have a Material Adverse Effect and (b) does not result in the
creation of any Lien other than Liens permitted by paragraph 6A(i).
8J. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company
nor any of its Subsidiaries is a party to any contract or agreement or subject
to any charter or other corporate restriction which could have a Material
Adverse Effect. Neither the execution nor delivery of this Agreement or the
Notes, nor the offering, issuance and sale of the Notes, nor fulfillment of nor
compliance with the terms and provisions hereof and of the Notes will conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries pursuant to, the charter or by-laws of the Company or any of
its Subsidiaries, any award of any arbitrator or any agreement (including any
agreement with stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which the Company or any of its Subsidiaries is subject.
Neither the Company nor any of its Subsidiaries is a party to, or otherwise
subject to any provision contained in, any instrument evidencing Indebtedness of
the Company or such Subsidiary, any agreement relating thereto or any other
contract or agreement (including its charter) which limits the amount of, or
otherwise imposes restrictions on the incurring of, Debt of the Company of the
type to be
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<PAGE> 28
evidenced by the Notes except as set forth in the agreements listed in Schedule
8J attached hereto (as such Schedule 8J may have been modified from time to time
by written supplements thereto delivered by the Company and accepted in writing
by the Required Holders).
8K. OFFERING OF NOTES. Neither the Company nor any agent acting
on its behalf (including William Blair & Company) has, directly or indirectly,
offered the Notes or any similar security of the Company for sale to, or
solicited any offers to buy the Notes or any similar security of the Company
from, or otherwise approached or negotiated with respect thereto with, any
Person other than you, the Other Purchasers and not more than 86 Institutional
Investors, each of which has been offered the Notes at a private sale for
investment. Neither the Company nor any agent acting on its behalf has taken or
will take any action which would subject the issuance or sale of the Notes to
the provisions of Section 5 of the Securities Act or to the provisions of any
securities or Blue Sky law of any applicable jurisdiction.
8L. USE OF PROCEEDS. The Company shall apply the proceeds of the
sale of the Notes as set forth in Schedule 8L. None of the proceeds of the sale
of any Notes will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any "margin stock"
as defined in Regulation U of the Board of Governors of the Federal Reserve
System (herein called " MARGIN STOCK") or for the purpose of maintaining,
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry any stock that is then currently a margin stock or for any other
purpose which might constitute the purchase of such Notes a "purpose credit"
within the meaning of such Regulation U. Neither the Company nor any agent
acting on its behalf (including William Blair & Company) has taken or will take
any action which might cause this Agreement or the Notes to violate Regulation
U, Regulation T, Regulation X or any other regulation of the Board of Governors
of the Federal Reserve System or to violate the Exchange Act, in each case as in
effect now or as the same may hereafter be in effect.
8M. ERISA. No contribution required to have been made to any Plan
by the Company or any Subsidiary under the provisions of the Plan or ERISA
remains unpaid and no accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by the Company, any
Subsidiary or any ERISA Affiliate which has caused or could cause a Material
Adverse Effect. None of the Company, any Subsidiary or any ERISA Affiliate has
incurred or presently expects to incur any withdrawal liability under Title IV
of ERISA with respect to any Multiemployer Plan which has caused or could cause
a Material Adverse Effect. The execution and delivery of this Agreement and the
issuance and sale of the Notes will be exempt from or will not involve any
transaction which is subject to the prohibitions of section 406 of ERISA and
will not involve any transaction in connection with which a penalty could be
imposed under section 502(i) of ERISA or a tax could be imposed pursuant to
section 4975 of the Code. The representation by the Company in the next
preceding sentence is made in reliance upon and subject to the accuracy of the
representation of you in paragraph 9B as to the source of funds to be used by
you to purchase any Notes.
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<PAGE> 29
8N. GOVERNMENTAL CONSENT. Neither the nature of the Company or of
any Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval, exemption or
any action by or notice to or filing with any court or administrative or
governmental body (other than routine filings after the Closing Date for any
Notes with the Securities and Exchange Commission and/or state Blue Sky
authorities) in connection with the execution and delivery of this Agreement,
the offering, issuance, sale or delivery of the Notes or fulfillment of or
compliance with the terms and provisions hereof or of the Notes.
8O. ENVIRONMENTAL COMPLIANCE. The Company and its Subsidiaries
and all of their respective properties and facilities have complied at all times
and in all respects with all Environmental Laws, except, in any such case, where
failure to so comply could not reasonably be expected to result in a Material
Adverse Effect.
8P. SECTION 144A. The Notes are not of the same class as
securities, if any, of the Company listed on a national securities exchange
registered under Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system.
8Q. STATUS UNDER CERTAIN STATUTES. Neither the Company nor any
Subsidiary is subject to regulation under the Investment Company Act of 1940, as
amended, the Public Utility Holding Company Act of 1935, as amended, the
Interstate Commerce Act, as amended, or the Federal Power Act, as amended.
8R. PRIORITY OF NOTES. The Notes constitute "Superior
Indebtedness" as such term is defined in the Company's Promissory (subordinated)
Notes, the form of which is attached hereto as Exhibit D and the Subordinated
Debt is subordinated to the Indebtedness owing from time to time by the Company
to the holders of the Notes in connection with this Agreement.
8S. LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 8S,
(i) the Company and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights, service
marks, trademarks and trade names, or rights thereto, that individually or
in the aggregate are Material, without known conflict with the rights of
others;
(ii) to the best knowledge of the Company, no product of the
Company infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or
other right owned by any other Person; and
(iii) to the best knowledge of the Company, there is no
Material violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or any of
its Subsidiaries.
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<PAGE> 30
9. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
9A. PURCHASE FOR INVESTMENT. You represent that you are
purchasing the Note for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension, trust or commingled
pension trust funds or for the account of one or more investors who are
accredited investors within the meaning of Regulation D of the Securities Act
for whom you are acting as investment manager, agent or investment advisor and
not with a view to the distribution thereof, provided that the disposition of
your or their property shall at all times be within your or their control. You
understand that the Notes have not been registered under the Securities Act and
may be resold only if registered pursuant to the provisions of the Securities
Act of if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Company is not required to register the Notes.
9B. SOURCE OF FUNDS. You represent that at least one of the
following statements is an accurate representation as to each source of funds (a
"Source") to be used by you to pay the purchase price of the Notes to be
purchased by you hereunder:
(i) if you are an insurance company, the Source is your
"insurance company general account" as defined in
Department of Labor Prohibited Transaction Exemption PTE
95-60 (60 FR 35925), July 12, 1995 (hereinafter "PTE
95-60"), and in respect thereof you represent that there
is no "employee benefit plan" (as defined in section 3(3)
of ERISA and section 4975(e)(1) of the Code) established
or maintained by the Company (and affiliates thereof as
defined in section V(a)(1) of the PTE 95-60) with respect
to which the amount of general account reserves and
liabilities of all contracts held by or on behalf of such
plan exceed ten percent (10%) of the total reserves and
liabilities of such general account (exclusive of
separate account liabilities) plus surplus, as set forth
in the National Association of Insurance Commissioners'
Annual Statement filed with your state of domicile; or
(ii) the Source is either (i) an insurance company pooled
separate account, within the meaning of Prohibited
Transaction Exemption ("PTE") 90-1 (issued January 29,
1990), or (ii) a bank collective investment fund, within
the meaning of the PTE 91-38 (issued July 12, 1991) and,
except as you have disclosed to the Company in writing
pursuant to this clause (ii), no employee benefit plan or
group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of
all assets allocated to such pooled separate account or
collective investment fund; or
(iii) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption)
managed by a "qualified professional asset manager" or
"QPAM" (within the meaning of Part V of the QPAM
Exemption), no employee benefit plan's assets that are
included in such investment fund, when combined with
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<PAGE> 31
the assets of all other employee benefit plans
established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, the conditions
of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a Person controlling or controlled
by the QPAM (applying the definition of "control" in
Section V(e) of the QPAM Exemption) owns a 5% or more
interest in the Company and (i) the identity of such QPAM
and (ii) the names of all employee benefit plans whose
assets are included in such investment fund have been
disclosed to the Company in writing pursuant to this
clause (iii); or
(iv) the Source is a governmental plan; or
(v) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more
employee benefit plans, each of which has been identified
to the Company in writing pursuant to this clause (v); or
(vi) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage
of ERISA.
As used in this paragraph 9B, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
10. DEFINITIONS; ACCOUNTING MATTERS. For the purpose of this
Agreement, the terms defined in paragraph 10A (or within the text of any other
paragraph) shall have the respective meanings specified therein and all
accounting matters shall be subject to determination as provided in paragraph
10B.
10A. DEFINED TERMS
"AFFILIATE" shall mean, at any time, and with respect to any
Person, any other Person that at such time directly or indirectly through one or
more intermediaries Controls, or is Controlled by, or is under common Control
with, such first Person. As used in this definition, "CONTROL" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, membership interests, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"AUTHORIZED OFFICER" shall mean, in the case of the Company, its
chief executive officer, its chief financial officer, its chief operating
officer or any other officer of the Company designated as an "Authorized
Officer" of the Company for the purpose of this Agreement in an Officer's
Certificate executed by the Company's chief executive officer or chief financial
officer and delivered to the holders of the Notes. Any action taken under this
Agreement on behalf of the Company by any individual who on or after the date of
this Agreement shall have been an Authorized Officer of
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<PAGE> 32
the Company shall be binding on the Company even though such individual shall
have ceased to be an Authorized Officer of the Company.
"BANKRUPTCY LAW" shall have the meaning specified in clause
(viii) of paragraph 7A.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or a
Sunday and (ii) a day on which commercial banks in New York City or in the State
of Illinois are required or authorized to be closed.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation
which, under GAAP, is or will be required to be capitalized on the books of the
Company or any Subsidiary, taken at the amount thereof accounted for as
indebtedness (net of interest expenses) in accordance with such principles.
"CLOSING" shall have the meaning specified in paragraph 3.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" shall have the meaning specified in
paragraph 18.
"CONSOLIDATED CAPITALIZATION" shall mean, as of the time of any
determination, the sum of (i) Consolidated Net Worth and (ii) Funded Debt of the
Company and its Subsidiaries on a consolidated basis.
"CONSOLIDATED NET EARNINGS" shall mean with respect to any
period:
(i) consolidated gross revenues of the Company and its
Subsidiaries, minus
(ii) all operating and non-operating expenses of the Company
and its Subsidiaries including all charges of a proper character (including
current and deferred taxes on income, provision for taxes on unremitted
foreign earnings which are included in gross revenues, and current
additions to reserves),
provided that it is agreed and understood that the following shall not be
included in the calculation of consolidated gross revenues of the Company
and its Subsidiaries:
(a) any gains (net of expenses and taxes applicable
thereto) in excess of losses resulting from the sale, conversion or
other disposition of capital assets (i.e., assets other than current
assets);
(b) any gains resulting from the appraised write-up of
assets;
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(c) any equity of the Company or any Subsidiary in the
unremitted earnings of any corporation which is not a Subsidiary;
(d) any earnings of any Person acquired by the Company
or any Subsidiary through purchase, merger or consolidation or
otherwise for any year prior to the year of acquisition; or
(e) any deferred credit representing the excess of
equity in any Subsidiary at the date of acquisition over the cost of
the investment in such Subsidiary.
"CONSOLIDATED NET WORTH" shall mean, as of any date of
determination, the sum of (i) the par value (or value stated on the books of the
Company) of the capital stock of all classes of the Company, plus (or minus in
the case of a surplus deficit) (ii) the amount of the consolidated surplus,
whether capital or earned, of the Company and its Subsidiaries, all determined
in accordance with GAAP.
"CONSOLIDATED TOTAL ASSETS" shall mean the consolidated assets of
the Company and its Subsidiaries calculated in accordance with GAAP.
"CURRENT DEBT" shall mean, with respect to any Person, all
Indebtedness of such Person for borrowed money which by its terms or by the
terms of any instrument or agreement relating thereto matures on demand or
within one year from the date of the creation thereof and is not directly or
indirectly renewable or extendible at the option of the debtor to a date more
than one year from the date of the creation thereof, provided that (i)
borrowings under any revolving credit facility (including, without limitation,
the Company's Credit Agreement, dated as of July 1, 1997 and the Company's
proposed 364 - Day Credit Agreement with Bank of America National Trust and
Savings Association, as agent) shall constitute Current Debt and (ii) Guarantees
of Indebtedness of Company members in an aggregate amount not to exceed
$20,000,000 shall not constitute Current Debt, so long as no event has occurred
the result of which would be to cause or permit such Indebtedness to become due
prior to any stated maturity.
"DEBT" shall mean Current Debt and Funded Debt.
"DESIGNATED PERMITTED ASSET SALE" shall mean the sale or other
disposition of up to ten warehouses and/or facilities selected by the Company
for sale or other disposition.
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and
foreign laws relating to pollution or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including without limitation ambient
air, surface water, ground water, or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
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<PAGE> 34
toxic or hazardous substances or wastes, and any and all regulations, codes,
plans, orders, decrees, judgments, injunctions, notices or demand letters
issued, entered, promulgated or approved thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of
the same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in
paragraph 7A, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "DEFAULT" shall mean
any of such events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FUNDED DEBT" shall mean and include, (i) any obligation payable
more than one year from the date of creation thereof which under GAAP is shown
on a balance sheet as a liability (including Capitalized Lease Obligations but
excluding reserves for deferred income taxes and other reserves to the extent
that such reserves do not constitute an obligation and excluding borrowings
under any revolving credit facility); (ii) indebtedness payable more than one
year from the date of creation thereof which is secured by any Lien on property
owned by the Company or any Subsidiary; and (iii) Guarantees, provided that,
Guarantees of Indebtedness of Company members in an aggregate amount not to
exceed $20,000,000 shall not constitute Funded Debt, so long as no event has
occurred the result of which would be to cause or permit such Indebtedness to
become due prior to any stated maturity.
"GAAP" shall mean United States generally accepted accounting
principles.
"GUARANTEE" shall mean, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
Indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(other than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including, without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or services regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or
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intent of such agreement is to provide assurance that such obligation will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected against loss in
respect thereof. The amount of any Guarantee shall be equal to the outstanding
principal amount of the obligation guaranteed or such lesser amount to which the
maximum exposure of the guarantor shall have been specifically limited.
"INCLUDING" shall mean, unless the context clearly requires
otherwise, "including without limitation".
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication, (i) all items (excluding items of contingency reserves or of
reserves for deferred income taxes) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as of the date on which Indebtedness is to be
determined, (ii) all indebtedness secured by any Lien on any property or asset
owned or held by such Person subject thereto, whether or not the indebtedness
secured thereby shall have been assumed, and (iii) all indebtedness of others
with respect to which such Person has become liable by way of Guarantee.
"INSTITUTIONAL INVESTOR" shall mean (i) any original purchaser of
a Note (or any of its affiliates) or (ii) any insurance company, pension fund,
mutual fund, investment company, bank, savings bank, savings and loan
association, investment banking company, broker, dealer, trust company, or any
finance or credit company, any portfolio or any investment fund managed by any
of the foregoing, or any other institutional investor, and any nominee of the
foregoing. The term "Institutional Investor" shall not include any competitor of
the Company or its Subsidiaries or any labor union with which the Company then
has a collective bargaining agreement; provided that it is understood and agreed
that no original purchaser of a Note (or any of its affiliates) shall be deemed
to be a competitor of the Company or any of its Subsidiaries for purposes of
this Agreement.
"INVESTMENTS" shall mean any loan or advance to, or ownership,
purchase or acquisition of any security (including stock) or obligations of, or
any other interest in, or any capital contribution made to, any Person.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction) or any other type of preferential arrangement for the purpose,
or having the effect, of protecting a creditor against loss or securing the
payment or performance of an obligation.
"MAJORITY HOLDER(S)" shall mean the holder or holders of at least
51% of the aggregate principal amount of the Notes from time to time outstanding
(exclusive of Notes then owned by the Company or any of its Affiliates).
"MATERIAL" means material in relation to the business,
operations, affairs, condition (financial or otherwise), assets, properties, or
prospects of the Company and its Subsidiaries taken as a whole.
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"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the business, operations, affairs, condition (financial or otherwise),
assets, properties or prospects of the Company and its Subsidiaries taken as a
whole, or (b) the ability of the Company to perform its obligations under this
Agreement and the Notes, or (c) the validity or enforceability of this Agreement
or the Notes.
"MEMORANDUM" shall have the meaning specified in paragraph 8C.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA.
"NOTES" shall have the meaning specified in paragraph 1.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
name of the Company by an Authorized Officer of the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERSON" shall mean and include an individual, a partnership, a
limited liability company, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
"PLAN" shall mean any employee pension benefit plan (as such term
is defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any ERISA Affiliate.
"QPAM EXEMPTION" shall mean Prohibited Transaction Class
Exemption 84-14 issued by the United States Department of Labor.
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least
66 2/3% of the aggregate principal amount of the Notes from time to time
outstanding (exclusive of Notes then owned by the Company or any of its
Affiliates).
"RESPONSIBLE OFFICER" shall mean the chief executive officer,
chief operating officer, chief financial officer or chief accounting officer of
the Company, the general counsel of the Company, or any other officer of the
Company involved principally in its financial administration or its
controllership function.
"RESTRICTED INVESTMENTS" shall mean any Investment prohibited by
paragraph 6B.
"RESTRICTED PAYMENT" shall have the meaning specified in
paragraph 6C.
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"SECURED FUNDED DEBT" shall mean Funded Debt which is secured by
any Lien.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SENIOR FINANCIAL OFFICER" shall mean the chief financial
officer, principal accounting officer, treasurer or controller of the Company.
"SENIOR FUNDED DEBT" shall mean Funded Debt of the Company or any
of its Subsidiaries on a consolidated basis which is not Subordinated Debt.
"SOURCE" shall have the meaning set forth in paragraph 9B.
"SUBORDINATED DEBT" shall mean any Indebtedness of the Company
which (i) is not Guaranteed by any other Person, (ii) requires no payment of
principal to be made prior to July 1, 2009 and (iii) contains terms of
subordination identical to or, in the reasonable determination of the holders of
the Notes no less favorable to such holders of the Notes than, the terms of
subordination set forth in Exhibit E hereto and, which by virtue of such
language and any necessary action of the Board of Directors of the Company, is
subordinated to the Indebtedness owing from time to time by the Company to the
holders of any Note issued in connection with this Agreement; provided, however,
that notwithstanding the foregoing, Indebtedness which requires payment of
principal to be made prior to July 1, 2009 that has been or is issued to and
beneficially held by any Person that at the time of such issuance is or was a
member of the Company shall be considered "Subordinated Debt" if such
Indebtedness otherwise complies with clauses (i) and (iii) above.
"SUBORDINATED FUNDED DEBT" shall mean Funded Debt of the Company
or any of its Subsidiaries which is Subordinated Debt.
"SUBSIDIARY" shall mean any corporation eighty percent (80%) or
more of the stock of every class of which, except directors' qualifying shares,
shall, at the time as of which any determination is being made, be owned by the
Company either directly or through Subsidiaries. Notwithstanding the foregoing,
for purposes of calculating the financial covenants, Cotter Canada Hardware and
Variety Cooperative, Inc. will be deemed a Subsidiary of the Company if, in
accordance with GAAP, it is consolidated in the financial statements of the
Company required to be delivered pursuant to clauses (i) and (ii) of paragraph
5A hereof.
"SUBSTANTIAL STOCKHOLDER" shall mean (i) any Person owning,
beneficially or of record, directly or indirectly, either individually or
together with all other Persons to whom such Person is related by blood,
adoption or marriage, stock of the Company (of any class having ordinary voting
power for the election of directors) aggregating five percent (5%) or more of
such voting power or (ii) any Person related by blood, adoption or marriage to
any Person described or coming within the provisions of clause (i) of this
definition.
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"VOTING STOCK" shall mean, with respect to any corporation, any
shares of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
10B. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all unaudited financial statements and certificates and
reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with GAAP applied on a basis consistent with the most
recent audited financial statements delivered pursuant to clause (ii) of
paragraph 5A or, if no such statements have been so delivered, the most recent
audited financial statements referred to in clause (i) of paragraph 8B.
11. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
11A. REGISTRATION OF NOTES. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of the Notes.
11B. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note
at the principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or his attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit A. Each such new Note shall be dated and bear interest from
the date to which interest shall have been paid on the surrendered Note or dated
the date of the surrendered Note if no interest shall have been paid thereon.
The Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes. Notes
shall not be transferred in denominations of less than $100,000, provided that
if necessary to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than $100,000. Any
transferee, by its acceptance of a Note registered in its name (or the name or
its nominee), shall be deemed to have made the representation set forth in
Section 9B.
11C. REPLACEMENT OF NOTES. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation) and
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(i) in the case of loss, theft, or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note is,
or is a nominee for, you or an original Other Purchaser or another holder
of a Note with a minimum net worth of at least $100,000,000, such Person's
own unsecured agreement of indemnity shall be deemed to be satisfactory),
or
(ii) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
12. PAYMENTS ON NOTES.
12A. PLACE OF PAYMENT. Subject to paragraph 12B, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable
on the Notes shall be made in Kansas City, Missouri at the principal office
of the United Missouri Bank in such jurisdiction. The Company may at any
time, by notice to each holder of a Note, change the place of payment of
the Notes so long as such place of payment shall be either the principal
office of the Company in such jurisdiction or the principal office of a
bank or trust company in such jurisdiction.
12B. HOME OFFICE PAYMENT. So long as you or your nominee
shall be the holder of any Note, and notwithstanding anything contained in
paragraph 12A or in such Note to the contrary, the Company will pay all
sums becoming due on such Note for principal, Make-Whole Amount, if any,
and interest by the method and at the address specified for such purpose
below your name in Schedule I, or by such other method or at such other
address as you shall have from time to time specified to the Company in
writing for such purpose, without the presentation or surrender of such
Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note
for cancellation, reasonably promptly after any such request, to the
Company at its principal executive office or at the place of payment most
recently designated by the Company pursuant to paragraph 12A. Prior to any
sale or other disposition of any Note held by you or your nominee you will,
at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or
surrender such Note to the Company in exchange for a new Note or Notes
pursuant to paragraph 11B. The Company will afford the benefits of this
paragraph 12B to any Institutional Investor that is the direct or indirect
transferee of any Note purchased by you under this Agreement and that has
made the same agreement relating to such Note as you have made in this
paragraph 12B.
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<PAGE> 40
13. EXPENSES, ETC.
13A. TRANSACTION EXPENSES. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all costs and
expenses (including reasonable attorneys' fees of a special counsel and, if
reasonably required, local or other counsel) incurred by you and each Other
Purchaser or holder of a Note in connection with such transactions and in
connection with any amendments, waivers or consents under or in respect of
this Agreement or the Notes (whether or not such amendment, waiver or
consent becomes effective), including, without limitation: (a) the costs
and expenses incurred in enforcing or defending (or determining whether or
how to enforce or defend) any rights under this Agreement or the Notes or
in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes,
or by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the
insolvency or bankruptcy of the Company or any Subsidiary or in connection
with any work-out or restructuring of the transactions contemplated hereby
and by the Notes. The Company will pay, and will save you and each other
holder of a Note harmless from, all claims in respect of any fees, costs or
expenses if any, of brokers and finders (other than those retained by you).
13B. SURVIVAL. The obligations of the Company under this
paragraph 13 will survive this payment or transfer of any Note, the
enforcement, amendment or waiver of any provision of this Agreement or the
Notes and the termination of this Agreement.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.
All representations and warranties contained herein shall
survive the execution and delivery of this Agreement and the Notes, the
purchase or transfer by you of any Note or portion thereof or interest
therein and the payment of any Note, and may be relied upon by any
subsequent holder of a Note, regardless of any investigation made at any
time by or on behalf of you or any other holder of a Note. All statements
contained in any certificate or other instrument delivered by or on behalf
of the Company pursuant to this Agreement shall be deemed representations
and warranties of the Company under this Agreement. Subject to the
preceding sentence, this Agreement and the Notes embody the entire
agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
15. AMENDMENT AND WAIVER.
15A. REQUIREMENTS. This Agreement and the Notes may be
amended, and the observance of any term hereof or of the Notes may be
waived (either retroactively or prospectively), with (and only with) the
written consent of the Company and the Required Holders, except that (a) no
amendment or waiver of any of the provisions of paragraphs 1, 2, 3, 8, 9 or
19 hereof, or any defined term (as it is used therein), will be effective
as to you unless consented to by you in writing, and (b) no such amendment
or waiver may, without the written consent of the holder of each Note at
the time outstanding affected thereby, (i) subject to the provisions of
paragraph 7 relating to acceleration or rescission, change the amount or
time of any prepayment or payment of principal of, or reduce the rate or
change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the
principal amount of the Notes the holders of which are required to consent
to any such amendment or waiver, or (iii) amend any of paragraphs 4, 7A(i),
7A(ii), 7A(a), 7A(b), 7A(c), 15 or 18.
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15B. SOLICITATION OF HOLDERS OF NOTES. (a) Solicitation. The
Company will provide each holder of the Notes (irrespective of the amount of
Notes then owned by it) with sufficient information, sufficiently far in advance
of the date a decision is required, to enable such holder to make an informed
and considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the Notes. The Company
will deliver executed or true and correct copies of each amendment, waiver or
consent effected pursuant to the provisions of this paragraph 15 to each holder
of outstanding Notes promptly following the date on which it is executed and
delivered by, or receives the consent or approval of, the requisite holders of
Notes.
(b) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
15C. BINDING EFFECT, ETC. Any amendment or waiver consented to as
provided in this paragraph 15 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any rights consequent thereon. No course of dealing between the
Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder in such Note. As used herein, the term "THIS AGREEMENT" and references
thereto shall mean this Agreement as it may from time to time be amended or
supplemented.
15D. NOTES HELD BY COMPANY, ETC. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or the Notes, or
have directed the taking of any action provided herein or in the Notes to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates shall be deemed not to
be outstanding.
16. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
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(i) if to you or your nominee or to any Other Purchaser, or its
nominee, to you or it at the address specified for such communications in
Schedule I, or at such other address as you or it shall have specified to the
Company in writing,
(ii) if to the Company, to the Company at its address set forth
at the beginning hereof to the attention of the Chief Financial Officer, or at
such other address as the Company shall have specified to the holder of each
Note in writing.
Notices under this paragraph 16 will be deemed given only when actually
received.
17. REPRODUCTION OF DOCUMENTS.
This Agreement and all other Agreements relating thereto,
including, without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by you at the Closing (except the
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to you, may be reproduced by you
by any photographic, photostatic, microfilm, microcard, miniature photographic
or other similar process and you may destroy any original document so
reproduced. The Company agrees and stipulates that, to the extent permitted by
applicable law, any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by you in
the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
paragraph 17 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
18. CONFIDENTIAL INFORMATION.
For the purposes of this paragraph 18, "CONFIDENTIAL INFORMATION"
means information delivered to you by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by you as
being confidential information of the Company or such Subsidiary, provided that
such term does not include information that (a) was publicly known or otherwise
known to you prior to the time of such disclosure, (b) subsequently becomes
publicly known through no act or omission by you or any Person acting on your
behalf, (c) otherwise becomes known to you other than through disclosure by the
Company or any Subsidiary or (d) constitutes financial statements delivered to
you under paragraph 5A that are otherwise publicly available. You will maintain
the confidentiality of such Confidential Information in accordance with
procedures adopted by you in good faith to protect confidential information of
third parties delivered to you, provided that you may deliver or disclose
Confidential Information to (i) your directors, officers, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes), (ii) your
financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially
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in accordance with the terms of this paragraph 18, (iii) any other holder of any
Note, (iv) any Institutional Investor to which you sell or offer to sell such
Note or any part thereof or any participation therein (if such Person has agreed
in writing prior to its receipt of such Confidential Information to be bound by
the provisions of this paragraph 18), (v) any Person from which you offer to
purchase any security of the Company (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this paragraph 18), (vi) any federal or state regulatory authority having
jurisdiction over you, (vii) the National Association of Insurance Commissioners
or any similar organization, or any nationally recognized rating agency that
requires access to information about your investment portfolio or (viii) any
other Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, rule, regulation or order
applicable to you, (x) in response to any subpoena or other legal process, (y)
in connection with any litigation to which you are a party or (z) if an Event of
Default has occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under your Notes
and this Agreement. Each holder of a Note, by its acceptance of a Note, will be
deemed to have agreed to be bound by and to be entitled to the benefits of this
paragraph 18 as though it were a party to this Agreement. On reasonable request
by the Company in connection with the delivery to any holder of a Note of
information required to be delivered to such holder under this Agreement or
requested by such holder (other than a holder that is a party to this Agreement
or its nominee), such holder will enter into an agreement with the Company
embodying the provisions of this paragraph 18.
19. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates
as the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in paragraph 9. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this paragraph 19), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this paragraph
19), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
20. MISCELLANEOUS.
20A. SUCCESSORS AND ASSIGNS. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.
20B. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or Make-Whole Amount or interest on any Note that is due on a date other than
a Business Day shall be made on the next
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succeeding Business Day without including the additional days elapsed in the
computation of the interest payable on such next succeeding Business Day.
20C. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
20D. CONSTRUCTION. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
20E. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one instrument. Each counterpart may consist of a number of
copies hereof, each signed by less than all, but together signed by all, of the
parties hereto.
20F. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of New York, excluding choice-of-law principles of the law
in such State that would require the application of the laws of a jurisdiction
other than such State.
20G. SUBMISSION TO JURISDICTION. The Company hereby submits to
the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
this Agreement, the Notes or the transactions contemplated hereby or thereby.
The Company irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
20H. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND EACH HOLDER OF
NOTES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
-40-
<PAGE> 45
* * * * *
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement and return
it to the Company, whereupon the foregoing shall become a binding agreement
between you and the Company.
Very truly yours,
TRUSERV CORPORATION
By:
------------------------------------
Kerry J. Kirby
Executive Vice President and
Chief Financial Officer
The foregoing Agreement is
hereby accepted as of the
date first above written.
By:
------------------------
Name:
Title:
-41-
<PAGE> 46
SCHEDULE I
Information Relating to Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Whiting & Co. $26,750,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
Bank of NYC/CTR/BBK
IOC566 - Custody
JPMIM Incoming Wire Account
ABA=021000018
Ref: TruServ Corp.
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
J.P. Morgan Investment Management Inc.
Securities Administration
522 Fifth Avenue
New York, N.Y. 10036
(3) All other communications:
J.P. Morgan Investment Management Inc.
Securities Administration
522 Fifth Avenue
New York, N.Y. 10036
-42-
<PAGE> 47
SCHEDULE I
INFORMATION RELATING TO PURCHASERS
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Whiting & Co. $2,000,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
Bank of NYC/CTR/BBK
IOC566 - Custody
JPMIM Incoming Wire Account
ABA=021000018
Ref: TruServ Corp.
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
J.P. Morgan Investment Management Inc.
Securities Administration
522 Fifth Avenue
New York, N.Y. 10036
(3) All other communications:
J.P. Morgan Investment Management Inc.
Securities Administration
522 Fifth Avenue
New York, N.Y. 10036
-43-
<PAGE> 48
SCHEDULE I
Information Relating to Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Wheelmotor & Co. $500,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
State Street Bank and Trust Co.- Boston Ma
ABA #011-000-028
A/C #EF4A
A/C Name: Global Strategic Income(Corporate)
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire transfers:
State Street Bank and Trust Co.
One Heritage Drive
North Quincy, Massachusetts 02171
Attn.: Phil Cummings
(3) All other communications:
State Street Bank and Trust Co.
One Heritage Drive
North Quincy, Massachusetts 02171
Attn.: Phil Cummings
-44-
<PAGE> 49
SCHEDULE I
Information Relating To Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Kane & Co. $750,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
Chase Manhattan Bank
ABA #021-000-021
FFC: P81858 (Kane & Co.)
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
Chase Manhattan Bank, N.A.
Three Chase Metrotec Center (6th Floor)
Brooklyn, New York 11245
Attn.: Mariam Lopez
(3) All other communications:
Chase Manhattan Bank, N.A.
Three Chase Metrotec Center (6th Floor)
Brooklyn, New York 11245
Attn.: Mariam Lopez
-45-
<PAGE> 50
SCHEDULE I
Information Relating To Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Allstate Life Insurance Company $13,333,340
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance Company
Collection Account #168-117-0
ORG = TruServ Corp.
OBI = DPP - PPN: 89824@AD7 Payment Due Date (MM/DD/YY) - P_
(Enter "P" and amount of principal being remitted, for
example, P 5000000.00) -I_(Enter "I" and amount of
interest being remitted, for example, I 225000.00)
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire transfers:
Allstate Insurance Company
Investment Operations - Private Placements
3075 Sanders Road, Suite G4A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-2769
Telecopy: (847) 326-5040
(3) All other communications:
Allstate Life Insurance Company
Private Placements Department
3075 Sanders Road, Suite G3A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-4394
Telecopy: (847) 402-3092
-46-
<PAGE> 51
SCHEDULE I
Information Relating To Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Allstate Life Insurance Company $6,666,660
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance Company
Collection Account #168-117-0
ORG = TruServ Corp.
OBI = DPP - PPN: 89824@AD7 Payment Due Date (MM/DD/YY) - P_
(Enter "P" and amount of principal being remitted, for
example, P 5000000.00) -I_(Enter "I" and amount of
interest being remitted, for example, I 225000.00)
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
Allstate Insurance Company
Investment Operations - Private Placements
3075 Sanders Road, Suite G4A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-2769
Telecopy: (847) 326-5040
(3) All other communications:
Allstate Life Insurance Company
Private Placements Department
3075 Sanders Road, Suite G3A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-4394
Telecopy: (847) 402-3092
-47-
<PAGE> 52
SCHEDULE I
Information Relating To Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Allstate Life Insurance Company $10,000,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance Company
Collection Account #168-114-7
ORG = TruServ Corp.
OBI = DPP - PPN: 89824@AD7 Payment Due Date (MM/DD/YY) - P_
(Enter "P" and amount of principal being remitted, for
example, P 5000000.00) -I_(Enter "I" and amount of
interest being remitted, for example, I 225000.00)
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
Allstate Insurance Company
Investment Operations - Private Placements
3075 Sanders Road, Suite G4A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-2769
Telecopy: (847) 326-5040
(3) All other communications:
Allstate Life Insurance Company
Private Placements Department
3075 Sanders Road, Suite G3A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-4394
Telecopy: (847) 402-3092
-48-
<PAGE> 53
SCHEDULE I
Information Relating to Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Aid Association for Lutherans $10,000,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
Citibank, N.A. ABA #021-000-089
DDA #36126473
Attn.: Judy Rock
Ref. Account #846647
Aid Association for Lutherans Custody
Account $105,000,000 6.85% Senior Notes Due 2008
July 1, 2008 payable date
principle and interest breakdown
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
Income Collection and Disbursement
REF Account #846647
Aid Association for Lutherans Custody Account
3800 Citibank Center Tampa
Building B, Floor 1, Zone 7
Tampa, Florida 33610-9122
Attn.: Income Collection/Judith Rock
(3) All other communications:
Investment Department
Aid Association for Lutherans
4321 North Ballard Road
Appleton, Wisconsin 54919
-49-
<PAGE> 54
SCHEDULE I
Information Relating to Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Keyport Life Insurance Company $10,000,000
c/o Stein Roe & Farnham Incorporated
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
Federal Reserve Bank of Boston
ABA# 011001234 / BOS SAFE DEP
DDA# 125261
For: KEYPORT / # KEYF0005002
CUSIP, Pay Date
Physical Private: Federal Reserve Bank of Boston
Placement Wire: 011001234/BOS SAFE DEP
Instructions for Income: Attn.: MBS Income
CC: 1253
For: Keyport / # KEYF0005002
Cusip, Description of Security, Pay Date
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
Keyport Life Insurance Company
c/o Stein Roe & Farnham Incorporated
1 South Wacker Drive
Chicago, Illinois 60606
Attn.: Private Placements
(3) All other communications:
Keyport Life Insurance Company
c/o Stein Roe & Farnham Incorporated
1 South Wacker Drive
Chicago, Illinois 60606
Attn.: Private Placements
-50-
<PAGE> 55
SCHEDULE I
Information Relating to Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Nationwide Life Insurance Company $10,000,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
The Bank of New York
ABA #021-000-018
BNF: IOC566
F/A/O Nationwide Life Insurance Company
Attn.: P & I Department
PPN #89824@AD7
Security Description_______________
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
Nationwide Life Insurance Company
c/o The Bank of New York
P.O. Box 19266
Attn.: P & I Department
Newark, New Jersey 07915
With a copy to:
Nationwide Life Insurance Company
Attn.: Investment Accounting
One Nationwide Plaza (1-32-05)
Columbus, Ohio 43215-2220
(3) All other communications:
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attn.: Corporate Fixed-Income Securities
-51-
<PAGE> 56
SCHEDULE I
Information Relating to Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Federated Mutual Insurance Company $3,000,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
Norwest Bank Minnesota, N.A.
ABA# 091000019
BNF A/C# 0840245
BNF A/C Name: Trust Clearing Acct.
OBI: FFC to A/C # 1236460
Federated Mutual Insurance Company
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
Federal Mutual Insurance Company
Attn.: Mark Hood
121 East Park Square
Owatonna, Minnesota 55060
(3) All other communications:
Federated Mutual Insurance Company
Attn.: Mark Hood
121 East Park Square
Owatonna, Minnesota 55060
-52-
<PAGE> 57
SCHEDULE I
Information Relating to Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Federated Life Insurance Company $2,000,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
Norwest Bank Minnesota, N.A.
ABA# 091000019
BNF A/C# 0840245
BNF A/C Name: Trust Clearing Acct.
OBI: FFC to A/C # 12364500
Federated Life Insurance Company
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire transfers:
Federated Life Insurance Company
Attn.: Mark Hood
121 East Park Square
Owatonna, Minnesota 55060
(3) All other communications:
Federated Life Insurance Company
Attn.: Mark Hood
121 East Park Square
Owatonna, Minnesota 55060
-53-
<PAGE> 58
SCHEDULE I
Information Relating to Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Modern Woodmen of America $5,000,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
The Northern Trust Company
50 South LaSalle Street
Chicago, Illinois 60675
ABA No. 071-000-152
Account Name: Modern Woodmen of America
Each such wire transfer shall set forth the name of the Company, the full
title (including the applicable coupon rate and final maturity date) of the
Notes, a reference to PPN No. 89824@AD7 and the due date and application (as
among principal, premium and interest) of the payment being made.
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
Modern Woodmen of America
Attn.: Investment Accounting Department
1701 First Avenue
Rock Island, Illinois 61201
(3) All other communications:
Modern Woodmen of America
Attn.: Investment Department
1701 First Avenue
Rock Island, IL 61201
-54-
<PAGE> 59
SCHEDULE I
Information Relating to Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
Ameritas Investment Management $3,000,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
U.S. Bank
ABA #104-000-029
Acct. #1-494-0070-0188
Re: Description of Note; Principal & Interest Breakdown
Principal and Interest Breakdown
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
Ameritas Life Insurance Corp.
5900 "O" Street
Lincoln, Nebraska 68510-2234
ATTN.: James Mikus
Telecopy: (402) 467-6970
(3) All other communications:
Ameritas Life Insurance Corp.
5900 "O" Street
Lincoln, Nebraska 68510-2234
ATTN.: James Mikus
-55-
<PAGE> 60
SCHEDULE I
Information Relating to Purchasers
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
<S> <C>
National Guardian Life Ins. Co. $2,000,000
</TABLE>
(1) All payments by wire transfer of
immediately available funds to:
Firstar Bank Madison
P.O. Box 7900
Madison, Wisconsin 53707
ABA No. 075900465
For credit to: National Guardian Life Insurance Company
Account No.: 312 335 010
with sufficient information
to identify the source and
application of such funds.
(2) All notices of payments and written
confirmations of such wire
transfers:
Attn.: Investment Department
National Guardian Life Insurance Company
2 East Gilman Streetomem
P.O. Box 1191
Madison, Wisconsin 53701-1191
(3) All other communications:
Attn.: Investment Department
National Guardian Life Insurance Company
2 East Gilman Street
P.O. Box 1191
Madison, Wisconsin 53703-1191
<PAGE> 61
EXHIBIT A
[FORM OF NOTE]
TRUSERV CORPORATION
6.85% SENIOR NOTE DUE 2008
No. [_____] September 10, 1998
$[_______] PPN: 89824@AD7
FOR VALUE RECEIVED, the undersigned, TruServ Corporation
(herein called the "Company"), a corporation organized and existing under the
laws of the State of Delaware, hereby promises to pay to [ ], or registered
assigns, the principal sum of [ ] DOLLARS on July 1, 2008, with interest
(computed on the basis of a 360-day year of twelve 30-day months) (a) on the
unpaid balance thereof at the rate of 6.85% per annum from the date hereof,
payable semiannually, on the first day of January and July in each year,
commencing with January 1, 1999, until the entire principal amount hereof shall
have become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreements referred to below), payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the greater of (i) 8.85% or (ii) 2%
over the rate of interest publicly announced by Morgan Guaranty Trust Company of
New York from time to time in the City of New York as its "base" or "prime"
rate.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money of the United
States of America at Kansas City, Missouri or at such other place as the Company
shall have designated by written notice to the holder of this Note as provided
in the Note Purchase Agreements referred to below.
This Note is one of a series of Senior Notes (herein called
the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of
September 10, 1998 (as from time to time amended, the "Note Purchase
Agreements"), between the Company and the respective Purchasers named therein
and is entitled to the benefits thereof. Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in paragraph 18 of the Note Purchase Agreements and (ii) to
have made the representation set forth in paragraph 9B of the Note Purchase
Agreements.
-56-
<PAGE> 62
This Note is a registered Note and, as provided in the Note
Purchase Agreements, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the
dates and in the amounts specified in the Note Purchase Agreements. This Note is
also subject to optional prepayment, in whole or from time to time in part, at
the times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of New
York, excluding choice of law principles in such State that would require the
application of the laws of a jurisdiction other than such State.
TRUSERV CORPORATION
By
-----------------------------
Kerry J. Kirby
Executive Vice President and
Chief Financial Officer
-57-
<PAGE> 63
EXHIBIT E
[Capitalized terms used herein have the meaning set forth in the Note Purchase
Agreement to which this Exhibit E is attached except that the term "Senior
Funded Debt" shall mean Senior Funded Debt of the Company and not Senior Funded
Debt of any of its Subsidiaries.]
(i) No payment or prepayment of any principal, premium (if
any) or interest on account of and no repurchase, redemption or other retirement
(whether at the option of the holder or otherwise) of Subordinated Debt (other
than the conversion of any convertible Subordinated Debt into common stock of
the Company) shall be made, if at the time of such payment, prepayment,
repurchase, redemption or retirement or immediately after giving effect thereto
(1) there shall exist a default in the payment or prepayment of any principal,
premium (if any) or interest with respect to any Senior Funded Debt or (2) there
shall have occurred an event of default (other than a default in the payment or
prepayment of principal, premium (if any) or interest with respect to any Senior
Funded Debt) permitting the holder or holders thereof to accelerate the maturity
thereof (with notice, lapse of time, or both) and such event of default shall
not have been cured or waived;
(ii) In the event of any insolvency or bankruptcy proceedings,
and any receivership, liquidation, reorganization or other similar proceedings
in connection therewith, relative to the Company or to its creditors, as such,
or to its property, and in the event of any proceedings for voluntary
liquidation, dissolution or other winding up of the Company, whether or not
involving insolvency or bankruptcy, then the holders of Senior Funded Debt shall
be entitled to receive payment in full of all principal, premium (if any) and
interest on all Senior Funded Debt (including interest thereon accruing after
the commencement of any such proceedings) before the holders of the Subordinated
Debt are entitled to receive any payment on account of principal, premium (if
any) or interest upon the Subordinated Debt, and to that end the holders of
Senior Funded Debt shall be entitled to receive distributions of any kind or
character, whether in cash or property or securities, which may be payable or
deliverable in any such proceedings in respect of the Subordinated Debt, except
for distributions in the form of securities which are subordinate and junior in
right of payment to the payment of all Senior Funded Debt then outstanding;
(iii) In the event that any Subordinated Debt is declared due
and payable before its expressed maturity because of the occurrence of an event
of default (under circumstances when the provisions of the foregoing paragraphs
(i) or (ii) are not applicable), the holders of the Senior Funded Debt
outstanding at the time such Subordinated Debt so becomes due and payable
because of such occurrence of such an event of default shall be entitled to
receive payment in full of all principal, premium (if any) and interest on all
Senior Funded Debt before the holders of the Subordinated Debt are entitled to
receive any payment on account of the principal, premium (if any) or interest
upon the Subordinated Debt;
<PAGE> 64
(iv) In the event that, notwithstanding the occurrence of any
of the events described in paragraphs (i), (ii) and (iii), any such payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by the holders of Subordinated Debt
before all Senior Funded Debt is paid in full, or provision made for such
payment in accordance with the terms of the Senior Funded Debt, such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of such Senior Funded Debt or their representative
or representatives, or to the trustee or trustees under any indenture pursuant
to which any instruments evidencing any of such Senior Funded Debt may have been
issued, as their respective interests may appear, for application to the payment
of all Senior Funded Debt remaining unpaid to the extent necessary to pay such
Senior Funded Debt in full, including principal, premium (if any) and interest
thereon, in accordance with its terms, after giving effect to any concurrent
payment or distribution to the holders of such Senior Funded Debt; and
(v) No holder of Senior Funded Debt shall be prejudiced in his
right to enforce surbordination of the Subordinated Debt by any act or failure
to act on the part of the Company;
provided, that the Subordinated Debt may provide that the foregoing provisions
are solely for the purpose of defining the relative rights of the holders of
Senior Funded Debt, on the one hand, and the holders of Subordinated Debt, on
the other hand, and that nothing therein shall impair, as between the Company
and the holders of the Subordinated Debt, the obligation of the Company, which
may be unconditional and absolute, to pay to the holders of the Subordinated
Debt the principal and premium (if any) thereof and interest thereon in
accordance with its terms, nor shall anything therein prevent the holders of the
Subordinated Debt from exercising all remedies otherwise permitted by applicable
law or the instruments pursuant to which the Subordinated Debt was issued upon
default thereunder, subject to the rights under paragraphs (i), (ii), (iii),
(iv) and (v) above of holders of Senior Funded Debt to receive cash, property or
securities otherwise payable or deliverable to the holders of the Subordinated
Debt.
<PAGE> 1
EXHIBIT 4-M
===============================================================================
PARTICIPATION AGREEMENT
dated as of April 30, 1998
among
MARYGREEN, LLC,
as Lessee
TRUSERV CORPORATION,
as Lessee Agent, Construction Agent and Guarantor,
TRUSERV 1998 TRUST,
as Lessor Trust
WILMINGTON TRUST COMPANY,
individually and as Owner Trustee under
TRUSERV 1998 TRUST,
BMO LEASING (U.S.), INC.,
as Agent Certificate Holder and Certificate Holder,
as Certificate Holder
BANK OF MONTREAL,
as Lender,
and
BANK OF MONTREAL,
as Administrative Agent and Arranger
-------------------------
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
SECTION HEADING PAGE
Parties.......................................................................1
Recitals......................................................................1
ARTICLE I DEFINITIONS; INTERPRETATION.............................2
ARTICLE II DOCUMENTATION DATE......................................2
Section 2.1. Documentation Date......................................2
ARTICLE III FUNDING OF ADVANCES.....................................5
Section 3.1. Advances................................................5
Section 3.2. Certificate Holders'Commitments.........................6
Section 3.3. Lenders'Commitments.....................................6
Section 3.4. Procedures for Advances.................................6
Section 3.5. Interest Rate; Yield Rate...............................7
Section 3.6. Interest Period Selection/Continuation/
Conversion Elections..................................7
Section 3.7. Voluntary Commitment Terminations.......................8
ARTICLE IV YIELD; INTEREST; FEES...................................8
Section 4.1. Yield...................................................8
Section 4.2. Interest on Loans.......................................9
Section 4.3. Prepayments.............................................9
Section 4.4. Fees....................................................9
Section 4.5. Place and Manner of Payments...........................10
Section 4.6. Pro Rata Treatment.....................................11
Section 4.7. Sharing of Payments....................................11
ARTICLE V CERTAIN INTENTIONS OF THE PARTIES......................12
Section 5.1. Nature of Transaction..................................12
Section 5.2. Amounts Due Under the Lease............................12
ARTICLE VI CONDITIONS PRECEDENT: ACQUISITION DATE;
FUNDING DATES..........................................13
Section 6.1. Acquisition Date.......................................13
Section 6.2. Funding Dates..........................................17
Section 6.3. Conditions to Completion Date..........................19
ARTICLE VII DISTRIBUTIONS..........................................19
Section 7.1. Basic Rent.............................................19
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Section 7.2. Purchase Payments by the Lessee Agent and
the Lessees..........................................19
Section 7.3. Payment of Loan Balance................................20
Section 7.4. Sales Proceeds of Remarketing of the Property..........20
Section 7.5. Supplemental Rent......................................21
Section 7.6. Distribution of Payments after Lease Event
of Default...........................................21
Section 7.7. Other Payments.........................................23
Section 7.8. Casualty and Condemnation Amounts......................24
Section 7.9. Order of Application...................................24
Section 7.10. Payments to Account....................................24
ARTICLE VIII REPRESENTATIONS........................................24
Section 8.1. Representations of the Participants....................24
Section 8.2. Representations of the Lessee and the Guarantor........25
Section 8.3. Representations with Respect to each Funding
Date and the Acquisition Date........................31
Section 8.4. Warranties and Representations of the Owner Trustee....32
Section 8.5. Warranties and Representations of the Lessor Trust.....33
ARTICLE IX PAYMENT OF CERTAIN EXPENSES............................34
Section 9.1. Transaction Expenses...................................34
Section 9.2. Brokers'Fees and Stamp Taxes...........................35
Section 9.3. Loan Agreement and Related Obligations.................35
ARTICLE X OTHER COVENANTS AND AGREEMENTS.........................35
Section 10.1. Affirmative Covenants of the Guarantor.................35
Section 10.2. Negative Covenants of the Guarantor....................40
Section 10.3. Affirmative Covenant of the Agent Certificate Holder...44
Section 10.4. Covenants of the Owner Trustee and Lessor Trust........44
ARTICLE XI RENEWALS; REPLACEMENT OF PARTICIPANTS..................46
Section 11.1. Extensions of Maturity Date and Expiration Date;
Replacement of Participants..........................46
Section 11.2. Replacement of Defaulting Participant..................48
ARTICLE XII TRANSFERS OF PARTICIPANTS'INTERESTS....................48
Section 12.1. Assignments............................................48
Section 12.2. Participations.........................................48
Section 12.3. Withholding Taxes; Disclosure of
Information; Pledge Under Regulation A...............49
ARTICLE XIII INDEMNIFICATION........................................50
Section 13.1. General Indemnification................................50
Section 13.2. End of Term Indemnity..................................52
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Section 13.3. Environmental Indemnity................................53
Section 13.4. Proceedings in Respect of Claims.......................54
Section 13.5. General Tax Indemnity..................................55
Section 13.6. Indemnity Payments in Addition to Lease Obligations....58
Section 13.7. Eurodollar Rate Lending Unlawful.......................58
Section 13.8. Deposits Unavailable...................................59
Section 13.9. Increased Costs, etc...................................59
Section 13.10. Funding Losses.........................................61
Section 13.11. Capital Adequacy.......................................61
ARTICLE XIV THE AGENT CERTIFICATE HOLDER...........................62
Section 14.1. Appointment and Authorization..........................62
Section 14.2. Delegation of Duties...................................63
Section 14.3. Agent Certificate Holder and Affiliates................63
Section 14.4. Action by Agent Certificate Holder.....................63
Section 14.5. Consultation with Experts..............................63
Section 14.6. Exculpatory Provisions.................................63
Section 14.7. Reliance on Communications.............................63
Section 14.8. Notice of Default......................................64
Section 14.9. Non-Reliance on Agent Certificate Holder
and Other Participants...............................64
Section 14.10. Indemnification........................................65
Section 14.11. Failure to Act.........................................65
Section 14.12. Resignation and Removal................................65
Section 14.13. Distributions..........................................66
Section 14.14. Rights of Lessee Agent.................................66
ARTICLE XV MISCELLANEOUS..........................................66
Section 15.1. Survival of Agreements.................................66
Section 15.2. No Broker, Etc.........................................67
Section 15.3. Notices................................................67
Section 15.4. Counterparts...........................................67
Section 15.5. Amendments, Etc........................................67
Section 15.6. Headings, Etc..........................................68
Section 15.7. Parties in Interest....................................68
Section 15.8. GOVERNING LAW..........................................69
Section 15.9. Severability...........................................69
Section 15.10. Liability Limited......................................69
Section 15.11. Further Assurances.....................................69
Section 15.12. SUBMISSION TO JURISDICTION.............................70
Section 15.13. Setoff.................................................70
Section 15.14. WAIVER OF JURY TRIAL...................................70
Section 15.15. No Participant Responsible for Other Participants......70
Section 15.16. Recourse during Construction...........................71
Section 15.17. No Recourse to Owner Trustee; Agent Certificate
Holder; Certificate Holders..........................71
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Appendix A -- Definitions
Schedule I -- Commitments
Schedule II -- Notice Information, Wire Instructions and
Funding Offices
Schedule III -- Commitment Fees; Certificate Holder Margin and
Loan Margin
Schedule IV -- Schedule of Restrictive Agreements
Schedule V -- Schedule of Liens
Schedule VI -- Schedule of Investments
Schedule VII -- Form of Subordinated Note
Exhibit A-1 -- Form of Legal Opinion of In-House Counsel
to Lessee Agent
Exhibit A-2 -- Form of Legal Opinion of Venable, Baetjer
and Howard, LLP
Exhibit A-3 -- Form of Legal Opinion of Morris, James,
Hitchens & Williams
Exhibit B -- Form of Funding Request
Exhibit C -- Form of Interest Period
Selection/Continuation/Conversion Notice
Exhibit D-1 -- Form of Officer's Certificate - Lessee/Guarantor
Exhibit D-2 -- Form of Secretary's Certificate - Lessee/Guarantor
Exhibit D-3 -- Form of Officer's Certificate - Owner Trustee
Exhibit D-4 -- Form of Secretary's Certificate- Owner Trustee
Exhibit D-5 -- Form of Responsible Officer's Certificate -
Lessee/Guarantor
Exhibit E -- Intentionally Omitted
Exhibit F -- Form of Assignment Agreement
Exhibit G -- Form of Local Counsel Opinion
Exhibit H -- Form of Completion Certificate
Exhibit I -- Form of Construction Agency Agreement
Exhibit J -- Form of Construction Agency Agreement Assignment
Exhibit K -- Form of Construction Documents Assignment
Exhibit L -- Intentionally Omitted
Exhibit M -- Form of Compliance Certificate
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT (this "Participation Agreement"), dated as
of April 30, 1998, is entered into by and among MARYGREEN, LLC, a Delaware
limited liability company, as the Lessee (together with any permitted successors
and assigns, the "Lessee"); TRUSERV CORPORATION, a Delaware corporation, as the
Lessee Agent, Construction Agent and Guarantor (in its capacity as Lessee Agent,
the "Lessee Agent"; in its capacity as Construction Agent, the "Construction
Agent"; and in its capacity as Guarantor, the "Guarantor"); TRUSERV 1998 TRUST,
a Delaware business trust, as the Lessor Trust (the "Lessor Trust"); WILMINGTON
TRUST COMPANY, a Delaware banking corporation, individually as set forth herein
and as Trustee under the Lessor Trust ("Owner Trustee"); BMO LEASING (U.S.),
INC., a Delaware corporation, as a Certificate Holder (together with any
permitted successors and assigns thereto, each a "Certificate Holder" and
collectively the "Certificate Holders"); BMO LEASING (U.S.), INC., as Agent
Certificate Holder for the Certificate Holders (in such capacity, the "Agent
Certificate Holder"); BANK OF MONTREAL, a Canadian banking organization ("BMO"),
and the other various financial institutions as are or may from time to time
become lenders (the "Lenders") under the Loan Agreement; and BMO as
Administrative Agent (in such capacity, the "Administrative Agent") for the
Lenders and as Arranger (in such capacity, the "Arranger").
WITNESSETH:
WHEREAS, on the Acquisition Date, the Lessor Trust will either (a)
purchase from one or more third parties designated by the Construction Agent, or
(b) lease pursuant to a ground lease, parcels of Land, together with any
Improvements thereon;
WHEREAS, the Lessee Agent, as Construction Agent will construct
Improvements or additional Improvements on such Land which will be the property
of the Lessor Trust and will become part of the Property;
WHEREAS, the Lessor Trust desires to lease the respective Property to
the Lessee, and the Lessee desires to lease the Property from the Lessor Trust;
WHEREAS, the Certificate Holders are willing to provide a portion of
the funding of the costs of the acquisition of the Land, all Improvements
thereon and the construction of additional Improvements;
WHEREAS, the Lenders are willing to provide the remaining portion of
the funding of the costs of the acquisition of the Land, all Improvements
thereon and the construction of additional Improvements; and
WHEREAS, to secure such financing (a) the Certificate Holders will have
the benefit of (i) the Guaranty from the Guarantor, and (ii) a first priority
Lien on the Property and (b) the Lenders will have the benefit of (i) the
Guaranty from the Guarantor, (ii) a Lien on the Agent Certificate Holder's
right, title and interest in the Property, and (iii) an assignment of certain of
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the Agent Certificate Holder's rights against the Lessee under the Lease and
against the Construction Agent under the Construction Agency Agreement;
NOW THEREFORE, in consideration of the mutual agreements contained in
this Participation Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and
not defined herein shall have the meanings assigned thereto in Appendix A hereto
for all purposes hereof (as such Appendix A may be amended, supplemented,
amended and restated or otherwise modified from time to time, "Appendix A to
this Participation Agreement"); and the rules of interpretation set forth in
Appendix A to this Participation Agreement shall apply to this Participation
Agreement.
ARTICLE II
DOCUMENTATION DATE
Section 2.1. Documentation Date. The Documentation Date (the
"Documentation Date") shall be deemed to have occurred and all rights and
obligations of the parties to the Operative Documents (each subject to any
conditions specified therein) shall be in effect, upon satisfaction or waiver of
each of the following conditions precedent:
(a) Participation Agreement. This Participation Agreement
shall have been duly authorized, executed and delivered by the
parties hereto.
(b) Master Lease. The Master Lease shall have been duly
authorized, executed and delivered by the parties thereto.
(c) Construction Agency Agreement. The Construction Agency
Agreement shall have been duly authorized, executed and delivered by
the parties thereto.
(d) Construction Agency Agreement Assignment; Construction
Documents Assignment. The Construction Agency Agreement Assignment and
the Construction Documents Assignment shall have been duly authorized,
executed and delivered by the parties thereto.
(e) Loan Agreement and Notes. The Loan Agreement and each
Lender's Note shall have been duly authorized, executed and delivered
by the parties thereto.
(f) Assignment of Lease and Rent. The Assignment of Lease and
Rent shall have been duly authorized, executed and delivered by the
Lessor Trust, as assignor, to the Administrative Agent, as assignee,
and the Assignment of Lease and Rent shall have been consented to and
acknowledged by the Lessee.
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(g) Guaranty. The Guaranty shall have been duly authorized,
executed and delivered by the Guarantor.
(h) Trust Agreement. The Trust Agreement and each Certificate
shall have been duly authorized, executed and delivered by the parties
thereto.
(i) Fees. The Administrative Agent and each Participant, as
applicable, shall have received all fees then due and payable pursuant
to Section 4.4.
(j) Certain Transaction Expenses. Chapman and Cutler, as
counsel for the Agent Certificate Holder and Administrative Agent,
shall have received, to the extent then invoiced, payment in full in
cash of all Transaction Expenses payable to such counsel pursuant to
Section 9.1.
(k) Corporate Documents; Certificates; Acceptance Letter. The
Lessee and the Guarantor shall have delivered, or shall each have
caused to be delivered, to the Administrative Agent, the Agent
Certificate Holder, each Lender and each Certificate Holder the
following:
(i) Articles of Incorporation; Articles of
Organization. Copies of its articles of incorporation or
articles of organization, as the case may be, certified to
be true and complete as of a recent date by the appropriate
governmental authority of the jurisdiction of their
respective incorporation or existence.
(ii) Resolutions. Copies of resolutions or other
authority documentation of Guarantor's Board of Directors
and the Lessee's managing member(s) approving and adopting
the Operative Documents, the transactions contemplated
therein and authorizing execution and delivery thereof,
certified by its secretary or assistant secretary or, as the
case may be, its manager as of the Documentation Date to be
true and correct and in full force and effect as of such
date and evidence of corporate authority of the Guarantor
and the Lessee with respect to the Operative Documents and
the transactions contemplated therein.
(iii) Bylaws. A copy of Guarantor's bylaws certified
by its secretary or assistant secretary and a copy of the
Lessee's operating agreement certified by its manager as of
the Documentation Date to be true and correct and in full
force and effect as of such date.
(iv) Good Standing. Copies of certificates of good
standing, existence or its equivalent, certified as of a
recent date by the appropriate governmental authorities of
the jurisdiction of its incorporation or existence, for
Lessee and Guarantor.
(v) Opinions of Counsel. Opinions of in-house counsel
for Lessee and Guarantor and Venable, Baetjer and Howard,
LLP, addressed to the Administrative Agent, the Agent
Certificate Holder, the Lessor Trust, the Owner
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Trustee, each of the Lenders and each of the Certificate
Holders, covering the matters set forth respectively in
Exhibits A-1 and A-2.
(vi) Officer's and Secretary's Certificate. An Officer's
Certificate (or, as the case may be, Member's Certificate)
substantially in the form of Exhibit D-1, dated the
Documentation Date and Secretary's Certificate (or, as the
case may be, Member's Certificate) substantially in the form
of Exhibit D-2, dated the Documentation Date.
(m) Corporate Documents; Certificates; Acceptance Letter. The
Owner Trustee shall have delivered, or shall have caused to be
delivered to each of the other parties hereto the following:
(i) Articles of Incorporation. Copies of its articles
of incorporation or charter documents, certified to be true
and complete as of a recent date by the appropriate
governmental authority of the state of its incorporation.
(ii) Resolutions. Copies of resolutions of its Board
of Directors approving and adopting the Operative Documents,
the transactions contemplated therein and authorizing
execution and delivery thereof, certified by its secretary
or assistant secretary as of the Documentation Date to be
true and correct and in full force and effect as of such
date.
(iii) Bylaws. A copy of its bylaws certified by its
secretary or assistant secretary as of the Documentation
Date to be true and correct and in full force and effect as
of such date.
(iv) Good Standing. Copies of certificates of good
standing, existence or its equivalent, certified as of a
recent date by the appropriate governmental authorities of
the state of its incorporation.
(v) Opinions of Counsel. An opinion of Morris,
James, Hitchens & Williams, counsel for the Owner Trustee and
the Lessor Trust addressed to each of the parties hereto,
covering the matters set forth in Exhibit A-3.
(vi) Officer's and Secretary's Certificate. An
Officer's Certificate substantially in the form of Exhibit
D-3, dated the Documentation Date and Secretary's
Certificate substantially in the form of Exhibit D-4, dated
the Documentation Date.
(vii) Certificate of Trust. The Certificate of Trust,
certified to be true and complete as of a recent date by the
appropriate governmental authority of the State of Delaware.
(n) Representations and Warranties. On the Documentation
Date, the representations and warranties of each of the parties hereto
contained in Sections 8.1, 8.2,
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8.4 and 8.5 shall be true and correct in all material respects as
though made on and as of such date, except to the extent such
representations or warranties relate solely to an earlier date, in
which case such representations and warranties shall have been true
and correct in all material respects on and as of such earlier date.
(o) No Default. No Default or Event of Default shall have
occurred and be continuing on the Documentation Date unless such
Default or Event of Default shall have been waived in accordance with
the Operative Documents.
(p) Governmental Approvals. All Governmental Actions required
by any Requirement of Law for the purpose of authorizing Lessee,
Guarantor, the Agent Certificate Holder, Owner Trustee, Lessor Trust,
the Administrative Agent and each Participant to enter into the
Operative Documents shall have been obtained or made and be in full
force and effect.
All documents and instruments required to be delivered pursuant to this Section
2.1 shall be delivered at the offices of Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois 60603 or at such other location as may be determined
by the Agent Certificate Holder, the Administrative Agent and the Lessee Agent,
and in such numbers as shall be reasonably requested by the Administrative
Agent.
ARTICLE III
FUNDING OF ADVANCES
Section 3.1. Advances. Subject to the conditions and terms hereof,
the Agent Certificate Holder and Lessor Trust shall take the following actions
on the Acquisition Date at the written request of the Lessee Agent with respect
to the Property:
(a) the Agent Certificate Holder shall make Advances (out of
funds provided by the Certificate Holders and the Lenders) for the
purpose of financing the acquisition of the Land or a leasehold
interest therein (and any existing Improvements thereon) and the
Construction of Improvements thereon and the proceeds of such Advances
shall be made directly to the Construction Agent or to such parties
designated in writing by the Construction Agent to the Agent
Certificate Holder;
(b) the Lessor Trust shall acquire the Land or leasehold
interest therein, and any existing improvements thereon (using funds
provided by the Certificate Holders and the Lenders); and
(c) the Lessor Trust shall lease (or in the case of
leaseholds, sublease) the Land and Improvements to the Lessee under the
Master Lease and the Lease Supplement.
Notwithstanding any other provision hereof, the Agent Certificate Holder shall
not be obligated to make any advance with respect to any Property if, after
giving effect thereto, (i) the aggregate outstanding amounts of the Loans and
the Certificate Holder Amounts would exceed the Aggregate Commitment Amount, or
(ii) the Property Balance would exceed the lesser of
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(x) 110% of the Estimated Improvements Costs plus Land Acquisition Cost and (y)
the Fair Market Sales Value of the Property as set forth in the As-Built
Appraisal thereof delivered pursuant to Section 6.2(b) hereof.
Section 3.2. Certificate Holders' Commitments. Subject to the
conditions and terms hereof, each of the Certificate Holders shall make
available to the Agent Certificate Holder at the request of the Construction
Agent from time to time during the Commitment Period on any Funding Date or on
the Acquisition Date, as appropriate, an amount (relative to such Certificate
Holder, a "Certificate Holder Amount") in immediately available funds equal to
such Certificate Holder's Commitment Percentage of the amount of the Advance
being funded on such Funding Date or Acquisition Date. Notwithstanding any other
provision hereof, no Certificate Holder shall be obligated to make available any
Certificate Holder Amount if, after giving effect to the proposed Certificate
Holder Amount, the outstanding aggregate amount of the Certificate Holder Amount
of such Certificate Holder would exceed such Certificate Holder's Commitment.
Section 3.3. Lenders' Commitments. Subject to the conditions and
terms hereof, each of the Lenders shall make Loans to the Agent Certificate
Holder at the request of the Construction Agent from time to time during the
Commitment Period on any Funding Date or Acquisition Date, as appropriate, an
amount (relative to such Lender, a "Loan") in immediately available funds equal
to such Lender's Commitment Percentage of the amount of the Advance being funded
on such Funding Date or Acquisition Date. Notwithstanding any other provision
hereof, no Lender shall be obligated to make any Loan if, after giving effect to
the proposed Loan, the outstanding aggregate amount of such Lender's Loans would
exceed such Lender's Commitment.
Section 3.4. Procedures for Advances. (a) With respect to each
Advance, the Construction Agent shall give the Agent Certificate Holder and the
Administrative Agent prior written notice pursuant to a Funding Request
substantially in the form of Exhibit B (a "Funding Request"), which Funding
Request shall be delivered not later than 9:00 a.m. (Chicago time), three (3)
Business Days prior to the proposed Acquisition Date or the proposed Funding
Date, specifying: (i) the proposed Acquisition Date or Funding Date, (ii) the
amount of Advance requested, (iii) whether, such Funding Date will also be an
Acquisition Date, and (iv) the requested Interest Period. With respect to any
Funding Request related to the acquisition of the Property (or leasehold
interest therein), in addition to the foregoing, the Construction Agent shall
also specify: (i) the Property to be acquired or leased, (ii) the seller or
ground lessor of the Property and the related Land Acquisition Cost, and (iii)
the Estimated Improvement Costs. Such Loans and Certificate Holder Amounts made
with respect to each Advance shall be Base Rate Loans/Certificate Holder
Amounts, and the duration of the initial Interest Period with respect to such
Advance shall begin on the proposed Acquisition Date or Funding Date and end on
the next succeeding Scheduled Payment Date (the "Initial Interest Period").
Subject to timely delivery of a Funding Request and the other terms and
conditions of the Operative Documents, each Participant shall make its
Commitment Percentage of the requested Advance available to the Agent
Certificate Holder by 1:00 p.m., (Chicago time), on the requested Acquisition
Date or Funding Date. The Agent Certificate Holder and the Administrative Agent
shall calculate the amounts of the Certificate Holder Amounts and the Loans
required to fund the
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requested Advance. No more than one (1) Funding Request shall be made during any
calendar month.
(b) Except as the Participants may otherwise agree in writing, Advances
shall be made solely to provide the Construction Agent with funds with which to
pay any Land Acquisition Costs or to pay or reimburse itself for Property
Improvement Costs, as the case may be.
Section 3.5. Interest Rate; Yield Rate. Each Loan and Certificate
Holder Amount shall accrue interest or Yield, as the case may be, by reference
to the Base Rate or the Adjusted Eurodollar Rate in accordance with Section 3.6.
Section 3.6. Interest Period Selection/Continuation/Conversion
Elections. (a) By delivering an Interest Period
Selection/Continuation/Conversion Notice to the Agent Certificate Holder and
Administrative Agent with respect to Certificate Holder Amounts and Loans,
respectively, the Lessee Agent may from time to time during the Lease Term
irrevocably select, on not less than three (3) nor more than five (5) Business
Days' notice, that all or any portion of the outstanding Loans and Certificate
Holder Amounts be, in the case of Base Rate Loans/Certificate Holder Amounts,
converted into Eurodollar Loans/Certificate Holder Amounts or, in the case of
Eurodollar Loans/Certificate Holder Amounts, converted into Base Rate
Loans/Certificate Holder Amounts or continued as Eurodollar Rate
Loans/Certificate Holder Amounts and, with respect to Eurodollar
Loans/Certificate Holder Amounts, select the duration for the next succeeding
Interest Period; provided, however, that (a) in the absence of a delivery of an
Interest Period Selection/Continuation/Conversion Notice with respect to any
Eurodollar Loan/Certificate Holder Amount at least three (3) Business Days
before the last day of the then current Interest Period with respect thereto,
the Lessee Agent shall be deemed to have selected that such Eurodollar
Loan/Certificate Holder Amount be continued as a Eurodollar Loan/Certificate
Holder Amount on such last day with an Interest Period of one (1) month, (b)
each such conversion or continuation shall be pro rated among the applicable
outstanding Loans and Certificate Holder Amounts of all Participants, (c) no
portion of any Loan or Certificate Holder Amount may be continued as, or
converted into, a Eurodollar Loan/Certificate Holder Amount when any Lease
Default or Lease Event of Default has occurred and is continuing, and (d) the
outstanding Loans and Certificate Holder Amounts may not be apportioned into
more than six (6) separate Loans and Certificate Holder Amounts pursuant to this
Section 3.6 at any one time and each such Eurodollar Loan/Certificateholder
Amount shall be in a minimum amount of $500,000.
(b) the Lessee Agent, with respect to any Loans and Certificate Holder
Amounts outstanding during the Interim Lease Term, shall be deemed to have (i)
converted Base Rate Loans/Certificate Holder Amounts into Eurodollar
Loans/Certificate Holder Amounts at the end of the initial Interest Period, (ii)
as of each Scheduled Payment Date (other than the Interim Termination Date),
continued all outstanding Eurodollar Loans/Certificate Holder Amounts as
Eurodollar Loans/Certificate Holder Amounts and (iii) as of each Scheduled
Payment Date (other than the Interim Termination Date) selected an Interest
Period ending on the earlier of the next succeeding Scheduled Payment Date and
the Interim Termination Date.
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Each Interest Period Selection/Continuation/Conversion Notice so delivered or
deemed delivered by the Lessee Agent shall be deemed an effective election by
the Certificate Holders of the method for computing interest on the Loans under
the Loan Agreement.
Section 3.7. Voluntary Commitment Terminations. The Lessee Agent
shall have the right at any time and from time to time upon not less than five
(5) Business Days prior notice to the Agent Certificate Holder and the
Administrative Agent (which shall promptly notify the Lenders) to terminate the
Commitments in whole or in part (but if in part then in a minimum amount of
$5,000,000 or such lesser amount as will terminate the Commitments in full) pro
rata in proportion among the Lenders and the Certificate Holders. No termination
of the Commitments hereunder may be reinstated.
ARTICLE IV
YIELD; INTEREST; FEES
Section 4.1. Yield. (a) The amount of the Certificate Holder Amounts
outstanding from time to time shall accrue yield ("Yield") at the Yield Rate,
calculated using the actual number of days elapsed and, when the Yield Rate is
based on the Adjusted Eurodollar Rate, a 360-day year basis and, if calculated
at the Base Rate, a 360-day year basis if the Base Rate is calculated at the
Federal Funds Rate, and a 365-, or, if applicable, 366-, day year basis if the
Base Rate is calculated at the Prime Rate. If all or any portion of the
Certificate Holder Amounts, any Yield payable thereon or any other amount
payable hereunder shall not be paid when due (whether at stated maturity,
acceleration thereof or otherwise), such overdue amount shall bear interest at a
rate per annum which is equal to the Overdue Rate. Upon the occurrence, and
during the continuance of a Lease Event of Default, the principal of and, to the
extent permitted by law, interest on (or Yield on) the Certificate Holder
Amounts and any other amounts owing hereunder or under the other Operative
Documents shall bear interest, payable on demand, at the Overdue Rate. The
Administrative Agent shall, as soon as practicable, but in no event later than
12:00 (noon), Chicago time, two (2) Business Days before the effectiveness of
each Adjusted Eurodollar Rate, cause to be determined such Adjusted Eurodollar
Rate, the resulting Yield and Basic Rent, and notify the Lessee Agent, each
Certificate Holder and Lender thereof.
(b) The Administrative Agent shall distribute, in accordance with
Article VII, the Certificate Holder Basic Rent and all other amounts due with
respect to the Certificate Holder Amounts paid to the Administrative Agent by
the Lessee under the Lease from time to time.
(c) Yield on outstanding Certificate Holder Amounts made with respect
to each Property shall be paid from Advances by the Certificate Holders deemed
to have been requested by the Lessee Agent pursuant to Section 3.4 on each
Scheduled Payment Date occurring prior to the earlier of the Completion Date and
the Outside Completion Date, and the Property Improvement Costs shall be
increased on the date of each such Advance by an amount equal to such Advance;
provided that if a Completion Certificate is delivered less than three (3)
Business Days prior to a Scheduled Payment Date, solely for purposes of this
clause (c) such Completion Certificate shall not be effective until the day
after such Scheduled Payment Date.
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(d) After the earlier of the Completion Date and the Outside Completion
Date, Yield on outstanding Certificate Holder Amounts made with respect to such
Property shall be due and payable in cash on each Scheduled Payment Date and not
funded pursuant to deemed Advances as referred to in clause (c) above.
(e) If not repaid sooner, the outstanding aggregate Certificate Holder
Amounts shall be repaid in full on the Maturity Date.
Section 4.2. Interest on Loans. (a) Each Loan shall accrue interest
computed and payable in accordance with the terms of the Loan Agreement. Each
Loan shall become due and payable at the dates and times provided under the Loan
Agreement.
(b) The Administrative Agent shall distribute, in accordance with
Article VII, the Lender Basic Rent and all other amounts due with respect to the
Loans paid to the Administrative Agent by the Lessee under the Lease from time
to time.
Section 4.3. Prepayments.
(a) Voluntary Prepayments. The Lessee Agent shall have the right to
prepay an amount equal to the aggregate outstanding Lease Balance in whole, but
not in part, pursuant to the exercise of purchase option permitted under the
Lease, without premium or penalty.
(b) Mandatory Prepayments. (i) If at any time the sum of the aggregate
amount of outstanding Loans and Certificate Holder Amounts shall exceed the
Aggregate Commitment Amount, the Lessee shall immediately make payment on the
Loans or Certificate Holder Amounts in an amount sufficient to eliminate such
excess; provided that the Lessee shall not be required to make such payments if
such excess is attributable to a default by a Lender, Certificate Holder or
Lessor Trust under the Loan Agreement or this Participation Agreement and, with
respect to Lessor Trust, not attributable to a Lease Event of Default. Payments
required to be made hereunder shall be applied to Base Rate Loans/Certificate
Holder Amounts and then to Eurodollar Loans/Certificate Holder Amounts in direct
order of their Interest Period maturities.
(ii) All amounts payable by the Lessee Agent or the Lessee pursuant to
Article XV, XVI, XVIII or XX of the Master Lease shall be applied to the Loans
and the Certificate Holder Amounts in the manner set forth in Article VII
hereof.
(d) Notice. The Lessee Agent will provide notice to the Administrative
Agent of any voluntary prepayment by 10:00 A.M. (Chicago time) at least three
(3) Business Days prior to the date of such voluntary prepayment.
Section 4.4. Fees. The Lessee Agent agrees to pay the fees set
forth in this Section 4.4.
(a) Structuring and Underwriting. The Lessee Agent agrees to pay to the
Arranger the Structuring and Underwriting Fees in accordance with the Arranger's
Fee Letter.
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(b) Administrative Agent's Fees. The Lessee Agent agrees to pay to the
Administrative Agent for its own account the non-refundable Administration Fee
set forth in the Arranger's Fee Letter on each anniversary of the Documentation
Date during the Lease Term and on the Expiration Date.
(c) Commitment Fee. The Lessee Agent agrees to pay to the
Administrative Agent for the account of each Participant, for the period
(including any portion thereof when its Commitment is suspended by reason of the
Lessee's inability to satisfy any condition of Article VI) commencing on the
Documentation Date and continuing through the Interim Termination Date, a
commitment fee (collectively, the "Commitment Fees") with respect to each such
Lender and Certificate Holder, calculated at a rate set forth in Schedule III
attached hereto on such Participant's Commitment Percentage of the average daily
Available Commitments.
The Commitment Fees shall be payable by the Lessee Agent in arrears on
each Quarterly Payment Date, commencing with the first such day following the
Documentation Date, and on the last day of Interim Termination Date. The
Commitment Fees shall be computed on the basis of the actual number of days
(including the first day but excluding the last day) occurring during the period
for which such Commitment Fees are payable over a year of 360 days.
(d) Owner Trustee's Fees. The Lessee Agent agrees to pay to the Owner
Trustee the fees set forth in the letter and exhibit attached thereto from Owner
Trustee to Sean T. Maloney, Esq., Chapman and Cutler dated March 31, 1998.
Section 4.5. Place and Manner of Payments. Except as otherwise
specifically provided herein, all payments by the Lessee Agent or the Lessee
hereunder, under the Master Lease or under any other Operative Document shall be
made to the Administrative Agent in Dollars in immediately available funds,
without offset, deduction, counterclaim or withholding of any kind, to the
Account in Chicago, Illinois not later than 12:00 p.m. (Noon) (Chicago time) on
the date when due. Payments received after such time shall be deemed to have
been received on the next succeeding Business Day. Administrative Agent shall
send an invoice to Lessee Agent for Basic Rent, Supplemental Rent and other
amounts due hereunder prior to such amounts being due hereunder. The Lessee
Agent or the Lessee shall, at the time it makes any payment under any Operative
Document, specify to the Administrative Agent the Loans and Certificate Holder
Amounts, fees or other amounts payable by the Lessee Agent or the Lessee
hereunder to which such payment is to be applied (and in the event that it fails
so to specify, or if such application would be inconsistent with the terms
hereof, the Administrative Agent shall distribute such payment to the Lenders
and the Certificate Holders in such manner as the Administrative Agent may
determine to be appropriate in respect of obligations owing by Lessee Agent or
the Lessee subject to the terms of Section 4.6). The Administrative Agent will
distribute such payments to such Lenders and Certificate Holders in accordance
with Article VII, if any such payment is received prior to 2:00 p.m. (Chicago
time) on a Business Day in like funds as received prior to such time, and
otherwise the Administrative Agent will distribute such payment to such Lenders
and Certificate Holders on the next succeeding Business Day. Whenever any
payment hereunder shall be stated to be due on a day which is not a Business
Day, the due date thereof shall be extended to the next Business Day (subject to
accrual of interest and fees for the period of such extension), except that in
the case of Eurodollar Loans/Certificate Holder Amounts, if the
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extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day.
Section 4.6. Pro Rata Treatment. Except to the extent otherwise
provided herein, each Advance, each payment or repayment of principal on any
outstanding Loan or Certificate Holder Amount and each payment of interest or
Yield shall be allocated pro rata among the relevant Lenders and Certificate
Holders, as the case may be, in accordance with the respective applicable
Commitments (or, if the Commitments of such Lenders or Certificate Holders have
expired or been terminated, in accordance with the respective principal amounts
of their outstanding Loans or Certificate Holder Amounts, as the case may be).
Section 4.7. Sharing of Payments. The Participants agree among
themselves that, in the event that any Participant shall obtain payment in
respect of any Loan or Certificate Holder Amount or any other obligation owing
to such Participant under the Operative Documents through the exercise of a
right of setoff, banker's lien or counterclaim, or pursuant to a secured claim
under Section 506 of Title 11 of the United States Code or other security or
interest arising from, or in lieu of, such secured claim, received by such
Participant under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Participation Agreement, such Participant shall
promptly purchase from the other Participants a participation in such Loans or
Certificate Holder Amounts and other obligations in such amounts, and make such
other adjustments from time to time, as shall be equitable to the end that all
Participants share such payment in accordance with their respective ratable
shares as provided for in this Participation Agreement. The Participants further
agree among themselves that if payment to a Participant obtained by such
Participant through the exercise of a right of setoff, banker's lien,
counterclaim or other event as aforesaid shall be rescinded or must otherwise be
restored, each Participant which shall have shared the benefit of such payment
shall, by repurchase of a participation theretofore sold, return its share of
that benefit (together with its share of any accrued interest payable with
respect thereto) to each Participant whose payment shall have been rescinded or
otherwise restored. The Lessee Agent and each Lessee agrees that any Participant
so purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including setoff, banker's lien or counterclaim,
with respect to such participation as fully as if such Participant were a holder
of such Loan or Certificate Holder Amount or other obligation in the amount of
such participation. Except as otherwise expressly provided herein, if any
Participant, the Agent Certificate Holder or the Administrative Agent shall fail
to remit to the Administrative Agent, the Agent Certificate Holder or any other
Participant an amount payable by such party to the Administrative Agent, the
Agent Certificate Holder or such other Participant pursuant to the Operative
Documents on the date when such amount is due, such payments shall be made
together with interest thereon for each date from the date such amount is due
until the date such amount is paid to the Administrative Agent, the Agent
Certificate Holder or such other Participant at a rate per annum equal to the
Federal Funds Rate. If under any applicable bankruptcy, insolvency or other
similar law, any Participant receives a secured claim in lieu of a setoff to
which this Section 4.7 applies, such Participant shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Participants under this Section 4.7 to share
in the benefits of any recovery on such secured claim.
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ARTICLE V
CERTAIN INTENTIONS OF THE PARTIES
Section 5.1. Nature of Transaction. (a) The parties hereto intend
that (i) for financial accounting purposes with respect to the Lessee, the
Lessor Trust will be treated as the owner and the lessor of the Property and the
Lessee will be treated as the lessee of the Property and (ii) for all other
purposes, including federal and all state and local income tax purposes, state
real estate and commercial law and bankruptcy purposes,
(A) the Lease will be treated as a financing arrangement,
(B) the Certificate Holders and the Lenders will be deemed
lenders making loans to the Lessees in an amount equal to the sum of
the Certificate Holder Amounts and the outstanding principal amount of
the Loans, which amounts are secured by the Properties, and
(C) the Lessee will be treated as the owner of the Property
described in the Lease Supplement and will be entitled to all tax
benefits ordinarily available to an owner of properties like the
Property for such tax purposes. Nevertheless, the Lessee acknowledges
and agrees that neither the Agent Certificate Holder, the
Administrative Agent nor any of the Certificate Holders or Lenders has
made any representations or warranties to the Lessee concerning the
tax, accounting or legal characteristics of the Operative Documents and
that the Lessee has obtained and relied upon such tax, accounting and
legal advice concerning the Operative Documents as it deems
appropriate.
(b) Specifically, without limiting the generality of clause (a) of this
Section 5.1, the parties hereto intend and agree that in the event of any
insolvency or receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of the United
States of America or any state or commonwealth thereof affecting the Lessee
Agent, Lessee, Guarantor, the Lessor Trust, the Owner Trustee, the Certificate
Holders, or the Lenders or any collection actions, the transactions evidenced by
the Operative Documents shall be regarded as loans made by the Certificate
Holders and the Lenders as unrelated third party lenders of the Lessee.
Section 5.2. Amounts Due Under the Lease. Anything herein or elsewhere
to the contrary notwithstanding, it is the intention of Lessee Agent, the
Lessee, the Certificate Holders and the Lenders that except for unindemnified
Taxes: (i) the amount and timing of installments of Basic Rent due and payable
from time to time from the Lessee under the Lease shall be equal to the
aggregate payments due and payable as interest and, to the extent Fixed Rent is
paid, as principal, on the Loans and Yield on the Certificate Holder Amounts on
each Scheduled Payment Date; (ii) if the Lessee Agent elects the Purchase Option
or the Lessee becomes obligated to purchase the Property under the Lease, the
Loans, the Certificate Holder Amounts, and all interest, principal, Yield,
Commitment Fees thereon and all other obligations of the Lessee Agent and the
Lessee owing to the Administrative Agent, the Agent Certificate Holder, the
Certificate Holders and the Lenders shall be due and payable in full by the
Lessee Agent and
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the Lessee, as the case may be, on the date set forth in the Lease; (iii) if the
Lessee Agent properly elects the Remarketing Option, the Lessee Agent shall only
be required to pay to the Administrative Agent from the proceeds of the sale of
the Property, that portion of the Loan Balance and any amounts due pursuant to
Article XIII hereof and Section 20.2 of the Master Lease (which aggregate
amounts may be less than the Lease Balance, with any amount in excess of the
Lease Balance being payable to the Lessee); and (iv) upon an Event of Default
resulting in an acceleration of the Lessee Agent's obligation to purchase the
Property under the Lease, the amounts then due and payable by the Lessee Agent
and the Lessee under the Lease shall include all amounts necessary to pay in
full the Lease Balance, plus all other amounts then due from the Lessee Agent
and the Lessee to the Participants under the Operative Documents.
ARTICLE VI
CONDITIONS PRECEDENT: ACQUISITION DATE; FUNDING DATES
Section 6.1. Acquisition Date. The closing date with respect to the
acquisition of the Land or leasehold interests therein (and the Improvements
thereon, if any) (the "Acquisition Date") shall occur on the date on or after
the Documentation Date on which all the conditions precedent thereto set forth
in this Section 6.1 shall have been satisfied or waived by the applicable
parties as set forth herein. The obligation of the Lessor Trust to acquire the
Land or leasehold interests therein on the Acquisition Date, the obligation of
each Certificate Holder to make available any related Certificate Holder Amount
on the Acquisition Date and the obligation of each Lender to make any related
Loan on the Acquisition Date, are subject to satisfaction or waiver of the
conditions precedent set forth in Section 2.1 and the following conditions
precedent:
(a) Funding Request. Each of the Administrative Agent and the
Agent Certificate Holder shall have received a fully executed
counterpart of the applicable Funding Request in accordance with
Section 3.4. Each of the delivery of a Funding Request and the
acceptance of the proceeds of such Advance shall constitute a
representation and warranty by the Lessee and Guarantor, each as to
itself, that on the applicable Acquisition Date (both immediately
before and after giving effect to the making of such Advance and the
application of the proceeds thereof), the statements made in Section
8.2 are true and correct.
(b) Fees. All fees due and payable pursuant to this
Participation Agreement shall have been paid.
(c) Representations and Warranties. On the Acquisition Date,
the representations and warranties of each party in this Participation
Agreement and in each of the other Operative Documents shall be true
and correct in all material respects as though made on and as of such
date, except to the extent such representations or warranties relate
solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on
and as of such earlier date; provided that a failure of any party's
representation or warranty to be true and correct on the Acquisition
Date shall not be a condition precedent to such party's performance of
its obligations under the Operative Documents.
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(d) Appraisal. At least ten (10) Business Days prior to the
Acquisition Date, the Agent Certificate Holder and the Administrative
Agent shall have received an Appraisal of the Property, in form and
substance satisfactory to the Administrative Agent and the Agent
Certificate Holder, which Appraisal shall show that the Fair Market
Sales Value of the Land as of the Acquisition Date is not less than the
Land Acquisition Cost for the Property.
(e) Governmental Approvals. All necessary Governmental
Actions required by any Requirement of Law for the purpose of
authorizing the Lessor Trust to acquire the Property shall have been
obtained or made and be in full force and effect.
(f) Responsible Officer's Certificate. The Agent Certificate
Holder and the Administrative Agent shall have received a Responsible
Officer's Certificate of the Lessee and Guarantor, in substantially the
form of Exhibit D-5 attached hereto, addressed to the Administrative
Agent, the Agent Certificate Holder, each Lender and each Certificate
Holder and dated as of the Acquisition Date, stating that (w) to such
Responsible Officer's knowledge the representations and warranties of
the Lessee and the Guarantor contained in the Participation Agreement
and each other Operative Document to which it is a party is true and
correct in all material respects on and as of the Acquisition Date; (x)
to such Responsible Officer's knowledge no Default or Event of Default
has occurred and is continuing under any Operative Document to which it
is a party with respect to the Lessee and the Guarantor; (y) to such
Responsible Officer's knowledge each Operative Document to which the
Lessee and the Guarantor is a party is in full force and effect with
respect to it; and (z) the Lessee and the Guarantor has duly performed
and complied with all conditions contained herein or in any other
Operative Document required to be performed and complied with by it on
or prior to the Acquisition Date.
(g) Evidence of Property Insurance. The Agent Certificate
Holder and the Administrative Agent shall have received evidence that
the insurance maintained by the Lessee with respect to the Property
satisfies the requirements set forth in Article XIII of the Master
Lease, setting forth the respective coverage, limits of liability,
carrier, policy number and period of coverage.
(h) Environmental Audit; Site Report. At least ten (10)
Business Days prior to the Acquisition Date, the Agent Certificate
Holder and the Administrative Agent shall have received (i) an
Environmental Audit and (ii) a physical site report each with respect
to the Property and in form and substance reasonably satisfactory to
the Agent Certificate Holder and the Administrative Agent.
(i) Deed or Ground Lease. The Agent Certificate Holder shall
have received either (i) in the case of Land being acquired from a
third-party Seller, at least one (1) Business Day prior to the
Acquisition Date a copy of the proposed Deed with respect to the
Property (and/or all Improvements located thereon) being purchased on
the Acquisition Date, and on or prior to the Acquisition Date, such
Deed duly executed conveying fee simple title to the Property (and/or
all Improvements located thereon) to
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the Lessor Trust and containing all customary seller's warranties and
subject only to Permitted Property Liens or (ii) in the case of Land
to be leased, at least ten (10) days prior to the Acquisition Date, a
copy of the proposed ground lease, in form and substance satisfactory
to the Agent Certificate Holder, and, on or prior to the Acquisition
Date, such ground lease duly executed by such ground lessor
thereunder, conveying to the Lessor Trust a leasehold interest in the
Land, which Land shall be a separate tax lot and a legal subdivision
under all applicable zoning laws.
(j) Bill of Sale. On or prior to the Acquisition Date, the
Lessor Trust shall have received a special warranty bill of sale (a
"Bill of Sale"), conveying title to the Lessor Trust in any Equipment
comprising part of the Property.
(k) Construction Agency Agreement Supplement. On or prior to
the Acquisition Date, the Construction Agent and the Agent Certificate
Holder and/or Lessor Trust shall have delivered to the Certificate
Holders and the Lenders a Construction Agency Agreement Supplement with
respect to the Property fully executed by the Construction Agent and
the Agent Certificate Holder.
(l) Supplement to Assignment of Lease and Rent. On or prior
to the Acquisition Date, the Agent Certificate Holder and/or Lessor
Trust shall have delivered to the Administrative Agent a supplement to
the Assignment of Lease and Rent with respect to the Property
substantially in the form of Exhibit A thereto, together with a consent
to and acknowledgment of such supplement duly executed by the Lessee in
proper form and substance for recording under Applicable Law and
otherwise effecting the assignments anticipated by the Assignment of
Lease and Rent.
(m) Lease Supplement. On or prior to the Acquisition Date,
the applicable Lessee, the Agent Certificate Holder and/or Lessor Trust
shall have delivered the original counterpart of the Lease Supplement
executed by the Lessee and the Agent Certificate Holder and/or Lessor
Trust with respect to the Property to the Lenders.
(n) Lessor Financing Statements. On or prior to the
Acquisition Date, the Lessee shall have delivered to the Agent
Certificate Holder on behalf of the Lessor Trust all Lessor Financing
Statements relating to the Property as the Agent Certificate Holder or
any other Certificate Holder may reasonably request in order to protect
the interests of the Lessor Trust, the Agent Certificate Holder and
each of the Certificate Holders under the Master Lease relating to the
Property to the extent the Master Lease constitutes a security
agreement.
(o) Recordation of Lessor Mortgage and Lessor Financing
Statements; Search Results. Each of the Participants shall have
received (x) evidence reasonably satisfactory to it that each of (i)
the Lease Supplement and any other instrument constituting a Lessor
Mortgage and (ii) the Lessor Financing Statements relating to such
Property has been, or is being, recorded or filed in a manner
sufficient to properly perfect each of their interests therein and (y)
copies of file search reports from the Uniform Commercial Code filing
officer in the jurisdiction (i) in which the Property is located or
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(ii) in which is located a place of business or the chief executive
office of the Lessee that owns or holds any right, title or interest in
the Property, setting forth the results of such Uniform Commercial Code
file searches.
(p) Property Survey. On or prior to the Acquisition Date, the
Lessee Agent shall have delivered to each of the Agent Certificate
Holder and the Administrative Agent an American Land Title
Association/American Congress on Surveying and Mapping ("ALTA")/1992
(Urban) Survey (or such other standards as are acceptable to the Agent
Certificate Holder and the Administrative Agent) of the Property
certified to the Participants and the title company and otherwise in
form reasonably acceptable to the Participants.
(q) Title Insurance. On or prior to the Acquisition Date, the
Lessee Agent shall have delivered to the Administrative Agent and the
Agent Certificate Holder a commitment to deliver an ALTA extended
owners and lenders title insurance policy covering the Property in
favor of the Lessor Trust and the Administrative Agent, respectively,
such policy to be in the amount not less than the sum of the related
Land Acquisition Cost and the Estimated Improvement Costs and to be
reasonably satisfactory to the Required Lenders and the Required
Certificate Holders with such customary endorsements and affirmative
assurances issued by the title company as a routine matter, to the
extent available in the state where the Property is located if
requested by the Agent Certificate Holder or the Administrative Agent.
The Administrative Agent and Agent Certificate Holder shall also
receive such reinsurance agreements as they may reasonably request.
(r) No Default. There shall not have occurred and be
continuing any Default or Event of Default under any of the Operative
Documents, and no Default or Event of Default under any of the
Operative Documents will have occurred after giving effect to the
acquisition of the Property.
(s) Opinion of Counsel and of Local Counsel to the Lessee.
The Agent Certificate Holder and the Administrative Agent shall have
received (i) an opinion of counsel qualified with respect to the laws
of the jurisdiction in which the Property is situated, addressed to the
Lessor Trust, the Administrative Agent, the Agent Certificate Holder,
each Lender and each Certificate Holder, substantially in the form of
Exhibit G and (ii) if requested by the Agent Certificate Holder and the
Administrative Agent, opinions from such other counsel and covering
such issues as they may reasonably request.
(t) Approval of Proposed Acquisition. The Property shall have
been disclosed to and approved by the Agent Certificate Holder and the
Administrative Agent prior to the six (6) month anniversary of the
Documentation Date.
All documents and instruments required to be delivered pursuant to this Section
6.1 shall be delivered at the offices of Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois
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60603, or at such other location as may be determined by the Agent Certificate
Holder, the Administrative Agent and the Lessee Agent.
Section 6.2. Funding Dates. The obligations of the Agent Certificate
Holder to make Advances on each Funding Date occurring after the Acquisition
Date, the obligation of the Certificate Holders to make available any related
Certificate Holder Amount on such Funding Date, and the obligation of the
Lenders to make available any related Loan on such Funding Date, are subject to
satisfaction or waiver of the following conditions precedent:
(a) Funding Request. Each of the Administrative Agent and the
Agent Certificate Holder shall have received a fully executed
counterpart of the applicable Funding Request in accordance with
Section 3.4. Each of the delivery of the Funding Request and the
acceptance of the proceeds of such Advance shall constitute a
representation and warranty by the Lessee Agent that on the Funding
Date (both immediately before and after giving effect to the making of
such Advance and the application of the proceeds thereof), the
statements made in Section 8.3 are true and correct in all material
respects as though made on and as of such date, except to the extent
such statements relate solely to an earlier date, in which case such
statements shall have been true and correct in all material respects on
and as of such earlier date.
(b) As-Built Appraisal. At least ten (10) Business Days prior
to (i) the Initial Construction Date, the Agent Certificate Holder and
the Administrative Agent shall have received an As-Built Appraisal of
the Property, in form and substance satisfactory to the Administrative
Agent and the Agent Certificate Holder, which As-Built Appraisal shall
show that as of each of the Completion Date, the last day of the Basic
Lease Term and the last day of any Renewal Term for the Property, the
Fair Market Sales Value of the Land and the Improvements to be
constructed thereon in accordance with the Plans and Specifications
shall not be less than 100% of the sum of the Land Acquisition Cost and
Estimated Improvement Costs and (ii) the Funding Date in the event the
Property Balance, after giving effect to such Advance, would be greater
than the Fair Market Sales Value for any date indicated in the As-Built
Appraisal delivered under clause (i) and subject to Section 3.1 of the
Construction Agency Agreement, a subsequent As-Built Appraisal which
shall show that as of each of the Completion Date, the last day of the
Basic Lease Term and the last day of any Renewal Term, the Fair Market
Sales Value shall not be less than the Property Balance after giving
effect to such Advance. In the event such subsequent As-Built Appraisal
shall show that the Fair Market Sales Value as of any of the Completion
Date, the last day of the Basic Lease Term or the last day of any
Renewal Term shall be less than the Property Balance after giving
effect to such Advance, the Lessee shall promptly remit to the
Administrative Agent the difference between the Property Balance as of
the Funding Date and the smallest of the Fair Market Sales Value of the
Property as of the Completion Date, the last day of the Basic Lease
Term and the last day of any Renewal Term as determined in such
subsequent As-Built Appraisal. The Administrative Agent shall apply
such remitted amounts pursuant to Section 7.7(a) hereof.
(c) [Intentionally Omitted]
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(d) Fees. All fees due and payable pursuant to this
Participation Agreement shall have been paid.
(e) Representations and Warranties. On the applicable Funding
Date, the representations and warranties of Lessee and the Lessee Agent
in this Participation Agreement and in each of the other Operative
Documents shall be true and correct in all material respects as though
made on and as of such date, except to the extent such representations
or warranties relate solely to an earlier date, in which case such
representations and warranties shall have been true and correct in all
material respects on and as of such earlier date.
(f) Litigation. On the applicable Funding Date, there shall
not be any actions, suits or proceedings pending or, to the knowledge
of Lessee and the Guarantor, threatened with respect to the Lessee or
the Guarantor (i) that are reasonably likely to have a Material Adverse
Effect, or (ii) that could reasonably be expected to have a material
adverse effect on the title to, or the use, operation or value of, the
Property which is the subject of the current Advance.
(g) No Default. There shall not have occurred and be
continuing any Lease Default or Lease Event of Default, and no Lease
Default or Lease Event of Default will have occurred after giving
effect to the making of the Advance requested by such Funding Request.
(h) Available Commitments. After giving effect to the
applicable Advance, the conditions set forth in Sections 3.2 and 3.3
shall not be violated.
(i) Construction Costs. After giving effect to the applicable
Advance, the estimated as yet unpaid cost to the Construction Agent of
completing the Construction pursuant to the Construction Documents
shall not exceed the Available Commitments, net of any portion of the
Available Commitments that shall be allocated for Advances deemed to
have been requested pursuant to Section 4.1(c).
(j) Taxes. All taxes, fees and other charges to be paid in
connection with the execution, delivery, recording, filing and
registration of the Operative Documents in connection with such Advance
shall have been paid or provisions for such payment shall have been
made by the Lessee or the Lessee Agent to the reasonable satisfaction
of the Agent Certificate Holder, the Administrative Agent, the
Certificate Holders and the Lenders.
(k) Construction Budget. At least ten (10) Business Days
prior to the Initial Construction Date, the Construction Agent shall
have delivered a construction budget to the Administrative Agent and
Agent Certificate Holder in such detail with respect to the
Construction as the Administrative Agent and Agent Certificate Holder
may reasonably request, and such construction budget shall be
reasonably satisfactory to the Administrative Agent and the Agent
Certificate Holder.
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Section 6.3. Conditions to Completion Date. The Completion Date with
respect to the Property shall be deemed to have occurred for purposes of the
Operative Documents on the earliest date on which each of the following events
shall have occurred:
(a) the Construction shall have been substantially completed
in accordance with the Plans and Specifications and all Applicable
Law;
(b) the Property shall be ready for occupancy and operation
in accordance with the Plans and Specifications, and all appropriate
Governmental Action (including the issuance by the appropriate
Governmental Authority of a permanent certificate of occupancy) shall
have been taken for the occupancy and operation of the Property;
(c) the Lessee Agent shall have provided to the
Administrative Agent and the Agent Certificate Holder an updated title
report and policies for the Property in form and substance reasonably
satisfactory to each of the Administrative Agent and the Agent
Certificate Holder; and
(d) the Agent Certificate Holder, the Administrative Agent,
the Certificate Holders and the Lenders shall have received a
Completion Certificate from the Construction Agent substantially in the
form of Exhibit H hereto (a "Completion Certificate").
ARTICLE VII
DISTRIBUTIONS
Section 7.1. Basic Rent. Each payment of Basic Rent (and any payment
of interest on overdue installments of Basic Rent) received by the
Administrative Agent shall be distributed by the Administrative Agent to the
Certificate Holders and the Lenders pro rata in accordance with, and for
application to, the Lender Basic Rent and Certificate Holder Basic Rent then
due, as well as any overdue interest or Yield due to the Certificate Holders or
the Lenders (to the extent permitted by Applicable Law).
Section 7.2. Purchase Payments by the Lessee Agent and the Lessees.
Any payment received by the Administrative Agent as a result of:
(a) the purchase of the Property in connection with the
exercise of the Purchase Option under Section 18.1 of the Master Lease,
or compliance with the obligation to purchase (or cause its designee to
purchase) all of the Property in accordance with Section 18.2 or 18.3
of the Master Lease, or
(b) compliance with the obligation to purchase all of the
Property in accordance with Section 16.2(f) of the Master Lease, or
(c) [Intentionally Omitted]
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(d) the payment of any portion of the Property Balance in
accordance with Section 15.1 of the Master Lease or Section 4.3(a) of
the Participation Agreement, or
(e) the payment of the Property Balance in accordance with
Section 5.3 of the Construction Agency Agreement
shall be distributed by the Administrative Agent to the Certificate Holders and
the Lenders pro rata without priority of one over the other, in the proportion
that the Participant Balance of each of the Lenders and the Certificate Holders
bears to the aggregate of all of the Participant Balances.
Section 7.3. Payment of Loan Balance. In accordance with Section
20.2(f) of the Master Lease upon the exercise of the Remarketing Option, the
payment of the Loan Balance to the Administrative Agent shall be distributed to
the Lenders for application to pay in full the Participant Balance of each
Lender.
Section 7.4. Sales Proceeds of Remarketing of the Property. Any
payments received by the Administrative Agent as proceeds from the sale of the
Properties sold pursuant to the exercise of the Remarketing Option pursuant to
Article XX of the Master Lease, together with any payment made as a result of an
appraisal pursuant to Section 13.2, shall be distributed by the Administrative
Agent in the funds so received in the following order of priority:
first, to the Certificate Holders in an amount equal to (x)
the aggregate Certificate Holder Balance minus (y) 3% of the sum of (i)
the largest principal amount outstanding of Certificate Holder Amounts
at any one time prior to the distribution hereunder and (ii) the
largest principal amount outstanding of Loans at any one time prior to
the distribution hereunder (such amount under clause (y), the "Equity
Amount"), shall be distributed to the Certificate Holders for
application to the Participant Balance of each Certificate Holder, pro
rata among the Certificate Holders without priority of one over the
other in the proportion that the Participant Balance of each such
Certificate Holder bears to the aggregate Participant Balances of all
Certificate Holders and, in the case where the amounts so distributed
shall be insufficient to pay in full as aforesaid, then pro rata among
the Certificate Holders without priority of one over the other in the
proportion that the Participant Balance of each such Certificate Holder
bears to the aggregate Participant Balances of all Certificate Holders;
second, to the extent not previously paid as required by
Section 7.3 hereof, an amount equal to the Loan Balance shall be
distributed to the Lenders as set forth in Section 7.3;
third, an amount equal to the Equity Amount shall be
distributed to the Certificate Holders for application to pay in full
the Participant Balance of each Certificate Holder, pro rata among the
Certificate Holders without priority of one over the other in the
proportion that the Participant Balance of each such Certificate Holder
bears to the aggregate Participant Balances of all Certificate Holders,
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fourth, the balance, if any, shall be promptly paid to the
Certificate Holders to be distributed as provided in Section 20.2(h) of
the Lease.
Section 7.5. Supplemental Rent. All payments of Supplemental Rent
received by the Administrative Agent (excluding any amounts payable pursuant to
the preceding provisions of this Article VII) shall be distributed promptly by
the Administrative Agent upon receipt thereof to the Persons entitled thereto
pursuant to the Operative Documents.
Section 7.6. Distribution of Payments after Lease Event of Default.
(a) During the continuance of a Lease Event of Default and subject to clause (b)
below, all proceeds from the sale of the Property shall be distributed by the
Administrative Agent in the following order of priority:
first, so much of such payment or amount as shall be required
to pay or reimburse the Administrative Agent and the Agent Certificate
Holder for any tax, fees, expense, indemnification or other loss
incurred by the Administrative Agent or the Agent Certificate Holder
(to the extent incurred in connection with any duties as the
Administrative Agent or Agent Certificate Holder, as the case may be),
shall be distributed to the Administrative Agent and the Agent
Certificate Holder without priority of one over the other for their own
accounts in accordance with the amount of such payment or amount
payable to such Person;
second, so much of such payments or amounts as shall be
required to pay the Lenders and the Certificate Holders the amounts
payable to them pursuant to any expense reimbursement or
indemnification provisions of the Operative Documents shall be
distributed to each such Lender and Certificate Holder without priority
of one over the other in accordance with the amount of such payment or
payments payable to each such Person;
third, to the Certificate Holders in an amount equal to the
aggregate Certificate Holder Balance minus the Equity Amount shall be
distributed to the Certificate Holders for application to the
Participant Balance of each Certificate Holder, pro rata among the
Certificate Holders without priority of one over the other in the
proportion that the Participant Balance of each such Certificate Holder
bears to the aggregate Participant Balances of all Certificate Holders
and, in the case where amounts so distributed shall be insufficient to
pay in full as aforesaid, then pro rata among the Certificate Holders
without priority of one over the other in the proportion that the
Participant Balance of each such Certificate Holder bears to the
aggregate Participant Balances of all Certificate Holders;
fourth, to the Lenders for application to pay in full the Loan
Balance, pro rata among the Lenders without priority of one over the
other in the proportion that the Participant Balance of each such
Lender bears to the aggregate Participant Balances of all Lenders and,
in the case where the amounts so distributed shall be insufficient to
pay in full as aforesaid, then pro rata among the Lenders without
priority of one over the other
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in the proportion that the Participant Balance of each such Lender
bears to the aggregate Participant Balances of all Lenders;
fifth, an amount equal to the Equity Amount shall be
distributed to the Certificate Holders for application to pay in full
the Participant Balance of each Certificate Holder, pro rata among the
Certificate Holders without priority of one over the other in the
proportion that the Participant Balance of each such Certificate Holder
bears to the aggregate Participant Balance of all Certificate Holders;
sixth, the balance, if any, of such payment or amounts
remaining thereafter shall be promptly distributed to, or as directed
by, the Lessee Agent.
(b) All payments received and amounts realized by the Administrative
Agent in connection with any Casualty or Condemnation during the continuance of
a Lease Event of Default shall be distributed by the Administrative Agent as
follows:
(i) in the event that the Agent Certificate Holder (at the
direction of the Certificate Holders) and the Administrative Agent
elect to pay all or a portion of such amounts to the appropriate Lessee
for the repair of damage caused by such Casualty or Condemnation in
accordance with Section 14.1(a) of the Master Lease, then such amounts
shall be distributed to the Lessee, and
(ii) in the event that the Agent Certificate Holder (at the
direction of the Certificate Holders) and the Administrative Agent
elect to apply all or a portion of such amounts to the purchase price
of the related Property in accordance with Section 14.1(a) and Article
XV of the Master Lease, then such amounts shall be distributed in
accordance with clause (a).
(c) During the continuance of a Lease Event of Default during which
recourse is limited by Section 26.11 of the Master Lease and Section 15.16 of
this Participation Agreement, all payments received and amounts realized with
respect to the relevant Properties by the Administrative Agent shall be
distributed by the Administrative Agent as follows:
first, so much of such payment or amount as shall be required
to pay or reimburse the Administrative Agent and the Agent Certificate
Holder for any tax, fees, expense, indemnification or other loss
incurred by the Administrative Agent or the Agent Certificate Holder
(to the extent incurred in connection with any duties as the
Administrative Agent or Agent Certificate Holder, as the case may be),
shall be distributed to the Administrative Agent and the Agent
Certificate Holder without priority of one over the other for their own
accounts in accordance with the amount of such payment or amount
payable to such Person;
second, so much of such payments or amounts as shall be
required to pay the Lenders and the Certificate Holders the amounts
payable to them pursuant to any expense reimbursement or
indemnification provisions of the Operative Documents shall be
distributed to each such Lender and Certificate Holder without priority
of one over the
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other in accordance with the amount of such payment or payments
payable to each such Person;
third, to the Lenders for application to pay in full the Loan
Balance, pro rata among the Lenders without priority of one over the
other in the proportion that the Participant Balance of each such
Lender bears to the aggregate Participant Balances of all Lenders and,
in the case where the amounts so distributed shall be insufficient to
pay in full as aforesaid, then pro rata among the Lenders without
priority of one over the other in the proportion that the Participant
Balance of each such Lenders bears to the aggregate Participant
Balances of all Lenders;
fourth, to the Certificate Holders in an amount equal to the
aggregate Certificate Holder Balance minus the Equity Amount shall be
distributed to the Certificate Holders for application to the
Participant Balance of each Lessor, pro rata among the Certificate
Holders without priority of one over the other in the proportion that
the Participant Balance of each such Certificate Holder bears to the
aggregate Participant Balances of all Certificate Holders and, in the
case where the amounts so distributed shall be insufficient to pay in
full as aforesaid, then pro rata among the Certificate Holders without
priority of one over the other in the proportion that the Participant
Balance of each such Certificate Holder bears to the aggregate
Participant Balances of all Certificate Holders;
fifth, an amount equal to the Equity Amount shall be
distributed to the Certificate Holders for application to pay in full
the Participant Balance of each Certificate Holder, pro rata among the
Certificate Holders without priority of one over the other in the
proportion that the Participant Balance of each such Certificate Holder
bears to the aggregate Participant Balance of all Certificate Holders;
sixth, the balance, if any, of such payment or amounts
remaining thereafter shall be promptly distributed to, or as directed
by, the Lessee Agent.
Section 7.7. Other Payments. (a) Except as otherwise provided in
Sections 7.1, 7.2, 7.6 and clause (b) below, any payment received by the
Administrative Agent for which no provision as to the application thereof is
made in the Operative Documents or elsewhere in this Article VII (including any
balance remaining after the application in full of amounts to satisfy any
expressed provision) shall be distributed pro rata among the Lenders and the
Certificate Holders without priority of one over the other, in the proportion
that the Participant Balance of each bears to the aggregate of all the
Participant Balances.
(b) Except as otherwise provided in Sections 7.1, 7.2 and 7.6, all
payments received and amounts realized by the Administrative Agent or the Agent
Certificate Holder under the Master Lease or otherwise with respect to the
Properties to the extent received or realized at any time after the indefeasible
payment in full of the Participant Balances of all of the Lenders and the
Certificate Holders and any other amounts due and owing to the Lenders or the
Certificate Holders, shall be distributed forthwith by the Administrative Agent
or the Agent Certificate Holder, as the case may be, in the order of priority
set forth in Section 7.6(a).
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(c) Except as otherwise provided in Sections 7.1 and 7.2, any payment
received by the Administrative Agent or the Agent Certificate Holder for which
provisions as to the application thereof is made in an Operative Document but
not elsewhere in this Article VII shall be distributed forthwith by the Agent
Certificate Holder or the Administrative Agent to the Person and for the purpose
for which such payment was made in accordance with the terms of such Operative
Document.
Section 7.8. Casualty and Condemnation Amounts. Subject to Section
7.6(b), any amounts payable to the Administrative Agent as a result of a
Casualty or Condemnation pursuant to Section 14.1 of the Master Lease and the
Assignment of Lease and Rent shall be distributed as follows:
(a) all amounts payable to the Lessee for the repair of
damage caused by such Casualty or Condemnation in accordance with
Section 14.1(a) of the Master Lease shall be distributed to the Lessee,
and
(b) all amounts that are to be applied to the purchase price
of the Property in accordance with Section 14.1(a) and Article XV of
the Master Lease shall be distributed by the Administrative Agent to
the Lenders and the Certificate Holders pro rata without priority of
one over the other, in the proportion that the Participant Balance of
each bears to the aggregate of all of the Participant Balances.
Section 7.9. Order of Application. To the extent any payment made to
any Lender or any Certificate Holder pursuant to Sections 7.2, 7.3, 7.4, 7.6 or
7.7 is insufficient to pay in full the Participant Balance of such Lender or
Certificate Holder, then each such payment shall first be applied to accrued
interest or Yield and then to principal on the Loans or the Certificate Holder
Amounts, as applicable.
Section 7.10. Payments to Account. All payments made to the
Administrative Agent pursuant to the Operative Documents shall be made to the
Account.
ARTICLE VIII
REPRESENTATIONS
Section 8.1. Representations of the Participants. Each Participant
represents and warrants to each other Participant, the Agent Certificate Holder,
the Administrative Agent and the Lessee that:
(a) ERISA. Such Participant is not and will not be making its
Loans or funding its Certificate Holder Amounts hereunder, and is not
performing its obligations under the Operative Documents, with the
assets of an "employee benefit plan" (as defined in Section 3(3) of
ERISA) which is subject to Title I of ERISA, or "plan" (as defined in
Section 4975(e)(1) of the Code).
(b) Status. Such Participant meets at least one of the
definitions (other than as a "Certificate Holder" or a "Lender") of the
term "Eligible Assignee."
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(c) Securities. Each Participant is participating in the
Transactions for its own account and not with a view toward
redistribution; provided that disposition of its rights hereunder shall
remain in its control and the foregoing shall not affect the ability of
any Participant to assign or sell participations in its rights in
accordance with the Operative Documents.
Section 8.2. Representations of the Lessee and the Guarantor. Each of
the Lessee, the Lessee Agent and the Guarantor hereby represents and warrants to
each Participant, the Lessor Trust, the Owner Trustee, the Agent Certificate
Holder and the Administrative Agent, as to itself, that:
(a) Lessee and Guarantor Organization; Powers. The Lessee is
a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware and Guarantor is
a corporation duly organized, validly existing and in good standing
under the laws of Delaware; the Lessee and Guarantor, (i) has all
requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be conducted,
(ii) is qualified to do business in every jurisdiction where such
qualification is required, except where the failure so to qualify would
not result in a Material Adverse Effect, (iii) has the corporate power
and authority to execute, deliver and perform its obligations under
each of the Operative Documents and each other agreement or instrument,
if any, contemplated thereby to which it is or will be a party
hereunder, and (iv), with respect to Guarantor, has its chief executive
office located at 8600 West Bryn Mawr Avenue, Chicago, Illinois 60631.
(b) Authorization. The execution, delivery and performance by
Lessee Agent, Lessee and Guarantor of each of the Operative Documents
to which it is a party (i) have been duly authorized by all requisite
corporate and, if required, stockholder action and (ii) will not (A)
violate (x) any provision of law, statute, rule or regulation, or of
the certificate or articles of incorporation or other constitutive
documents or bylaws of Lessee Agent, Lessee or Guarantor, (y) any
order, writ, ruling, injunction or decree of any Governmental Authority
binding on it or (z) any provision of any indenture, agreement or other
instrument to which Lessee Agent, Lessee or Guarantor is a party or by
which either of them, or any of their property is or may be bound
except for violations which, in the case of clauses (y) and (z), would
not have a Material Adverse Effect, (B) be in conflict with, result in
a breach of or constitute (alone or with notice or lapse of time or
both) a default under any such indenture, agreement or other instrument
except for breaches or defaults which would not have a Material Adverse
Effect or (C) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon or with respect to any
property or assets now owned or hereafter acquired by Lessee Agent,
Lessee or Guarantor except pursuant to the Operative Documents.
(c) Enforceability. (i) This Participation Agreement has been
duly executed and delivered by the Lessee and Guarantor and
constitutes, and each other Operative Document to which Lessee Agent,
Lessee or Guarantor is a party when executed and delivered by such
party will constitute, a legal, valid and binding obligation of Lessee
Agent, Lessee or Guarantor enforceable against it in accordance with
its terms, except as
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such enforceability may be limited by (A) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and (B) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(ii) If the transactions are treated as creating a
secured loan to Lessee, as is the intent of the parties
hereto, each of the Lessor Financing Statements, the Lessor
Mortgage and the Lease Supplements, if any, creates, or upon
their execution, will create valid security interests in and
mortgage liens on the Property purported to be covered
thereby, which security interests and mortgage liens are, and
will remain to the extent appropriate UCC continuation filings
are made, perfected security interests and mortgage liens,
prior to all Liens other than Permitted Property Liens.
(d) Governmental and Other Approvals. No action, consent or
approval of, registration or filing with or any other action by any
Governmental Authority or any third party is or will be required in
connection with the activities of Lessee Agent, Lessee and Guarantor
pursuant to the Transactions or the enforceability of any Operative
Document against either Lessee Agent, Lessee or Guarantor to which
Lessee Agent, Lessee or Guarantor is a party, except such as have been
made or obtained and are in full force and effect.
(e) Financial Statements. The Guarantor has heretofore
furnished to the Administrative Agent, the Agent Certificate Holder and
each Participant with the following financial statements, identified by
a principal financial officer of the Guarantor: (i) a consolidated
balance sheet of the Guarantor and its Subsidiaries as at fiscal year
end in each of the three fiscal years of the Guarantor most recently
completed prior to the date as of which this representation is made or
repeated to such Participant (other than fiscal years completed within
ninety (90) days prior to such date for which audited financial
statements have not been released) and consolidated statements of
operations and cash flows and a consolidated statement of capital stock
and retained earnings of the Guarantor and its Subsidiaries for each
such year, all reported on by Ernst & Young LLP (or any other
independent public accounting firm of recognized national standing) and
(ii) a consolidated balance sheet of the Guarantor and its Subsidiaries
as at the end of the quarterly period (if any) most recently completed
prior to such date and after the end of such fiscal year (other than
quarterly periods completed within 60 days prior to such date for which
financial statements have not been released) and the comparable
quarterly period in the preceding fiscal year and consolidated
statements of operations and cash flows and a consolidated statement of
capital stock and retained earnings for the period from the beginning
of the fiscal years in which such quarterly periods are included to the
end of such quarterly period, prepared by the Guarantor. Such financial
statements (including any related schedules and/or notes) are true and
correct in all material respects (subject, as to interim statements, to
changes resulting from audits and year-end adjustments), have been
prepared in accordance with GAAP consistently followed throughout the
periods involved and show all liabilities, direct and contingent, of
the Guarantor and its Subsidiaries required to be shown in accordance
with such principles.
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The balance sheets fairly present the condition of the Guarantor and
its Subsidiaries as at the dates thereof, and the statements of
operations, capital stock and retained earnings and cash flows fairly
present the results of the operations of the Guarantor and its
Subsidiaries and their cash flows for the periods indicated. There has
been no material adverse change in the business, property or assets,
condition (financial or otherwise, operations or prospects of the
Guarantor and its Subsidiaries taken as a whole since the end of the
most recent fiscal year for which such audited financial statements
have been furnished.
(f) No Material Adverse Change. There has been no material
adverse change in the business, financial position, results of
operations or prospects of the Guarantor since the date of the most
recent financial statements described in Section 8.2(e) hereof.
(g) Title to Properties. The Guarantor has and each of its
Subsidiaries has good and indefeasible title to its respective real
properties (other than properties which it leases) and good title to
all of its other respective properties and assets, including the
properties and assets reflected in the most recent audited balance
sheet referred to in Section 8.2(e) (other than properties and assets
disposed of in the ordinary course of business), subject to no Lien of
any kind except Liens permitted by Section 10.2(b). All leases
necessary in any material respect for the conduct of the respective
businesses of the Guarantor and its Subsidiaries are valid and
subsisting and are in full force and effect.
(h) Single Purpose, Single Asset, No Subsidiaries. Lessee is
a single purpose entity, wholly owned by Guarantor, whose sole purpose
is the leasing, subleasing and ownership of the Property and related
purposes and whose sole asset is the leasehold interest in the
Property. Lessee has no Subsidiaries.
(i) Litigation; Compliance with Laws. There is no action,
suit, investigation or proceeding pending or, to the knowledge of the
Guarantor, threatened against the Guarantor or any of its Subsidiaries,
or any properties or rights of the Guarantor or any of its
Subsidiaries, by or before any court, arbitrator or administrative or
governmental body which could be reasonably expected to result in any
material adverse change in the business, property or assets, condition
(financial or otherwise) or operations of the Guarantor and its
Subsidiaries taken as a whole or the ability of the Guarantor to
perform its obligations under the Operative Documents or the
Transactions.
(j) Federal Reserve Regulations. (i) Neither Lessee Agent nor
Lessee is engaged in the business of extending credit for the purpose
of purchasing or carrying Margin Stock.
(ii) No part of the proceeds of any Advance will be
used by the Lessee, whether directly or indirectly, and
whether immediately, incidentally or ultimately, (A) to the
purchase or carry Margin Stock or to extend credit to others
for the purpose of purchasing or carrying Margin Stock or to
refund indebtedness originally incurred for such purpose, or
(B) for any purpose which entails a
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violation of, or which is inconsistent with the provisions
of the Regulations of the F.R.S. Board, including Regulation
G, U or X.
(k) Governmental Regulation. Neither Lessee Agent nor Lessee
is an "investment company" or a company "controlled" by an "investment
company" as defined in, or subject to regulation under, the Investment
Company Act of 1940 or (ii) subject to regulation under the Public
Utility Holding Company Act of 1935.
(l) Use of Proceeds. The proceeds of each Advance will be
used only for the purpose of financing the acquisition of Land or
leasehold interests therein (and Improvements existing thereon, if any)
and, the payment of Property Improvement Costs incurred in connection
therewith.
(m) Tax Returns. The Guarantor has and each of its
Subsidiaries has filed all federal, state and other income tax returns
which, to the best knowledge of the officers of the Guarantor and its
Subsidiaries, are required to be filed, and each has paid all taxes as
shown on such returns and on all assessments received by it to the
extent that such taxes have become due, except such taxes (i) as are
being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP or (ii)
the non-payment of which (a) could not be reasonably expected to have a
material adverse effect on the business, condition (financial or
otherwise) or operations of the Guarantor and its Subsidiaries taken as
a whole and (b) does not result in the creation of any Lien other than
Liens permitted by Section 10.2(b) hereof.
(n) No Misstatements. Neither the Operative Documents nor any
other document, certificate or statement furnished to the Participant
by or on behalf of the Guarantor in connection herewith contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein
not misleading. there is no fact peculiar to the Guarantor or any of
its Subsidiaries which materially adversely affects or in the future
may (so far as the Guarantor can now foresee) materially adversely
affect the business, property or assets, condition (financial or
otherwise or operations of the Guarantor or any of the Subsidiaries and
which has not been set forth in the Operative Documents.
(o) ERISA. No accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the Code), whether or not
waived, exists with respect to any Plan (other than a Multiemployer
Plan). No liability to the PBGC has been or is expected by the
Guarantor or any ERISA Affiliate to be incurred with respect to any
Plan (other than a Multiemployer Plan) by the Guarantor, any Subsidiary
or any ERISA Affiliate which is or would be materially adverse to the
business, property or assets, condition (financial or otherwise) or
operations of the Guarantor and its Subsidiaries taken as a whole.
Neither the Guarantor, any Subsidiary nor any ERISA Affiliate has
incurred or presently expects to incur any withdrawal liability under
Title IV of ERISA with respect to any Multiemployer Plan which is or
would be materially adverse to the business, property or assets,
condition (financial or otherwise) or operations of the Company and its
Subsidiaries taken as a whole. The execution and delivery of the
Operative
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Documents and the consummation of the Transactions will be exempt from
or will not involve any transaction which is subject to the
prohibitions of section 406 of ERISA and will not involve any
transaction in connection with which a penalty could be imposed under
Section 502(i) of ERISA or a tax could be imposed pursuant to section
4975 of the Code.
(p) Environmental Compliance. The Guarantor and is
Subsidiaries and all of their respective properties and facilities have
complied at all times and in all respects with all applicable foreign,
federal, state, local and regional statutes, laws, ordinances and
judicial or administrative orders, judgments, rulings and regulations
relating to protection of the environment except, in any such case,
where failure to so comply could not reasonably be expected to result
in a material adverse effect on the business, condition (financial or
otherwise) or operations of the Guarantor and its Subsidiaries taken as
a whole or the ability of the Guarantor to perform its obligations
under the Operative Documents.
(q) Offer of Securities, etc. Neither Lessee Agent nor any
Person authorized to act on its behalf has, directly or indirectly,
offered any interest in the Property or any other interest similar
thereto (the sale or offer of which would be integrated with the sale
or offer of such interest in the Property), for sale to, or solicited
any offer to acquire any of the same from, any Person other than each
initial Participant and the Administrative Agent, the Agent Certificate
Holder and other "accredited investors" (as defined in Regulation D of
the Securities and Exchange Commission).
(r) Property. The Property as improved in accordance with the
Plans and Specifications and the contemplated use thereof by the Lessee
and its agents, assignees, employees, lessees, sublessees, licensees,
tenants and subtenants shall be in material compliance with all
Requirements of Law (including, without limitation, all zoning and land
use laws and Environmental Laws) and Insurance Requirements, except for
such Requirements of Law as it shall be contesting in good faith by
appropriate proceedings. There is no action, suit or proceeding
(including any proceeding in condemnation or eminent domain or under
any Environmental Law) pending or, to the best of its knowledge,
threatened with respect to it, or the Property which materially
adversely affects the title to, or the use, operation or value of, the
Property except as has been previously disclosed to the Agent
Certificate Holder and Administrative Agent in writing.
(s) Plans and Specifications. Upon completion of construction
for the Property, all water, sewer, electric, gas (if applicable),
telephone and drainage facilities and all other utilities required to
adequately service the applicable Improvements for the Property's
intended use will be available pursuant to adequate permits (including
any that may be required under applicable Environmental Laws). No fire
or other casualty with respect to the Property has occurred which fire
or other casualty has had a Material Adverse Effect on the Property.
Upon completion of construction for the Property, the Property will
have available all Material services of public facilities and other
utilities necessary for use and operation of the Property for its
intended purpose including, without limitation, adequate water, gas and
electrical supply, storm and sanitary sewerage
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facilities, telephone, other required public utilities and means of
legal access between the Property and public streets and sidewalks.
All utilities serving the Property or proposed to serve the Property
in accordance with the Plans and Specifications are located in, and
access to the Property is provided by, either public rights-of-way
abutting the Property or Appurtenant Rights. All Material licenses,
approvals, authorizations, consents, permits (including, without
limitation, building, demolition and environmental permits, licenses,
approvals, authorizations and consents), easements and rights-of-way,
including proof and dedication, required for (x) the use, treatment,
storage, transport, disposal or disposition of any Hazardous Material
on, at, under or from the Property during the construction of the
Improvements thereon, and (y) construction of the Improvements on the
Property in accordance with the Plans and Specifications and the
Construction Agency Agreement have either been irrevocably obtained
from the appropriate Governmental Authorities having jurisdiction or
from private parties, as the case may be, or will be irrevocably
obtained from the appropriate Governmental Authorities having
jurisdiction or from private parties, as the case may be, prior to
commencing any such construction or use and operation, as applicable.
Prior to any Advance with respect of the Land or Improvements, the
Lessee has obtained (or will obtain prior to the Completion Date) all
appropriate Governmental Action, and has and will keep in full force
and effect, all material operating permits necessary to allow for the
Property to be operated in accordance with its intended use.
(t) Deed. With respect to the acquisition by purchase of the
Property on the Acquisition Date, the Deed will be sufficient to convey
good and marketable title to the Property (subject to the Permitted
Property Liens) to the Lessor Trust. With respect to the acquisition by
ground lease of the Property on the Acquisition Date, the ground lease
will be sufficient to convey good and marketable leasehold title to the
Property (subject to Permitted Property Liens) to the Lessor Trust.
(u) Insurance. Lessee will, on or before the Acquisition
Date, have obtained insurance coverage covering the Property which
meets the requirements of the Master Lease, and such coverage is in
full force and effect.
(v) Flood Hazard Areas. Except as otherwise identified on the
applicable survey delivered pursuant to Section 6.1(p), no portion of
the Property will be located within an area identified as a special
flood hazardous area by the Federal Emergency Management Agency.
(w) Solvency. The Guarantor and the Lessee are Solvent.
(x) Outstanding Debt. Neither the Guarantor nor any of its
Subsidiaries has outstanding any Debt except as permitted by Section
10.2(c). There exists no default under the provisions of any instrument
evidencing Debt of the Guarantor or any of its Subsidiaries in an
amount greater than $250,000 or of any agreement relating thereto.
(y) Conflicting Agreements and Other Matters. Neither the
Guarantor nor any of its Subsidiaries is a party to any contract or
agreement or subject to any charter or
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other corporate restriction which materially and adversely affects its
business, property or assets, condition (financial or otherwise) or
operations. None of the execution and delivery of this Participation
Agreement or any other Operative Document, the making of the Loans or
the fulfillment of or compliance with the terms and provisions hereof
and of the other Operative Documents will conflict with, or result in
a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the
Guarantor or any of its Subsidiaries pursuant to, the charter or
by-laws of the Guarantor or any of its Subsidiaries, any award of any
arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule
or regulation to which the Guarantor or any of its Subsidiaries is
subject. Neither the Guarantor nor any of its Subsidiaries is a party
to, or otherwise subject to any provision contained in, any instrument
evidencing Indebtedness of the Guarantor or such Subsidiary, any
agreement relating thereto or any other contract or agreement
(including its charter) which limits the amount of, or otherwise
imposes restrictions on the incurring of, Debt of the Guarantor of the
type that the Obligations constitute except as set forth in the
agreements listed in Schedule IV attached hereto (as such Schedule IV)
may have been modified from time to time by written supplements
thereto delivered by the Guarantor and accepted in writing by the
Required Participants).
Section 8.3. Representations with Respect to each Funding Date and the
Acquisition Date. The Lessee and the Guarantor each represents and warrants to
the Administrative Agent, the Lessor Trust, the Owner Trustee, the Agent
Certificate Holder and each Participant as of each Funding Date and the
Acquisition Date, as to itself, as follows:
(a) Representations and Warranties. Its representations and
warranties set forth in Section 8.2 are true and correct in all
material respects on and as of such Funding Date and the Acquisition
Date, as the case may be, except to the extent such representations or
warranties relate solely to an earlier date, in which case such
representations and warranties shall have been true and correct on and
as of such earlier date. It is in compliance with its obligations under
the Operative Documents and there exists no Lease Default or Lease
Event of Default. No Lease Default or Lease Event of Default will occur
as a result of, or after giving effect to, the Advance requested by the
Funding Request on such date.
(b) Improvements. The Construction of the Improvements has,
to the best knowledge of Lessee Agent and the Lessee, been performed in
a good and workmanlike manner, substantially in accordance with the
Plans and Specifications therefor in all material respects and in
compliance with all Insurance Requirements and Requirements of Law.
(c) Liens. Neither Lessee Agent nor Lessee has permitted any
Liens to be placed against the Property other than Permitted Property
Liens.
(d) Advance. The amount of the Advance requested represents
amounts advanced or to be advanced by the Construction Agent to third
parties (except for the
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Construction Agent Fee) in connection with Land Acquisition Costs or
Property Improvement Costs. With respect to each Advance, the
conditions precedent to such Advance and the related Certificate
Holder Amounts and Loans set forth in Article VI have been satisfied.
Section 8.4. Warranties and Representations of the Owner Trustee.
Wilmington Trust Company warrants and represents in its individual capacity
notwithstanding the provisions of Section 15.19 hereof or any similar provision
of any other Operative Document, that:
(a) Wilmington Trust Company
(i) is a banking corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and has the capacity to act as trustee of
a trust which owns real property located in the State of
Maryland;
(ii) has the corporate power and authority to enter
into and perform its obligations under the Trust Agreement and
this Participation Agreement; and
(iii) has full right, power and authority under the
Trust Agreement to enter into and perform its obligations, as
Owner Trustee on behalf of the Lessor Trust, under the
Operative Documents.
(b) There are no actions or proceedings pending, or to the
knowledge of Wilmington Trust Company, threatened, against or affecting
Wilmington Trust Company in or before any Governmental Authority which,
if adversely determined, would materially and adversely affect the
Trust Estate or would call into question the right, power and authority
of Wilmington Trust Company to enter into or perform the Trust
Agreement and each Operative Documents to which it is a party.
(c) The Trust Estate will be free and clear of any liens and
encumbrances which result from claims against Wilmington Trust Company
in its individual capacity. Wilmington Trust Company, in its individual
capacity, has not by affirmative act, conveyed any interest in the
Trust Estate to any Person or subjected the Trust Estate to any Lien,
and will not do so by affirmative act.
(d) The Trust Agreement and (insofar as it is entering into
this Participation Agreement in its individual capacity) this
Participation Agreement have been duly authorized by all necessary
corporate action on the part of Wilmington Trust Company, have been
duly executed and delivered by Wilmington Trust Company and constitute
the valid and binding obligations of Wilmington Trust Company
enforceable against Wilmington Trust Company in accordance with the
terms thereof, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally
and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
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(e) Neither any relationship between Wilmington Trust Company
and any other Person, nor any circumstance in connection with the
execution and delivery of the Trust Agreement or this Participation
Agreement, is such as to require a consent, approval or authorization
of, or filing, registration or qualification with, any Governmental
Authority on the part of Wilmington Trust Company in connection with
the execution and delivery of the Trust Agreement or this Participation
Agreement other than as contemplated by the Operative Documents.
(f) The execution and delivery of the Trust Agreement and
this Participation Agreement and compliance by Wilmington Trust Company
with all of the provisions thereof do not and will not contravene any
federal law of the United States of America or any law of the State of
Delaware regulating the banking or trust activities or business of
Wilmington Trust Company, or any order of any Governmental Authority
applicable to or binding on Wilmington Trust Company or its articles of
association or its by-laws.
(g) The Operative Documents to which Owner Trustee is a party
have been duly executed and delivered by the Owner Trustee and the
Operative Documents to which Lessor Trust is a party have been duly
executed and delivered by Owner Trustee on behalf of Lessor Trust.
(h) Both Wilmington Trust Company's chief executive office
and the place where its active records concerning the Project and the
Lessor Trust are kept are located in Wilmington, Delaware.
Section 8.5. Warranties and Representations of the Lessor Trust. The
Lessor Trust warrants and represents that:
(a) The Lessor Trust is a Delaware Business Trust duly formed
by a valid, binding and effective declaration of trust by Agent
Certificate Holder and the Owner Trustee and the filing of a
certificate of trust with the Delaware Secretary of State pursuant to
the laws of the State Delaware and has all requisite power and
authority under the Trust Agreement to execute and deliver, and to
perform its obligations under, the Operative Documents to which it is a
party.
(b) The Operative Documents to which it is, or will be, a
party are duly authorized pursuant to the Trust Agreement and such
Operative Documents have been duly executed and delivered by the Lessor
Trust, and constitute, and each other Operative Document to which
Lessor Trust is a party when executed and delivered by Lessor Trust
will constitute, the valid and binding obligations of the Lessor Trust
enforceable against the Lessor Trust in accordance with the respective
terms thereof, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally
and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
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(c) The Lessor Trust is not in violation of any term of any
of the Operative Documents.
(d) Neither the execution and delivery of the Operative
Documents, the consummation of the transactions contemplated thereby
nor the fulfillment of or compliance with the provisions thereof nor
any circumstance in connection with the issuance of the Certificates
will require consent, approval, authorization, filing, registration or
qualification under or conflict with or violate any Applicable Law
having jurisdiction over the Lessor Trust or any of the Property of the
Lessor Trust, except as contemplated by the Operative Documents.
(e) The Lessor Trust has not by affirmative act conveyed any
interest in the Trust Estate to any Person or subjected the Trust
Estate to any Lien except pursuant to the Operative Documents, and will
not do so by affirmative act.
(f) On the date hereof, the Lessor Trust is "located" (as
defined in ss.9-103(3)(d) of the Uniform Commercial Code) at 1100 North
Market Street, Rodney Square North, Wilmington, Delaware 19890-0001.
(g) Neither the Lessor Trust nor any Person authorized by the
Lessor Trust to act on its behalf has offered or sold any interest in
the Lease, or in any similar security relating to the Property, or in
any security the offering of which for the purposes of the Securities
Act would be deemed to be part of the same offering as the offering of
the aforementioned securities to, or solicited any offer to acquire any
of the same from, any Person other than the Agent Certificate Holder,
Administrative Agent and the Participants, and neither the Lessor Trust
nor any Person authorized by the Lessor Trust to act on its behalf will
take any action which would subject the issuance or sale of any
interest in the Lease or the Property to the provisions of Section 5 of
the Securities Act or require the qualification of any Operative
Document under the Trust Indenture Act of 1939, as amended.
(h) The Lessor Trust is a single purpose entity whose sole
purpose is the leasing and ownership of the Property and related
purposes and whose sole asset will be the Property and ancillary
rights.
ARTICLE IX
PAYMENT OF CERTAIN EXPENSES
The Lessee Agent agrees, for the benefit of the Arranger, the Lessor
Trust, the Owner Trustee, the Trust Company, the Agent Certificate Holder, the
Administrative Agent, the Certificate Holders and the Lenders, that:
Section 9.1. Transaction Expenses. (a) The Lessee Agent shall pay, or
cause to be paid, from time to time all Transaction Expenses in respect of the
transactions on the Documentation Date, the Acquisition Date and each Funding
Date to the extent provided herein; provided, however, that, if the Lessee Agent
has not received written invoices therefor at least two
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(2) Business Days prior to such date, such Transaction Expenses shall be paid
within thirty (30) days after the Lessee Agent has received written invoices
therefor.
(b) The Lessee Agent shall pay or cause to be paid (i) all Transaction
Expenses incurred by the Agent Certificate Holder, Lessor Trust, Owner Trustee,
the Trust Company, the Administrative Agent or the Arranger in entering into any
future amendments or supplements with respect to any of the Operative Documents,
whether or not such amendments or supplements are ultimately entered into, or
giving or withholding of waivers or consents hereto or thereto, in each case
which have been requested by or approved by the Lessee Agent, (ii) all
Transaction Expenses incurred by the Arranger, the Agent Certificate Holder,
Lessor Trust, Owner Trustee, the Trust Company, the Administrative Agent, the
Lenders or the Certificate Holders in connection with the purchase of the
Property by Lessee or other Person pursuant to Articles XVIII and XXI of the
Master Lease and (iii) after the occurrence and during the continuance of a
Lease Event of Default or a Construction Agency Event of Default, all
Transaction Expenses incurred by any of the Participants, the Agent Certificate
Holder, Lessor Trust, Owner Trustee, the Trust Company, the Administrative Agent
or the Arranger in respect of enforcement of any of their rights or remedies
against the Lessee or the Lessee Agent/Guarantor in respect of the Operative
Documents.
Section 9.2. Brokers' Fees and Stamp Taxes. The Lessee Agent shall pay
or cause to be paid any brokers' fees and any and all stamp, transfer and other
similar taxes, fees and excise, if any, including any interest and penalties,
which are payable in connection with the transactions contemplated by this
Participation Agreement and the other Operative Documents.
Section 9.3. Loan Agreement and Related Obligations. If a Lease Event
of Default has occurred and is continuing, the Lessee Agent shall pay, without
duplication of any other obligation of any Lessee or the Lessee Agent to pay any
such amount under the Operative Documents, before the due date thereof, all
costs, expenses and other amounts (other than principal and interest on the
Loans which are payable to the extent otherwise required by the Operative
Documents) required to be paid by the Agent Certificate Holder, Lessor Trust,
Owner Trustee, the Trust Company, Administrative Agent or any of the Lenders or
Certificate Holders under the Loan Agreement and the Assignment of Lease and
Rent and the Construction Agency Agreement Assignment.
ARTICLE X
OTHER COVENANTS AND AGREEMENTS
Section 10.1. Affirmative Covenants of the Guarantor. The Lessee Agent
covenants and agrees with the Arranger, the Agent Certificate Holder, Lessor
Trust, Owner Trustee, the Administrative Agent, the Certificate Holders and the
Lenders that, so long as this Participation Agreement shall remain in effect or
the principal or interest on any Loan, any Certificate Holder Amount or Yield
thereon, or any fees or any other expenses or amounts payable under any
Operative Document shall be unpaid, and until all Commitments shall have been
permanently terminated, unless the Required Participants shall otherwise consent
in writing, the Lessee Agent will:
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(a) Financial Statements. The Guarantor shall deliver to the
Administrative Agent, in form and detail reasonably satisfactory to the
Administrative Agent and the Required Participants, with sufficient copies for
each Participant:
(i) as soon as available, but not later than one hundred
twenty (120) days after the end of each fiscal year, a copy of the
audited consolidated balance sheet of the Guarantor and its
Subsidiaries as at the end of such year and the related consolidated
statements of income or operations, shareholders' equity and cash flows
for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, and accompanied by the opinion of
Ernst & Young or another nationally-recognized independent public
accounting firm ("Independent Auditor") which report (x) shall state
that such consolidated financial statements present fairly the
financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years and (y) shall not be
qualified or limited because of a restricted or limited examination by
the Independent Auditor of any material portion of the Guarantor's or
any Subsidiary's records; and
(ii) as soon as available, but not later than sixty (60) days
after the end of each of the first three fiscal quarters of each fiscal
year, a copy of the unaudited consolidated balance sheet of the
Guarantor and its Subsidiaries as of the end of such quarter and the
related consolidated statements of income, shareholders' equity and
cash flows for the period commencing on the first day and ending on the
last day of such quarter, and certified by a Responsible Officer as
fairly presenting, in accordance with GAAP (subject to ordinary, good
faith year-end audit adjustments), the financial position and the
results of operations of the Guarantor and the Subsidiaries.
(b) Certificates; Other Information. The Guarantor shall furnish to the
Administrative Agent, with sufficient copies for each Participant:
(i) concurrently with the delivery of the financial
statements referred to in subsection 10.1(a)(i), a certificate of the
Independent Auditor stating that in making the examination necessary
therefor no knowledge was obtained of any Event of Default or Unmatured
Event of Default, except as specified in such certificate;
(ii) concurrently with the delivery of the financial
statements referred to in subsections 10.1(a)(i) and (ii), a Compliance
Certificate executed by a Responsible Officer;
(iii) promptly, copies of all financial statements and reports
that the Guarantor sends to its shareholders, and copies of all
financial statements and regular, periodical or special reports
(including Forms 10K, 10Q and 8K) that the Guarantor or any Subsidiary
may make to, or file with, the SEC; and
(iv) promptly, such additional information regarding the
business, financial or corporate affairs of the Guarantor or any
Subsidiary as the Administrative Agent, at the request of any
Participant, may from time to time request.
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(c) Notices. The Guarantor shall promptly notify the Administrative
Agent and each Participant promptly after a Responsible Officer obtains
knowledge of:
(i) the occurrence of any Event of Default or Unmatured
Event of Default;
(ii) any of the following matters that has resulted or may
reasonably be expected to result in a Material Adverse Effect: (A) any
breach or non-performance of, or any default under, a Contractual
Obligation of the Guarantor or any Subsidiary; (B) any dispute,
litigation, investigation, proceeding or suspension between the
Guarantor or any Subsidiary and any Governmental Authority; or (C) the
commencement of, or any material development in, any litigation or
proceeding affecting the Guarantor or any Subsidiary including pursuant
to any applicable Environmental Law;
(iii) the occurrence of any of the following events affecting
the Guarantor or any ERISA Affiliate (but in no event more than ten
(10) days after such event; provided that the Guarantor shall notify
the Administrative Agent and each Participant not less than ten (10)
days before the occurrence of any event described in clause (B) below),
and deliver to the Administrative Agent and each Participant a copy of
any notice with respect to such event that is filed with a Governmental
Authority and any notice delivered by a Governmental Authority to the
Guarantor or any ERISA Affiliate with respect to such event:
(A) an ERISA Event;
(B) a contribution failure with respect to a Pension
Plan sufficient to give rise to a Lien under Section 302(f) of
ERISA;
(C) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(D) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the code
by the Guarantor or any ERISA Affiliate; or
(E) the adoption of any amendment to a Plan subject
to Section 412 of the Code, if such amendment results in a
material increase in contributions or Unfunded Pension
Liability; and
(iv) any material change in accounting policies or financial
reporting practices by the Guarantor or any of its consolidated
Subsidiaries.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Guarantor or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under subsection 10.1(c)(i) shall describe with particularity any and all
clauses
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or provisions of this Participation Agreement or any other Operative Document
that have been breached or violated.
(d) Preservation of Corporate Existence Etc. The Guarantor shall, and
shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation or formation; provided, however, that,
subject at all times to the limits set forth in Section 10.2(d) hereof,
the Guarantor shall be permitted to dissolve any Subsidiary that is not
a Material Subsidiary;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business
except (i) in connection with transactions permitted by Section 10.2(e)
and sales of assets permitted by Section 10.2(d) and (ii) to the extent
the non-preservation or non-maintenance thereof could not reasonably be
expected to have a Material Adverse Effect;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of
which could reasonably be expected to have a Material Adverse Effect.
(e) Maintenance of Property. The Guarantor shall, and shall cause each
Subsidiary to, maintain and preserve all its property which is used or useful in
its business in good working order and condition, ordinary wear and tear
excepted and make all necessary repairs thereto and renewals and replacements
thereof except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect. The Guarantor and each Subsidiary shall use the
standard of care typical in the industry in the operation and maintenance of its
facilities.
(f) Insurance. The Guarantor shall, and shall cause each Subsidiary to,
maintain with financially sound and reputable insurers, insurance in such
amounts and against such liabilities and hazards as customarily maintained by
the Guarantor in accordance with its practices, policies and procedures prior to
the Documentation Date. Together with each delivery of financial statements
under subsection 10.1(a)(i), the Guarantor will, upon the request of any
Participant, deliver a certificate of a Responsible Officer specifying the
details of such insurance in effect.
(g) Payment of Obligations. The Guarantor shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable all
their respective obligations and liabilities, including:
(i) all tax liabilities, assessments and governmental charges
or levies upon it or its properties or assets, unless the same are
being contested in good faith by
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appropriate proceedings and adequate reserves in accordance with GAAP
are being maintained by the Guarantor or such Subsidiary;
(ii) all lawful claims which, if unpaid, would by law become a
Lien upon its property; and
(iii) all indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness.
(h) Compliance with Laws. The Guarantor shall, and shall cause each
Subsidiary to, comply in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
(i) Compliance with ERISA. The Guarantor shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
(j) Inspection of Property and Books and Records. The Guarantor shall,
and shall cause each Subsidiary to, maintain proper books of record and account,
in which full, true and correct entries in conformity with GAAP consistently
applied shall be made of all financial transactions and matters involving the
assets and business of the Guarantor and such Subsidiary. The Guarantor shall,
and shall cause each Subsidiary to, permit representatives and independent
contractors of the Administrative Agent or any Participant to visit and inspect
any of their respective properties, to examine their respective corporate,
financial and operating records, and make copies thereof or abstracts therefrom,
and to discuss their respective affairs, finances and accounts with their
respective directors, officers, and independent public accountants, all at the
reasonable expense of the Guarantor and at such reasonable times during normal
business hours and as often as may be reasonably desired, upon reasonable
advance notice to the Guarantor; provided that when an Event of Default exists
the Administrative Agent or any Participant may do any of the foregoing at the
reasonable expense of the Guarantor at any time during normal business hours
without advance notice.
(k) Environmental Laws. The Guarantor shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
material compliance with all material Environmental Laws.
(l) Use of Proceeds. The Guarantor shall use the proceeds of the Loans
to acquire the Property and to fund Construction of Improvements.
(m) Covenant to Secure Obligations Equally. The Guarantor covenants
that, if it or any Subsidiary shall create or assume any Lien upon any of its
property or assets, whether now owned or hereafter acquired, other than Liens
permitted by the provisions of Section 10.2(b)
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(unless prior written consent to the creation or assumption thereof shall have
been obtained pursuant to Section 15.5 hereof), it will make or cause to be made
effective provision whereby the Obligations will be secured by such Lien equally
and ratably with any and all other Debt thereby secured so long as any such
other Debt shall be so secured.
(n) Cooperative Status. The Guarantor covenants that it will at all
times maintain its status as a cooperative for purposes of Subchapter T of the
Code; provided, however, in the event that the Code or other applicable law is
modified after the date hereof and as a result of such modification the
Guarantor is unable to satisfy its obligations under this Section, then the
Required Participants and the Guarantor shall agree, or in good faith negotiate
to agree, to amend the covenants contained in this Participation Agreement so
that the application of such covenants (following such modification of the Code
or other applicable law and the effect thereof on the Guarantor) will be
substantially the same as prior thereto.
Section 10.2. Negative Covenants of the Guarantor. The Guarantor
covenants and agrees with the Arranger, the Agent Certificate Holder, Lessor
Trust, Owner Trustee, the Administrative Agent, the Certificate Holders and the
Lenders that, so long as this Participation Agreement shall remain in effect or
the principal or interest on any Loan, any Certificate Holder Amount or Yield
thereon, or any fees or any other expenses or amounts payable under any
Operative Document shall be unpaid, and until all Commitments shall have been
permanently terminated, unless the Required Participants shall otherwise consent
in writing, the Guarantor will:
(a) Fixed Charge Coverage Ratio. The Guarantor will not permit the
Fixed Charge Coverage Ratio to be less than 1.50 to 1.00, in each case
determined at the end of each fiscal quarter for the four (4) consecutive fiscal
quarter period then ending.
(b) Lien Restrictions. The Guarantor will not and will not permit any
Subsidiary to create, assume or suffer to exist any Lien upon any of its
property or assets, whether now owned or hereafter acquired (whether or not
provision is made for the equal and ratable securing of the Obligations in
accordance with the provisions of Section 10.1(m)), except:
(i) Liens for taxes not yet due or which are being actively
contested in good faith by appropriate proceedings,
(ii) Liens incidental to the conduct of its business or the
ownership of its property and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or
credit,
(iii) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Guarantor or another Subsidiary,
(iv) Liens in existence on the Documentation Date and
described on Schedule VI,
(v) Liens in respect of capital leases entered into in
connection with, or any Lien arising in connection with, the
acquisition of property, after the date hereof and
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attaching only to the property being acquired, if the Indebtedness
secured thereby does not exceed one hundred percent (100%) of the
lesser of (i) the fair market value of the property acquired at the
time of acquisition thereof and (ii) the total purchase price of the
property so acquired, and
(vi) other Liens (including Liens arising under capital
leases), in addition to the Liens permitted by clauses (a) through (d)
above, securing Indebtedness of the Guarantor or any Subsidiary (other
than Indebtedness that constitutes Subordinated Debt); provided,
however, that (i) such Indebtedness is permitted by the provisions of
Section 10.2(c) and (ii) the aggregate outstanding principal amount of
all such Indebtedness does not at any time exceed an amount equal to
ten percent (10%) of the consolidated total assets of the Guarantor.
(c) Debt Restrictions. The Guarantor will not and will not permit any
Subsidiary to create, incur, assume or suffer to exist any Debt, except:
(i) Senior Funded Debt in existence as of the
Documentation Date,
(ii) Subordinated Debt,
(iii) Senior Funded Debt (including any Short Term Debt to be
included in the computation of Senior Funded Debt pursuant to clause
(iv) below) of the Guarantor, so long as the aggregate principal amount
of all consolidated Senior Funded Debt does not exceed at any time an
amount equal to fifty percent (50%) of Consolidated Capitalization, and
(iv) Short Term Debt of the Guarantor, provided that there
shall have been a period of at least thirty (30) consecutive days
within the twelve (12) month period immediately preceding the date of
determination during which the aggregate principal amount of Short Term
Debt of the Guarantor outstanding as of the close of business on any
day during such twelve month period did not exceed an amount equal to
the amount of Funded Debt which would have been permitted as additional
Funded Debt under clause (iii) of this Section 10.2(c) as of the close
of business on such day, and provided further that an amount equal to
the largest balance of such Short Term Debt outstanding on any day of
such thirty (30) day period shall be included in all computations of
Senior Funded Debt under clause (iii) above until such Short Term Debt
has been repaid in full, and
For purposes of this Section 10.2(c), Debt represented by the Loans and
Certificate Holder Amounts shall be considered Short Term Debt.
(d) Sale of Assets. The Guarantor will not and will not permit any
Subsidiary to sell, lease or transfer or otherwise dispose of any assets of the
Guarantor or any Subsidiary other than in the ordinary course of business (which
shall be deemed to include the planned sale of up to eight distribution
facilities); provided that the Guarantor and its Subsidiaries may sell, lease,
transfer or otherwise dispose of assets outside the ordinary course of business
so long as the
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aggregate amount of all assets sold, leased, transferred or otherwise disposed
of outside the ordinary course of business during the most recent thirty-six
(36) month rolling period when added together, without duplication, with (a) any
shares of stock or Debt of any Subsidiary sold or otherwise disposed of, or with
respect to which the Guarantor or any Subsidiary has parted control of, except
to the Guarantor or another Subsidiary, during such period and (b) any assets
then proposed to be sold outside of the ordinary course of business do not
constitute more than ten percent (10%) of the consolidated total assets of the
Guarantor as of the end of the most recent fiscal quarter for which the
Guarantor has delivered financial statements pursuant to Section 10.1(a).
(e) Merger. The Guarantor will not and will not permit any Subsidiary
to merge or consolidate with any other Person, except that Subsidiaries may be
merged into the Guarantor or any other Subsidiary and the Guarantor may merge
with another Person, provided that the Guarantor is the surviving corporation
and no Event of Default or Default shall exist either immediately before or
after such merger; provided, however, that any Subsidiary that is not a Material
Subsidiary shall be allowed to merge or consolidate with any Person but subject
at all times to the limits set forth in Section 10.2(d) hereof.
(f) Restrictions on Transactions with Affiliates and Stockholders. The
Guarantor will not and will not permit any Subsidiary to directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease any
property (other than shares of stock of the Guarantor) to, or otherwise deal
with (i) any Affiliate or Substantial Stockholder, or (ii) any corporation in
which an Affiliate, Substantial Stockholder or the Guarantor (either directly or
through Subsidiaries) owns five percent (5%) or more of the outstanding voting
stock, except that (A) any such Affiliate or Substantial Stockholder may be a
director, officer or employee of the Guarantor or any Subsidiary and may be paid
reasonable compensation in connection therewith (B) the Guarantor and its
Subsidiaries may perform or engage in any of the foregoing in the ordinary
course of business upon terms no less favorable to the Guarantor or such
Subsidiary (as the case may be) than if no such relationship described in
clauses (i) and (ii) above existed and (C) the Guarantor may sell to or purchase
from any such Person shares of the Guarantor's stock subject to the provisions
of Section 10.2.
(g) Issuance of Stock by Subsidiaries. The Guarantor will not permit
any Subsidiary to (either directly, or indirectly by the issuance of rights or
options for, or securities convertible into, such shares) issue, sell or
otherwise dispose of any shares of any class of its stock (other than directors'
qualifying shares) except to the Guarantor or another Subsidiary; provided,
however, Cotter Canada Hardware may issue and sell shares of its stock in the
ordinary course of business consistent with its practices as of April 13, 1992.
(h) Compliance with ERISA. The Guarantor will not and will not permit
any Subsidiary to engage in any transaction in connection with which the
Guarantor or any Subsidiary could be subject to either a civil penalty assessed
pursuant to section 502(i) of ERISA or a tax imposed by section 4975 of the
Code, terminate or withdraw from any Plan (other than a Multiemployer Plan) in a
manner, or take any other action with respect to any such Plan (including,
without limitation, a substantial cessation of operations within the meaning of
section 4062(f) of ERISA), which could result in any liability of the Guarantor
or any Subsidiary to the PBGC, to a trust
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established pursuant to section 4041(c)(3)(B)(ii) or (iii) or 4042(i) of ERISA,
or to a trustee appointed under section 4042(b) or (c) of ERISA, incur any
liability to the PBGC on account of a termination of a Plan under section 4064
of ERISA, fail to make full payment when due of all amounts which, under the
provisions of any Plan, the Guarantor or any Subsidiary is required to pay as
contributions thereto, or permit to exist any accumulated funding deficiency,
whether or not waived, with respect to any Plan (other than a Multiemployer
Plan), if, in any such case, such penalty or tax or such liability, or the
failure to make such payment, or the existence of such deficiency, as the case
may be, could be reasonably expected to have a material adverse effect on the
Guarantor and its Subsidiaries taken as a whole.
(i) No Change in Subordination Terms, etc. The Guarantor will not and
will not permit any Subsidiary to amend, alter or otherwise change any provision
of any of the subordinated promissory notes now or hereafter issued by the
Guarantor or take any other action (or refrain from taking an action) which
would have the effect of eliminating or altering in any way the effect of the
subordination language appearing in such subordinated promissory notes or the
rights of the Administrative Agent and the Participants arising as a result
thereof.
(j) Nature of Business. The Guarantor will not and will not permit any
Subsidiary to engage in the business of underwriting risks for insurance
purposes, or in any other aspect of insurance related business other than in the
ordinary course of business in accordance with its practices as of the
Documentation Date; or purchase and sell real estate (other than on an agency
basis) for purposes other than those relating directly to its principal business
except for purchases and sales of store locations in the ordinary course of
business which in the aggregate for the Guarantor and its Subsidiaries taken as
a whole do not exceed $10,000,000 during any rolling consecutive five (5) year
period.
(k) Restricted Investments. The Guarantor will not and will not permit
any Subsidiary to make or permit a Subsidiary to make any Investment except the
Guarantor and any Subsidiary may:
(i) make or permit to remain outstanding loans or advances
to any Subsidiary,
(ii) own, purchase or acquire stock, obligations or
securities of a Subsidiary or of a corporation which immediately after
such purchase or acquisition will be a Subsidiary,
(iii) acquire and own stock, obligations or securities
received in settlement of debts (created in the ordinary course of
business) owing to the Guarantor or any Subsidiary,
(iv) own, purchase or acquire prime commercial paper,
banker's acceptances and certificates of deposit in United States and
Canadian commercial banks (having combined capital and surplus of not
less than U.S. $100,000,000) and repurchase agreements with respect to
the foregoing, in each case due within one year from the date of
purchase and payable in the United States in United States dollars,
obligations of the
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government of the United States or any agency thereof, and obligations
guaranteed by the government of the United States,
(v) make or permit to remain outstanding travel and other
similar advances to officers and employees in the ordinary course of
business,
(vi) permit to remain outstanding Investments existing on
the Documentation Date and described on Schedule VI, and
(vii) to the extent applicable, make Investments permitted
under Section 10.2(l) below.
(l) Restricted Payments. The Guarantor will not and will not permit any
Subsidiary to pay or declare cash dividends, cash patronage dividends or
dividends on any class of its stock (other than dividends in kind) or redeem,
purchase or otherwise acquire, or make any redemptions, purchase, or other
acquisition of any of its stock or apply miscellaneous deductions in lieu of
patronage dividends, or make or permit any Subsidiary to make any Restricted
Investment (each a "Restricted Payment") except to the extent that the aggregate
amount of all such Restricted Payments made after December 28, 1996 shall not
exceed an amount equal to the sum of (i) $25,000,000 plus (ii) 100% (or minus
100% in the case of a deficit) of Consolidated Net Earnings for the period
(taken as one accounting period) commencing on December 29, 1996 and terminating
at the end of the last fiscal quarter preceding the date of any proposed
Restricted Payment.
(m) Use of Proceeds. The Guarantor shall not, and shall not permit any
Subsidiary to, use any portion of the proceeds of any Loan, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of the Guarantor or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
Section 10.3. Affirmative Covenant of the Agent Certificate Holder.
The Agent Certificate Holder covenants and agrees with the Arranger, the Lessee
Agent, the Administrative Agent and the Lenders that, so long as this
Participation Agreement shall remain in effect or the principal or interest on
any Loan, or any fees or any other expenses or amounts payable under any
Operative Document to the Administrative Agent or the Lenders shall be unpaid,
unless the Required Lenders shall otherwise consent in writing, the Agent
Certificate Holder will, upon the written request of the Required Lenders after
the occurrence and during the continuance of an Event of Default, qualify to do
business in every jurisdiction where such qualification is necessary for the
Agent Certificate Holder to exercise its remedies under the Master Lease, if it
becomes the lessor thereunder, or any other Operative Document.
Section 10.4. Covenants of the Owner Trustee and Lessor Trust. Each
of the Owner Trustee and Lessor Trust hereby agrees that so long as this
Participation Agreement is in effect:
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(a) Discharge of Liens. Each of the Lessor Trust and the
Owner Trustee, in its individual capacity, will not create or permit to
exist at any time, and will, at its own cost and expense, promptly take
such action as may be necessary duly to discharge, or to cause to be
discharged, all Lessor Liens on the Property attributable to it or any
of its Affiliates; provided, however, that the Owner Trustee (in its
individual capacity) and Lessor Trust shall not be required to so
discharge any such Lessor Lien while the same is being contested in
good faith by appropriate proceedings diligently prosecuted so long as
such proceedings shall not involve any material danger of impairment of
the Liens of the Operative Documents or of the sale, forfeiture or loss
of, and shall not interfere with the use, value, marketability or
disposition of, the Property or title thereto or any interest therein
or the payment of Rent.
(b) Trust Agreement. Without prejudice to any right under the
Trust Agreement of the Owner Trustee to resign, or the Certificate
Holders' right under the Trust Agreement to remove the institution
acting as trustee, the Owner Trustee hereby agrees with the Lessee
Agent and each Lessee and the Administrative Agent (i) not to terminate
or revoke the trust created by the Trust Agreement except as permitted
by the Trust Agreement or unless consented to by all of the parties to
this Participation Agreement, (ii) not to amend, supplement, terminate
or revoke or otherwise modify any provision of the Trust Agreement
without the prior written consent of any party hereto adversely
affected by such amendment and (iii) to comply with all of the terms of
the Trust Agreement, the nonperformance of which would adversely affect
such party.
(c) Successor Trust Company. The Owner Trustee or any
successor may resign or be removed by the Certificate Holders as
trustee, a successor Owner Trustee may be appointed, and a corporation
may become the Owner Trustee under the Trust Agreement, only in
accordance with the provisions of Article VIII of the Trust Agreement
and with the consent of the Lessee, which consent shall not be
unreasonably withheld or delayed.
(d) Indebtedness; Other Business. The Lessor Trust shall not
contract for, create, incur or assume any indebtedness, or enter into
any business or other activity, other than pursuant to or under the
Operative Documents.
(e) No Violation. The Agent Certificate Holder will not
instruct the Lessor Trust to take any action in violation of the terms
of any Operative Document.
(f) No Voluntary Bankruptcy. The Lessor Trust shall not (i)
commence any case, proceeding or other action under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, arrangement, winding-up,
liquidation, dissolution, composition or other relief with respect to
the Lessor Trust or such Certificate Holder's or the Lessor Trust's
debts, or (ii) seek appointment of a receiver, trustee, custodian or
other similar official for the Lessor Trust or for all or any
substantial benefit of the Lessor Trust's creditors; and the Lessor
Trust shall not take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth
in this paragraph.
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(g) Change of Chief Place of Business. The Lessor Trust shall
give prompt notice to the Lessee Agent and the Agent Certificate Holder
if the Lessor Trust's chief place of business or chief executive
office, or the office where the records concerning the accounts or
contract rights relating to the Property are kept, shall cease to be
located at 1100 North Market Street, Rodney Square North, Wilmington,
Delaware 19890-0001 or if it shall change its name.
(h) Operative Documents. None of the Lenders, the Lessor
Trust, the Lessee Agent, the Lessee, the Administrative Agent, the
Agent Certificate Holder nor the Participants shall consent to or
permit any amendment, supplement, waiver or other modification of the
terms and provisions of the Loan Agreement, the Notes, the
Certificates, or the Operative Documents, in each case without the
prior written consent of the Lessee Agent.
(i) Disposition of Assets. The Lessor Trust shall not convey,
sell, lease, assign, transfer or otherwise dispose of any of its
property, business or assets, whether now owned or hereafter acquired,
except to the extent expressly authorized by the Operative Documents.
(j) Compliance with Operative Documents. The Lessor Trust
shall at all times observe and perform all of the covenants, conditions
and obligations required to be performed by it under each Operative
Document to which it is a party.
(k) Books and Records; Financial Statements; Bank Accounts.
The Lessor Trust and each Certificate Holder each covenants and agrees
to maintain separate books and records. The Lessor Trust and Agent
Certificate Holder each covenant and agree to maintain its own bank
account in its own name. To the extent that financial statements are
prepared or issued by the Lessor Trust and any Certificate Holder, each
of the Lessor Trust and each such Certificate Holder covenants and
agrees to maintain separate financial statements from those financial
statements which may be prepared or issued by any of them.
(l) Separate Existence. The Lessor Trust covenants and agrees
not to merge or consolidate with, or transfer any of its assets or
properties to any Person. The Owner Trustee covenants and agrees not to
commingle its assets and funds with those assets and funds of the
Lessor Trust. The Lessor Trust covenants and agrees to conduct its own
business in its own name.
ARTICLE XI
RENEWALS; REPLACEMENT OF PARTICIPANTS
Section 11.1. Extensions of Maturity Date and Expiration Date;
Replacement of Participants. (a) So long as the Lessee Agent has not elected the
Remarketing Option on behalf of the Lessee, the Lessee Agent may, not earlier
than one (1) year after the Completion Date and not later than one (1) year
prior to the Maturity Date, direct a written request to the Owner Trustee, the
Agent Certificate Holder and the Administrative Agent that the Expiration Date
then
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in effect under the Master Lease be extended to the date occurring one (1)
year after such Expiration Date and concurrently therewith request that the
Administrative Agent and the Agent Certificate Holder direct a written request
to the Certificate Holders and the Lenders that the applicable Maturity Date be
extended to the same date (each such additional year, a "Renewal Term"). In no
event may the Expiration Date or the Maturity Date be extended more than two (2)
times pursuant to this Section 11.1(a). Each Participant may grant or deny its
consent to a Renewal Term in its sole discretion by notifying the Administrative
Agent and the Agent Certificate Holder in writing (with a copy to the Lessee
Agent); provided, however, that any Participant that fails to respond to such
request for a Renewal Term within sixty (60) days after its receipt thereof
shall be deemed to have denied such request for a Renewal Term. Nothing
contained in this Section 11.1 shall impair any extension of the Expiration Date
to any Extended Expiration Date pursuant to Section 20.3 of the Lease.
(b) In connection with a written request of the Lessee Agent for a
Renewal Term, upon the request of the Lessee Agent, the Administrative Agent and
the Agent Certificate Holder shall be permitted to replace any non-consenting
Participant and any Participant that fails to respond to the Administrative
Agent's and the Agent Certificate Holder's written request for a Renewal Term
within the time period specified in clause (a) above (each, a "Non-Consenting
Participant") with a replacement bank or other financial institution (a
"Replacement Participant") satisfactory to the Lessee Agent, the Certificate
Holders and the Lenders, with such replacement to be effective as of the
Expiration Date and Maturity Date in effect prior to the requested Renewal Term;
provided, however, that (i) such replacement does not conflict with any
Requirement of Law, (ii) the Replacement Participant shall purchase from the
Non-Consenting Participant (A) at par, all Loans, in the case of a Lender, and
all Certificate Holder Amounts, in the case of a Certificate Holder, (B) all
accrued interest, in the case of a Lender, and all accrued Yield, in the case of
a Certificate Holder, and (C) all other amounts owing to such Non-Consenting
Participant on or prior to the date of replacement, in each case, (iii) the
Lessee Agent shall be liable to such Non-Consenting Participant under Section
13.10 if any Loan or Certificate Holder Amount, as the case may be, owing to
such Non-Consenting Participant shall be prepaid (or purchased) at the request
of the Lessee Agent other than on the last day of the Interest Period or
Interest Periods relating thereto, (iv) such replacement shall be made in
accordance with the provisions of Article XII (provided that the Lessee Agent or
the relevant Replacement Participant shall be obligated to pay the Transaction
Expenses arising in connection therewith), and (v) the Replacement Participant
shall have agreed to be subject to all of the terms and conditions of the
applicable Operative Documents (including the extension of the Maturity Date
contemplated by the relevant request for a Renewal Term and the related
extension). The Administrative Agent and the Agent Certificate Holder hereby
agree to cooperate with the Lessee Agent in its efforts to arrange one or more
Replacement Participants as contemplated by this Section 11.1(b).
(c) Any Renewal Term and extension of the Maturity Date and the
Expiration Date as contemplated by Section 11.1(a) shall be effective only upon
the consent of all Participants after giving effect to the provisions of Section
11.1(b). Except as otherwise provided in this Article XI, all other terms of the
Operative Documents shall remain unchanged and with the same force and effect
(including the Certificate Holder Margin and Loan Margin), and there shall not
be any additional structuring or underwriting fee in connection with such
Renewal Term.
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Section 11.2. Replacement of Defaulting Participant. The Lessee Agent
shall have the right (but not the obligation) to require any Defaulting
Participant to assign and delegate in accordance with Section 12.1 all of such
Lender's or Certificate Holder's total Loans or Certificate Holder Amounts, as
the case may be, and Commitment, if any, to any other financial institution
selected by the Lessee Agent that, in each case, is willing to accept such
assignment and delegation and shall be satisfactory to the Administrative Agent
and the Agent Certificate Holder.
ARTICLE XII
TRANSFERS OF PARTICIPANTS' INTERESTS
Section 12.1. Assignments. Each Participant may, with the prior written
consent of the Lessee Agent, the Administrative Agent and the Agent Certificate
Holder (which consents shall not be unreasonably withheld, provided that Lessee
consent shall not be required after and during the continuance of a Lease
Default) assign all or a portion of its rights and obligations hereunder
pursuant to an assignment agreement substantially in the form of Exhibit F to
one or more Eligible Lender Assignees, with respect to Lender Commitments and
Loans, and/or Eligible Certificate Holder Assignees with respect to Certificate
Holder Commitments and Certificate Holder Amounts, each such assignment shall be
of a constant, not varying, percentage of all of the assigning Participant's
rights and obligations under the Operative Documents. In the case of assignments
made by a Lender, any such assignment shall be in a minimum aggregate amount of
$10,000,000 of its Loan Commitment (or the balance of such Loan Commitment, if
less). In the case of assignments made by a Certificate Holder, any such
assignment shall be in a minimum aggregate amount of $3,000,000 of its
Certificate Holder Commitment (or the balance of such Certificate Holder
Commitment, if less). Any assignment hereunder shall be effective upon delivery
to the Administrative Agent and the Agent Certificate Holder of written notice
of the assignment together with a transfer fee of $3,500 payable by the assignor
Participant or the assignee Participant to the Administrative Agent for its own
account. The assigning Participant will give prompt notice to the Administrative
Agent of any such assignment. Upon the effectiveness of any such assignment (and
after notice to and consent of the Lessee, the Administrative Agent and the
Agent Certificate Holder, as provided herein), the assignee shall become a
"Lender" or "Certificate Holder", as the case may be, for all purposes of the
Operative Documents (including all representations, warranties and covenants
which will all be deemed made and agreed to by such assignee) and, to the extent
of such assignment, the assigning Participant shall be relieved of its
obligations hereunder to the extent of the Loans or Certificate Holder Amounts,
as the case may be, and Commitment components being assigned. The Administrative
Agent agrees that upon notice of any such assignment and surrender of the
appropriate Note or Notes, it will promptly provide to the assigning Lender and
to the assignee separate promissory notes in the amount of their respective
interests substantially in the form of the original Note (but with notation
thereon that it is given in substitution for and replacement of the original
Note or any replacement notes thereof). The Lessee Agent shall not be
responsible for any costs or expenses incurred by any Participant in connection
with an assignment of all or any of its rights and obligations in connection
with an assignment pursuant to this Section 12.1.
Section 12.2. Participations. Each Participant may sell, transfer, grant
or assign participations in all or any part of such Participant's interests and
obligations hereunder;
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provided that (i) such selling Participant shall remain a "Lender" or
"Certificate Holder", as the case may be, for all purposes under the Operative
Documents (such selling Participant's obligations under the Operative Documents
remaining unchanged) and the sub-participant shall not constitute a Lender or a
Certificate Holder, as the case may be, hereunder, (ii) no such sub-participant
shall have, or be granted, rights to approve any amendment or waiver relating to
the Operative Documents except to the extent any such amendment or waiver would
(A) reduce the principal of or rate of interest on or fees in respect of any
Loans or Certificate Holder Amounts in which the sub-participant is
participating, (B) postpone the date fixed for any payment of principal
(including extension of the Expiration Date or the date of any mandatory
prepayment), interest or fees in which the sub-participant is participating, or
(C) release all or substantially all of the collateral or guarantees (except as
expressly provided in the Operative Documents) supporting any of the Loans or
Certificate Holder Amounts or Commitments in which the sub-participant is
participating, (iii) sub-sub-participations by the sub-participant (except to an
Affiliate, parent company or Affiliate of a parent company of the
sub-participant) shall be prohibited and (iv) written notice of each such
participation is given to the Lessee Agent. In the case of any such
participation, the sub-participant shall not have any rights under the Operative
Documents (the sub-participant's rights against the selling Participant in
respect of such participation to be those set forth in the participation
agreement with such Participant creating such participation) and all amounts
payable by the Lessee Agent hereunder shall be determined as if such Participant
had not sold such participation; provided, however, that such sub-participant
shall be entitled to receive additional amounts under Sections 13.5, 13.10 and
13.11 on the same basis as if it were a Participant (but only to the extent that
the Participant would have been entitled to receive such additional amounts with
respect to the interest participated had it not sold such participation). The
Lessee Agent shall not be responsible for any costs or expenses incurred by any
Participant in connection with a sale, transfer, grant or assignment of
participations pursuant to this Section 12.2.
Section 12.3. Withholding Taxes; Disclosure of Information; Pledge Under
Regulation A. (a) If any Participant (or the assignee of or subparticipant of a
Participant, each a "Transferee") is organized under the laws of any
jurisdiction other than the United States or any state thereof, then such
Participant or the Transferee of such Participant, as applicable, shall (as a
condition precedent to acquiring or participating in such Loan or Certificate
Holder Amount and as a continuing obligation to the Certificate Holder and the
Lender) (i) furnish to each of the Administrative Agent, the Agent Certificate
Holder and the Lessee in duplicate, for each taxable year of such Participant or
Transferee during the term of the Lease, a properly completed and executed copy
of either Internal Revenue Service Form 4224 or Internal Revenue Service Form
1001 and Internal Revenue Service Form W-8 or Internal Revenue Service Form W-9
and any additional form (or such other form) as is necessary to claim complete
exemption from United States withholding taxes (wherein such Transferee claims
entitlement to complete exemption from United States withholding taxes on all
payments hereunder), and (ii) provide to each of the Administrative Agent, the
Agent Certificate Holder and the Lessee Agent a new Internal Revenue Service
Form 4224 or Internal Revenue Service Form 1001 and Internal Revenue Service
Form W-8 or Internal Revenue Service Form W-9 and any such additional form (or
any successor form or forms) upon the expiration or obsolescence of any
previously delivered form and comparable statements in accordance with
applicable United States laws and regulations and amendments duly executed and
completed by such Participant or Transferee, and to comply from
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time to time with all applicable United States laws and regulations with regard
to such withholding tax exemption. By its acceptance of a participation or
assignment hereunder, each Transferee shall be deemed bound by the provisions
set forth in this Article XII.
(b) Any Participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Article
XII, disclose to such assignee or participant or proposed assignee or
participant, any information relating to Lessee Agent, any Lessee, the Guarantor
or the Transactions, subject to appropriate confidentiality requirements
relating to such information.
(c) Anything in this Article XII to the contrary notwithstanding, any
Participant may without the consent of Lessee Agent, the Administrative Agent or
the Agent Certificate Holder, assign and pledge all or any portion of the Notes
held by it to any Federal Reserve Bank, the United States Treasury or to any
other financial institution as collateral security pursuant to Regulation A of
the F.R.S. Board and any operating circular issued by the Federal Reserve System
and/or the Federal Reserve Bank or otherwise; provided, any payment by Lessee
Agent or Guarantor for the benefit of the assigning or pledging Participant
shall be deemed to satisfy the Lessee Agent's, such Lessee's or the Guarantor's
obligations with respect thereto.
ARTICLE XIII
INDEMNIFICATION
Section 13.1. General Indemnification. The Lessee Agent agrees whether
or not any of the transactions contemplated hereby shall be consummated (unless
such failure to consummate is due to the breach of any obligation under any
Operative Document by any party other than Lessee or Guarantor), to assume
liability for, and to indemnify, protect, defend, save and keep harmless each
Indemnitee, on an After Tax Basis, from and against any and all Claims that may
be imposed on, incurred by or asserted against such Indemnitee (whether because
of action or omission by such Indemnitee or otherwise), whether or not such
Indemnitee shall also be indemnified as to any such Claim by any other Person
and whether or not such Claim arises or accrues prior to the Acquisition Date or
after the Expiration Date, in any way relating to or arising out of:
(a) any of the Operative Documents or any of the
transactions contemplated thereby, and any amendment, modification or
waiver in respect thereof;
(b) the Properties or any part thereof or interest therein;
(c) the purchase, design, construction, preparation,
installation, inspection, delivery, nondelivery, acceptance, rejection,
ownership, management, possession, operation, rental, lease, sublease,
repossession, maintenance, repair, alteration, modification, addition
or substitution, storage, transfer of title, redelivery, use, financing
or refinancing by the Lessee, disposition, operation, condition, sale
(including without limitation, any sale pursuant to Section 16.2(d) or
16.2(f) of the Master Lease or any sale pursuant to Article XV, XVIII
or XX of the Master Lease), return or other disposition of all or any
part or any interest in the Property or the imposition of any Lien
except Lessor
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Liens and Liens in favor of the Lenders, Lessor Trust or the
Certificate Holders (or incurring of any liability to refund or pay
over any amount as a result of any such Lien) thereon, including,
without limitation: (1) Claims or penalties arising from any violation
of law or in tort (on the basis of strict liability or otherwise), (2)
latent or other defects, whether or not discoverable, (3) any Claim
based upon a violation or alleged violation of the terms of any
restriction, easement, condition or covenant or other matter affecting
title to the Property, (4) the making of any Modifications in
violation of any standards imposed by any insurance policies required
to be maintained by Lessee Agent or Lessee pursuant to the Lease which
are in effect at any time with respect to the Property or any part
thereof, (5) any Claim for patent, trademark or copyright infringement
with respect to the Property, and (6) Claims arising from any public
improvements with respect to the Property resulting in any change or
special assessments being levied against the Property or any plans to
widen, modify or realign any street or highway adjacent to the
Property, or any Claim for utility "tap-in" fees;
(d) the breach by Lessee Agent or Lessee or Guarantor of any
covenant, representation or warranty made by it in any Operative
Document or any certificate required to be delivered by it by any
Operative Document;
(e) the retaining or employment of any broker, finder or
financial advisor by Lessee Agent or any Lessee to act on its behalf in
connection with this Participation Agreement or any other Operative
Document;
(f) the existence of any Lien on or with respect to the
Property, the Improvements, any Basic Rent or Supplemental Rent, title
thereto, or any interest therein including any Liens which arise out of
the possession, use, occupancy, construction, repair or rebuilding of
the Property or by reason of labor or materials furnished or claimed to
have been furnished to the Lessee, or any of its contractors or agents
or by reason of the financing of any personalty or equipment purchased
or leased by the Lessee or Modifications constructed by the Lessee,
except Lessor Liens and Liens in favor of the Lenders or the
Certificate Holders;
(g) subject to the accuracy of any Participant's
representation set forth in Section 8.1(a), as to such Participant, the
transactions contemplated by the Lease or by any other Operative
Document, in respect of the application of Parts 4 and 5 of Subtitle B
of Title I of ERISA and any prohibited transaction described in Section
4975(c) of the Code.
Provided, however, that the Lessee Agent shall not be required to indemnify any
Indemnitee under this Section 13.1 for any of the following: (1) any Claim to
the extent resulting from the willful misconduct or gross negligence of any
Indemnitee (it being understood that the Lessee Agent shall be required to
indemnify an Indemnitee even if the ordinary (but not gross) negligence of such
Indemnitee caused or contributed to such Claim) or the breach of any
representation, warranty or covenant of such Indemnitee set forth in any
Operative Document, (2) any Claim resulting from Lessor Liens, (3) any Claim
arising from a breach or alleged breach by any Lender or any Certificate Holder
of any Operative Document or any agreement entered
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into in connection with the assignment or participation of any Loan or
Certificate Holder Amount, (4) any Claim arising in respect to the Property to
the extent attributable to acts or events occurring in the period after the
Lessee ceases to lease the Property from the Lessor Trust under the related
Lease, provided that the facts supporting such Claim occur after such period and
(5) without limiting any other provision of this Participation Agreement, any
Claim for Taxes except to the extent arising by reason of Section 13.1(g). It is
expressly understood and agreed that the indemnity provided for herein shall
survive the expiration or termination of and shall be separate and independent
from any remedy under the Lease or any other Operative Document. Without
limiting the express rights of any Indemnitee under this Section 13.1, this
Section 13.1 shall be construed as an indemnity only and not a guaranty of
residual value of the Property or as a guaranty of the Notes.
Section 13.2. End of Term Indemnity. (a) If the Lessee Agent elects (on
behalf of the Lessee) the Remarketing Option and there would, after giving
effect to the proposed remarketing transaction, be a Shortfall Amount, then
prior to the Expiration Date and as a condition to the Lessee Agent's right to
complete the remarketing of the Property pursuant to Article XX of the Master
Lease, the Lessee shall cause to be delivered to the Agent Certificate Holder at
least one hundred twenty (120) days prior to the Expiration Date, at the Lessee
Agent's sole cost and expense, a report from the Appraiser in form and substance
satisfactory to the Agent Certificate Holder, the Administrative Agent and the
Participants (the "End of the Term Report") which shall state the appraiser's
conclusions as to the reason for any decline in the Fair Market Sales Value of
the Property from that anticipated for such date in the As-Built Appraisal
delivered with respect to the Property or any Improvements to the Property.
(b) On or prior to the Expiration Date the Lessee Agent shall pay to
the Agent Certificate Holder for the account of each of the Certificate Holders
an amount (not to exceed the Shortfall Amount) equal to the portion of the
Shortfall Amount that the End of the Term Report demonstrates was the result of
a decline in the Fair Market Sales Value of the Property due to:
(i) extraordinary use; failure to maintain, repair, restore,
rebuild or replace; failure to comply with all applicable laws; failure
to use; workmanship; method of installation or removal or maintenance,
repair, rebuilding or replacement (excepting in each case ordinary wear
and tear and except as otherwise provided in the Lease); or
(ii) any change(s) to the Plans and Specifications or any
Modification made to, or any rebuilding of, the Property or any part
thereof by the Lessee, the Construction Agent or any sublessee, in each
case not in compliance with the Operative Documents or;
(iii) contamination at the Property resulting from any
Hazardous Activity, Hazardous Materials or Environmental Violations
other than as disclosed to the Certificate Holders in writing in
connection with the Acquisition Date, the indemnity for which shall not
exceed the cost of the remediation thereof, or
(iv) any restoration or rebuilding carried out by the Lessee
Agent or the Lessee or Construction Agent, or
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(v) any condemnation of any portion of the Property pursuant
to Article XIV of the Master Lease, or
(vi) any use of the Property or any part thereof by the
Lessee other than as distribution facility as contemplated by the
Appraisal, or
(vii) any grant, release, dedication, transfer, annexation or
amendment made pursuant to Section 11.2 of the Master Lease, or
(viii) the failure of the Lessor Trust to have good and
marketable title to the Property free and clear of all Liens (other
than Permitted Property Liens), or
(ix) the existence of any sublease relating to the Property
that shall survive the Expiration Date.
The indemnity set forth in this Section 13.2 is not a guaranty of the residual
value or Certificate Holder Amount with respect to the Property.
Section 13.3. Environmental Indemnity. Without limitation of the other
provisions of this Article XIII, Lessee and Guarantor hereby agree to indemnify,
hold harmless and defend each Indemnitee from and against any and all claims
(including, without limitation, third party claims for personal injury or real
or personal property damage), losses, damages, liabilities, fines, penalties,
charges, administrative and judicial proceedings, judgments, remedial actions,
requirements, enforcement actions of any kind, and all reasonable and documented
costs and expenses incurred in connection therewith (including but not limited
to reasonable and documented attorneys' and/or paralegals' fees and expenses and
costs incurred in connection with any investigation or monitoring of site
conditions or any clean-up, remedial, removal or restoration work with respect
to the Property undertaken or required by any federal, state or local
Governmental Authority), arising or asserted under any Environmental Laws, and
arising in whole or in part, out of:
(a) the presence on or under the Property of any Hazardous
Materials, or any Releases of any Hazardous Materials on, under,
from or at the Property;
(b) any activity, including, without limitation,
construction, carried on or undertaken on or off the Property, whether
by the Lessee (or any predecessor in title) or any employees, agents,
contractors or subcontractors of the Lessee (or any predecessor in
title), or in connection with the handling, treatment, removal,
storage, decontamination, clean-up, transport or disposal of any
Hazardous Materials that at any time are located or present on or under
or that at any time migrate, flow, percolate, diffuse or in any way
move onto or off the Property;
(c) with respect to any Hazardous Materials at the Property,
loss of or damage to any property or the environment (including,
without limitation, clean-up costs, response costs, remediation and
removal costs, costs of corrective action, costs of financial
assurance, fines and penalties and natural resource damages), or death
or injury
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to any Person, and all expenses associated with the protection of
wildlife, aquatic species, vegetation, flora and fauna, and any
mitigative action required by or under Environmental Laws; or
(d) any noncompliance with Environmental Laws, or any act or
omission causing an environmental condition at the Property that
requires remediation or causing any Governmental Authority to record a
Lien pursuant to Environmental Laws on the land record of the Property;
or
(e) any residual contamination on or under the Property,
including any contamination affecting any natural resources, and any
contamination of any property or natural resources arising in
connection with the generation, use, handling, storage, transport or
disposal of any Hazardous Material associated with the Property, and
irrespective of whether any of such activities were or will be
undertaken in accordance with applicable laws, regulations, codes and
ordinances;
provided, however, that the Lessees and Guarantor shall not be required to
indemnify any Indemnitee under this Section 13.3 for any Claim to the extent
resulting from the willful misconduct or gross negligence of such Indemnitee
arising in respect to the Property to the extent attributable to acts or events
occurring in the period after the Lessee ceases to lease the Property from the
Lessor Trust under the related Lease Supplement, provided that the facts
supporting such Claim occur after such period. It is expressly understood and
agreed that the indemnity provided for herein shall survive the expiration or
termination of the Lease Term with respect to any Claim based on facts or
circumstances arising prior to or during the Lease Term, and shall be separate
and independent from any remedy under the Lease or any other Operative Document.
Section 13.4. Proceedings in Respect of Claims. In case any action,
suit or proceeding shall be brought against any Indemnitee in respect of Claims
indemnifiable under Sections 13.1 or 13.3, such Indemnitee shall notify the
Lessee Agent of the commencement thereof, and the Lessee Agent shall be
entitled, at the Lessee Agent's expense, to participate in, and, to the extent
that the Lessee Agent desires to, assume and control the defense thereof;
provided, however, that the Lessee Agent shall have acknowledged in writing its
obligation to fully indemnify such Indemnitee in respect of such action, suit
or proceeding, and the Lessee Agent shall keep such Indemnitee fully apprised
of the status of such action, suit or proceeding and shall provide such
Indemnitee with all information with respect to such action, suit or proceeding
as such Indemnitee shall reasonably request, and provided, further, that the
Lessee Agent shall not be entitled to assume and control the defense of any
such action, suit or proceeding if and to the extent that, (A) in the
reasonable opinion of such Indemnitee's counsel, (x) such action, suit or
proceeding involves any risk of imposition of criminal liability or will
involve a risk of the sale, forfeiture or loss of, or the creation of any Lien
(other than a Permitted Property Lien) on the Property or any part thereof
unless, in the case of civil liability only, the Lessee Agent shall have agreed
in writing to be responsible for such risk or (y) the control of such action,
suit or proceeding would involve an actual or potential conflict of interest,
(B) such proceeding involves Claims not fully indemnified by the Lessee Agent
which the Lessee Agent and the Indemnitee have been unable to sever from the
indemnified claim(s), or (C) an Event of Default under the
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Lease has occurred and is continuing. The Indemnitee will join in the Lessee
Agent's efforts to sever such action. The Indemnitee may participate at its own
expense and with its own counsel in any proceeding conducted by the Lessee Agent
in accordance with the foregoing. The Lessee Agent shall not enter into any
settlement or other compromise with respect to any Claim which is entitled to be
indemnified under Section 13.1 or 13.3 without prior written consent of the
Indemnitee, which consent shall not be unreasonably withheld in the case of a
money settlement not involving an admission of liability of such Indemnitee.
Each Indemnitee shall at the expense of the Lessee Agent supply the
Lessee Agent with such information and documents reasonably requested by the
Lessee Agent as are necessary or advisable for the Lessee Agent to participate
in any action, suit or proceeding to the extent permitted by Section 13.1 or
13.3.
Upon payment in full of any Claim by the Lessee Agent pursuant to
Section 13.1 or 13.3 to or on behalf of an Indemnitee, the Lessee Agent, without
any further action, shall be subrogated to any and all claims that such
Indemnitee may have relating thereto (other than claims in respect of insurance
policies maintained by such Indemnitee at its own expense), and such Indemnitee
shall execute such instruments of assignment and conveyance, evidence of claims
and payment and such other documents, instruments and agreements as may be
necessary to preserve any such claims and otherwise cooperate with the Lessee
Agent and give such further assurances as are necessary or advisable to enable
the Lessee Agent vigorously to pursue such claims.
Any amount payable to an Indemnitee pursuant to Section 13.1 or 13.3
shall be paid to such Indemnitee promptly upon receipt of a written demand
therefor from such Indemnitee, accompanied by a written statement describing in
reasonable detail the basis for such indemnity and the computation of the amount
so payable.
Section 13.5. General Tax Indemnity. (a) Indemnification. The Lessee
Agent shall pay and assume liability for, and does hereby agree to indemnify,
protect and defend the Property and all Tax Indemnitees, and hold them harmless
against, all Impositions on an After Tax Basis.
(b) Contests. If any claim shall be made against any Tax Indemnitee or
if any proceeding shall be commenced against any Tax Indemnitee (including a
written notice of such proceeding) for any Imposition as to which the Lessee
Agent may have an indemnity obligation pursuant to this Section 13.5, or if any
Tax Indemnitee shall determine that any Imposition to which the Lessee Agent may
have an indemnity obligation pursuant to this Section 13.5 may be payable, such
Tax Indemnitee shall promptly (and in any event, within thirty (30) days) notify
the Lessee Agent in writing (provided that failure to so notify the Lessee Agent
within thirty (30) days shall not alter such Tax Indemnitee's rights under this
Section 13.5 except to the extent such failure precludes or materially adversely
affects the ability to conduct a contest of any Impositions) and shall not take
any action with respect to such claim, proceeding or Imposition without the
written consent of the Lessee Agent (such consent not to be unreasonably
withheld or unreasonably delayed) for thirty (30) days after the receipt of such
notice by the Lessee Agent; provided, however, that in the case of any such
claim or proceeding, if such Tax Indemnitee shall be required by law or
regulation to take action prior to the end of such thirty (30) day period,
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such Tax Indemnitee shall in such notice to the Lessee Agent, so inform the
Lessee and such Tax Indemnitee shall not take any action with respect to such
claim, proceeding or Imposition without the consent of the Lessee Agent (such
consent not to be unreasonably withheld or unreasonably delayed) for 10 days
after the receipt of such notice by the Lessee Agent unless such Tax Indemnitee
shall be required by law or regulation to take action prior to the end of such
ten (10) day period.
The Lessee Agent shall be entitled for a period of thirty (30) days
from receipt of such notice from such Tax Indemnitee (or such shorter period as
such Tax Indemnitee has notified the Lessee Agent is required by law or
regulation for such Tax Indemnitee to commence such contest), to request in
writing that such Tax Indemnitee contest the imposition of such Tax, at the
Lessee Agent's expense. If (x) such contest can be pursued in the name of the
Lessee Agent and independently from any other proceeding involving a Tax
liability of such Tax Indemnitee for which the Lessee Agent has not agreed to
indemnify such Tax Indemnitee, (y) such contest must be pursued in the name of
such Tax Indemnitee, but can be pursued independently from any other proceeding
involving a Tax liability of such Tax Indemnitee for which the Lessee Agent has
not agreed to indemnify such Tax Indemnitee or (z) such Tax Indemnitee so
requests, then the Lessee Agent shall be permitted to control the contest of
such claim, provided that in the case of a contest described in clause (y), if
such Tax Indemnitee determines reasonably and in good faith that such contest by
the Lessee Agent could have a material adverse impact on the business or
operations of such Tax Indemnitee and provides a written explanation to the
Lessee Agent of such determination, such Tax Indemnitee may elect to control or
reassert control of the contest, and provided that by taking control of the
contest, the Lessee Agent acknowledges that it is responsible for the Imposition
ultimately determined to be due by reason of such claim, and provided, further,
that in determining the application of clauses (x) and (y) above, each Tax
Indemnitee shall take any and all reasonable steps to segregate claims for any
Taxes for which the Lessee Agent indemnifies hereunder from Taxes for which the
Lessee Agent is not obligated to indemnify hereunder, so that the Lessee Agent
can control the contest of the former. In all other claims requested to be
contested by the Lessee Agent, such Tax Indemnitee shall control the contest of
such claim, acting through counsel reasonably acceptable to the Lessee Agent. In
no event shall the Lessee Agent be permitted to contest (or such Tax Indemnitee
required to contest) any claim, (A) if such Tax Indemnitee provides the Lessee
Agent with a legal opinion of counsel reasonably acceptable to the Lessee Agent
that such action, suit or proceeding involves a risk of imposition of criminal
liability or will involve a material risk of the sale, forfeiture or loss of, or
the creation of any Lien (other than a Permitted Lien) on the Property or any
part thereof unless, with respect to civil liability only, the Lessee Agent
shall have agreed in writing to be responsible for such risk, (B) if an Event of
Default has occurred and is continuing, (C) unless the Lessee Agent shall have
agreed to pay and shall pay, to such Tax Indemnitee on demand all reasonable
out-of-pocket costs, losses and expenses that such Tax Indemnitee may incur in
connection with contesting such Imposition including all reasonable legal,
accounting and investigatory fees and disbursements, or (D) if such contest
shall involve the payment of the Tax prior to the contest, unless the Lessee
Agent shall provide to such Tax Indemnitee an interest-free advance in an amount
equal to the Imposition that the Indemnitee is required to pay (with no
additional net after-tax costs to such Tax Indemnitee). In addition for Tax
Indemnitee controlled contests and claims contested in the name of such Tax
Indemnitee in a public forum, no contest shall be required: (A) unless the
amount of the potential indemnity (taking into account all
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similar or logically related claims that have been or could be raised in any
audit involving any or all such Tax Indemnitees with respect to any period for
which the Lessee Agent may be liable to pay an indemnity under this Section
13.5(b)) exceeds $100,000 and (B) unless, if requested by such Tax Indemnitee,
the Lessee Agent shall have provided to such Tax Indemnitee an opinion of
counsel selected by the Lessee Agent (which may be in-house counsel) that a
reasonable basis exists to contest such claim. In no event shall a Tax
Indemnitee be required to appeal an adverse judicial determination to the United
States Supreme Court.
The party conducting the contest shall consult in good faith with the
other party and its counsel with respect to the contest of such claim for Taxes
(or claim for refund) but the decisions regarding what actions are to be taken
shall be made by the controlling party in its sole judgment, provided, however,
that if such Tax Indemnitee is the controlling party and the Lessee Agent
recommends the acceptance of a settlement offer made by the relevant
Governmental Authority and such Tax Indemnitee rejects such settlement offer
then the amount for which the Lessee will be required to indemnify such Tax
Indemnitee with respect to the Taxes subject to such offer shall not exceed the
amount which it would have owed if such settlement offer had been accepted. In
addition, the controlling party shall keep the non-controlling party reasonably
informed as to the progress of the contest, and shall provide the noncontrolling
party with a copy of (or appropriate excerpts from) and reports or claims issued
by the relevant auditing agents or taxing authority to the controlling party
thereof, in connection with such claim or the contest thereof.
Each Tax Indemnitee shall, at the Lessee's expense, supply the Lessee
Agent with such information and documents reasonably requested by the Lessee
Agent as are necessary or advisable for the Lessee Agent to participate in any
action, suit or proceeding to the extent permitted by this Section 13.5(b).
Notwithstanding anything in this Section 13.5(b) to the contrary, no Tax
Indemnitee shall enter into any settlement or other compromise or fail to appeal
an adverse ruling with respect to any claim which is entitled to be indemnified
under this Section 13.5 (and with respect to which contest is required under
this Section 13.5(b)) without the prior written consent of the Lessee Agent,
unless such Tax Indemnitee waives its right to be indemnified under this Section
13.5 with respect to such claim pursuant to the next paragraph.
Notwithstanding anything contained herein to the contrary, a Tax
Indemnitee will not be required to contest or continue to contest (and the
Lessee Agent shall not be permitted to contest or continue to contest) a claim
with respect to the imposition of any Tax if such Tax Indemnitee shall waive its
right to indemnification under this Section 13.5 with respect to such claim (and
any claim with respect to such year or any other taxable year the contest of
which is materially adversely affected as a result of such waiver) and returns
to the Lessee Agent all amounts previously advanced to the Indemnitee with
respect to the contest of such claim.
(c) [Intentionally omitted]
(d) Payments. Any Imposition indemnifiable under this Section 13.5
shall be paid directly when due to the applicable taxing authority if direct
payment is practicable and permitted. If direct payment to the applicable taxing
authority is not permitted or is otherwise not made, any amount payable to a Tax
Indemnitee pursuant to Section 13.5 shall be paid within
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thirty (30) days after receipt of a written demand therefor from such Tax
Indemnitee accompanied by a written statement describing in reasonable detail
the amount so payable, but not prior to the date that the relevant Taxes are
due. Any payments made pursuant to this Section 13.5 shall be made directly to
such Tax Indemnitee entitled thereto or the Lessee Agent, as the case may be, in
immediately available funds at such bank or to such account as specified by the
payee in written directions to the payor, or, if no such direction shall have
been given, by check of the payor payable to the order of the payee by certified
mail, postage prepaid at its address as set forth in Schedule II hereto. Upon
the request of any Tax Indemnitee with respect to a Tax that the Lessee Agent is
required to pay, the Lessee Agent shall furnish to such Tax Indemnitee the
original or a certified copy of a receipt for the Lessee Agent's payment of such
Tax or such other evidence of payment as is reasonably acceptable to such Tax
Indemnitee.
(e) Reports. In the case of any report, return or statement required to
be filed with respect to any Taxes that are subject to indemnification under
this Section 13.5 and of which the Lessee Agent has knowledge, the Lessee Agent
shall promptly notify such Tax Indemnitee of such requirement and, at the Lessee
Agent's expense (i) if the Lessee Agent is permitted by Applicable Law, timely
file such report, return or statement in its own name or (ii) if such report,
return or statement is required to be in the name of or filed by such Tax
Indemnitee, prepare and finish such statement for filing by such Tax Indemnitee
in such manner as shall be satisfactory to such Tax Indemnitee and send the same
to such Tax Indemnitee for filing no later than fifteen (15) days prior to the
due date therefor. In any case in which such Tax Indemnitee will file any such
report, return or statement, the Lessee Agent shall, upon written request of
such Tax Indemnitee, provide such Tax Indemnitee with such information as is
reasonably necessary to allow such Tax Indemnitee to file such report, return or
statement.
(f) [Intentionally omitted]
(g) Tax Ownership. Each Tax Indemnitee represents and warrants that it
will not, prior to the termination of the Master Lease, claim ownership of (or
any tax benefits, including depreciation, with respect to) the Property for any
income tax purposes (unless required to do so by a Governmental Authority), it
being understood that the Lessee is and will remain the owner of the Property
for such income tax purposes until the termination of the Master Lease.
Section 13.6. Indemnity Payments in Addition to Lease Obligations. The
Lessee Agent acknowledges and agrees that the Lessee Agent's obligations to make
indemnity payments under this Article XIII are separate from, in addition to,
and do not reduce, the Lessee Agent's or the Lessee's obligations to pay any
amounts owing from time to time under the Lease.
Section 13.7. Eurodollar Rate Lending Unlawful. Notwithstanding any
other provision herein, if the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof occurring after the
Documentation Date shall make it unlawful for any Participant to make, continue
or maintain Eurodollar Loans/Certificate Holder Amounts as contemplated by the
Operative Documents, (i) such Participant shall promptly give written notice of
such circumstances to the Lessee Agent, the Certificate Holder Agent and the
Administrative Agent (which notice shall be withdrawn whenever such
circumstances no longer exist), (ii) the commitment of such Lender or
Certificate Holder, as the case may be, hereunder
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to make, continue or maintain Eurodollar Loans/Certificate Holder Amounts shall
forthwith be canceled and, until such time as it shall no longer be unlawful for
such Participant to make, continue or maintain Eurodollar Loans/Certificate
Holder Amounts, such Participant shall then have a commitment only to make or
maintain Base Rate Loans/Certificate Holder Amounts when Eurodollar
Loans/Certificate Holder Amounts are requested and (c) such Participant's Loans
and Certificate Holder Amounts then outstanding as Eurodollar Loans/Certificate
Holder Amounts, if any, shall be converted automatically to Base Rate
Loans/Certificate Holder Amounts on the respective last days of the then current
Interest Periods with respect to such Loans and Certificate Holder Amounts or
within such earlier period as required by law. If any such conversion of
Eurodollar Loans/Certificate Holder Amounts occurs on a day which is not the
last day of the then current Interest Period with respect thereto, the Lessee
Agent shall pay to such Participant such amounts, if any, as may be required
pursuant to Section 13.10. In any such case, interest and principal (if any)
shall be payable contemporaneously with the related Eurodollar Loans/Certificate
Holder Amounts of the other Participants so affected.
Section 13.8. Deposits Unavailable. If any of the Participants shall
have determined that:
(i) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to such Participant in
its relevant market; or
(ii) by reason of circumstances affecting such Participant's
relevant market, adequate means do not exist for ascertaining the
interest rate or Yield, as the case may be, applicable to such
Participant's Eurodollar Loans/Certificate Holder Amounts;
then, upon notice from such Participant to the Lessee Agent, the Certificate
Holder Agent, the Administrative Agent and the other Participants, (x) the
obligations of such Participant to make or continue any Loans or Certificate
Holder Amounts as, or to convert any Loans or Certificate Holder Amounts into
Eurodollar Loans/Certificate Holder Amounts shall be suspended, and (y) each
outstanding Eurodollar Loan/Certificate Holder Amount held by such Participant
shall automatically convert into a Base Rate Loan/Certificate Holder Amount on
the last day of the current Interest Period applicable thereto.
Section 13.9. Increased Costs, etc. (a) If the adoption of or any
change in a Requirement of Law or in the interpretation or application thereof
applicable to any Participant, or compliance by any Participant with any request
or directive (whether or not having the force of law) from any central bank or
other Governmental Authority, in each case made subsequent to the Documentation
Date (or, if later, the date on which such Participant becomes a Participant):
(i) shall subject such Participant to any tax of any kind
whatsoever with respect to any Eurodollar Loans/Certificate Holder
Amounts made, continued or maintained by it or its obligation to make,
continue or maintain Eurodollar Loans/Certificate Holder Amounts, or
change the basis of taxation of payments to such Participant in respect
thereof (except for excluded Impositions, any changes in taxes measured
by or imposed upon the overall gross or net income, franchise or other
taxes (imposed in lieu of such net income tax), of such Participant or
its applicable lending office, branch, or any affiliate thereof); or
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(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of,
Loans and Certificate Holder Amounts, loans or other extensions of
credit by, or any other acquisition of funds by, any office of such
Participant which is not otherwise included in the determination of the
Adjusted Eurodollar Rate hereunder; or
(iii) shall impose on such Participant any other condition
(excluding any Tax of any kind) whatsoever in connection with the
Operative Documents;
and the result of any of the foregoing is to increase the cost to such
Participant, by a material amount, of making, continuing or maintaining
Eurodollar Loans/Certificate Holder Amounts or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, upon notice to the Lessee
Agent from such Participant, through the Administrative Agent and/or the Agent
Certificate Holder, in accordance herewith, the Lessee Agent shall pay such
Participant any additional amounts necessary to compensate such Participant for
such increased cost or reduced amount receivable; provided that, in any such
case, the Lessee Agent may elect to convert the Eurodollar Loans/Certificate
Holder Amounts made by such Participant hereunder to Base Rate Loans/Certificate
Holder Amounts by giving the Administrative Agent at least one (1) Business
Day's notice of such election, in which case the Lessee Agent shall promptly pay
to such Participant, upon demand, without duplication, such amounts, if any, as
may be required pursuant to Section 13.10. All payments required by this Section
13.9(a) shall be made by the Lessee within ten (10) Business Days after demand
by the affected Participant. The Lessee Agent shall not be obligated to
reimburse any Participant for any increased cost or reduced return incurred more
than one hundred eighty (180) days after the date that such Participant receives
actual notice of such increased cost or reduced return unless such Participant
gives notice thereof to the Lessee Agent in accordance with this Section 13.9
during such one hundred eighty (180) day period. If any Participant becomes
entitled to claim any additional amounts pursuant to this subsection, it shall
provide prompt notice thereof to the Lessee Agent, through the Administrative
Agent and/or the Agent Certificate Holder, certifying (x) that one of the events
described in this clause (a) has occurred and describing in reasonable detail
the nature of such event, (y) as to the increased cost or reduced amount
resulting from such event and (z) as to the additional amount demanded by such
Participant and a reasonably detailed explanation of the calculation thereof
(including the method by which such Participant allocated such amounts to the
Lessee Agent). Such a certificate as to any additional amounts payable pursuant
to this clause submitted by such Participant, through the Administrative Agent
and/or the Agent Certificate Holder, to the Lessee Agent shall be conclusive in
the absence of manifest error. This covenant shall survive the termination of
this Participation Agreement and the payment of the Loans and Certificate Holder
Amounts and all other amounts payable hereunder.
(b) Each Participant shall use its reasonable efforts to reduce or
eliminate any unlawfulness or claim for compensation pursuant to Sections 13.7,
13.8 or 13.9(a), including, without limitation, a change in the office of such
Participant at which its obligations related to this Participation Agreement are
maintained if such change will cure the unlawfulness or avoid the need for, or
reduce the amount of, such compensation and will not, in the reasonable judgment
of such Participant, be otherwise disadvantageous to it. If any such claim of
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unlawfulness or for compensation shall not be eliminated or waived, the Lessee
Agent shall have the right to replace the affected Participant with a new
financial institution that shall succeed to the rights of such Participant under
this Participation Agreement; provided, however, that such Participant shall not
be replaced hereunder until it has been paid in full such claim and all other
amounts owed to it hereunder.
Section 13.10. Funding Losses. The Lessee Agent agrees to indemnify each
Indemnitee and to hold each Indemnitee harmless from any loss or expense which
such Indemnitee may sustain or incur (other than through such Person's own gross
negligence or willful misconduct) as a consequence of (a) default by the Lessee
Agent (or any Lessee) in making a borrowing of Loans or Certificate Holder
Amounts which are Eurodollar Loans/Certificate Holder Amounts after Lessee has
given a notice requesting the same in accordance with the provisions of this
Participation Agreement, (b) default by the Lessee Agent (or any Lessee) in
making any prepayment of a Loan or Certificate Holder Amount which is a
Eurodollar Loan/Certificate Holder Amount after the Lessee has given a notice
thereof in accordance with the provisions of this Participation Agreement, or
(c) the making of a prepayment of Loans or Certificate Holder Amounts which are
Eurodollar Loans/Certificate Holder Amounts on a day which is not the last day
of an Interest Period with respect thereto. This covenant shall survive the
termination of this Participation Agreement or any other Operative Document and
the payment of the Loans, Certificate Holder Amounts and all other amounts
payable under the Operative Documents.
Section 13.11. Capital Adequacy. (a) If the adoption of any applicable
law, rule or regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Participant with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, in each case made
subsequent to the Documentation Date has or will have the effect of reducing the
rate of return on any Participant's or its parent company's capital by a
material amount, as a consequence of its commitments or obligations hereunder to
a level below that which such Participant or its parent company could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Participant's or its parent company's policies with respect
to capital adequacy), then, upon notice from such Participant, the Lessee Agent
shall pay to such Participant such additional amount or amounts as will
compensate such Participant and its parent company for such reduction (it being
understood that such parent company shall not be reimbursed to the extent its
subsidiary Participant is reimbursed by the Lessee Agent in connection with the
same or a similar law, rule, regulation, change, request or directive applicable
to such Participant). All payments required by this Section 13.11 shall be made
by the Lessee Agent within ten (10) Business Days after demand by the affected
Participant. The Lessee Agent shall not be obligated to reimburse any
Participant for any reduced return incurred more than one hundred eighty (180)
days after the date that such Participant receives actual notice of such reduced
return unless such Participant gives notice thereof to the Lessee Agent in
accordance with this Section 13.11 during such one hundred eighty (180) day
period. If any Participant becomes entitled to claim any additional amounts
pursuant to this clause, it shall provide prompt written notice thereof to the
Lessee, through the Administrative Agent and/or the Agent Certificate Holder,
certifying (x) that one of the events described in this clause (a) has
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occurred and describing in reasonable detail the nature of such event, (y) as to
the increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Participant and a reasonably detailed
explanation of the calculation thereof. Such a certificate as to any additional
amounts payable pursuant to this clause submitted by such Participant, through
the Administrative Agent and/or the Agent Certificate Holder, to the Lessee
Agent shall be conclusive in the absence of manifest error. This covenant shall
survive the termination of this Participation Agreement and the other Operative
Documents and the payment of the Loans, Certificate Holder Amounts and all other
amounts payable hereunder and thereunder.
(b) Each Participant shall use its commercially reasonable efforts to
reduce or eliminate, any claim for compensation pursuant to this Section 13.11,
including, without limitation, a change in the office of such Participant at
which its obligations related to the Operative Documents are maintained if such
change will avoid the need for, or reduce the amount of, such compensation and
will not, in the reasonable judgment of such Participant, be otherwise
disadvantageous to it. If any such claim for compensation shall not be
eliminated or waived, the Lessee Agent shall have the right to replace the
affected Participant with a new financial institution that shall succeed to the
rights of such Participant under the Operative Documents; provided, however,
that such Participant shall not be replaced hereunder until it has been paid in
full such claim and all other amounts owed to it hereunder.
ARTICLE XIV
THE AGENT CERTIFICATE HOLDER
Section 14.1. Appointment and Authorization. Each Certificate Holder
irrevocably appoints and authorizes BMO Leasing (U.S.), Inc. as Agent
Certificate Holder (in such capacity as Agent Certificate Holder hereunder and
under the other Operative Documents, the "Agent Certificate Holder") of such
Certificate Holder to enter into the Operative Documents on behalf of such
Certificate Holder and to act as specified herein and in the other Operative
Documents, and each such Certificate Holder hereby authorizes the Agent
Certificate Holder as agent for such Certificate Holder, to take such action on
its behalf under the provisions of this Participation Agreement and the other
Operative Documents and to exercise such powers and perform such duties as are
expressly delegated by the terms hereof and thereof, together with such other
powers as are reasonably incidental thereto (including, without limitation, the
execution and delivery, or causing Lessor Trust to execute and deliver, from
time to time in accordance with the provisions and terms hereof of Lease
Supplements, Construction Agency Agreement Supplements, Assignment of Lease and
Rent Supplements and the various other documents, conveyances, terminations,
assignments and instruments contemplated herein to be delivered by the Agent
Certificate Holder on behalf of the Certificate Holders). Each action taken by
the Agent Certificate Holder under any Operative Document shall be deemed to be
on behalf of each the Certificate Holders, unless otherwise indicated.
Notwithstanding any provision to the contrary elsewhere herein or in the other
Operative Documents, the Agent Certificate Holder shall not have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Certificate Holder, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this
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Participation Agreement or any of the other Operative Documents, or shall
otherwise exist against the Agent Certificate Holder.
Section 14.2. Delegation of Duties. The Agent Certificate Holder may
execute any of its duties hereunder or under the other Operative Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent Certificate Holder
shall not be responsible for the negligence or misconduct of any agents or
attorneys in fact selected by it with reasonable care.
Section 14.3. Agent Certificate Holder and Affiliates. The Agent
Certificate Holder shall have the same rights and powers under this
Participation Agreement and under the other Operative Documents as any other
Certificate Holder, and may exercise or refrain from exercising the same as
though it were not the Agent Certificate Holder.
Section 14.4. Action by Agent Certificate Holder. The obligations of the
Agent Certificate Holder hereunder and under the other Operative Documents are
only those expressly set forth herein and therein. Without limiting the
generality of the foregoing, the Agent Certificate Holder shall not be required
to take any action with respect to any Default or Event of Default, except as
expressly provided herein and in the other Operative Documents.
Section 14.5. Consultation with Experts. The Agent Certificate Holder
may consult with legal counsel (who may be counsel for Lessee Agent, the Lessee,
Guarantor, a Participant, the Administrative Agent, or any Affiliate of any of
them), independent public accountants and other experts selected by it and shall
not be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
Section 14.6. Exculpatory Provisions. Neither the Agent Certificate
Holder nor any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates shall be responsible for or have any duty to ascertain, inquire
into or verify (a) any statement, warranty or representation made in connection
with the Operative Documents; (b) the performance or observance of any of the
covenants or agreements of Guarantor, Lessee Agent or the Lessee; (c) the
satisfaction of any condition precedent specified herein or in any other
Operative Document; (d) the validity, effectiveness or genuineness of any of the
Operative Documents or any other instrument or writing furnished in connection
herewith or therewith; (e) the use of the proceeds of the Advance; (f) the
existence of any Default or Event of Default; or (g) the properties, books or
records of Guarantor or the Lessee.
Section 14.7. Reliance on Communications. The Agent Certificate Holder
shall be entitled to rely, and shall be fully protected in relying, upon any
note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to
Lessee, Guarantor, independent accountants and other experts selected by the
Agent Certificate Holder with reasonable care). The Agent Certificate Holder may
deem and treat the Participants as the owners of their respective interests
hereunder and under the other Operative Documents for all
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purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent Certificate Holder in accordance with
Section 12.1 of the Participation Agreement. The Agent Certificate Holder,
acting in its capacity as Agent Certificate Holder, shall be fully justified in
failing or refusing to take any action under this Participation Agreement or
under any of the other Operative Documents unless it shall first receive such
advice or concurrence of the Certificate Holders as it deems appropriate or it
shall first be indemnified to its satisfaction by the Participants against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent Certificate Holder shall in all
cases be fully protected in acting, or in refraining from acting, hereunder or
under any of the other Operative Documents in accordance with a request of the
Certificate Holders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Participants (including their
successors and assigns).
Section 14.8. Notice of Default. The Agent Certificate Holder shall not
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless the Agent Certificate Holder has received notice
from a Participant or any Lessee or Guarantor referring to the Operative
Document, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent Certificate Holder
receives such a notice, the Agent Certificate Holder shall give prompt notice
thereof to the Participants. The Agent Certificate Holder shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Required Certificate Holders.
Section 14.9. Non-Reliance on Agent Certificate Holder and Other
Participants. Each Participant expressly acknowledges that neither the Agent
Certificate Holder (other than in its role as Participant) nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agent Certificate
Holder or any affiliate thereof hereafter taken, including any review of the
affairs of the Lessee or Guarantor, shall be deemed to constitute any
representation or warranty by the Agent Certificate Holder to any Participant.
Each Participant represents to the Agent Certificate Holder that it has,
independently and without reliance upon the Agent Certificate Holder or any
other Participant, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial, and other conditions, prospects and
creditworthiness of any Lessee and Guarantor and made its own decision to make
its proportionate share of the Advances hereunder and under the other Operative
Documents and enter into this Participation Agreement and the other Operative
Documents. Each Participant also represents that it will, independently and
without reliance upon the Agent Certificate Holder or any other Participant, 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 Participation Agreement, and to make such
investigation as it deems necessary to inform itself as to the business, assets,
operations, property, financial and other conditions, prospects and
creditworthiness of Lessee and Guarantor. Except for notices, reports and other
documents expressly required to be furnished to the Participants by the Agent
Certificate Holder hereunder, the Agent Certificate Holder shall not have any
duty or responsibility to provide any Participant with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Lessee or Guarantor which
may come into the
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possession of the Agent Certificate Holder or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
Section 14.10. Indemnification. The Certificate Holders agree to
indemnify the Agent Certificate Holder in its capacity as such (to the extent
not reimbursed by the Lessee or Guarantor and without limiting the obligation of
the Lessee and Guarantor to do so, to the extent set forth herein or in the
other Operative Documents to which the Lessee or the Guarantor is a party),
ratably according to their respective Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against the Agent
Certificate Holder in its capacity as such in any way relating to or arising out
of this Participation Agreement or the other Operative Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent
Certificate Holder under or in connection with any of the foregoing; provided
that no Certificate Holder shall be liable for the payment of any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross negligence or
willful misconduct of the Agent Certificate Holder. If any indemnity furnished
to the Agent Certificate Holder for any purpose shall, in the opinion of the
Agent Certificate Holder, be insufficient or become impaired, the Agent
Certificate Holder may call for additional indemnity and cease, or not commence,
to do the acts indemnified against until such additional indemnity is furnished.
The agreements in this Section shall survive the payment in full of the
Obligations and all other amounts payable hereunder and under the other
Operative Documents.
Section 14.11. Failure to Act. Except for action expressly required of
the Agent Certificate Holder hereunder, the Agent Certificate Holder shall in
all cases be fully justified in failing or refusing to act hereunder unless it
shall be indemnified to its satisfaction by the Certificate Holders against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
Section 14.12. Resignation and Removal. The Agent Certificate Holder may
resign at any time upon at least thirty (30) days prior notice to Lessee Agent
and the Participants, and may be removed for cause at any time by vote of the
Required Certificate Holders and notice to the retiring Agent Certificate
Holder, the Administrative Agent and the Lessee Agent. In the event of any such
resignation or removal, the Required Certificate Holders shall as promptly as
practicable (but with five (5) Business Days' prior written notice being given
to Lessee Agent) appoint a successor Agent Certificate Holder, provided that
such successor Agent Certificate Holder shall be approved by Lessee Agent,
Administrative Agent, and, unless an Event of Default is continuing, be approved
by the Lessee Agent (which approval shall not be unreasonably withheld or
delayed) and, if the Lessee has not responded within such five (5) Business Day
period, Lessee Agent shall be deemed to have approved such new Agent Certificate
Holder. If no successor Agent Certificate Holder shall have been so appointed
and shall have accepted such appointment within thirty (30) days after either
the retiring Agent Certificate Holder's giving of notice of resignation or the
Required Certificate Holders' vote to remove the retiring Agent Certificate
Holder, then the retiring Agent Certificate Holder may, on
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behalf of the Certificate Holders, appoint a successor Agent Certificate Holder,
which shall be a commercial bank organized under the laws of the United States
of America or of any State thereof or under the laws of another country that is
doing business in the United States and having a combined capital, surplus and
undivided profits of at least $100,000,000, or a wholly owned subsidiary of such
bank. Upon its acceptance of its appointment, such successor Agent Certificate
Holder shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent Certificate Holder, and the retiring
Agent Certificate Holder shall be discharged from all further duties and
obligations as Agent Certificate Holder under this Participation Agreement and
under the other Operative Documents. After any retiring Agent Certificate
Holder's resignation or removal hereunder as Agent Certificate Holder, the
provisions of this Participation Agreement and of the other Operative Documents
shall continue to inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent Certificate Holder under this Participation
Agreement. No resignation or renewal of the Agent Certificate Holder may become
effective until a successor Agent Certificate Holder has been appointed as
provided above.
Section 14.13. Distributions. The Agent Certificate Holder shall, as
promptly as practicable, distribute to each Participant its appropriate portion,
if any, of payments received (in good, collected funds) by the Agent Certificate
Holder from the Lessee, Lessee Agent or Guarantor for the account of the
Participants or of any such payments so received for the account of such
Participant.
Section 14.14. Rights of Lessee Agent. Except where Lessee Agent is
expressly referenced in this Article XIV or Article VII or in the Lease, (w) the
Agent Certificate Holder shall act solely as agent of the Certificate Holders
and does not assume and shall not be deemed to have assumed any obligation or
relationship of agency or trust with or for Lessee Agent, (x) this Article XIV
is for the benefit of the Agent Certificate Holder and the Participants only,
(y) Lessee Agent shall have no right to enforce any part of this Article XIV and
shall have no rights as third party beneficiary or otherwise therein, and (z)
this Article XIV may be amended by the approval of Agent Certificate Holder and
the Required Participants, without any need to obtain the approval of Lessee
Agent.
ARTICLE XV
MISCELLANEOUS
Section 15.1. Survival of Agreements. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery of this Participation Agreement, the
transfer of the Property to the Lessor Trust, the construction of any
Improvements, any disposition of any interest of the Lessor Trust, Agent
Certificate Holder or any Participant in the Property or any Improvements and
the payment of the Notes and Certificates and any disposition thereof, and shall
be and continue in effect to the extent set forth in such Operative Documents
notwithstanding any investigation made by any party and the fact that any party
may waive compliance with any of the other terms, provisions or conditions of
any of the Operative Documents. Except as otherwise expressly set forth herein
or in the other
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Operative Documents, the indemnities of the parties provided for in the
Operative Documents shall survive the expiration or termination of any thereof.
Section 15.2. No Broker, Etc. Each of the parties hereto represents to
the others that it has not retained or employed any broker, finder or financial
adviser (other than Insignia Group and KNLB) to act on its behalf in connection
with this Participation Agreement or the transactions contemplated herein or in
the other Operative Documents nor has it authorized any broker, finder or
financial adviser (other than Insignia Group and KNLB) retained or employed by
any other Person so to act. In the event that any party retains any other
broker, finder or financial advisor, such party will promptly notify the other
parties in writing of such broker, finder or financial advisor. Any party which
is in breach of this representation shall indemnify and hold the other parties
harmless from and against any liability arising out of such breach of this
representation.
Section 15.3. Notices. Unless otherwise specifically provided herein,
all notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be given in writing by United States mail, by nationally recognized
courier service, by hand or by facsimile, and any such notice shall become
effective (i) if delivered by United States mail, five (5) Business Days after
being deposited in the mail, certified or registered with appropriate postage
prepaid, (ii) if delivered by a nationally recognized courier service, upon
delivery to the intended recipient, (iii) if delivered by hand, when received or
(iv) if delivered by facsimile, when transmitted (upon electronic confirmation
thereof) provided that any facsimile transmitted after 5:00 P.M. (recipient
time) shall be deemed to have been received on the next Business Day, and shall
be directed to the address or facsimile number of such Person as indicated on
Schedule II. From time to time any party may designate a new address or
facsimile number for purposes of notice hereunder by written notice to each of
the other parties hereto in accordance with this Section.
Section 15.4. Counterparts. This Participation Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 15.5. Amendments, Etc. Neither any Operative Document nor any of
the terms thereof may be terminated (except upon payment in full of the Lease
Balance or effective exercise and consummation of the Remarketing Option in
accordance with Article XX of the Master Lease and payment in full of all
amounts due in accordance therewith), amended, supplemented, waived or modified
without the written agreement or consent of each party thereto and the Lessee
Agent's consent with respect to amendments, supplements, waivers and
modifications in the Loan Agreement, Notes, Trust Agreement and Certificates
and, regardless of whether the Lenders and the Certificate Holders are parties
thereto, the Required Participants; provided, however, that:
(a) no such termination, amendment, supplement, waiver or
modification shall without written agreement or consent of each
Participant:
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(i) modify any of the provisions of this Section 15.5,
change the definition of "Required Participants" or modify
or waive any provision of any Operative Document requiring
action by the foregoing;
(ii) amend, modify, waive or supplement any of the
provisions of Section 2.5, 2.6 or 2.7 of the Loan Agreement;
(iii) reduce, modify, amend or waive any fees or
indemnities in favor of any Participant, including without
limitation amounts payable pursuant to Article XIII (except
that any Person may consent to any reduction, modification,
amendment or waiver of any indemnity payable to it);
(iv) modify, postpone, reduce or forgive, in whole or
in part, any payment of Rent (other than pursuant to the terms
of any Operative Document), any Loan or Certificate Holder
Amount, the Lease Balance, the Loan Balance, Commitment Fees
and any other fee payable hereunder, amounts due pursuant to
Section 20.2 of the Master Lease, interest or Yield (except
that any Person may consent to any modification, postponement,
reduction or forgiveness of any payment of any fee payable to
it) or, subject to subclause (iii) above, any other amount
payable under the Lease or this Participation Agreement, or
modify the definition or method of calculation of Rent (other
than pursuant to the terms of any Operative Document), Loans
or Certificate Holder Amounts, Lease Balance, Loan Balance,
Commitment Fees, Shortfall Amount, Property Improvement Costs,
Estimated Improvement Costs, Participant Balance, or any other
definition which would affect the amounts to be advanced or
which are payable under the Operative Documents; or
(v) consent to any assignment of the Master Lease or
the Lease Supplement by any Lessee, releasing Lessee from its
obligations in respect of the payments of Rent, Loan Balance
or Lease Balance or changing the absolute and unconditional
character of such obligations.
(b) no such termination, amendment, supplement, waiver or
modification that would increase the obligations of Lessee or Guarantor
thereunder or deprive Lessee or Guarantor of any of its rights
thereunder shall be effective against Lessee or Guarantor without its
written agreement or consent.
Section 15.6. Headings, Etc. The Table of Contents and headings of the
various Articles and Sections of this Participation Agreement are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
Section 15.7. Parties in Interest. Except as expressly provided herein,
none of the provisions of this Participation Agreement is intended for the
benefit of any Person except the parties hereto. Neither the Lessee Agent, the
Lessee nor Guarantor shall assign or transfer any of its rights or obligations
under the Operative Documents except in accordance with the terms and conditions
thereof.
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Section 15.8. GOVERNING LAW. THIS PARTICIPATION AGREEMENT AND THE OTHER
OPERATIVE DOCUMENTS (EXCEPT AS OTHERWISE PROVIDED IN ANY OPERATIVE DOCUMENT) AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF
ILLINOIS.
Section 15.9. Severability. Any provision of this Participation
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 15.10. Liability Limited. (a) The parties hereto agree that
except as specifically set forth herein or in any other Operative Document, no
Certificate Holder or Owner Trustee shall have any personal liability whatsoever
to any Participant or their respective successors and assigns for any claim
based on or in respect hereof or any of the other Operative Documents or arising
in any way from the transactions contemplated hereby or thereby and recourse, if
any, shall be solely had against such Certificate Holder's interest in the
Lessor Trust; provided, however, that each Certificate Holder and Owner Trustee
shall be liable in its individual capacity (a) for its own willful misconduct or
gross negligence, (b) breach of any of its representations, warranties or
covenants under the Operative Documents, (c) with respect to Certificate
Holders, for any Tax based on or measured by any fees, commission or
compensation received by a Certificate Holder for acting as a Certificate Holder
as contemplated by the Operative Documents, or (d) any Lessor Liens attributable
to it. It is understood and agreed that, except as provided in the preceding
sentence: (i) no Certificate Holder or Owner Trustee shall have any personal
liability under any of the Operative Documents as a result of acting pursuant to
and consistent with any of the Operative Documents; (ii) all obligations of each
Certificate Holder and Owner Trustee to any Lender are solely nonrecourse
obligations except to the extent that such Certificate Holder or Owner Trustee
has received payment from others (including, without limitation, obligations
with respect to the Loans); and (iii) all such personal liability of any
Certificate Holder and Owner Trustee is expressly waived and released as a
condition of, and as consideration for, the execution and delivery of the
Operative Documents by such Certificate Holder and Owner Trustee.
(b) No Participant shall have any obligation to any other Participant
or to Lessee Agent, the Lessee, the Certificate Holders or the Lenders with
respect to transactions contemplated by the Operative Documents, except those
obligations of such Participant expressly set forth in the Operative Documents
or except as set forth in the instruments delivered in connection therewith, and
no Participant shall be liable for performance by any other party hereto of such
other party's obligations under the Operative Documents except as otherwise so
set forth.
Section 15.11. Further Assurances. The parties hereto shall promptly
cause to be taken, executed, acknowledged or delivered, at the sole expense of
the Lessee Agent, all such further acts, conveyances, documents and assurances
as the other parties may from time to time reasonably request in order to carry
out and preserve the security interests and liens (and the priority thereof)
intended to be created pursuant to this Participation Agreement, the other
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Operative Documents, and the transactions thereunder (including, without
limitation, the preparation, execution and filing of any and all Uniform
Commercial Code financing statements and other filings or registrations which
the parties hereto may from time to time request to be filed or effected). The
Lessee Agent, at its own expense and upon prior request from any other party,
shall take such action as may be reasonably necessary (including any action
specified in the preceding sentence), or as so requested, in order to maintain
and protect all security interests provided for hereunder or under any other
Operative Document.
Section 15.12. SUBMISSION TO JURISDICTION. EACH PARTY HERETO HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF ILLINOIS FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS PARTICIPATION AGREEMENT OR ANY OF THE OTHER OPERATIVE
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 15.13. Setoff. The Lenders and the Certificate Holders shall,
upon the occurrence of any Lease Event of Default or Construction Agency
Agreement Event of Default, have the right to appropriate and, subject to
Section 4.7, apply to the payment of Lessee Agent's obligations under the Lease,
the Construction Agency Agreement and the other Operative Documents as security
for the payment of such obligations, any and all balances, credits, deposits,
accounts or moneys of Lessee Agent then or thereafter maintained with any Lender
or any Certificate Holder. The rights of the Lenders and the Certificate Holders
under this Section are in addition to other rights and remedies (including other
rights of setoff under applicable law or otherwise) which such Person may have.
Section 15.14. WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS PARTICIPATION AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
ANY OF THE PARTIES HERETO. THE PARTIES HERETO HEREBY AGREE THAT THEY WILL NOT
SEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY OTHER LITIGATION IN WHICH A
JURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE PROVISIONS OF THIS SECTION 15.14
HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO AND SHALL BE SUBJECT TO NO
EXCEPTIONS. EACH OF GUARANTOR, LESSEE AGENT AND THE LESSEE ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE AGENT
CERTIFICATE HOLDER, THE OWNER TRUSTEE, THE LESSOR TRUST, THE ADMINISTRATIVE
AGENT, THE ARRANGER AND EACH OF THE PARTICIPANTS ENTERING INTO THIS
PARTICIPATION AGREEMENT AND EACH SUCH OTHER OPERATIVE DOCUMENT.
Section 15.15. No Participant Responsible for Other Participants. The
obligations of each Participant under this Participation Agreement and the other
Operative Documents are several
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and not joint; and, in the event of a failure by a Participant to perform any of
its obligations hereunder or under any other Operative Document, neither the
Agent Certificate Holder nor the Administrative Agent nor any other Participant
(other than the defaulting Participant) shall have any liability as a
consequence thereof.
Section 15.16. Recourse during Construction. Notwithstanding any
provision herein to the contrary, prior to the Completion Date if no
Construction Agency Agreement Event of Default described in clauses (a), (b) or
(c) of Section 5.1 of the Construction Agency Agreement has occurred, so long as
the Lessee and the Lessee Agent relinquish their interests therein and conveys
possession of the Property and all Improvements and Modifications to the Agent
Certificate Holder as contemplated by Section 20.3(b)(ii) of the Master Lease
with the affidavit and certificate contemplated by Section 20.3(b)(i) of the
Master Lease, the maximum recovery on a recourse basis from the Lessee (and any
guarantor of the Lessee, including the Guarantor) for such Property shall be
limited to 89.99% of the Property Cost; provided that the Lessee acknowledges
and agrees that Certificate Holders shall be entitled to recover 100% of the
Lease Balance from their interest as owner or mortgagee, as the case may be, of
the Property and provided further that nothing contained in this Section 15.16
limits the obligations of Guarantor with respect to indemnification under
Article XIII hereof except to the extent that such indemnification relates to
the payment of Construction Costs.
Section 15.17. No Recourse to Owner Trustee; Agent Certificate Holder;
Certificate Holders. Notwithstanding any provision to the contrary, the
obligations, representations, warranties and agreements of the Lessor Trust
hereunder and under the Certificates, the other Operative Documents and any
other certificate, instrument or document executed in connection herewith or
therewith, and any other document supplemental hereto or thereto, shall be
deemed obligations and agreements of the Lessor Trust, and not of Wilmington
Trust Company in its individual capacity, Agent Certificate Holder or any
Certificate Holder, or any shareholder, officer, agent or employee of Wilmington
Trust Company in its individual capacity or Agent Certificate Holder or any
Certificate Holder, and the shareholders, officers, agents and employees of
Wilmington Trust Company in its individual capacity or Agent Certificate Holder
any Certificateholder shall not be liable personally hereon or thereon or be
subject to any personal liability or accountability based upon or in respect
hereof or thereof or of any transaction contemplated hereby or thereby.
-71-
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
TRUSERV CORPORATION, as Lessee Agent
By
-------------------------------------
Kerry J. Kirby
Its Executive Vice President and
Chief Financial Officer
MARY GREEN, LLC, as Lessee
By: TruServ Corporation,
its sole member
By
---------------------------
Kerry J. Kirby
Its Executive Vice President
and Chief Financial Officer
BMO LEASING (U.S.), INC., as Agent
Certificate Holder and as a
Certificate Holder
By
-------------------------------------
Joseph A. Bliss
Its Vice President
BANK OF MONTREAL, as Administrative
Agent, Arranger and as a Lender
By
-------------------------------------
Julia B. Buthman
Its Managing Director
<PAGE> 78
WILMINGTON TRUST COMPANY, not in its
individual capacity, except as
expressly provided herein, but solely
as Owner Trustee
By
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
TRUSERV 1998 TRUST, as Lessor Trust
By: Wilmington Trust Company,
not in its individual capacity
but solely as Owner Trustee
By
---------------------------
Name:
----------------------
Title:
---------------------
<PAGE> 79
SCHEDULE I
TO PARTICIPATION AGREEMENT
COMMITMENTS
COMMITMENT
PARTICIPANT COMMITMENT PERCENTAGE
LENDERS
Bank of Montreal $33,700,000 84.25%
CERTIFICATE HOLDERS
BMO Leasing (U.S.), Inc. $6,300,000 15.75%
TOTAL $40,000,000 100%
<PAGE> 80
SCHEDULE II
TO PARTICIPATION AGREEMENT
Notice Information, Wire Instructions and Funding Offices,
AGENT CERTIFICATE HOLDER:
BMO LEASING (U.S.), INC.
311 West Monroe Street
Chicago, Illinois 60603
Attention: Thomas Rawlinson
Facsimile No.: (312) 750-4304
Wire Transfer Instructions:
Bank: Harris Trust and Savings Bank
ABA Number: 071-000-288
Account Name: BMO Leasing
Account Number: 124-8566
Ref: TruServ Synthetic Lease
ADMINISTRATIVE AGENT:
BANK OF MONTREAL
115 South LaSalle Street
Chicago, Illinois 60603
Attention: Thomas Rawlinson
Facsimile No.: (312) 750-4304
Wire Transfer Instructions for the Account:
Bank: Harris Trust and Savings Bank
ABA Number: 071-000-288
Account Name: Bank of Montreal
Account Number: 124-8566
Ref: TruServ Synthetic Lease
<PAGE> 81
CERTIFICATE HOLDER:
BMO LEASING (U.S.), INC.
311 West Monroe Street
Chicago, Illinois 60603
Attention: Thomas Rawlinson
Facsimile No.: (312) 750-4304
Wire Transfer Instructions:
Bank: Harris Trust and Savings Bank
ABA Number: 071-000-288
Account Name: BMO Leasing
Account Number: 1814165
Ref: TruServ Synthetic Lease
LENDERS:
BANK OF MONTREAL
115 South LaSalle
Chicago, Illinois 60603
Attention: Thomas Rawlinson
Facsimile No.: (312) 750-4304
Wire Transfer Instructions:
Bank: Harris Trust and Savings Bank
ABA Number: 071-000-288
Account Name: Bank of Montreal
Account Number: 124-8566
Ref: TruServ Synthetic Lease
LESSEE AGENT AND GUARANTOR:
TruServ Corporation
8600 West Bryn Mawr Avenue
Chicago, Illinois 60631-3505
Attention: Kerry J. Kirby
Facsimile No.: (773) 695-6563
II-2
<PAGE> 82
With a copy to:
TruServ Corporation
8600 West Bryn Mawr Avenue
Chicago, Illinois 60631-3505
Attention: General Counsel
Facsimile No.: (773) 695-5465
Wire Transfer Instructions:
Bank: Harris Trust and Savings Bank
ABA Number: 071-000-288
Account Name: TruServ Corporation
Account Number: 232-897-9
OWNER TRUSTEE:
Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
II-3
<PAGE> 83
SCHEDULE III
TO PARTICIPATION AGREEMENT
COMMITMENT FEES; CERTIFICATE HOLDER MARGIN
AND LOAN MARGIN
Commitment Fees with respect to the Loans and Certificate Holder
Amounts on any day, shall be calculated using the percentage set forth below
opposite the applicable Fixed Charge Coverage Ratio of Guarantor in effect for
such day for the Available Loan Commitment and Available Certificate Holder
Commitment:
FIXED CHARGE COVERAGE RATIO COMMITMENT FEE
--------------------------- --------------
Less than 2.00 to 1.00 .15%
Equal to or greater than 2.00 to 1.00 but less than .125%
2.75 to 1.00
Equal to or greater than 2.75 to 1.00 .10%
"Certificate Holder Margin" means, with respect to any Certificate
Holder Amount which is a Eurodollar Loan/Certificate Holder Amount, the
percentage set forth below opposite the Fixed Charge Coverage Ratio in effect
for such date:
FIXED CHARGE COVERAGE RATIO CERTIFICATE
HOLDER MARGIN
-------------
Less than 2.00 to 1.00 .85%
Equal to or greater than 2.00 to 1.00, .775%
but less than 2.75 to 1.00
Equal to or greater than 2.75 to 1.00 .725%
"Loan Margin" means, with respect to any Loan which is a Eurodollar
Loan/Certificate Holder Amount, the percentage set forth below opposite the
Fixed Charge Coverage Ratio in effect for such date :
FIXED CHARGE COVERAGE RATIO LOAN MARGIN
Less than 2.00 to 1.00 .50%
Equal to or greater than 2.00 to 1.00, .425%
but less than 2.75 to 1.00
Equal to or greater than 2.75 to 1.00 .375%
<PAGE> 84
SCHEDULE IV
RESTRICTIVE AGREEMENTS
Cotter & Company $50,000,000 Private Shelf Agreement dated as of
December 29, 1995 (as amended by Amendment No. 1 thereto dated June 24, 1997)
with The Prudential Insurance Company of America and the other entities from
time to time party thereto.
<PAGE> 85
SCHEDULE V
LIENS
CAPITAL LEASES CAPITALIZED VALUE ESTIMATED OBLIGATION
Transportation Equipment
Lessors of Tractors & Trailers
Security Pacific $ 266,139.13 $ 253,362.80
Norlease, Inc. $3,115,550.75 $2,495,710.49
Met Life $4,652,584.89 $2,226,092.50
------------- -------------
TOTAL $8,034,274.77 $4,975,165.79
============= =============
<PAGE> 86
SCHEDULE VI
INVESTMENTS
None.
<PAGE> 87
SCHEDULE VII
FORM OF SUBORDINATED NOTE
<PAGE> 1
EXHIBIT 4-N
================================================================================
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1998
AMONG
TRUSERV CORPORATION,
VARIOUS FINANCIAL INSTITUTIONS,
AND
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
AS AGENT
ARRANGED BY BANCAMERICA SECURITIES, INC.
================================================================================
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
Section Page
- ------- ----
<S> <C> <C>
1.1 Certain Defined Terms........................................... 1
1.2 Other Interpretive Provisions................................... 15
1.3 Accounting Principles........................................... 16
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitments................................ 16
2.2 Loan Accounts................................................... 17
2.3 Procedure for Borrowing......................................... 17
2.4 Conversion and Continuation Elections........................... 18
2.5 Voluntary Termination or Reduction of Commitments............... 19
2.6 Optional Prepayments............................................ 20
2.7 Repayment....................................................... 20
2.8 Interest........................................................ 20
2.9 Fees............................................................ 21
(a) Certain Fees............................................... 21
(b) Commitment Fees............................................ 21
2.10 Computation of Fees and Interest................................ 21
2.11 Payments by the Company......................................... 22
2.12 Payments by the Lenders to the Agent............................ 23
2.13 Sharing of Payments, Etc........................................ 23
2.14 Optional Increase in Commitments................................ 24
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes........................................................... 25
3.2 Illegality...................................................... 26
3.3 Increased Costs and Reduction of Return......................... 27
3.4 Funding Losses.................................................. 28
3.5 Inability to Determine Rates.................................... 28
3.6 Reserves on Offshore Rate Loans................................. 29
3.7 Certificates of Lenders......................................... 29
3.8 Substitution of Lenders......................................... 29
3.9 Survival........................................................ 30
</TABLE>
-i-
<PAGE> 3
ARTICLE IV
CONDITIONS PRECEDENT
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
4.1 Conditions to Initial Loans..................................... 30
(a) Credit Agreement and Notes.................................. 30
(b) Resolutions; Incumbency; Certificate of
Incorporation; By-Laws..................................... 30
(c) Good Standing............................................... 30
(d) Legal Opinion............................................... 30
(e) Payment of Fees............................................. 31
(f) Certificate................................................. 31
(g) Other Documents............................................. 31
4.2 Conditions to All Loans......................................... 31
(a) Notice...................................................... 31
(b) Continuation of Representations and Warranties.............. 31
(c) No Existing Default......................................... 31
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Organization; Subsidiary Preferred Stock........................ 32
5.2 Financial Statements............................................ 32
5.3 Actions Pending................................................. 33
5.4 Outstanding Debt................................................ 33
5.5 Title to Properties............................................. 33
5.6 Taxes........................................................... 33
5.7 Conflicting Agreements and Other Matters........................ 34
5.8 Use of Proceeds................................................. 34
5.9 ERISA........................................................... 34
5.10 Governmental Consent............................................ 35
5.11 Environmental Compliance........................................ 35
5.12 Disclosure...................................................... 35
5.13 Hostile Tender Offers........................................... 36
5.14 Priority of Obligations......................................... 36
5.15 Year 2000 Problem............................................... 36
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1 Financial Statements............................................ 36
6.2 Certificates; Other Information................................. 37
6.3 Notices......................................................... 38
6.4 Preservation of Corporate Existence, Etc........................ 39
6.5 Maintenance of Property......................................... 39
6.6 Insurance....................................................... 39
6.7 Payment of Obligations.......................................... 40
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
6.8 Compliance with Laws............................................ 40
6.9 Compliance with ERISA........................................... 40
6.10 Inspection of Property and Books and Records.................... 40
6.11 Environmental Laws.............................................. 41
6.12 Use of Proceeds................................................. 41
6.13 Covenant to Secure Obligations Equally.......................... 41
6.14 Cooperative Status.............................................. 41
ARTICLE VII
NEGATIVE COVENANTS
7.1 Fixed Charge Coverage Ratio..................................... 42
7.2 Lien Restrictions............................................... 42
7.3 Debt Restrictions............................................... 43
7.4 Sale of Assets.................................................. 43
7.5 Merger.......................................................... 44
7.6 Restrictions on Transactions with Affiliates and Stockholders... 44
7.7 Issuance of Stock by Subsidiaries............................... 44
7.8 Compliance with ERISA........................................... 44
7.9 No Change in Subordination Terms, etc........................... 45
7.10 Nature of Business.............................................. 45
7.11 Restricted Investments.......................................... 45
7.12 Restricted Payments............................................. 46
7.13 Use of Proceeds................................................. 46
7.14 Minimum Asset Coverage.......................................... 47
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Event of Default................................................ 47
8.2 Remedies........................................................ 50
8.3 Rights Not Exclusive............................................ 50
ARTICLE IX
THE AGENT
9.1 Appointment and Authorization; "Agent".......................... 50
9.2 Delegation of Duties............................................ 51
9.3 Liability of Agent.............................................. 51
9.4 Reliance by Agent............................................... 51
9.5 Notice of Default............................................... 52
9.6 Credit Decision................................................. 52
9.7 Indemnification of Agent........................................ 53
9.8 Agent in Individual Capacity.................................... 53
9.9 Successor Agent................................................. 54
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
9.10 Withholding Tax................................................ 54
9.11 Co-Agents...................................................... 56
ARTICLE X
MISCELLANEOUS
10.1 Amendments and Waivers......................................... 56
10.2 Notices........................................................ 57
10.3 No Waiver; Cumulative Remedies................................. 58
10.4 Costs and Expenses............................................. 58
10.5 Company Indemnification........................................ 59
10.6 Payments Set Aside............................................. 59
10.7 Successors and Assigns......................................... 59
10.8 Assignments, Participations, etc............................... 60
10.9 Confidentiality................................................ 61
10.10 Set-off....................................................... 62
10.11 Automatic Debits of Fees...................................... 62
10.12 Notification of Addresses, Lending Offices, Etc............... 62
10.13 Counterparts.................................................. 63
10.14 Severability.................................................. 63
10.15 No Third Parties Benefited.................................... 63
10.16 Governing Law and Jurisdiction................................ 63
10.17 Waiver of Jury Trial.......................................... 63
10.18 Entire Agreement.............................................. 64
SCHEDULES
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 5.7 Restrictive Agreements
Schedule 7.2 Liens
Schedule 7.11 Investments
Schedule 10.2 Offshore and Domestic Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Counsel to the Company
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Note
Exhibit G Form of Subordinated Note
Exhibit H Form of Request for Increase
</TABLE>
-iv-
<PAGE> 6
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of September 30, 1998, among
TRUSERV CORPORATION, a Delaware corporation (the "Company"), various financial
institutions (together with their respective successors and assigns,
collectively the "Lenders"; individually each a "Lender"), and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent.
WHEREAS, the Lenders have agreed to make available to the Company a
revolving credit facility on the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms have the following
meanings:
Affiliate means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common
control with, such Person. A Person shall be deemed to control another
Person if the controlling Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of
such other Person, whether through the ownership of voting securities,
membership interests, by contract, or otherwise.
Agent means BofA in its capacity as agent for the Lenders hereunder,
and any successor agent arising under Section 9.9.
Agent-Related Persons means the Agent and any successor thereto in
such capacity hereunder, together with their respective Affiliates, and
the officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
Agent's Payment Office means the address for payments to the Agent
set forth on Schedule 10.2 or such other address as the Agent may from
time to time specify in accordance with Section 10.2.
<PAGE> 7
Agreement means this Credit Agreement.
Arranger means BancAmerica Securities, Inc.
Assignee - see subsection 10.8(a).
Attorney Costs means and includes all fees and charges of any law
firm or other external counsel, and, without duplication, the allocated
cost of internal legal services and all disbursements of internal
counsel.
Bankruptcy Code means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, et seq.).
Bankruptcy Law - see subsection 8.1(h).
Base Rate means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; and (b) the rate of interest in
effect for such day as publicly announced from time to time by BofA in
San Francisco, California, as its "reference rate." (The "reference
rate" is a rate set by BofA based upon various factors including BofA's
costs and desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate.) Any change in the
reference rate announced by BofA shall take effect at the opening of
business on the day specified in the public announcement of such change.
Base Rate Loan means a Loan that bears interest based on the Base
Rate.
BofA means Bank of America National Trust and Savings Association, a
national banking association.
Borrowing means a borrowing hereunder consisting of Loans of the
same Type made to the Company on the same day by one or more Lenders
under Article II and, in the case of Offshore Rate Loans, having the same
Interest Period.
Borrowing Date means any date on which a Borrowing occurs under
Section 2.3.
Business Day means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City, Chicago or San Francisco
are authorized or required by law to close and, with respect to
disbursements and payments relating to Offshore Rate Loans, a day on
which dealings are carried on in the offshore Dollar interbank market.
2
<PAGE> 8
Capital Adequacy Regulation means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law, in
each case, regarding capital adequacy of any bank or of any corporation
controlling a bank.
Capitalized Lease Obligation means any rental obligation which,
under GAAP, is or will be required to be capitalized on the books of the
Company or any Subsidiary, taken at the amount thereof accounted for as
indebtedness (net of interest expense).
Closing Date means the date on which all conditions precedent set
forth in Section 4.1 are satisfied or waived by all Lenders (or, in the
case of subsection 4.1(e), waived by the Person entitled to receive the
applicable payment).
Code means the Internal Revenue Code of 1986 and regulations
promulgated thereunder.
Commitment - see Section 2.1.
Company - see the Preamble.
Compliance Certificate means a certificate substantially in the form
of Exhibit C.
Consolidated Capitalization means, as of the time of any
determination, the sum of (i) Consolidated Net Worth and (ii) Funded
Debt.
Consolidated Net Earnings means with respect to any period:
(i) consolidated gross revenues of the Company and its Subsidiaries,
minus
(ii) all operating and non-operating expenses of the Company and its
Subsidiaries including all charges of a proper character (including
current and deferred taxes on income, provision for taxes on unremitted
foreign earnings which are included in gross revenues, and current
additions to reserves),
but not including in gross revenues:
(a) any extraordinary gains or losses (net of expenses and taxes
applicable thereto) resulting from the sale, conversion or other
disposition of capital assets (i.e., assets other than current
assets);
3
<PAGE> 9
(b) any gains resulting from the appraised write-up of assets;
(c) any equity of the Company or any Subsidiary in the
unremitted earnings of any corporation which is not a Subsidiary;
(d) any earnings of any Person acquired by the Company or any
Subsidiary through purchase, merger or consolidation or otherwise for
any year prior to the year of acquisition; or
(e) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the investment
in such Subsidiary;
all determined in accordance with GAAP.
Consolidated Net Worth means, as of any date of determination, the
sum of (i) the par value (or value stated on the books of the Company) of
the capital stock of all classes of the Company, plus (or minus in the
case of a surplus deficit) (ii) the amount of the consolidated surplus,
whether capital or earned, of the Company and its Subsidiaries, all
determined in accordance with GAAP.
Contractual Obligation means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or
agreement to which such Person is a party or by which it or any of its
property is bound.
Conversion/Continuation Date means any date on which, under Section
2.4, the Company (a) converts Loans of one Type to another Type or (b)
continues Offshore Rate Loans having an Interest Period expiring on such
date for a new Interest Period.
Debt means Short Term Debt and Funded Debt.
Dollars, dollars and $ each mean lawful money of the United States.
Effective Date means the date on which the Agent has received
counterparts of this Agreement executed by the parties hereto.
Eligible Assignee means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined
capital and surplus of at least
4
<PAGE> 10
$100,000,000; (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development (the "OECD"), or a political subdivision of any such country,
and having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
United States; and (c) a Person that is primarily engaged in the business
of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a
Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person
of which a Lender is a Subsidiary.
Environmental Claims means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment.
Environmental Laws means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with
all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and
land use matters.
ERISA means the Employee Retirement Income Security Act of 1974 and
regulations promulgated thereunder.
ERISA Affiliate means any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code
for purposes of provisions relating to Section 412 of the Code).
ERISA Event means (a) a Reportable Event with respect to a Pension
Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer (as defined in Section 4001(a)(2) of ERISA)
or a substantial cessation of operations which is treated as such a
withdrawal; (c) a complete or partial withdrawal by the Company or any
ERISA Affiliate from a Multiemployer Plan 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 PBGC to terminate a Pension Plan or Multiemployer
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
5
<PAGE> 11
a trustee to administer, any Pension Plan or Multiemployer Plan; or (f)
the imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the
Company or any ERISA Affiliate.
Event of Default - see Section 8.1.
Exchange Act means the Securities Exchange Act of 1934 and
regulations promulgated thereunder.
Federal Funds Rate means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including
any such successor, "H.15(519)") on the preceding Business Day opposite
the caption "Federal Funds (Effective)"; or, if for any relevant day such
rate is not so published on any such preceding Business Day, the rate for
such day will be the arithmetic mean as determined by the Agent of the
rates for the last transaction in overnight Federal funds arranged prior
to 9:00 a.m. (New York City time) on that day by each of three leading
brokers of Federal funds transactions in New York City selected by the
Agent.
Fee Letter - see subsection 2.9(a).
Fixed Charge Coverage Ratio means, for any quarter, the ratio of
(a) the sum of (i) Consolidated Net Earnings, (ii) operating lease
expense, and (iii) interest expense,
to
(b) the sum of (i) operating lease expense and (ii) interest
expense;
each determined for the Company and its Subsidiaries on a consolidated
basis.
FRB means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
Funded Debt means and includes, (i) any obligation payable more than
one year from the date of creation thereof which under GAAP is shown on a
balance sheet as a liability (including Capitalized Lease Obligations and
notes payable to Members but excluding reserves for deferred income taxes
and other reserves to the extent that such reserves do not
6
<PAGE> 12
constitute an obligation); (ii) indebtedness payable more than one year
from the date of creation thereof which is secured by any lien on property
owned by the Company or any Subsidiary; and (iii) Guarantees (excluding
Guarantees of loans made to Members in an amount not exceeding
$20,000,000).
Further Taxes means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar
charges (including net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 3.1.
GAAP means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards
Board (or agencies with similar functions of comparable stature and
authority within the U.S. accounting profession), which are applicable to
the circumstances as of the date of determination.
Governmental Authority means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary
or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
Guarantee means, with respect to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including,
without limitation, any such obligation directly or indirectly guaranteed,
endorsed (other than for collection of deposit in the ordinary course of
business) or discounted or sold with recourse by such Person, or in respect
of which such Person is otherwise directly or indirectly liable, including,
without limitation, any such obligation in effect guaranteed by such Person
through any agreement (contingent or otherwise) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form
of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain the solvency or any balance sheet or other financial
condition of the obligor of such obligation, or to make payment for any
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products, materials or supplies or for any transportation or services
regardless of the non-delivery or non-furnishing thereof, in any such case
if the purpose or intent of such agreement is to provide assurance that
such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will
be protected against loss in respect thereof. The amount of any Guarantee
shall be equal to the outstanding principal amount of the obligation
guaranteed or such lesser amount to which the maximum exposure of the
guarantor shall have been specifically limited.
Hostile Tender Offer means, with respect to the use of proceeds of any
Loan, any offer to purchase, or any purchase of, shares of capital stock of
any corporation or equity interests in any other entity, or securities
convertible into or representing the beneficial ownership of, or rights to
acquire, any such shares or equity interests, if such shares, equity
interests, securities or rights are of a class which is publicly traded on
any securities exchange or in any over-the-counter market, other than
purchases of such shares, equity interests, securities or rights
representing less than 5% of the equity interests or beneficial ownership
of such corporation or other entity for portfolio investment purposes, and
such offer or purchase has not been duly approved by the board of directors
of such corporation or the equivalent governing body of such other entity
prior to the date on which the Company makes the borrowing request for such
Loan.
Indebtedness means, with respect to any Person, without duplication,
(i) all items (excluding items of contingency reserves or of reserves for
deferred income taxes) which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance
sheet of such Person as of the date on which Indebtedness is to be
determined, (ii) all indebtedness secured by any Lien on any property or
asset owned or held by such Person subject thereto, whether or not the
indebtedness secured thereby shall have been assumed, and (iii) all
indebtedness of others with respect to which such Person has become liable
by way of Guarantee.
Indemnified Liabilities - see Section 10.5.
Indemnified Person - see Section 10.5.
Independent Auditor - see subsection 6.1(a).
Insolvency Proceeding means, with respect to any Person, (a) any
case, action or proceeding with respect to
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such Person before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general assignment
for the benefit of creditors, composition, marshaling of assets for
creditors, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; undertaken under
U.S. Federal, state or foreign law, including the Bankruptcy Code.
Interest Payment Date means, (i) as to any Offshore Rate Loan, the
last day of each Interest Period applicable to such Loan and, if any such
Interest Period exceeds three months, the date that falls three months
after the first day of such Interest Period and (ii) as to any Base Rate
Loan, the last Business Day of each calendar quarter.
Interest Period means, as to any Offshore Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two, three
or six months thereafter as selected by the Company in its Notice of
Borrowing or Notice of Conversion/Continuation, as the case may be;
provided that:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the
following Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend beyond the
scheduled Termination Date.
Investments means any loan or advance to, or ownership, purchase or
acquisition of any security (including stock) or obligations of, or any
other interest in, or any capital contribution made to, any Person.
IRS means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
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Lender - see the Preamble.
Lending Office means, as to any Lender, the office or offices of
such Lender specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
10.2, or such other office or offices as such Lender may from time to
time notify the Company and the Agent.
Lien means any mortgage, pledge, security interest, encumbrance,
lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction) or any other type of preferential
arrangement for the purpose, or having the effect, of protecting a
creditor against loss or securing the payment or performance of an
obligation.
Loan means a loan by a Lender to the Company under Section 2.1,
which may be an Offshore Rate Loan or a Base Rate Loan (each a "type" of
Loan).
Loan Documents means this Agreement, any Note, the Fee Letter and
all other documents delivered to the Agent or any Lender in connection
herewith.
Long-Term Credit Agreement means the Credit Agreement dated as of
July 1, 1997 among the Company, various financial institutions and BofA,
as Agent.
Margin Stock means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
Material Adverse Effect means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Company or the
Company and its Subsidiaries taken as a whole; (b) a material impairment of
the ability of the Company or any Subsidiary to perform its obligations
under any Loan Document; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against the Company or
any Subsidiary of any Loan Document.
Member means any Person which is a member of the Company.
Minimum Tranche means, in respect of Loans comprising part of the
same Borrowing, or to be converted or continued
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under Section 2.4, (a) in the case of Base Rate Loans, $1,000,000 or a
higher integral multiple thereof and (b) in the case of Offshore Rate
Loans, $5,000,000 or a higher integral multiple of $1,000,000.
Multiemployer Plan means any Plan which is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
Note means a promissory note executed by the Company in favor of a
Lender pursuant to subsection 2.2(b), in substantially the form of
Exhibit F.
Notice of Borrowing means a notice in substantially the form of
Exhibit A.
Notice of Conversion/Continuation means a notice in substantially
the form of Exhibit B.
Obligations means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company
to any Lender, the Agent or any Indemnified Person, whether direct or
indirect (including those acquired by assignment), absolute or
contingent, due or to become due, or now existing or hereafter arising.
Offshore Rate means, for any Interest Period, with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate of
interest per annum determined by the Agent as the average (rounded
upwards, if necessary, to the nearest 0.01%) of the rates at which
deposits in Dollars in the approximate amount of the Offshore Rate Loan
of each Reference Lender for such Interest Period would be offered by
such Reference Lender to major banks in the offshore interbank market at
their request at approximately 11:00 a.m. (New York City time) two
Business Days prior to the commencement of such Interest Period.
Offshore Rate Loan means a Loan that bears interest based on the
Offshore Rate.
Organization Documents means, for any corporation, the certificate
or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
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Other Taxes means any present or future stamp, court or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery, performance, enforcement or registration of, or otherwise with
respect to, this Agreement or any other Loan Document.
Participant - see subsection 10.8(c).
PBGC means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under
ERISA.
Pension Plan means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA with respect to which the Company or
any ERISA Affiliate may have any liability.
Person means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
Plan shall mean any employee pension benefit plan (as such term is
defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the
Company or any ERISA Affiliate.
Preferred Stock, as applied to any corporation, means shares of such
corporation that shall be entitled to preference or priority over any
other shares of such corporation in respect of either the payment of
dividends or the distribution of assets upon liquidation, or both.
Pro Rata Share means, as to any Lender at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place)
at such time of such Lender's Commitment divided by the combined
Commitments of all Lenders (or, after the Commitments have terminated, of
the amount of such Lender's Loans divided by the amount of all
outstanding Loans).
Prudential Agreement means the Private Shelf Agreement dated as of
December 29, 1995 between the Company and The Prudential Insurance
Company of America and certain of its Affiliates.
Reference Lender means each of BofA, Bank of Montreal and PNC Bank,
National Association.
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Replacement Lender - see Section 3.8.
Reportable Event means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event
for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
Required Lenders means Lenders having Pro Rata Shares of 66-2/3% or
more.
Requirement of Law means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or
of a Governmental Authority, in each case applicable to or binding upon
the Person or any of its property or to which the Person or any of its
property is subject.
Responsible Officer means the chief executive officer, chief
operating officer, chief financial officer, treasurer or chief accounting
officer of the Company, general counsel of the Company or any other
officer of the Company involved principally in its financial
administration or its controllership function.
Restricted Investment shall mean any Investment other than those
expressly permitted by clauses (a) through (f) of Section 7.11.
Restricted Payment - see Section 7.12.
SEC means the Securities and Exchange Commission or any Governmental
Authority succeeding to any of its principal functions.
Secured Funded Debt means Funded Debt which is secured by any Lien.
Senior Funded Debt means Funded Debt of the Company which is not
Subordinated Debt.
Short Term Debt means, as of any date of determination with respect
to any Person, (i) all Indebtedness of such Person for borrowed money
other than Funded Debt of such Person and (ii) Guarantees by such Person
of Short Term Debt of Persons other than Members.
Subordinated Debt shall mean any Indebtedness of the Company which
contains terms of subordination identical to or, in the reasonable
determination of the Agent no less favorable to the Lenders than, the
terms of subordination
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set forth in Exhibit G hereto and, which by virtue of such language and
any necessary action of the Board of Directors of the Company, is
subordinated to the Obligations.
Subsidiary means any corporation all of the stock of every class of
which, except directors' qualifying shares, shall, at the time as of which
any determination is being made, be owned by the Company either directly or
through Subsidiaries. Notwithstanding the foregoing, for purposes of
calculating the financial covenants, each of Cotter Canada Hardware and
Variety Cooperative, Inc. will be deemed a Subsidiary of the Company if,
in accordance with GAAP, it is consolidated in the financial statements of
the Company required to be delivered pursuant to clauses (a) and (b) of
Section 6.1 hereof.
Substantial Stockholder means (i) any Person owning, beneficially or
of record, directly or indirectly, either individually or together with all
other Persons to whom such Person is related by blood, adoption or
marriage, stock of the Company (of any class having ordinary voting power
for the election of directors) aggregating five percent (5%) or more of
such voting power or (ii) any Person related by blood, adoption or marriage
to any Person described or coming within the provisions of clause (i) of
this definition.
Taxes means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, charges or withholdings, fees, withholdings or
similar charges, and all liabilities with respect thereto, excluding, in
the case of each Lender and the Agent, such taxes (including income taxes
or franchise taxes) as are taxes imposed on or measured by its net income
by the jurisdiction (or any political subdivision thereof) under the laws
of which such Lender or the Agent, as the case may be, is organized or
maintains a lending office.
Termination Date means the earlier to occur of:
(a) September 29, 1999; and
(b) the date on which the Commitments terminate in accordance
with the provisions of this Agreement.
Type has the meaning specified in the definition of "Loan."
Unfunded Pension Liability means the excess of a Pension Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current
value of that Plan's assets,
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determined in accordance with the assumptions used for funding the Pension
Plan pursuant to Section 412 of the Code for the applicable plan year.
United States and U.S. each means the United States of America.
Unmatured Event of Default means any event or circumstance which,
with the giving of notice, the lapse of time, or both, would (if not
cured or otherwise remedied during such time) constitute an Event of
Default.
Year 2000 Problem means the risk that computer applications and
embedded microchips in non-computing devices may be unable to recognize
and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999.
1.2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including";
the words "to" and "until" each mean "to but excluding", and the word
"through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending,
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replacing, supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms. Unless otherwise expressly provided
herein, any reference to any action of the Agent, the Lenders or the Required
Lenders by way of consent, approval or waiver shall be deemed modified by the
phrase "in its/their sole discretion."
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Company
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Lenders or the Agent merely because of the
Agent's or Lenders' involvement in their preparation.
1.3 Accounting Principles.
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied; provided that if the Company notifies the Agent that
the Company wishes to amend any covenant in Article VII to eliminate the effect
of any change in GAAP on the operation of such covenant (or if the Agent
notifies the Company that the Required Lenders wish to amend Article VII for
such purpose), then the Company's compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant change
in GAAP became effective, until either such notice is withdrawn or such covenant
is amended in a manner satisfactory to the Company and the Required Lenders.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitments. Each Lender severally agrees, on
the terms and conditions set forth herein, to make Loans to the Company from
time to time on any Business
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Day during the period from the Closing Date to the Termination Date, in an
aggregate amount not to exceed at any time outstanding the amount set forth on
Schedule 2.1 (such amount, as the same may be reduced under Section 2.5 or as
a result of one or more assignments under Section 10.8, such Lender's
"Commitment"); provided that the aggregate principal amount of all outstanding
Loans shall not at any time exceed the combined Commitments. Within the
foregoing limits, and subject to the other terms and conditions hereof, the
Company may borrow under this Section 2.1, prepay under Section 2.6 and reborrow
under this Section 2.1.
2.2 Loan Accounts. (a) The Loans made by each Lender shall be
evidenced by one or more accounts or records maintained by such Lender in the
ordinary course of business. The accounts or records maintained by the Agent
and each Lender shall be rebuttably presumptive evidence of the amount of the
Loans made by the Lenders to the Company, and the interest and payments
thereon. Any failure so to record or any error in doing so shall not, however,
limit or otherwise affect the obligation of the Company hereunder to pay any
amount owing with respect to the Loans.
(b) Upon the request of any Lender made through the Agent, the Loans made
by such Lender may be evidenced by one or more Notes, instead of or in addition
to loan accounts. Each such Lender shall endorse on the schedules annexed to
its Note(s) the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Company with respect thereto.
Each such Lender is irrevocably authorized by the Company to endorse its
Note(s) and each Lender's record shall be rebuttably presumptive evidence;
provided that the failure of a Lender to make, or an error in making, a
notation thereon with respect to any Loan shall not limit or otherwise affect
the obligations of the Company hereunder or under any such Note to such Lender.
2.3 Procedure for Borrowing. (a) Each Borrowing shall be made upon the
Company's irrevocable written notice delivered to the Agent in the form of a
Notice of Borrowing, which notice must be received by the Agent prior to (i)
9:00 a.m. (Chicago time) two Business Days prior to the requested Borrowing
Date, in the case of Offshore Rate Loans, and (ii) 11:00 a.m. (Chicago time) on
the requested Borrowing Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be in an
aggregate amount not less than the Minimum Tranche;
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(B) the requested Borrowing Date, which shall be a Business
Day;
(C) the Type of Loans comprising such Borrowing; and
(D) in the case of Offshore Rate Loans, the duration of the
initial Interest Period therefor.
(b) Each Lender will make the amount of its Pro Rata Share of each
Borrowing available to the Agent for the account of the Company at the Agent's
Payment Office by noon (Chicago time) on the Borrowing Date requested by the
Company and in immediately available funds. The proceeds of all such Loans
will then be made available to the Company by the Agent at such office by
crediting the account of the Company on the books of BofA with the aggregate of
the amounts made available to the Agent by the Lenders and in like funds as
received by the Agent.
(c) After giving effect to any Borrowing, unless the Agent otherwise
consents, there may not be more than ten different Interest Periods in effect
for all Borrowings.
2.4 Conversion and Continuation Elections. (a) The Company may, upon
irrevocable written notice to the Agent in accordance with subsection 2.4(b):
(i) elect, as of any Business Day, in the case of Base Rate Loans, or
as of the last day of the applicable Interest Period, in the case of
Offshore Rate Loans, to convert any such Loans (or any part thereof in an
aggregate amount not less than the Minimum Tranche) into Loans of the other
Type; or
(ii) elect, as of the last day of the applicable Interest Period, to
continue any Offshore Rate Loans having Interest Periods expiring on such
day (or any part thereof in an amount not less than the Minimum Tranche) as
Offshore Rate Loans for a new Interest Period;
provided that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment or conversion of
part thereof, to be less than the Minimum Tranche, such Offshore Rate Loans
shall automatically convert into Base Rate Loans.
(b) The Company shall deliver a Notice of Conversion/Continuation to be
received by the Agent not later than (i) 10:00 a.m. (Chicago time) two Business
Days in advance of the Conversion/Continuation Date, if the Loans are to be
converted into or continued as Offshore Rate Loans; and (ii)
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<PAGE> 24
11:00 a.m. (Chicago time) on the Conversion/Continuation Date, if the Loans
are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or
continued;
(C) the Type of Loans resulting from the proposed conversion
or continuation; and
(D) in the case of conversions into or continuations of
Offshore Rate Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to Offshore
Rate Loans, the Company has failed to select timely a new Interest Period to be
applicable to such Offshore Rate Loans, the Company shall be deemed to have
elected to convert such Offshore Rate Loans into Base Rate Loans effective as
of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Lender of its receipt of a Notice
of Conversion/Continuation, or, if no timely notice is provided by the Company,
the Agent will promptly notify each Lender of the details of any automatic
conversion. All conversions and continuations shall be made ratably among the
Lenders according to their respective Pro Rata Shares.
(e) Unless the Required Lenders otherwise consent, during the existence of
an Event of Default or Unmatured Event of Default, the Company may not elect to
have a Loan converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of Loans, unless
the Agent shall otherwise consent, there may not be more than ten different
Interest Periods in effect for all Loans.
2.5 Voluntary Termination or Reduction of Commitments. The Company may,
upon not less than five Business Days' prior notice to the Agent, terminate the
Commitments, or permanently reduce the Commitments by an aggregate amount of
$5,000,000 or a higher integral multiple of $1,000,000; unless, after giving
effect thereto and to any payments or prepayments of Loans made on the
effective date thereof, the aggregate principal amount of all Loans would
exceed the amount of the combined Commitments then in effect. Once reduced in
accordance with this Section, the Commitments may not be increased. Any
reduction of the Commitments shall be applied to each Lender according to its
Pro
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Rata Share. All accrued commitment fees to, but not including, the effective
date of any reduction or termination of Commitments shall be paid on the
effective date of such reduction or termination.
2.6 Optional Prepayments. (a) Subject to Section 3.4, the Company may,
from time to time, upon irrevocable notice to the Agent not later than 11:00
a.m. (Chicago time) on any Business Day, ratably prepay Loans in whole or in
part, in minimum amounts of not less than the Minimum Tranche. The Company
shall deliver a notice of prepayment in accordance with Section 10.2 to be
received by the Agent not later than (i) 11:00 a.m. (Chicago time) three
Business Days in advance of the prepayment date if the Loans to be prepaid are
Offshore Rate Loans, and (ii) 10:00 a.m. (Chicago time) on the prepayment date
if the Loans to be prepaid are Base Rate Loans. Such notice of prepayment
shall specify the date and amount of such prepayment and whether such
prepayment is of Base Rate Loans, Offshore Rate Loans, or any combination
thereof. Such notice shall not thereafter be revocable by the Company. The
Agent will promptly notify each Lender of its receipt of any such notice, and
of such Lender's ratable share of such prepayment (based on its Pro Rata
Share). If such notice is given by the Company, the Company shall make such
prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein, together with, in the case of Offshore
Rate Loans, accrued interest to each such date on the amount prepaid and any
amounts required pursuant to Section 3.4.
2.7 Repayment. The Company shall repay all Loans on the Termination
Date.
2.8 Interest. (a) Each Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to (i) at all times such Loan is a Base Rate Loan, the Base Rate as in
effect from time to time and (ii) at all times such Loan is an Offshore Rate
Loan, the sum of the Offshore Rate for the applicable Interest Period plus
0.5%.
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest also shall be paid on the date of any conversion of
Offshore Rate Loans under Section 2.4 and prepayment of Offshore Rate Loans
under Section 2.6, in each case for the portion of the Loans so prepaid.
During the existence of any Event of Default, interest shall be paid on demand
of the Agent at the request or with the consent of the Required Lenders.
(c) Notwithstanding subsection (a) of this Section, while any Event of
Default exists, the Company shall pay interest
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(after as well as before entry of judgment thereon to the extent permitted by
law) on the principal amount of all outstanding Loans and, to the extent
permitted by applicable law, on any other amount payable hereunder or under any
other Loan Document, at a rate per annum equal to the rate otherwise applicable
thereto pursuant to the terms hereof or such other Loan Document (or, if no such
rate is specified, the Base Rate) plus 2%. All such interest shall be payable
on demand.
(d) Anything herein to the contrary notwithstanding, the obligations of
the Company to any Lender hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by such Lender would be contrary to the provisions of
any law applicable to such Lender limiting the highest rate of interest that
may be lawfully contracted for, charged or received by such Lender, and in such
event the Company shall pay such Lender interest at the highest rate permitted
by applicable law.
2.9 Fees.
(a) Certain Fees. The Company shall pay certain fees to the Agent and
the Arranger for their own respective accounts at the times and in the amounts
required by the letter agreement (the "Fee Letter") among the Company, the Agent
and the Arranger dated July 21, 1998.
(b) Commitment Fees. The Company shall pay to the Agent for the
account of each Lender a commitment fee in such Lender's Pro Rata Share of the
unused amount of the combined Commitments, as calculated by the Agent on a
quarterly basis in arrears on the last day of each calendar quarter and on the
Termination Date, at a rate per annum equal to 0.15%. Such commitment fees
shall accrue from the Effective Date to the Termination Date and shall be due
and payable quarterly in arrears on the last Business Day of each calendar
quarter and on the Termination Date. The commitment fees shall accrue at all
times after the Effective Date, including at any time during which one or more
conditions in Article IV are not met.
2.10 Computation of Fees and Interest. (a) All computations of interest
for Base Rate Loans when the Base Rate is determined by BofA's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed. All other computations of interest and fees shall be
made on the basis of a 360-day year and actual days elapsed. Interest and fees
shall accrue during each period during which such interest or such fees are
computed from the first day thereof to the last day thereof.
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(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Company and the Lenders in the absence of
manifest error. The Agent will, at the request of the Company or any Lender,
deliver to the Company or such Lender, as the case may be, a statement showing
the quotations used by the Agent in determining any interest rate. Each
Reference Lender agrees to deliver to the Agent timely information for the
purpose of determining the Offshore Rate. If any one of the Reference Lenders
shall fail to furnish such information to the Agent for any such interest rate,
the Agent shall determine such interest rate on the basis of the information
furnished by the remaining Reference Lender or Reference Lenders.
2.11 Payments by the Company. (a) All payments to be made by the
Company shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company shall be made
to the Agent for the account of the Lenders at the Agent's Payment Office, and
shall be made in Dollars and in immediately available funds. Such payments
shall be made no later than 11:00 a.m. (Chicago time) on the date specified
herein, and any payment received by the Agent later than such time shall be
deemed to have been received on the following Business Day (and any applicable
interest or fee shall continue to accrue). The Agent will promptly distribute
to each Lender its Pro Rata Share (or other applicable share as expressly
provided herein) of such payment in like funds as received.
(b) Whenever any payment is due on a day other than a Business Day, such
payment shall be made on the following Business Day (unless, in the case of an
Offshore Rate Loan, the following Business Day is in another calendar month, in
which case such payment shall be made on the preceding 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.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Lenders that the Company will not make
such payment in full as and when required, the Agent may assume that the
Company has made such payment in full to the Agent on such date in
immediately available funds and the 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 the
Company has not made such payment in full to the Agent, each Lender shall repay
to the Agent on demand such amount distributed to such Lender, together with
interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
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2.12 Payments by the Lenders to the Agent. (a) Unless the Agent
receives notice from a Lender on or prior to the Closing Date or, with respect
to any Borrowing after the Closing Date, at least one Business Day prior to the
date of a Borrowing that such Lender will not make available as and when
required hereunder to the Agent for the account of the Company the amount of
such Lender's Pro Rata Share of such Borrowing, the Agent may assume that such
Lender has made such amount available to the Agent in immediately available
funds on the Borrowing Date and the Agent may (but shall not be so required),
in reliance upon such assumption, make available to the Company on such date a
corresponding amount. If and to the extent any Lender shall not have made its
full amount available to the Agent in immediately available funds and the Agent
in such circumstances has made available to the Company such amount, such
Lender shall on the Business Day following such Borrowing Date make such amount
available to the Agent, together with interest at the Federal Funds Rate for
each day during such period. A notice of the Agent submitted to any Lender
with respect to amounts owing under this subsection (a) shall be conclusive,
absent manifest error. If such amount is so made available, such payment to
the Agent shall constitute such Lender's Loan on the date of Borrowing for all
purposes of this Agreement. If such amount is not made available to the Agent
on the Business Day following the Borrowing Date, the Agent will notify the
Company of such failure to fund and, upon demand by the Agent, the Company
shall pay such amount to the Agent for the 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 Loans
comprising such Borrowing.
(b) The failure of any Lender to make any Loan on any Borrowing Date shall
not relieve any other Lender of any obligation hereunder to make a Loan on such
Borrowing Date, but no Lender shall be responsible for the failure of any other
Lender to make the Loan to be made by such other Lender on any Borrowing Date.
2.13 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Lender shall obtain any payment or other recovery
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of principal of or interest on any Loan or any other
amount payable hereunder in excess of its Pro Rata Share of payments and other
recoveries received by all Lenders (excluding any payment under Article III,
any payment resulting from an assignment by a Lender and any payment made to
give effect to a non-pro-rata increase in the Commitments as described in the
last sentence of Section 2.14) such Lender shall immediately (i) notify the
Agent of such fact and (ii) purchase from the other Lenders such participations
in the Loans made by (or other Obligations owed to) them as shall
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be necessary to cause such purchasing Lender to share the excess payment or
other recovery pro rata with each of them; provided that if all or any portion
of such excess payment or other recovery is thereafter recovered from the
purchasing Lender, such purchase shall to that extent be rescinded and each
other Lender shall repay to the purchasing Lender the purchase price paid
therefor, together with an amount equal to such paying Lender's ratable share
(according to the proportion of (A) the amount of such paying Lender's required
repayment to (B) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Company agrees that any Lender so
purchasing a participation from another Lender may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off, but subject to Section 10.10) with respect to such participation as
fully as if such Lender were the direct creditor of the Company in the amount of
such participation. The Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations purchased under this
Section and will in each case notify the Lenders following any such purchases or
repayments.
2.14 Optional Increase in Commitments. The Company may at any time, by
means of a letter to the Agent substantially in the form of Exhibit H, request
that the combined Commitments be increased by (a) increasing the Commitment of
one or more Lenders which have agreed to such increase and/or (b) adding an
Eligible Assignee as a party hereto with a Commitment in an amount agreed to by
such Eligible Assignee; provided that (i) no Eligible Assignee shall be added
as a party hereto without the written consent of the Agent (which shall not be
unreasonably withheld) and (ii) in no event shall the aggregate amount of the
combined Commitments exceed $120,000,000 without the written consent of all
Lenders. Any increase in the combined Commitments pursuant to this Section
2.14 shall effective three Business Days after the date on which the Agent has
received and accepted the applicable increase letter in the form of Annex 1 to
Exhibit H (in the case of an increase in the Commitment of an existing Lender)
or assumption letter in the form of Annex 2 to Exhibit H (in the case of the
addition of an Eligible Assignee as a new Lender) or on such other date as is
agreed among the Company, the Agent and the increasing or new Lender. The
Agent shall promptly notify the Company and the Lenders of any increase in the
amount of the combined Commitments pursuant to this Section 2.14 and of the
Commitment and Pro Rata Share of each Lender after giving effect thereto. The
Company acknowledges that, in order to maintain Loans in accordance with each
Lender's Pro Rata Share, a reallocation of the Commitments as a result of a
non-pro-rata
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increase in the combined Commitments may require prepayment of all or portions
of certain Loans on the date of such increase (and any such prepayment shall be
subject to the provisions of Section 3.4).
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes. (a) Any and all payments by the Company to each Lender and
each Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for, any Taxes. In
addition, the Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or withhold any
Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(i) the sum payable shall be increased as necessary so that, after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section),
such Lender or the Agent, as the case may be, receives and retains an
amount equal to the sum it would have received and retained had no such
deductions or withholdings been made;
(ii) the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or withheld to
the relevant taxing authority or other authority in accordance with
applicable law; and
(iv) the Company shall also pay to the Agent for the account of any
applicable Lender or the Agent, at the time interest is paid, all
additional amounts which such Lender or the Agent specifies as necessary
to preserve the after-tax yield such Lender or Agent would have received
if such Taxes, Other Taxes or Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless each Lender and
the Agent for the full amount of Taxes, Other Taxes and Further Taxes in the
amount that such Lender or the Agent specifies as necessary to preserve the
after-tax yield such Lender would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including penalties,
interest, additions to tax and reasonable expenses)
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arising therefrom or with respect thereto, whether or not such Taxes, Other
Taxes or Further Taxes were correctly or legally asserted. Payment under
this indemnification shall be made within 30 days after the date the Company
receives written demand therefor from such Lender or the Agent.
(d) Within 30 days after the date of any payment by the Company of
Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Lender
and the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Lender or the Agent.
(e) If the Company is required to pay any amount to any Lender or the
Agent pursuant to subsection (b) or (c) of this Section, then such Lender or the
Agent shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office or other relevant
office so as to eliminate any such additional payment by the Company which may
thereafter accrue, if such change in the good faith judgment of such Lender or
the Agent is not otherwise disadvantageous to such Lender or the Agent.
3.2 Illegality. (a) If any Lender determines that the introduction of
any applicable Requirement of Law, or any change in any applicable Requirement
of Law, or in the interpretation or administration of any applicable
Requirement of Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable Lending Office to make Offshore Rate Loans, then, on notice thereof
by the Lender to the Company through the Agent, any obligation of that Lender
to make Offshore Rate Loans shall be suspended until the Lender notifies the
Agent and the Company that the circumstances giving rise to such determination
no longer exist.
(b) If a Lender determines that it is unlawful to maintain any
Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact
and demand from such Lender (with a copy to the Agent), prepay in full such
Offshore Rate Loan of such Lender then outstanding, together with interest
accrued thereon and amounts required under Section 3.4, either on the last day
of the Interest Period thereof or, if earlier, on the date on which such Lender
may no longer lawfully continue to maintain such Offshore Rate Loan. If the
Company is required to so prepay any Offshore Rate Loan, then concurrently with
such prepayment, the Company shall borrow from the affected Lender, in the
amount of such repayment, a Base Rate Loan.
(c) If the obligation of any Lender to make or maintain Offshore Rate
Loans has been so terminated or suspended,
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all Loans which would otherwise be made by such Lender as Offshore Rate Loans
shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent or demand upon the Company under
this Section, the affected Lender shall designate a different Lending Office
with respect to its Offshore Rate Loans if such designation will avoid the need
for giving such notice or making such demand and will not, in the good faith
judgment of the Lender, be illegal in any respect or otherwise disadvantageous
to the Lender.
3.3 Increased Costs and Reduction of Return. (a) If after the date
hereof any Lender determines that, due to either (i) the introduction of or any
change (other than any change by way of imposition of or increase in reserve
requirements included in the calculation of the Offshore Rate) in or in the
interpretation of any law or regulation or (ii) the compliance by that Lender
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be any increase
in the cost to such Lender of agreeing to make or making, funding or
maintaining any Offshore Rate Loan, then the Company shall be liable for, and
shall from time to time, upon demand (with a copy of such demand to be sent to
the Agent), pay to the Agent for the account of such Lender, additional amounts
as are sufficient to compensate such Lender for such increased costs.
(b) If after the date hereof any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration
of any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by such Lender (or its Lending Office) or any corporation
controlling such Lender with any Capital Adequacy Regulation, affects or would
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and (taking into
consideration such Lender's or such corporation's policies with respect to
capital adequacy and such Lender's desired return on capital) determines that
the amount of such capital is increased as a consequence of its Commitment,
loans, credits or obligations under this Agreement, then, upon demand of such
Lender to the Company through the Agent, the Company shall pay to the Lender,
from time to time as specified by such Lender, additional amounts sufficient to
compensate such Lender for such increase.
(c) Notwithstanding the foregoing subsections 3.3(a) and (b), if any
Lender fails to notify the Company of any event which will entitle such Lender
to compensation pursuant to this
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Section 3.3 within 180 days after such Lender obtains knowledge of such event,
then such Lender shall not be entitled to any compensation from the Company for
any such increased cost or reduction of return arising prior to the date which
is 180 days before the date on which such Lender notifies the Company of such
event.
3.4 Funding Losses. The Company shall reimburse each Lender and hold
each Lender harmless from any loss or reasonable expense which such Lender may
sustain or incur as a consequence of:
(a) the failure of the Company to make on a timely basis any payment
of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/Continuation;
(c) the failure of the Company to make any prepayment of a Loan in
accordance with any notice delivered under Section 2.6;
(d) the prepayment or other payment (including after acceleration
thereof) of an Offshore Rate Loan on a day that is not the last day of the
relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any Offshore Rate
Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or reasonable expense arising from the liquidation or
reemployment of funds obtained by it to maintain its Offshore Rate Loans or
from fees payable to terminate the deposits from which such funds were
obtained. For purposes of calculating amounts payable by the Company to the
Lenders under this Section and under subsection 3.3(a), each Offshore Rate Loan
made by a Lender (and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded at the Offshore
Rate used in determining the interest rate for such Offshore Rate Loan by a
matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Offshore
Rate Loan is in fact so funded.
3.5 Inability to Determine Rates. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the Offshore
Rate for any requested Interest Period with respect to a proposed Offshore Rate
Loan, or any Lender determines that the Offshore Rate applicable pursuant to
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subsection 2.8(a) for any requested Interest Period with respect to a proposed
Offshore Rate Loan does not adequately and fairly reflect the cost to such
Lender of funding such Loan, the Agent will promptly so notify the Company and
each Lender. Thereafter, the obligation of the Lenders to make or maintain
Offshore Rate Loans hereunder shall be suspended until the Agent revokes such
notice in writing. Upon receipt of such notice, the Company may revoke any
Notice of Borrowing or Notice of Conversion/Continuation then submitted by it.
If the Company does not revoke such Notice, the Lenders shall make, convert or
continue the applicable Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but such Loans
shall be made, converted or continued as Base Rate Loans instead of Offshore
Rate Loans.
3.6 Reserves on Offshore Rate Loans. The Company shall pay to each
Lender, as long as such Lender shall be required under regulations of the FRB
to maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency funds or deposits (currently known as "Eurocurrency
liabilities"), additional costs on the unpaid principal amount of each Offshore
Rate Loan equal to the actual costs of such reserves allocated to such Loan by
such Lender (as determined by such Lender in good faith, which determination
shall be conclusive), payable on each date on which interest is payable on such
Loan, provided the Company shall have received at least 15 days' prior written
notice (with a copy to the Agent) of the amount of such additional interest
from such Lender. If a Lender fails to give notice 15 days prior to the
relevant Interest Payment Date, such additional interest shall be payable 15
days from receipt of such notice.
3.7 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Article III shall deliver to the Company (with a copy
to the Agent) a certificate setting forth in reasonable detail the amount
payable to such Lender hereunder and such certificate shall be conclusive and
binding on the Company in the absence of manifest error.
3.8 Substitution of Lenders. Upon the receipt by the Company from any
Lender (an "Affected Lender") of a claim for compensation under Section 3.1 or
3.3 or a notice pursuant to Section 3.2 (which claim or notice results from
circumstances applicable to such Lender and not Lenders generally) the Company
may: (i) request the Affected Lender to use its best efforts to obtain a
replacement bank or financial institution satisfactory to the Company to
acquire and assume all or a ratable part of all of such Affected Lender's Loans
and Commitment (a "Replacement Lender"); (ii) request one more of the other
Lenders to acquire and assume all or part of such Affected Lender's Loans and
Commitment; or (iii) designate a Replacement Lender. Any such
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designation of a Replacement Lender under clause (i) or (iii) shall be subject
to the prior written consent of the Agent (which consent shall not be
unreasonably withheld).
3.9 Survival. The agreements and obligations of the Company in this
Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions to Initial Loans. The obligation of each Lender to make
its initial Loan is, in addition to the conditions precedent set forth in
Section 4.2, subject to the conditions that the Agent shall have received all
of the following, in form and substance satisfactory to the Agent and each
Lender, and (except in the case of clause (e)) in sufficient copies for each
Lender:
(a) Credit Agreement and Notes. This Agreement and the Notes executed
by each party thereto.
(b) Resolutions; Incumbency; Certificate of Incorporation; By-Laws.
(i) Copies of the resolutions of the board of directors of the
Company authorizing the transactions contemplated hereby, certified as of
a recent date by the Secretary or an Assistant Secretary of the Company;
(ii) a certificate of the Secretary or Assistant Secretary of the
Company certifying the names and true signatures of the officers of the
Company authorized to execute and deliver this Agreement and all other
Loan Documents to be delivered by it hereunder; and
(iii) copies of the certificate of incorporation and by-laws of the
Company, certified by the Secretary or an Assistant Secretary of the
Company.
(c) Good Standing. A copy of a good standing certificate as of a recent
date for the Company from the Secretary of State (or similar, applicable
Governmental Authority) of its state of incorporation.
(d) Legal Opinion. An opinion of counsel to the Company, substantially
in the form of Exhibit D.
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(e) Payment of Fees. Evidence of payment by the Company of all accrued
and unpaid fees, costs and reasonable expenses to the extent then due and
payable on the Closing Date, together with Attorney Costs of the Agent to the
extent invoiced prior to or on the Closing Date, plus such additional amounts of
Attorney Costs as shall constitute the Agent's reasonable estimate of Attorney
Costs incurred or to be incurred by it through the closing proceedings (provided
that such estimate shall not thereafter preclude final settling of accounts
between the Company and the Agent), including any such costs, fees and
reasonable expenses arising under or referenced in Sections 2.9 and 10.4.
(f) Certificate. A certificate signed by a Responsible Officer, dated
as of the Closing Date, stating that:
(i) the representations and warranties contained in Article V are
true and correct on and as of such date, as though made on and as of such
date;
(ii) no Event of Default or Unmatured Event of Default exists or
would result from the initial Loan; and
(iii) since December 31, 1997, no event or circumstance has
occurred that has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(g) Other Documents. Such other approvals, opinions, documents or
materials as the Agent or any Lender may request.
4.2 Conditions to All Loans. The obligation of each Lender to make any
Loan is subject to the satisfaction of the following conditions precedent on
the date of such Loan:
(a) Notice. The Agent shall have received a Notice of Borrowing.
(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct on and as
of the date of such Loan with the same effect as if made on and as of such date
(except to the extent such representations and warranties expressly refer to
an earlier date, in which case they shall be true and correct as of such
earlier date).
(c) No Existing Default. No Event of Default or Unmatured Event of
Default shall exist or shall result from such Loan.
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Each Notice of Borrowing submitted by the Company hereunder shall constitute a
representation and warranty by the Company that, as of the date of such notice
or request and as of the date of the applicable Borrowing, the conditions in
this Section 4.2 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Lender as
follows:
5.1 Organization; Subsidiary Preferred Stock. The Company is a
corporation duly organized and existing in good standing under the laws of the
State of Delaware, each Subsidiary is duly organized and existing in good
standing under the laws of the jurisdiction in which it is incorporated, and
the Company has and each Subsidiary has the corporate power to own its
respective property and to carry on its respective business as now being
conducted. No Subsidiary has outstanding any shares of stock of a class which
has priority over any other class as to dividends or in liquidation.
5.2 Financial Statements. (a) The audited consolidated balance sheet of
the Company and its Subsidiaries dated December 31, 1997, and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the fiscal year ended on that date; and (b) the unaudited
consolidated balance sheet of the Company and its Subsidiaries dated July 4,
1998, and the related consolidated statements of income, shareholders' equity
and cash flows for the period ended on that date
(i) were prepared in accordance with GAAP consistently applied
throughout the periods covered thereby, except as otherwise expressly noted
therein, subject in the case of July 4, 1998 financial statements to
ordinary, good faith year end audit adjustments;
(ii) fairly present the financial condition of the Company and its
Subsidiaries as of the dates thereof and results of operations for the
periods covered thereby; and
(iii) show all material indebtedness and other liabilities, direct or
contingent, of the Company and its consolidated Subsidiaries as of the
dates thereof, including liabilities for taxes, material commitments and
contingent obligations.
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(b) Since December 31, 1997, there has been no Material Adverse Effect.
5.3 Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or
administrative or governmental body which could be reasonably expected to
result in any material adverse change in the business, property or assets,
condition (financial or otherwise) or operations of the Company and its
Subsidiaries taken as a whole or the ability of the Company to perform its
obligations under this Agreement.
5.4 Outstanding Debt. Neither the Company nor any of its Subsidiaries has
outstanding any Debt except as permitted by Section 7.3. There exists no
default under the provisions of any instrument evidencing Debt of the Company
or any of its Subsidiaries in an amount greater than $250,000 or of any
agreement relating thereto.
5.5 Title to Properties. The Company has and each of its Subsidiaries has
good and indefeasible title to its respective real properties (other than
properties which it leases) and good title to all of its other respective
properties and assets, including the properties and assets reflected in the
most recent audited balance sheet referred to in Section 5.2 (other than
properties and assets disposed of in the ordinary course of business), subject
to no Lien of any kind except Liens permitted by Section 7.2. All leases
necessary in any material respect for the conduct of the respective businesses
of the Company and its Subsidiaries are valid and subsisting and are in full
force and effect.
5.6 Taxes. The Company has and each of its Subsidiaries has filed all
federal, state and other income tax returns which, to the best knowledge of the
officers of the Company and its Subsidiaries, are required to be filed, and
each has paid all taxes as shown on such returns and on all assessments
received by it to the extent that such taxes have become due, except such taxes
(i) as are being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP or (ii) the
non-payment of which (a) could not be reasonably expected to have a material
adverse effect on the business, condition (financial or otherwise) or
operations of the Company and its Subsidiaries taken as a whole and (b) does
not result in the creation of any Lien other than Liens permitted by Section
7.2.
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5.7 Conflicting Agreements and Other Matters. Neither the Company nor any
of its Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction which materially and adversely affects
its business, property or assets, condition (financial or otherwise) or
operations. None of the execution and delivery of this Agreement or any other
Loan Document, the making of the Loans, or the fulfillment of or compliance
with the terms and provisions hereof and of the other Loan Documents will
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries pursuant to, the charter or by-laws of the Company or any
of its Subsidiaries, any award of any arbitrator or any agreement (including
any agreement with stockholders), instrument, order, judgment, decree, statute,
law, rule or regulation to which the Company or any of its Subsidiaries is
subject. Neither the Company nor any of its Subsidiaries is a party to, or
otherwise subject to any provision contained in, any instrument evidencing
Indebtedness of the Company or such Subsidiary, any agreement relating thereto
or any other contract or agreement (including its charter) which limits the
amount of, or otherwise imposes restrictions on the incurring of, Debt of the
Company of the type that the Obligations constitute except as set forth in the
agreements listed in Schedule 5.7 attached hereto (as such Schedule 5.7 may
have been modified from time to time by written supplements thereto delivered
by the Company and accepted in writing by the Required Lenders).
5.8 Use of Proceeds. None of the proceeds of any Loan will be used,
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock or for the purpose of
maintaining, reducing or retiring any Indebtedness which was originally
incurred to purchase or carry any stock that is then currently a Margin Stock
or for any other purpose which might constitute the transactions contemplated
hereby a "purpose credit" within the meaning of such Regulation U, unless the
Company shall have delivered to the Lenders, on the date of borrowing of such
Loan, an opinion of counsel satisfactory to the Lenders stating that the making
of such Loan does not constitute a violation of such Regulation U. Neither the
Company nor any agent acting on its behalf has taken or will take any action
which might cause this Agreement or the Loans to violate Regulation G,
Regulation T, Regulation U or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the Exchange Act, in each case as in
effect now or as the same may hereafter be in effect.
5.9 ERISA. No accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the Code), whether or
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not waived, exists with respect to any Plan (other than a Multiemployer Plan).
No liability to the PBGC has been or is expected by the Company or any ERISA
Affiliate to be incurred with respect to any Plan (other than a Multiemployer
Plan) by the Company, any Subsidiary or any ERISA Affiliate which is or would be
materially adverse to the business, property or assets, condition (financial or
otherwise) or operations of the Company and its Subsidiaries taken as a whole.
Neither the Company, any Subsidiary nor any ERISA Affiliate has incurred or
presently expects to incur any withdrawal liability under Title IV of ERISA with
respect to any Multiemployer Plan which is or would be materially adverse to the
business, property or assets, condition (financial or otherwise) or operations
of the Company and its Subsidiaries taken as a whole. The execution and
delivery of this Agreement and the making of Loans will be exempt from or will
not involve any transaction which is subject to the prohibitions of section 406
of ERISA and will not involve any transaction in connection with which a penalty
could be imposed under section 502(i) of ERISA or a tax could be imposed
pursuant to section 4975 of the Code.
5.10 Governmental Consent. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor
any circumstance in connection with the making of the Loans is such as to
require any authorization, consent, approval, exemption or any action by or
notice to or filing with any court or administrative or governmental body
(other than routine filings after the Closing Date with the Securities and
Exchange Commission and/or state Blue Sky authorities) in connection with the
execution and delivery of this Agreement, the making of the Loans or the
fulfillment of or compliance with the terms and provisions of the Loan
Documents.
5.11 Environmental Compliance. The Company and its Subsidiaries and all
of their respective properties and facilities have complied at all times and in
all respects with all applicable foreign, federal, state, local and regional
statutes, laws, ordinances and judicial or administrative orders, judgments,
rulings and regulations relating to protection of the environment except, in
any such case, where failure to so comply could not reasonably be expected to
result in a material adverse effect on the business, condition (financial or
otherwise) or operations of the Company and its Subsidiaries taken as a whole
or the ability of the Company to perform its obligations under this Agreement.
5.12 Disclosure. Neither this Agreement nor any other document,
certificate or statement furnished to the Agent or any Lender by or on behalf
of the Company in connection herewith
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contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. There is no fact peculiar to the Company or any of its
Subsidiaries which materially adversely affects or in the future may (so far as
the Company can now foresee) materially adversely affect the business, property
or assets, condition (financial or otherwise) or operations of the Company or
any of its Subsidiaries and which has not been set forth in this Agreement.
5.13 Hostile Tender Offers. None of the proceeds of any Loan will be used
to finance a Hostile Tender Offer.
5.14 Priority of Obligations. The Obligations constitute "Superior
Indebtedness" as such term is defined in the Company's Promissory
(subordinated) Notes, the form of which is attached hereto as Exhibit G, and
the Subordinated Debt is subordinated to the Obligations.
5.15 Year 2000 Problem. The Company and its Subsidiaries (a) have
reviewed the areas within their business and operations which could be
adversely affected by, and have developed or are developing a program to
address on a timely basis, the Year 2000 Problem and (b) have made appropriate
inquiries as to the effect the Year 2000 Problem will have on their material
suppliers and customers. Based on such review, program and inquiries, the
Company reasonably believes that the Year 2000 Problem will not have a Material
Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Required
Lenders waive compliance in writing:
6.1 Financial Statements. The Company shall deliver to the Agent, in
form and detail reasonably satisfactory to the Agent and the Required Lenders,
with sufficient copies for each Lender:
(a) as soon as available, but not later than 120 days after the end of
each fiscal year, a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of Ernst & Young
or another nationally-recognized independent public accounting firm
("Independent Auditor") which
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report (x) shall state that such consolidated financial statements present
fairly the financial position for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years and (y) shall not be
qualified or limited because of a restricted or limited examination by the
Independent Auditor of any material portion of the Company's or any
Subsidiary's records; and
(b) as soon as available, but not later than 60 days after the end of
each of the first three fiscal quarters of each fiscal year, a copy of the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the end of such quarter and the related consolidated statements of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by a Responsible
Officer as fairly presenting, in accordance with GAAP (subject to ordinary,
good faith year-end audit adjustments), the financial position and the results
of operations of the Company and the Subsidiaries.
6.2 Certificates; Other Information. The Company shall furnish to the
Agent, with sufficient copies for each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.1(a), a certificate of the Independent Auditor
stating that in making the examination necessary therefor no knowledge was
obtained of any Event of Default or Unmatured Event of Default, except as
specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), (i) a Compliance Certificate
executed by a Responsible Officer and (ii) a schedule of the daily and 30 day
average amounts of accounts receivable and Debt outstanding during the fiscal
quarter ending on the date as of which such financial statements were prepared,
together the calculations necessary to demonstrate compliance with Sections
7.1, 7.3 and 7.14;
(c) promptly, copies of all financial statements and reports that the
Company sends to its shareholders, and copies of all financial statements and
regular, periodical or special reports (including Forms 10K, 10Q and 8K) that
the Company or any Subsidiary may make to, or file with, the SEC;
(d) promptly, such information or documentation as the Agent, at the
request of any Lender, may request from time to time regarding the efforts of
the Company and its Subsidiaries to address the Year 2000 Problem; and
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(e) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the Agent,
at the request of any Lender, may from time to time request.
6.3 Notices. The Company shall promptly notify the Agent and each
Lender promptly after a Responsible Officer obtains knowledge of:
(a) the occurrence of any Event of Default or Unmatured Event of
Default;
(b) any of the following matters that has resulted or may reasonably
be expected to result in a Material Adverse Effect: (i) any breach or
non-performance of, or any default under, a Contractual Obligation of the
Company or any Subsidiary; (ii) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary and any
Governmental Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting the Company or any
Subsidiary including pursuant to any applicable Environmental Law;
(c) the occurrence of any of the following events affecting the
Company or any ERISA Affiliate (but in no event more than 10 days after such
event; provided that the Company shall notify the Agent and each Lender not
less than ten days before the occurrence of any event described in clause (ii)
below), and deliver to the Agent and each Lender a copy of any notice with
respect to such event that is filed with a Governmental Authority and any
notice delivered by a Governmental Authority to the Company or any ERISA
Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a contribution failure with respect to a Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA;
(iii) a material increase in the Unfunded Pension Liability of any
Pension Plan;
(iv) the adoption of, or the commencement of contributions to, any
Plan subject to Section 412 of the Code by the Company or any ERISA
Affiliate; or
(v) the adoption of any amendment to a Plan subject to Section 412
of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability; and
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(d) any material change in accounting policies or financial reporting
practices by the Company or any of its consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under subsection 6.3(a) shall describe with particularity any and all clauses
or provisions of this Agreement or any other Loan Document that have been
breached or violated.
6.4 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business except (i) in connection
with transactions permitted by Section 7.6 and sales of assets permitted by
Section 7.5 and (ii) to the extent the non-preservation or non-maintenance
thereof could not reasonably be expected to have a Material Adverse Effect;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
6.5 Maintenance of Property. The Company shall, and shall cause each
Subsidiary to, maintain and preserve all its property which is used or useful
in its business in good working order and condition, ordinary wear and tear
excepted and make all necessary repairs thereto and renewals and replacements
thereof except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect. The Company and each Subsidiary shall use the
standard of care typical in the industry in the operation and maintenance of
its facilities.
6.6 Insurance. The Company shall, and shall cause each Subsidiary to,
maintain with financially sound and reputable insurers, insurance in such
amounts and against such liabilities and hazards as customarily maintained by
the Company in
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accordance with its practices, policies and procedures prior to the Closing
Date. Together with each delivery of financial statements under subsection
6.1(a), the Company will, upon the request of any Lender, deliver a certificate
of a Responsible Officer specifying the details of such insurance in effect.
6.7 Payment of Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable all
their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien
upon its property; and
(c) all indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
6.8 Compliance with Laws. The Company shall, and shall cause each
Subsidiary to, comply in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
6.9 Compliance with ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
6.10 Inspection of Property and Books and Records. The Company shall,
and shall cause each Subsidiary to, maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall, and shall cause each Subsidiary to, permit representatives and
independent contractors of the Agent or any Lender to visit and inspect any of
their respective properties, to examine their respective corporate, financial
and operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with
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their respective directors, officers, and independent public accountants, all
at the reasonable expense of the Company and at such reasonable times during
normal business hours and as often as may be reasonably desired, upon
reasonable advance notice to the Company; provided that when an Event of
Default exists the Agent or any Lender may do any of the foregoing at the
reasonable expense of the Company at any time during normal business hours
without advance notice.
6.11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
material compliance with all material Environmental Laws.
6.12 Use of Proceeds. The Company shall use the proceeds of the Loans to
repay Debt and for working capital and other general corporate purposes not in
contravention of any applicable Requirement of Law or of any Loan Document.
6.13 Covenant to Secure Obligations Equally. The Company covenants
that, if it or any Subsidiary shall create or assume any Lien upon any of its
property or assets, whether now owned or hereafter acquired, other than Liens
permitted by the provisions of Section 7.2 (unless prior written consent to the
creation or assumption thereof shall have been obtained pursuant to Section
10.1), it will make or cause to be made effective provision whereby the
Obligations will be secured by such Lien equally and ratably with any and all
other Debt thereby secured so long as any such other Debt shall be so secured.
6.14 Cooperative Status. The Company covenants that it will at all
times maintain its status as a cooperative for purposes of Subchapter T of the
Code; provided, however, in the event that the Code or other applicable law is
modified after the date hereof and as a result of such modification the Company
is unable to satisfy its obligations under this Section, then the Required
Lenders and the Company shall agree, or in good faith negotiate to agree, to
amend the covenants contained in this Agreement so that the application of such
covenants (following such modification of the Code or other applicable law and
the effect thereof on the Company) will be substantially the same as prior
thereto.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or
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unsatisfied, unless the Required Lenders waive compliance in writing:
7.1 Fixed Charge Coverage Ratio. The Company will not permit the Fixed
Charge Coverage Ratio to be less than 1.50 to 1.00, in each case determined at
the end of each fiscal quarter for the four consecutive fiscal quarter period
then ending.
7.2 Lien Restrictions. The Company will not and will not permit any
Subsidiary to create, assume or suffer to exist any Lien upon any of its
property or assets, whether now owned or hereafter acquired (whether or not
provision is made for the equal and ratable securing of the Obligations in
accordance with the provisions of Section 6.13), except:
(a) Liens for taxes not yet due or which are being actively contested
in good faith by appropriate proceedings,
(b) Liens incidental to the conduct of its business or the ownership
of its property and assets which were not incurred in connection with the
borrowing of money or the obtaining of advances or credit,
(c) Liens on property or assets of a Subsidiary to secure obligations
of such Subsidiary to the Company or another Subsidiary, (di Liens in
existence on the Closing Date and described on Schedule 7.2,
(e) Liens in respect of capital leases entered into in connection
with, or any Lien arising in connection with, the acquisition of property,
after the date hereof and attaching only to the property being acquired,
if the Indebtedness secured thereby does not exceed 100% of the lesser of
(i) the fair market value of the property acquired at the time of
acquisition thereof and (ii) the total purchase price of the property so
acquired, and
(f) other Liens (including Liens arising under capital leases), in
addition to the Liens permitted by clauses (a) through (d) above, securing
Indebtedness of the Company or any Subsidiary (other than Indebtedness
that constitutes Subordinated Debt); provided, however, that (i) such
Indebtedness is permitted by the provisions of Section 7.3 and (ii) the
aggregate outstanding principal amount of all such Indebtedness does not
at any time exceed an amount equal to ten percent (10%) of the
consolidated total assets of the Company.
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7.3 Debt Restrictions. The Company will not and will not permit any
Subsidiary to create, incur, assume or suffer to exist any Debt, except:
(a) Subordinated Debt,
(b) Senior Funded Debt, and
(c) Short Term Debt of the Company;
provided that the ratio of (x) the sum of (i) the aggregate amount of
all Senior Funded Debt plus (ii) an amount equal to the lowest daily
average amount of Short Term Debt outstanding for any period of 30
consecutive days during the 12 month-period ending on the last day of the
most recently-completed month to (y) the sum of Consolidated
Capitalization plus the amount determined pursuant to clause (x)(ii) above
shall not at any time exceed the ratio set forth below during any period
set forth below:
Specified
Period Percentage
--------- ----------
Closing Date through
12/31/98 60%
1/1/99 through 10/2/99 55%
10/3/99 and thereafter 50%.
For purposes of this Section 7.3, Debt represented by loans under, or
arising under the bankers' acceptances accepted under, the Long-Term
Credit Agreement shall be considered Short Term Debt.
7.4 Sale of Assets. The Company will not and will not permit any
Subsidiary to sell, lease or transfer or otherwise dispose of any assets of the
Company or any Subsidiary other than in the ordinary course of business (which
shall be deemed to include the planned sale of up to ten distribution
facilities); provided that the Company and its Subsidiaries may sell, lease,
transfer or otherwise dispose of assets outside the ordinary course of business
so long as the aggregate amount of all assets sold, leased, transferred or
otherwise disposed of outside the ordinary course of business during the most
recent 36-month rolling period when added together, without duplication, with
(a) any shares of stock or Debt of any Subsidiary sold or otherwise disposed
of, or with respect to which the Company or any Subsidiary has parted control
of, except to the Company or another Subsidiary, during such period and (b) any
assets then proposed to be sold outside of the ordinary course of business do
not constitute more than 10% of the consolidated total assets of
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the Company as of the end of the most recent fiscal quarter for which the
Company has delivered financial statements pursuant to Section 6.1.
7.5 Merger. The Company will not and will not permit any Subsidiary to
merge or consolidate with any other Person, except that Subsidiaries may be
merged into the Company or any other Subsidiary and the Company may merge with
another Person, provided that the Company is the surviving corporation and no
Event of Default or Unmatured Event of Default shall exist either immediately
before or after such merger.
7.6 Restrictions on Transactions with Affiliates and Stockholders. The
Company will not and will not permit any Subsidiary to, directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease any
property (other than shares of stock of the Company) to, or otherwise deal with
(i) any Affiliate or Substantial Stockholder, or (ii) any corporation in which
an Affiliate, Substantial Stockholder or the Company (either directly or
through Subsidiaries) owns 5% or more of the outstanding voting stock, except
that (a) any such Affiliate or Substantial Stockholder may be a director,
officer or employee of the Company or any Subsidiary and may be paid reasonable
compensation in connection therewith (b) the Company and its Subsidiaries may
perform or engage in any of the foregoing in the ordinary course of business
upon terms no less favorable to the Company or such Subsidiary (as the case may
be) than if no such relationship described in clauses (i) and (ii) above
existed and (c) the Company may sell to or purchase from any such Person shares
of the Company's stock subject to the provisions of Section 7.11.
7.7 Issuance of Stock by Subsidiaries. The Company will not permit any
Subsidiary to (either directly, or indirectly by the issuance of rights or
options for, or securities convertible into, such shares) issue, sell or
otherwise dispose of any shares of any class of its stock (other than
directors' qualifying shares) except to the Company or another Subsidiary;
provided, however, Cotter Canada Hardware may issue and sell shares of its
stock in the ordinary course of business consistent with its practices as of
April 13, 1992.
7.8 Compliance with ERISA. The Company will not and will not permit any
Subsidiary to engage in any transaction in connection with which the Company or
any Subsidiary could be subject to either a civil penalty assessed pursuant to
section 502(i) of ERISA or a tax imposed by section 4975 of the Code, terminate
or withdraw from any Plan (other than a Multiemployer Plan) in a manner, or
take any other action with respect to any such Plan (including, without
limitation, a substantial cessation of operations within the meaning of section
4062(f) of ERISA),
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which could result in any liability of the Company or any Subsidiary to
the PBGC, to a trust established pursuant to section 4041(c)(3)(B)(ii) or (iii)
or 4042(i) of ERISA, or to a trustee appointed under section 4042(b) or (c) of
ERISA, incur any liability to the PBGC on account of a termination of a Plan
under section 4064 of ERISA, fail to make full payment when due of all amounts
which, under the provisions of any Plan, the Company or any Subsidiary is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency, whether or not waived, with respect to any Plan (other than
a Multiemployer Plan), if, in any such case, such penalty or tax or such
liability, or the failure to make such payment, or the existence of such
deficiency, as the case may be, could be reasonably expected to have a material
adverse effect on the Company and its Subsidiaries taken as a whole.
7.9 No Change in Subordination Terms, etc. The Company will not and
will not permit any Subsidiary to amend, alter or otherwise change any
provision of any of the subordinated promissory notes now or hereafter issued
by the Company or take any other action (or refrain from taking an action)
which would have the effect of eliminating or altering in any way the effect of
the subordination language appearing in such subordinated promissory notes or
the rights of the Agent and the Lenders arising as a result thereof.
7.10 Nature of Business. The Company will not and will not permit any
Subsidiary to engage in the business of underwriting risks for insurance
purposes, or in any other aspect of insurance related business other than in
the ordinary course of business in accordance with its practices as of the
Closing Date; or purchase and sell real estate (other than on an agency basis)
for purposes other than those relating directly to its principal business
except for purchases and sales of store locations in the ordinary course of
business which in the aggregate for the Company and its Subsidiaries taken as a
whole do not exceed $10,000,000 during any rolling consecutive five year
period.
7.11 Restricted Investments. The Company will not and will not permit
any Subsidiary to make or permit a Subsidiary to make any Investment except the
Company and any Subsidiary may:
(a) make or permit to remain outstanding loans or advances to any
Subsidiary,
(b) own, purchase or acquire stock, obligations or securities of a
Subsidiary or of a corporation which immediately after such purchase or
acquisition will be a Subsidiary,
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(c) acquire and own stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing to
the Company or any Subsidiary,
(d) own, purchase or acquire prime commercial paper, bankers'
acceptances and certificates of deposit in United States and Canadian
commercial banks (having combined capital and surplus of not less than
U.S. $100,000,000) and repurchase agreements with respect to the
foregoing, in each case due within one year from the date of purchase and
payable in the United States in United States dollars, obligations of the
government of the United States or any agency thereof, and obligations
guaranteed by the government of the United States,
(e) make or permit to remain outstanding travel and other similar
advances to officers and employees in the ordinary course of business,
(f) permit to remain outstanding Investments existing on the Closing
Date and described on Schedule 7.11, and
(g) to the extent applicable, make Investments permitted under
Section 7.12 below.
7.12 Restricted Payments. The Company will not and will not permit any
Subsidiary to pay or declare cash dividends, cash patronage dividends or
dividends on any class of its stock (other than dividends in kind) or redeem,
purchase or otherwise acquire, or make any redemptions, purchase, or other
acquisition of any of its stock or apply miscellaneous deductions in lieu of
patronage dividends, or make or permit any Subsidiary to make any Restricted
Investment (each a "Restricted Payment"), except to the extent that the
aggregate amount of all such Restricted Payments made after December 28, 1996
shall not exceed an amount equal to the sum of (i) $25,000,000 plus (ii) 100%
(or minus 100% in the case of a deficit) of Consolidated Net Earnings for the
period (taken as one accounting period) commencing on December 29, 1996 and
terminating at the end of the last fiscal quarter preceding the date of any
proposed Restricted Payment.
7.13 Use of Proceeds. The Company shall not, and shall not permit any
Subsidiary to, use any portion of the proceeds of any Loan, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of the Company or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
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7.14 Minimum Asset Coverage. Not permit the ratio, as of the last day
of any fiscal quarter, of (a) the daily average of all accounts receivable owed
to the Company during the last 30 days of such fiscal quarter (the "Measurement
Period") minus all Subordinated Debt payable to Members as of the last day of
such fiscal quarter to (b) the daily average of all Debt (other than
Subordinated Debt) outstanding during such Measurement Period to be less than
the applicable ratio set forth in the table below:
Quarter ended Ratio
------------- -----
10/3/98 .60 to 1
12/31/98, 4/3/99 and 7/3/99 .75 to 1
10/2/99 and thereafter .80 to 1.
Notwithstanding the foregoing, the Company shall not be required to
comply with this Section 7.14 as of the last day of any fiscal quarter
after October 2, 1999 if no Event of Default or Unmatured Event of Default
exists at any time during the period from the Closing Date through October
2, 1999 (including any Event of Default arising under this Section 7.14 or
any other financial test set forth in this Section 7 as of October 2, 1999
notwithstanding the fact that the existence of such Event of Default may
not be known until the Company delivers its financial statements for the
quarter ending on such date).
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Event of Default. Any of the following events which occur and are
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise) shall constitute an "Event of Default":
(a) The Company defaults in the payment of any principal of any
Loan when the same shall become due.
(b) The Company defaults in the payment of any interest, fee or
other amount payable hereunder or under any other Loan Document for more
than three (3) days after the date due.
(c) The Company or any Subsidiary defaults (whether as primary
obligor or as guarantor or other surety) in any payment of principal of
or interest on any other obligation for money borrowed (or any
Capitalized Lease Obligation, any obligation under a conditional sale or
other title retention
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agreement, any obligation issued or assumed as full or partial payment
for property whether or not secured by a purchase money mortgage or any
obligation under notes payable or drafts accepted representing extensions
of credit) beyond any period of grace provided with respect thereto, or
the Company or any Subsidiary fails to perform or observe any other
agreement, term or condition contained in any agreement under which any
obligation is created (or if any other event thereunder or under any such
agreement shall occur and be continuing) and the effect of such failure or
other event is to cause, or to permit the holder or holders of such
obligation (or a trustee on behalf of such holder or holders) to cause,
such obligation to become due (or to be repurchased by the Company or any
Subsidiary) prior to any stated maturity, provided that the aggregate
amount of all obligations as to which such a payment default shall occur
and be continuing or such a failure or other event causing or permitting
acceleration (or resale to the Company or any Subsidiary) shall occur and
be continuing exceeds $5,000,000.
(d) Any representation or warranty made by the Company herein or in
any other Loan Document or by the Company or any of its officers in any
writing furnished in connection with or pursuant to this Agreement or any
other Loan Document shall be false in any material respect on the date as
of which made.
(e) The Company fails to perform or observe any agreement contained
in Article VII.
(f) The Company fails to perform or observe any other agreement,
term or condition contained herein and such failure shall not be remedied
within 30 days after any Responsible Officer obtains actual knowledge of
such failure.
(g) The Company or any Subsidiary makes an assignment for the
benefit of creditors or is generally not paying its debts as such debts
become due.
(h) Any decree or order for relief in respect of the Company or any
Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law, whether now or hereafter in effect (herein called a
"Bankruptcy Law"), of any jurisdiction.
(i) The Company or any Subsidiary petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession
by, a trustee, receiver, custodian,
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liquidator or similar official of the Company or any Subsidiary, or of
any substantial part of the assets of the Company or any Subsidiary, or
commences a voluntary case under the Bankruptcy Law of the United States
or any proceedings (other than proceedings for the voluntary liquidation
and dissolution of a Subsidiary) relating to the Company or any Subsidiary
under the Bankruptcy Law of any other jurisdiction.
(j) Any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and the
Company or such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or decree
is entered appointing any such trustee, receiver, custodian, liquidator
or similar official, or approving the petition in any such proceedings,
and such order, judgment or decree remains unstayed and in effect for
more than 30 days.
(k) Any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 60
days.
(l) Any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary which requires the divestiture of assets representing
a substantial part, or the divestiture of the stock of a Subsidiary whose
assets represent a substantial part, of the consolidated assets of the
Company and its Subsidiaries (determined in accordance with GAAP) or
which requires the divestiture of assets, or stock of a Subsidiary, which
shall have contributed a substantial part of the consolidated net income
of the Company and its Subsidiaries (determined in accordance with GAAP)
for any of the three fiscal years then most recently ended, and such
order, judgment or decree remains unstayed and in effect for more than 60
days.
(m) A final judgment in an amount in excess of $7,000,000 is
rendered against the Company or any Subsidiary and, within 60 days after
entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within 60 days after the expiration of any such
stay, such judgment is not discharged.
(n) An Event of Default exists under the Prudential Agreement.
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8.2 Remedies. If any Event of Default occurs, the Agent shall, at the
request of, or may, with the consent of, the Required Lenders, do any or all of
the following:
(a) declare the Commitment of each Lender to make Loans to be
terminated, whereupon such Commitments and obligations shall be
terminated;
(b) declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder or under any other Loan Document to be immediately due
and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Lenders all rights and
remedies available to it and the Lenders under the Loan Documents or
applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (g), (h), (i) or (j) of Section 8.1, the obligation of each Lender
to make Loans shall automatically terminate and the unpaid principal amount of
all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable, all without further act of the Agent or
any Lender.
8.3 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE IX
THE AGENT
9.1 Appointment and Authorization; "Agent". Each Lender hereby
irrevocably (subject to Section 9.9) appoints, designates and authorizes the
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. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall
the Agent have or be deemed to have any fiduciary relationship with any Lender,
and no
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implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship
between independent contracting parties.
9.2 Delegation of Duties. The 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. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
9.3 Liability of Agent. 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 the Company or any
Subsidiary or Affiliate of the Company, or any officer 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 the
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 the Company 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 the Company or any
of the Company's Subsidiaries or Affiliates.
9.4 Reliance by Agent. (a) The 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 the Company), independent
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accountants and other experts selected by the Agent. The 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, if expressly required hereunder, all
Lenders) as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Required Lenders and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 4.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Lender for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Lender.
9.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Event of Default or Unmatured Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Agent for the account of the Lenders,
unless the Agent shall have received written notice from a Lender or the
Company referring to this Agreement, describing such Event of Default or
Unmatured Event of Default and stating that such notice is a "notice of
default". The Agent will notify the Lenders of its receipt of any such notice.
The Agent shall take such action with respect to such Event of Default or
Unmatured Event of Default as may be requested by the Required Lenders in
accordance with Article VIII; provided, however, that unless and until the
Agent has received any such request, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Event of Default or Unmatured Event of Default as it shall deem advisable or in
the best interest of the Lenders.
9.6 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 the Agent hereinafter taken, including any review of the affairs of
the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and
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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 the Company and its Subsidiaries, 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 the Company hereunder. 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 the Company. Except for notices, reports and other
documents expressly herein required to be furnished to the Lenders by the
Agent, the 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 the
Company which may come into the possession of any of the Agent-Related Persons.
9.7 Indemnification of Agent. 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 the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; provided, however, that
no Lender shall be liable for the payment to any Agent-Related Person of any
portion of the Indemnified Liabilities resulting solely from such Person's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender shall reimburse the Agent upon demand for its ratable share of any
costs or out-of-pocket expenses (including Attorney Costs) incurred by the
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 the Agent is
not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of the Agent.
9.8 Agent in Individual Capacity. BofA 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,
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underwriting or other business with the Company and its Subsidiaries and
Affiliates as though BofA were not the Agent hereunder, in each case without
notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to
such activities, BofA or its Affiliates may receive information regarding the
Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA and any Affiliate thereof
shall have the same rights and powers under this Agreement as any other Lender
and may exercise the same as though BofA were not the Agent.
9.9 Successor Agent. The Agent may, and at the request of the Required
Lenders shall, resign as Agent upon 30 days' notice to the Lenders and the
Company. If the Agent resigns under this Agreement, the Required Lenders
(with, if no Event of Default and Unmatured Event of Default then exists, the
consent of the Company, not to be unreasonably withheld) shall appoint from
among the Lenders a successor agent for the Lenders. If no successor agent is
appointed prior to the effective date of the resignation of the Agent, the
Agent may appoint, after consulting with the Lenders and the Company, a
successor agent from among the Lenders. 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 Agent's resignation hereunder as
Agent, the provisions of this Article IX and Sections 10.4 and 10.5 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 30 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 the Agent
hereunder until such time, if any, as the Required Lenders appoint a successor
agent as provided for above.
9.10 Withholding Tax. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Lender agrees with and in favor of the Agent, to deliver
to the Agent:
(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
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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 Code or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Each such Lender agrees to promptly notify the Agent 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 the Company to such Lender, such Lender agrees to notify
the Agent of the percentage amount in which it is no longer the beneficial
owner of Obligations of the Company to such Lender. To the extent of such
percentage amount, the Agent 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 the Agent sells, assigns, grants a participation in,
or otherwise transfers all or part of the Obligations of the Company 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 Code.
(d) If any Lender is entitled to a reduction in the applicable withholding
tax, the 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 the Agent, then the 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.
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(e) If the IRS or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that the Agent did not properly withhold tax
from amounts paid to or for the account of any Lender (because the appropriate
form was not delivered or was not properly executed, or because such Lender
failed to notify the Agent 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 the Agent fully for all amounts paid,
directly or indirectly, by the Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the
amounts payable to the Agent under this Section, together with all costs and
expenses (including Attorney Costs). The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of the Agent.
9.11 Co-Agents. None of the Lenders identified on the signature pages
of this Agreement or any related document as a "co-agent" shall have any right,
power, obligation, liability, responsibility or duty under this Agreement other
than those applicable to all Lenders as such. Without limiting the foregoing,
none of the Lenders so identified as a "co-agent" shall have or be deemed to
have any fiduciary relationship with any Lender. Each Lender acknowledges that
it has not relied, and will not rely, on any of the Lenders so identified in
deciding to enter into this Agreement or in taking or not taking action
hereunder.
ARTICLE X
MISCELLANEOUS
10.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Required
Lenders (or by the Agent at the written request of the Required Lenders) and
the Company and acknowledged by the Agent, and then any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided that no such waiver, amendment, or consent shall,
unless in writing and signed by all the Lenders and the Company and
acknowledged by the Agent, do any of the following:
(a) increase (except as provided in Section 2.14) or extend the
Commitment of any Lender (or reinstate any Commitment terminated pursuant to
Section 8.2);
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(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 the principal of, or the rate of interest specified herein
on, any Loan, or (subject to clause (ii) below) reduce 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 Obligations which is required for the Lenders or
any of them to take any action hereunder; or
(e) amend this Section, or Section 2.13, or any provision herein
providing for consent or other action by all Lenders;
and provided, further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the Agent in addition to the Required Lenders or all
the Lenders, as the case may be, affect the rights or duties of the Agent under
this Agreement or any other Loan Document and (ii) the Fee Letter may be
amended, or rights or privileges thereunder waived, in a writing executed by
the parties thereto.
10.2 Notices. (a) All notices, requests and other communications shall
be in writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Company by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule 10.2, and (ii) shall be followed
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered to the address or facsimile number specified for notices on Schedule
10.2 or (x) if directed to the Company or the Agent, to such other address as
shall be designated by such party in a written notice to the other parties or
(y) if directed to any other party, at such other address as shall be
designated by such party in a written notice to the Company and the Agent.
(b) All such notices, requests and communications shall, when transmitted
by overnight delivery, or faxed, be effective when delivered or transmitted in
legible form by facsimile machine, respectively, or if mailed, upon the third
Business Day after the date deposited into the U.S. mail, certified mail,
return receipt requested; except that notices pursuant to Article II or IX to
the Agent shall not be effective until actually received by the Agent.
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(c) Any agreement of the Agent and the Lenders herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Company. The Agent and the Lenders shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the Company
to give such notice and the Agent and the Lenders shall not have any liability
to the Company or any other Person on account of any action taken or not taken
by the Agent or the Lenders in reliance upon such telephonic or facsimile
notice. The obligation of the Company to repay the Obligations shall not be
affected in any way or to any extent by any failure by the Agent and the
Lenders to receive written confirmation of any telephonic or facsimile notice
or the receipt by the Agent and the Lenders of a confirmation which is at
variance with the terms understood by the Agent and the Lenders to be contained
in the telephonic or facsimile notice.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Agent or any Lender, any right, remedy, power
or privilege hereunder, shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.
10.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are consummated,
pay or reimburse the Agent within five Business Days after demand (subject to
subsection 4.1(e)) for all reasonable costs and expenses incurred by the Agent
in connection with the development, preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated), this Agreement, any other Loan Document and
any other document prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including
reasonable Attorney Costs incurred by the Agent with respect thereto; and
(b) pay or reimburse the Agent and each Lender within five Business Days
after demand for all reasonable costs and expenses (including Attorney Costs)
incurred by them in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement or any other Loan
Document during the existence of an Event of Default or after acceleration of
the Loans and other Obligations (including in connection with any "workout" or
restructuring regarding the Loans and other Obligations, and including in any
Insolvency Proceeding or appellate proceeding); provided that the Company shall
not be obligated to pay or reimburse the Agent or
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any Lender in respect of any suit or proceeding in which the Company is
adverse to the Agent or such Lender and final nonappealable judgment is
rendered by a court of competent jurisdiction in favor of the Company on all
counts.
10.5 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify and hold the
Agent-Related Persons, and each Lender and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Obligations and the termination, resignation or replacement of
the Agent or replacement of any Lender) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby or thereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided that the Company shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities resulting solely
from the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
10.6 Payments Set Aside. To the extent that the Company makes a payment
to the Agent or any Lender, or the Agent or any Lender exercises its right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Lender in its discretion) to be repaid to a trustee, receiver, or
any other party, in connection with any Insolvency Proceeding or otherwise,
then (a) to the extent of such recovery the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been made or such set-off had not
occurred and (b) each Lender severally agrees to pay to the Agent upon demand
its pro rata share of any amount so recovered from or repaid by the Agent or
any Lender.
10.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the
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parties hereto and their respective successors and assigns, except that
the Company may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of the Agent and each Lender.
10.8 Assignments, Participations, etc. (a) Any Lender may, with the
written consent of the Company (unless an Event of Default exists) and the
Agent, which consents shall not be unreasonably withheld, at any time assign
and delegate to one or more Eligible Assignees (provided that no written
consent of the Company or the Agent shall be required in connection with any
assignment and delegation by a Lender to an Eligible Assignee that is an
Affiliate of such Lender) (each an "Assignee") all, or any ratable part of all,
of the Loans, the Commitment and the other rights and obligations of such
Lender hereunder, in a minimum amount of $5,000,000 (or, if less, all of such
Lender's remaining rights and obligations hereunder); provided that the Company
and the 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 the
Company and the Agent by such Lender and the Assignee; (ii) such Lender and its
Assignee shall have delivered to the Company and the Agent an Assignment and
Acceptance in the form of Exhibit E ("Assignment and Acceptance") together with
any Note or Notes subject to such assignment and (iii) the assignor Lender or
Assignee has paid to the Agent a processing fee in the amount of $2,500.
(b) From and after the date that the Agent notifies the assignor Lender
that it has received and provided its consent (and received the consent of the
Company, if applicable) with respect to an 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 the Loan Documents.
(c) Any Lender may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Company (a "Participant") participating
interests in any Loans, the Commitment of such Lender and the other interests
of such 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
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performance of such obligations, (iii) the Company and the 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, and (iv) no Lender shall transfer or grant any
participating interest under which the Participant has rights 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, consent or waiver
would require unanimous consent of the Lenders as described in the first
proviso to Section 10.1. In the case of any such participation, the Participant
shall be entitled to the benefit of Sections 3.1, 3.3 and 10.5 as though it
were also a Lender hereunder, and 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.
(d) 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 and any Note held by it in favor of
any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
10.9 Confidentiality. Each Lender agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information provided to it by the Company
or any Subsidiary, or by the Agent on the Company's or such Subsidiary's
behalf, under this Agreement or any other Loan Document, and neither such
Lender nor any of its Affiliates shall use any such information other than in
connection with or in enforcement of this Agreement and the other Loan
Documents or in connection with other business now or hereafter existing or
contemplated with the Company or any Subsidiary; except to the extent such
information (i) was or becomes generally available to the public other than as
a result of disclosure by such Lender, or (ii) was or becomes available on a
non-confidential basis from a source other than the Company, provided that such
source is not bound by a confidentiality agreement with the Company or any
Subsidiary known to such Lender; provided, however, that any Lender may
disclose such information (A) at the request or pursuant to any requirement of
any Governmental Authority to which such Lender is subject or in connection
with an examination of such Lender by any such authority; (B) pursuant to
subpoena or other court process; (C)
61
<PAGE> 67
when required to do so in accordance with the provisions of any applicable
Requirement of Law; (D) to the extent reasonably required in connection with
any litigation or proceeding to which the Agent or any Lender or any of their
respective Affiliates may be party; (E) to the extent reasonably required in
connection with the exercise of any remedy hereunder or under any other Loan
Document; (F) to such Lender's independent auditors and other professional
advisors; (G) to any Participant or Assignee, actual or potential, provided
that such Person agrees in writing to keep such information confidential to
the same extent required of the Lenders hereunder; (H) as toany Lender or its
Affiliate, as expressly permitted under the terms of any other document or
agreement regarding confidentiality to which the Company or any Subsidiary is
party or is deemed party with such Lender or such Affiliate; and (I) to its
Affiliates.
10.10 Set-off. In addition to any rights and remedies of the Lenders
provided by law, if an Event of Default exists, or the Obligations have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived by the
Company to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such Lender to or
for the credit or the account of the Company against any and all Obligations
owing to such Lender, now or hereafter existing, irrespective of whether or not
the Agent or such Lender shall have made demand under this Agreement or any
other Loan Document and although such Obligations may be contingent or
unmatured. Each Lender agrees promptly to notify the Company and the Agent
after any such set-off and application made by such Lender; provided that the
failure to give such notice shall not affect the validity of such set-off and
application.
10.11 Automatic Debits of Fees. With respect to any non-use fee,
arrangement fee or other fee, or any other cost or expense (including Attorney
Costs) due and payable to the Agent or BofA under the Loan Documents, the
Company hereby irrevocably authorizes BofA to debit any deposit account of the
Company with BofA in an amount such that the aggregate amount debited from all
such deposit accounts does not exceed such fee or other cost or expense. If
there are insufficient funds in such deposit accounts to cover the amount of
the fee or other cost or expense then due, such debits will be reversed (in
whole or in part, in BofA's sole discretion) and such amount not debited shall
be deemed to be unpaid. No such debit under this Section shall be deemed a
set-off.
10.12 Notification of Addresses, Lending Offices, Etc. Each Lender shall
notify the Agent in writing of any change in
62
<PAGE> 68
the address to which notices to such Lender should be directed, of addresses of
any Lending Office, of payment instructions in respect of all payments to be
made to it hereunder and of such other administrative information as the Agent
shall reasonably request.
10.13 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of which taken together shall be deemed to constitute but one
and the same instrument.
10.14 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not
in any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or such instrument or agreement.
10.15 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Company, the Lenders, the
Agent, the Agent-Related Persons and the Indemnified Persons, and their
respective permitted successors and assigns, and no other Person shall be a
direct or indirect legal beneficiary of, or have any direct or indirect cause
of action or claim in connection with, this Agreement or any other Loan
Document.
10.16 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND ANY NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
ILLINOIS; PROVIDED THAT THE COMPANY, THE AGENT AND THE LENDERS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR OF
THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE LENDERS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF SUCH COURTS. EACH OF THE COMPANY, THE AGENT AND THE LENDERS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE
AGENT AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
10.17 Waiver of Jury Trial. THE COMPANY, THE LENDERS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR
63
<PAGE> 69
RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION
OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY
AGENT-RELATED PERSON OR INDEMNIFIED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL
BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY
OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENT, RENEWAL,
SUPPLEMENT OR MODIFICATION TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
10.18 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Lenders and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
64
<PAGE> 70
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
TRUSERV CORPORATION
By:
----------------------------------------
Title:
-------------------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Agent
By:
----------------------------------------
Title:
-------------------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
BANK OF MONTREAL
By:
----------------------------------------
Title:
-------------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By:
----------------------------------------
Title:
-------------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
----------------------------------------
Title:
-------------------------------------
S-1
<PAGE> 71
THE NORTHERN TRUST COMPANY
By:
----------------------------------------
Title:
-------------------------------------
UMB BANK, N.A.
By:
----------------------------------------
Title:
-------------------------------------
BANK HAPOALIM B.M.
By:
----------------------------------------
Title:
-------------------------------------
S-2
<PAGE> 72
SCHEDULE 2.1
------------
COMMITMENTS
-----------
AND PRO RATA SHARES
-------------------
<TABLE>
<CAPTION>
Pro Rata
Lender Commitment Share
------ ---------- --------
<S> <C> <C>
Bank of America National Trust
and Savings Association $ 20,000,000 20%
Bank of Montreal $ 15,000,000 15%
The First National Bank $ 15,000,000 15%
of Chicago
PNC Bank, National $ 15,000,000 15%
Association
The Northern Trust Company $ 10,000,000 10%
UMB Bank, N.A. $ 15,000,000 15%
Bank Hapoalim B.M. $ 10,000,000 10%
TOTAL $100,000,000 100%
</TABLE>
<PAGE> 73
SCHEDULE 5.7
RESTRICTIVE AGREEMENTS
Amended and Restated Note Purchase and Private Shelf Agreement dated as of
December 29, 1995 as amended through September 9, 1998 with The Prudential
Insurance Company of America and the other entities from time to time party
thereto.
Participation Agreement dated as of April 30, 1998 among MaryGreen, LLC, as
Lessee, the Company, as Lessee Agent, Construction Agent and Guarantor, TruServ
1998 Trust, as Lessor Trust, Wilmington Trust Company, individually and as
Owner Trustee under TruServ 1998 Trust, BMO Leasing (U.S.), Inc., as Agent
Certificate Holder and Certificate Holder, Bank of Montreal, as Lender, and
Bank of Montreal, as Administrative Agent and Arranger, and the documents
related thereto.
Note Purchase Agreement dated September 10, 1998 for the Company's 6.85% Senior
Notes due 2008.
<PAGE> 74
SCHEDULE 10.2
-------------
OFFSHORE AND DOMESTIC LENDING OFFICES,
--------------------------------------
ADDRESSES FOR NOTICES
---------------------
BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION, as Agent
- -----------------------------------
Bank of America National Trust
and Savings Association
Agency Management Services #33499
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Senior Agency Officer
Telephone: (312) 828-7933
Facsimile: (312) 974-9102
BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION, as a Lender
- -------------------------------------
Domestic and Offshore Lending Office:
231 South LaSalle Street
Chicago, Illinois 60697
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Bank of America National Trust
and Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Brian Soeldner
Telephone: (312) 828-2731
Facsimile: (312) 974-0761
BANK OF MONTREAL
- ----------------
Domestic and Offshore Lending Office:
Bank of Montreal
115 South LaSalle Street
Chicago, Illinois 60603
Attention: Sheila Weimer
Telephone: (312) 750-6044
Facsimile: (312) 750-3702
<PAGE> 75
THE FIRST NATIONAL BANK OF CHICAGO
- ----------------------------------
Domestic and Offshore Lending Office:
The First National Bank of Chicago
One First National Plaza
Suite 0086
Chicago, Illinois 60670
Attention: Catherine Muszynski
Telephone: (312) 732-7634
Facsimile: (312) 732-1117
PNC BANK, NATIONAL ASSOCIATION
- ------------------------------
Domestic and Offshore Lending Office:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
2nd Floor
Pittsburgh, PA 15222-2707
Telephone: (412) 768-3807
Facsimile: (412) 762-6484
with a copy to:
PNC Bank, National Association
One South Wacker Drive
Suite 2980
Chicago, Illinois 60606
Attention: Robert Krasnow
Telephone: (312) 338-5693
Facsimile: (312) 338-5620
THE NORTHERN TRUST COMPANY
- --------------------------
Domestic and Offshore Lending Office:
The Northern Trust Company
50 South LaSalle Street
Chicago, Illinois 60675
Attention: Keith O'Donnell
Telephone: (312) 444-3640
Facsimile: (312) 444-5055
2
<PAGE> 76
UMB BANK, N.A.
- --------------
Domestic and Offshore Lending Office:
UMB Bank, N.A.
1010 Grand Blvd.
Kansas City, Missouri 64106
Attention: Terry Dierks
Telephone: (816)860-7101
Facsimile: (816)860-7143
BANK HAPOALIM B.M.
- ------------------
Domestic and Offshore Lending Office:
Bank Hapoalim B.M.
225 North Michigan, Suite 900
Chicago, Illinois 60601
Attention: Craig McGuire
Telephone: (312) 228-6415
Facsimile: (312) 228-6490
TRUSERV CORPORATION
- -------------------
Address for Notices:
TruServ Corporation
8600 West Bryn Mawr
Chicago, Illinois 60631-3505
Attention: Frank Hashimoto
Telephone: (773) 695-5375
Facsimile: (773) 695-6568
3
<PAGE> 77
FIRST AMENDMENT
THIS FIRST AMENDMENT dated as of September 4, 1998 (this "Amendment")
amends the Credit Agreement dated as of July 1, 1997 (the "Credit Agreement")
among TRUSERV CORPORATION (the "Company"), various financial institutions (the
"Lenders") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent
(in such capacity, the "Agent"). Terms defined in the Credit Agreement are,
unless otherwise defined herein or the context otherwise requires, used herein
as defined therein.
WHEREAS, the Company, the Lenders and the Agent have entered into the
Credit Agreement; and
WHEREAS, the parties hereto desire to amend the Credit Agreement as
more fully set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1 Amendments. Effective on (and subject to the occurrence of)
the Amendment Effective Date (as defined below), the Credit Agreement shall be
amended in accordance with Sections 1.1 through 1.6:
1.1 Amendment to Funded Debt Definition. The definition of "Funded
Debt" is amended by deleting the amount "$10,000,000" therein and substituting
the amount "$20,000,000" therefor.
1.2 Additional Reporting Requirement. Clause (b) of Section 6.2 is
amended in its entirety to read as follows:
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), (i) a Compliance Certificate
executed by a Responsible Officer and (ii) a schedule of the daily and
30 day average amounts of accounts receivable and Debt outstanding
during the fiscal quarter ending on the date as of which such financial
statements were prepared, together the calculations necessary to
demonstrate compliance with Sections 7.14 and 7.3;
1.3 Amendment of Debt Covenant. Section 7.3 is amended in its entirety
to read as follows:
7.3 Debt Restrictions. The Company will not and will not
permit any Subsidiary to create, incur, assume or suffer to exist any
Debt, except:
(a) Senior Funded Debt in existence as of the Closing Date,
<PAGE> 78
(b) Subordinated Debt,
(c) Senior Funded Debt,
(d) Short Term Debt of the Company, and
(e) Debt under the Existing Credit Agreements which will be
repaid prior to or concurrently with the making of the initial
Credit Extensions hereunder;
provided that the ratio of (x) the sum of (i) the aggregate amount of
all Senior Funded Debt plus (ii) an amount equal to the lowest daily
average amount of Short Term Debt outstanding for any period of 30
consecutive days during the 12 month-period ending on the last day of
the most recently-completed month to (y) the sum of Consolidated
Capitalization plus the amount determined pursuant to clause (x)(ii)
above shall not at any time exceed the ratio set forth below during any
period set forth below:
Specified
Period Percentage
------ ----------
Prior to 7/5/98 65%
7/5/98 through 12/31/98 60%
1/1/99 through 10/2/99 55%
10/3/99 and thereafter 50%.
For purposes of this Section 7.3, Debt represented by the Loans or
arising under the BAs shall be considered Short Term Debt.
1.4 Amendment to Asset Sale Covenant. Section 7.4 is amended by
deleting the words "eight distribution facilities" in the parenthetical clause
immediately before the proviso therein and substituting the words "ten
distribution facilities" therefor.
1.5 Addition of Covenant. The following Section 7.14 is added at the
end of Section 7:
7.14 Minimum Asset Coverage. Not permit the ratio, as of the
last day of any fiscal quarter, of (a) the daily average of all
accounts receivable owed to the Company during the last 30 days of such
fiscal quarter (the "Measurement Period") minus all Subordinated Debt
payable to Members as of the last day of such fiscal quarter to (b) the
daily average of all
-2-
<PAGE> 79
Debt (other than Subordinated Debt) outstanding during such Measurement
Period to be less than the applicable ratio set forth in the table
below:
Quarter ended Ratio
------------- -----
10/3/98 .60 to 1
12/31/98, 4/3/99 and 7/3/99 .75 to 1
10/2/99 and thereafter .80 to 1.
Notwithstanding the foregoing, the Company shall not be required to
comply with this Section 7.14 as of the last day of any fiscal quarter
after October 2, 1999 if no Event of Default or Unmatured Event of
Default exists at any time during the period from the date of the
effectiveness of the First Amendment to this Agreement through October
2, 1999 (including any Event of Default arising under this Section 7.14
or any other financial test set forth in this Section 7 as of October
2, 1999 notwithstanding the fact that the existence of such Event of
Default may not be known until the Company delivers its financial
statements for the quarter ending on such date).
1.6 Amendment to Default. Subsection 8.1(e) is amended by deleting the
reference to "Article VIII" therein and substituting "Article VII" therefor.
SECTION 2 Representations and Warranties. The Company represents and
warrants to the Agent and the Lenders that, after giving effect hereto, (a) each
representation and warranty set forth in Article V of the Credit Agreement is
true and correct as of the date of the execution and delivery of this Amendment
by the Company with the same effect as if made on such date (except to the
extent such representations and warranties expressly refer to an earlier date,
in which case they were true and correct as of such earlier date), and (b) no
Event of Default or Unmatured Event of Default exists.
SECTION 3 Effectiveness. The amendments set forth in Section 1 above
shall become effective on the date (the "Amendment Effective Date") when the
Agent shall have received (a) counterparts of this Amendment executed by the
Company and the Required Lenders and (b) an amendment fee, for the account of
each Lender which has executed and delivered to the Agent a counterpart of this
Amendment prior to 5:00 p.m., Chicago time, on September 4, 1998, in an amount
equal to 0.1% of such Lender's Commitment.
-3-
<PAGE> 80
SECTION 4 Miscellaneous.
4.1 Continuing Effectiveness, etc. As herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the Amendment Effective Date, all references in
the Credit Agreement and the other Loan Documents to "Credit Agreement" or
similar terms shall refer to the Credit Agreement as amended hereby.
4.2 Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Amendment.
4.3 Governing Law. This Amendment shall be a contract made under and
governed by the laws of the State of Illinois applicable to contracts made and
to be performed entirely within such state.
4.4 Successors and Assigns. This Amendment shall be binding upon the
Company, the Lenders and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Lenders and the Agent and the
respective successors and assigns of the Lenders and the Agent.
Delivered at Chicago, Illinois, as of the day and year first above
written.
TRUSERV CORPORATION
By:_____________________________
Title:__________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By:_____________________________
Title:__________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Lender
By:_____________________________
Title:__________________________
-4-
<PAGE> 81
BANK OF MONTREAL
By:_____________________________
Title:__________________________
THE FIRST NATIONAL BANK
OF CHICAGO
By:_____________________________
Title:__________________________
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Title:__________________________
WACHOVIA BANK, N.A.
By:_____________________________
Title:__________________________
THE NORTHERN TRUST COMPANY
By:_____________________________
Title:__________________________
ABN AMRO BANK N.V.
By:_____________________________
Title:__________________________
By:_____________________________
Title:__________________________
-5-
<PAGE> 82
NCB MORTGAGE CORPORATION
By:_____________________________
Title:__________________________
UMB BANK
By:_____________________________
Title:__________________________
-6-
<PAGE> 83
SECOND AMENDMENT
THIS SECOND AMENDMENT dated as of September 30, 1998 (this "Amendment")
amends the Credit Agreement dated as of July 1, 1997 (as previously amended, the
"Credit Agreement") among TRUSERV CORPORATION (the "Company"), various financial
institutions (the "Lenders") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Agent (in such capacity, the "Agent"). Terms defined in the
Credit Agreement are, unless otherwise defined herein or the context otherwise
requires, used herein as defined therein.
WHEREAS, the Company, the Lenders and the Agent have entered into the
Credit Agreement; and
WHEREAS, the parties hereto desire to amend the Credit Agreement as
more fully set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1 Amendments. Effective on (and subject to the occurrence of)
the Amendment Effective Date (as defined below), the Credit Agreement shall be
amended in accordance with Sections 1.1 through 1.7:
1.1 Amendment to Definition of Interest Payment Date. The definition is
amended by deleting the comma after the word "means" in the first line thereof
and substituting "(i)" therefor.
1.2 Addition of Definition. The following definition is added to
Section 1.1 in appropriate alphabetical sequence:
Year 2000 Problem means the risk that computer applications
and embedded microchips in non-computing devices may be unable to
recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999.
1.3 Amendment to Section 3.4. Section 3.4(c) is amended by deleting the
reference to "Section 2.8" and substituting "Section 2.9" therefor.
1.4 Addition of a Representation and Warranty. The following Section
5.16 is added at the end of Article V:
5.16 Year 2000 Problem. The Company and its Subsidiaries (a)
have reviewed the areas within their business and operations which
could be adversely affected by, and have developed or are
developing a program to address on a timely basis, the Year 2000
Problem and (b) have made appropriate inquiries as to the effect
the Year 2000 Problem will have on their
<PAGE> 84
material suppliers and customers. Based on such a review, program
and inquiries, the Company reasonably believes that the Year 2000
Problem will not have a Material Adverse Effect.
1.5 Amendment to Information Covenant. Section 6.2 is amended by (i)
deleting the word "and" immediately after clause (c); (ii) relettering the
existing clause (d) as clause (e); and (iii) inserting the following new clause
(d):
(d) promptly, such information or documentation as the Agent,
at the request of any Lender, may request from time to time
regarding the efforts of the Company and its Subsidiaries to
address the Year 2000 Problem; and
1.6 Amendment to Merger Covenant. Section 7.5 is amended by deleting
the words "or Default" and substituting the words "or Unmatured Event of
Default" therefor.
1.7 Schedule 5.7. Schedule 5.7 is hereby amended in its entirety by
substituting Schedule 5.7 hereto therefor.
SECTION 2 Representations and Warranties. The Company represents and
warrants to the Agent and the Lenders that, after giving effect hereto, (a) each
representation and warranty set forth in Article V of the Credit Agreement is
true and correct as of the date of the execution and delivery of this Amendment
by the Company with the same effect as if made on such date (except to the
extent such representations and warranties expressly refer to an earlier date,
in which case they were true and correct as of such earlier date), and (b) no
Event of Default or Unmatured Event of Default exists.
SECTION 3 Effectiveness. The amendments set forth in Section 1 above
shall become effective on the date (the "Amendment Effective Date") when the
Agent shall have received counterparts of this Amendment executed by the Company
and the Required Lenders.
SECTION 4 Miscellaneous.
4.1 Continuing Effectiveness, etc. As herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the Amendment Effective Date, all references in
the Credit Agreement and the other Loan Documents to "Credit Agreement" or
similar terms shall refer to the Credit Agreement as amended hereby.
4.2 Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an
-2-
<PAGE> 85
original but all such counterparts shall together constitute one and the same
Amendment.
4.3 Governing Law. This Amendment shall be a contract made under and
governed by the laws of the State of Illinois applicable to contracts made and
to be performed entirely within such state.
4.4 Successors and Assigns. This Amendment shall be binding upon the
Company, the Lenders and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Lenders and the Agent and the
respective successors and assigns of the Lenders and the Agent.
Delivered at Chicago, Illinois, as of the day and year first above
written.
TRUSERV CORPORATION
By:_____________________________
Title:__________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By:_____________________________
Title:__________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Lender
By:_____________________________
Title:__________________________
BANK OF MONTREAL
By:_____________________________
Title:__________________________
S-1
<PAGE> 86
THE FIRST NATIONAL BANK
OF CHICAGO
By:_____________________________
Title:__________________________
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Title:__________________________
WACHOVIA BANK, N.A.
By:_____________________________
Title:__________________________
THE NORTHERN TRUST COMPANY
By:_____________________________
Title:__________________________
ABN AMRO BANK N.V.
By:_____________________________
Title:__________________________
By:_____________________________
Title:__________________________
NCB MORTGAGE CORPORATION
By:_____________________________
Title:__________________________
UMB BANK
By:_____________________________
Title:__________________________
S-2
<PAGE> 1
EXHIBIT 99.5
March 30, 1999
TruServ Corporation
8600 West Bryn Mawr Avenue
Chicago, Illinois 60631-3505
Re: Post Effective Amendment No. 6 on Form S-2 to Registration
Statement on Form S-4 (No. 333-18397)
Gentlemen:
I refer to the Post Effective Amendment No. 6 on Form S-2 to Registration
Statement on Form S-4 (No. 333-18397) being filed by TruServ Corporation, a
Delaware corporation (hereinafter referred to as the "Company"), with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, pertaining to the registration of 95,228 shares of Class A Common
Stock, $100 par value.
The Class A Common Stock will be issued and sold directly by the Company in
60 share units at the par value thereof, for an aggregate cash purchase price
of $6,000 per unit. Sales shall be made to retailers and renters of hardware,
lumber and related merchandise, in connection with becoming Members of the
Company.
Based upon our examination, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware.
2. The proposed offering of 95,228 shares of Class A Common Stock, $100 par
value, of the Company has been duly authorized and when sold as
contemplated will be legally issued and fully paid and non-assessable.
I hereby consent to the use of this opinion as an exhibit to the foregoing
Registration Statement and the reference to us under the caption "Legal
Matters" in the related Prospectus as counsel for the Company who have passed
upon the legalities of the securities registered hereunder.
Sincerely,
/s/ Daniel T. Burns, Esq.
Daniel T. Burns, Esq.
