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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) July 18, 1996
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KMART CORPORATION
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN
(State or Other Jurisdiction of Incorporation)
1-327 38-0729500
(Commission File Number) (I.R.S. Employer Identification No.)
3100 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084
(Address of Principal Executive Offices) (Zip Code)
(810) 643-1000
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On June 6, 1996 and June 17, 1996, respectively, Kmart Corporation entered into
the attached written agreements regarding a $3.7 billion credit facility, the
closing of which occurred on June 17, 1996.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KMART CORPORATION
(Registrant)
By: /s/ Nancie W. LaDuke
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Nancie W. LaDuke
Vice President and
Secretary
Date: July 18, 1996
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EXECUTION COPY
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KMART CORPORATION
_______________________________________________________________________________
$3,700,000,000
CREDIT AGREEMENT
June 6, 1996
________________________________________________________________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
THE BANK OF NEW YORK
as Co-Arrangers
CHASE SECURITIES INC.
as Arranger
CHEMICAL BANK
as Administrative Agent
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS ................................................................................................. 1
1.1 Defined Terms .................................................................................................. 1
1.2 Other Definitional Provisions .................................................................................. 38
SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS ................................................................... 39
2.1 Term Loans ..................................................................................................... 39
2.2 Procedure for Term Loan Borrowing .............................................................................. 39
2.3 Repayment of Term Loans ........................................................................................ 39
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS ............................................................ 39
3.1 Revolving Credit Commitments ................................................................................... 39
3.2 Procedure for Revolving Credit Borrowing ...................................................................... 40
3.3 Commitment Fee ................................................................................................ 40
3.4 Termination or Reduction of Commitments ........................................................................ 41
3.5 Repayment of Revolving Credit Loans ............................................................................ 41
3.6 L/C Commitment ................................................................................................. 41
3.7 Procedure for Issuance of Letters of Credit .................................................................... 42
3.8 Letter of Credit Fees, Commissions and Other Charges ........................................................... 42
3.9 L/C Participations ............................................................................................. 43
3.10 Letter of Credit Reimbursement Obligations .................................................................... 44
3.11 Obligations Absolute .......................................................................................... 44
3.12 Letter of Credit Payments ..................................................................................... 45
3.13 Letter of Credit Applications ................................................................................. 45
3.14 CAF Advances .................................................................................................. 45
3.15 Procedure for CAF Advance Borrowing ........................................................................... 45
3.16 CAF Advance Payments .......................................................................................... 48
3.17 Certain Restrictions With Respect to CAF Advances ............................................................. 48
3.18 Annual Revolving Credit Clean-Down ............................................................................ 49
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT ................................................ 49
4.1 Optional and Mandatory Prepayments ............................................................................. 49
4.2 Conversion and Continuation Options ............................................................................ 50
4.3 Minimum Amounts and Maximum Number of Tranches ................................................................. 51
4.4 Interest Rates and Payment Dates ............................................................................... 51
4.5 Computation of Interest and Fees ............................................................................... 52
4.6 Inability to Determine Interest Rate ........................................................................... 52
4.7 Pro Rata Treatment and Payments ................................................................................ 53
4.8 Illegality ..................................................................................................... 54
4.9 Requirements of Law ............................................................................................ 54
4.10 Indemnification for Taxes ..................................................................................... 55
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4.11 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.12 Change of Lending Office . . . . . . . . . . . . . . . . . . . . . . 57
4.13 Evidence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 59
5.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.2 No Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . 60
5.4 Corporate Power; Authorization; Enforceable Obligations . . . . . . . 60
5.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . 61
5.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.8 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . 61
5.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.10 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . 61
5.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.12 Investment Company Act; Other Regulations . . . . . . . . . . . . . 62
5.13 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.14 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . 62
5.15 The Security Documents . . . . . . . . . . . . . . . . . . . . . . . 63
5.16 Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . 64
5.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 64
5.18 Pledged Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.19 Real Estate Matters . . . . . . . . . . . . . . . . . . . . . . . . 65
5.20 Continuing Letters of Credit . . . . . . . . . . . . . . . . . . . . 65
5.21 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.22 Certain Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.23 Purpose of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.24 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.1 Conditions of Initial Extensions of Credit . . . . . . . . . . . . . 66
6.2 Conditions to Each Extension of Credit . . . . . . . . . . . . . . . 70
SECTION 7. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 70
7.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 70
7.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . 71
7.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . 72
7.4 Conduct of Business and Maintenance of Existence . . . . . . . . . . 72
7.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . 72
7.6 Inspection of Property; Books and Records; Discussions . . . . . . . 72
7.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
7.8 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.9 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.10 Mortgages; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
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7.11 Additional Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.12 Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 8. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
8.1 Financial Condition Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 76
8.2 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 76
8.3 Limitation on Guarantee Obligations . . . . . . . . . . . . . . . . . . . . . . 77
8.4 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.5 Limitation on Fundamental Changes. . . . . . . . . . . . . . . . . . . . . . . 80
8.6 Limitation on Sale of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 81
8.7 Limitation on Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
8.8 Limitation on Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . 82
8.9 Limitation on Investments, Loans and Advances. . . . . . . . . . . . . . . . . 83
8.10 Limitation on Optional Payments and Modifications of Debt Instruments. . . . . 84
8.11 Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . 84
8.12 Limitation on Sales and Leasebacks. . . . . . . . . . . . . . . . . . . . . . 84
8.13 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.14 Joint Ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 9. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 10. THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
10.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
10.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
10.4 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . 89
10.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
10.6 Non-Reliance on Administrative Agent and Other Lenders . . . . . . . . . . . . 90
10.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
10.8 Administrative Agent in Its Individual Capacity . . . . . . . . . . . . . . . 90
10.9 Successor Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . 91
10.10 Upfront Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
11.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . 93
11.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . 93
11.5 Payment of Expenses and Taxes; Indemnity . . . . . . . . . . . . . . . . . . . 93
11.6 Successors and Assigns; Participations and Assignments . . . . . . . . . . . . 94
11.7 Replacement of Lenders under Certain Circumstances . . . . . . . . . . . . . . 96
11.8 Adjustments; Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
11.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
11.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
11.11 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
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11.12 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
11.13 Collateral Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
11.14 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
11.15 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . 98
11.16 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
11.17 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
11.18 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
11.19 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
11.20 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
11.21 Waivers of Prepayment and Commitment Termination Notices in connection
with Existing Credit Facilities. . . . . . . . . . . . . . . . . . . . . . . 100
11.22 Waivers of Certain Requirements Under the Existing Credit Facilities . . . . . 100
11.23 Continuing Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 101
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CREDIT AGREEMENT, dated as of June 6, 1996, among KMART CORPORATION,
a Michigan corporation (the "Borrower"), the several banks, financial
institutions and other entities from time to time parties to this Agreement
(collectively, the "Lenders"; individually, a "Lender") and CHEMICAL BANK, a
New York banking corporation, as administrative agent for the Lenders
hereunder.
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on such
day plus 1% and (c) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the
rate of interest per annum publicly announced from time to time by the
Administrative Agent as its prime rate in effect at its principal office
in New York City (the Prime Rate not being intended to be the lowest
rate of interest charged by the Administrative Agent in connection with
extensions of credit to debtors); "Base CD Rate" shall mean the sum of
(a) the product of (i) the Three-Month Secondary CD Rate and (ii) a
fraction, the numerator of which is one and the denominator of which is
one minus the CD Reserve Percentage and (b) the CD Assessment Rate;
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in
effect on such day (or, if such day shall not be a Business Day, the
next preceding Business Day) by the Board of Governors through the
public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board of
Governors, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of
the secondary market quotations for three-month certificates of deposit
of major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not
be a Business Day, on the next preceding Business Day) by the
Administrative Agent from three New York City negotiable certificate of
deposit dealers of recognized standing selected by it; "CD Assessment
Rate" shall mean, for any day, the annual assessment rate in effect on
such day which is payable by a member of the Bank Insurance Fund
maintained by the FDIC classified as well-capitalized and within
supervisory subgroup "B" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. Section 327.4 (or any
successor provision) to the FDIC for the FDIC's insuring time deposits
at offices of such institution in the United States; "CD Reserve
Percentage" shall mean, for any day, that percentage (expressed as a
decimal) which is in effect on such day, as prescribed by the Board of
Governors, for determining the maximum reserve requirement for a
Depositary Institution (as defined in Regulation D of the Board of
Governors or any successor provisions) in respect of new non-personal
time deposits in Dollars having a maturity of 30 days or more; and
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers,
as published on the next succeeding Business Day by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it.
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Any change in the ABR due to a change in the Prime Rate, the Three-Month
Secondary CD Rate, the CD Assessment Rate, the CD Reserve Percentage or
the Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Rate, the
Three-Month Secondary CD Rate, the CD Assessment Rate, the CD Reserve
Percentage or the Federal Funds Effective Rate, respectively.
"ABR Loans": Committed Loans the rate of interest applicable to
which is based upon the ABR.
"Acquisition": as to any Person, the acquisition by such Person
of (a) all the Capital Stock of any other Person, (b) all or
substantially all of the assets of any other Person or (c) assets
constituting one or more business units of any other Person.
"Addendum": an instrument, substantially in the form of Exhibit
A, by which a Lender becomes a party to this Agreement.
"Additional Permitted Capital Expenditure Amount": (x) with
respect to the 1997 Fiscal Year, an amount equal to 50% of the amount
(if any) by which EBITDA for the 1996 Fiscal Year exceeds
$1,000,000,000, (y) with respect to the 1998 Fiscal Year, an amount
equal to 50% of the amount (if any) by which EBITDA for the 1997 Fiscal
Year exceeds $1,250,000,000, and (z) with respect to the 1999 Fiscal
Year, an amount equal to 50% of the amount (if any) by which EBITDA for
the 1998 Fiscal Year exceeds $1,500,000,000.
"Adjusted Eligible Inventory Amount": as of the last day of any
fiscal month, (a) the Inventory Value of all Inventory of the Borrower
and the Subsidiary Guarantors that consists of finished goods as of such
day minus (b) the sum of (i) the Ineligible Inventory Amount as of such
day plus (ii) the Markdown Reserve for such fiscal month.
"Adjustment Date": the second Business Day following receipt by
the Administrative Agent of both (i) the financial statements required
to be delivered pursuant to subsection 7.1(a) or 7.1(b), as the case may
be, for the most recently completed fiscal period and (ii) the
certificate required to be delivered pursuant to subsection 7.2(b) with
respect to such fiscal period.
"Administrative Agent": Chemical, together with its affiliates,
as the arranger of the Commitments and as the agent for the Lenders
under this Agreement and the other Loan Documents.
"Affiliate": 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. For purposes of this definition, "control"
of a Person means the power, directly or indirectly, either to (a) vote
10% or more of the securities having ordinary voting power for the
election of directors of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by
contract or otherwise. For the purposes of this Agreement, the Borrower
and its Restricted Subsidiaries shall not be deemed to be Affiliates of
each other.
"Aggregate Outstanding Extensions of Credit": at any time, an
amount equal to the sum of (a) the Aggregate Revolving Credit
Outstandings at such time and (b) the aggregate outstanding principal
amount of Term Loans of all the Term Loan Lenders at such time.
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"Aggregate Revolving Credit Outstandings": at any time, an
amount equal to the sum of (a) the Committed Revolving Credit Extensions
of Credit of all the Revolving Credit Lenders at such time and (b) the
aggregate outstanding principal amount of CAF Advances of all the
Revolving Credit Lenders at such time.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Agreement Currency": as defined in subsection 11.19.
"Applicable Margin": for each Type of Committed Loan, the rate
per annum set forth under the relevant column heading below:
ABR Loans Eurodollar Loans
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1.50% 2.50%
provided that, from and after the last day of the second fiscal quarter
of the 1996 Fiscal Year, the Applicable Margin for all Types of
Committed Loans will be adjusted, on each Adjustment Date, to the
Applicable Margin set forth on Annex A opposite the Margin Level Status
of the Borrower in effect on such Adjustment Date, and provided,
further, that, (a) from and after the first anniversary of the Closing
Date, the Applicable Margin on any outstanding Term Loans shall be equal
to the Applicable Margin determined in accordance with the other
provisions of this definition plus 0.50% and (b) in the event that the
financial statements required to be delivered pursuant to subsection
7.1(a) or 7.1(b), as applicable, and the related certificate required
pursuant to subsection 7.2(b), are not delivered when due, then, during
the period from the date upon which such financial statements were
required to be delivered until two Business Days following the date upon
which they actually are delivered, the Applicable Margin for ABR Loans
shall be 1.50% and the Applicable Margin for Eurodollar Loans will be
2.50%.
"Applicant": with respect to any Letter of Credit, the Borrower
or any of its Subsidiaries.
"Application": an application or request, in such form as an
Issuing Bank may specify from time to time, requesting such Issuing Bank
to open a Letter of Credit.
"Asset Sale": any sale, transfer or other disposition (including
any sales, transfers or other dispositions in connection with
Sale-Leasebacks or Securitization Transactions) by the Borrower or any
of its Restricted Subsidiaries of any property of the Borrower or any
such Restricted Subsidiary (including property subject to any Lien under
any Security Document).
"Assignee": as defined in subsection 11.6(c).
"Assignment Financing Statement": with respect to each Mortgage
Assignment, a uniform commercial code financing statement naming the
Trustee as the "secured party", on the appropriate state form, executed
by the Borrower or a Subsidiary, as appropriate, and describing the
appropriate Mortgage Assignment.
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"Available Revolving Credit Commitment": as to any Revolving
Credit Lender, at any time, an amount equal to the excess, if any, of
(a) such Revolving Credit Lender's Revolving Credit Commitment over (b)
such Revolving Credit Lender's Committed Revolving Credit Extensions of
Credit at such time; collectively, as to all the Revolving Credit
Lenders, the "Available Revolving Credit Commitments".
"Big Beaver Companies": the collective reference to [ ]
"Big Beaver Joint Ventures": the collective reference to [ ]
"Big Beaver Joint Venture Agreements": the collective reference
to [ ]
"Big Beaver Loan Agreements": the collective reference to
(a) the Loan Agreement dated as of January 21, 1992, among the borrowers
thereunder, certain financial institutions party thereto, and [ ],
as managing agent, and (b) the Loan Agreement dated as of August 7,
1992, among the borrowers thereunder, certain financial institutions
party thereto, and [ ], as agent, in each case as the
same may be amended, supplemented or otherwise modified from time to
time.
"Board of Governors": the Board of Governors of the Federal
Reserve System and any Governmental Authority which succeeds to the
powers and functions thereof.
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"Borrowing Base": at any time, an amount, calculated initially
based upon the Borrowing Base Certificate delivered pursuant to
subsection 6.1(q) and thereafter upon the most recent Borrowing Base
Certificate delivered pursuant to subsection 7.2(c), equal to the sum of
(a) the Eligible Inventory Borrowing Base Amount at such time, plus (b)
60% of the excess of (i) the sum of (A) the aggregate Mortgage Value of
Eligible Mortgaged Real Property at such time, (B) the aggregate
Mortgage Value of Eligible Put Bond Real Property at such time, (C) the
aggregate Designated Value of Eligible Big Beaver Real Property at such
time and (D) the aggregate Mortgage Value of Eligible California Real
Property at such time over (ii) the Environmental Reserve Amount. The
Borrowing Base established based upon a particular Borrowing Base
Certificate shall remain in effect until the delivery of a subsequent
Borrowing Base Certificate.
"Borrowing Base Certificate": as defined in subsection 7.2(c).
"Borrowing Date": any Business Day specified in a notice
pursuant to subsection 2.2, 3.2 or 3.15(a) as a date on which the
Borrower requests the Lenders to make Loans hereunder.
"Business": as defined in subsection 5.14(b).
"Business Day": a day other than a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required by
law to close; provided, that when such term is used to describe a day on
which a borrowing, payment or interest rate determination is to be made
in respect of a LIBO Rate CAF Advance, such day shall also be a day on
which dealings in foreign currencies and exchange between banks may be
carried on in London, England.
"CAF Advance": as defined in subsection 3.14.
"CAF Advance Availability Period": the period from and including
the Closing Date to and including the date which is 14 days prior to the
Revolving Credit Termination Date.
"CAF Advance Confirmation": each confirmation by the Borrower of
its acceptance of CAF Advance Offers, which confirmation shall be
substantially in the form of Exhibit B and shall be delivered to the
Administrative Agent by facsimile transmission.
"CAF Advance Interest Payment Date": as to each CAF Advance,
each interest payment date specified by the Borrower for such CAF
Advance in the related CAF Advance Request.
"CAF Advance Maturity Date": as to any CAF Advance, the date
specified by the Borrower in the related CAF Advance Request and
confirmed pursuant to subsection 3.15(d)(ii) in its acceptance of the
related CAF Advance Offer.
"CAF Advance Note": as defined in subsection 4.13(f).
"CAF Advance Offer": each offer by a Revolving Credit Lender to
make CAF Advances pursuant to a CAF Advance Request, which offer shall
contain the information specified in Exhibit C and shall be delivered to
the Administrative Agent by telephone, immediately confirmed by
facsimile transmission.
<PAGE> 14
6
"CAF Advance Request": each request by the Borrower for
Revolving Credit Lenders to submit bids to make CAF Advances, which
request shall contain the information in respect of such requested CAF
Advances specified in Exhibit D and shall be delivered to the
Administrative Agent in writing, by facsimile transmission, or by
telephone, immediately confirmed by facsimile transmission.
"California Mortgage Note": any promissory note, bond or other
instrument issued by the Borrower to a Subsidiary Guarantor on terms
reasonably satisfactory to the Administrative Agent which is secured by
a Lien on one or more parcels of Material Real Property of the Borrower
located in the State of California, Alaska, Nevada or Washington, as
amended, supplemented or otherwise modified from time to time with the
prior written consent of the Administrative Agent (which shall not be
unreasonably withheld).
"Capital Funds": of any Person, as of the date of determination
thereof, the sum of Consolidated Net Worth of such Person and
Consolidated Funded Debt of such Person at such date of determination.
"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing, provided that the Convertible Debentures
shall not constitute Capital Stock of the Borrower.
"Cash Collateral Account": as defined in subsection 4.1(b).
"Cash Interest Expense": of any Person for any period,
Consolidated Interest Expense of such Person for such period (a) minus,
in each case to the extent included in determining such Consolidated
Interest Expense for such period, the sum of the following: (i) non-cash
expenses for interest payable in kind and non-cash interest expense
related to closed stores and (ii) amortization of debt discount and fees
and (b) plus the sum of the following in each case to the extent
previously subtracted pursuant to clause (a) of this definition: cash
payments made by such Person or any Consolidated Subsidiary of such
Person during such period in respect of the items referred to in such
clause (a), provided that Cash Interest Expense shall in no event
include any fees or amortization of debt discount associated with the
transactions contemplated hereby or by the Convertible Preferred
Securities Offering.
"Chemical": Chemical Bank, a New York banking corporation, and
its successors.
"Closing Date": the date on which the initial Extensions of
Credit are made hereunder.
"Co-Arrangers": collectively, Bank of America National Trust and
Savings Association, Morgan Guaranty Trust Company of New York and The
Bank of New York.
"Code": the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral": the collective reference to the Pledged Stock, the
Mortgaged Properties, the Mortgage Assignments, all Security (as defined
in each Security Agreement), all Pledged
<PAGE> 15
7
Securities (as defined in the Pledge Agreement) and all other
property which is part of the Trust Estate.
"Commercial L/C Fee Rate": at any time, the rate per annum equal
to (a) the Applicable Margin then in effect for Eurodollar Loans which
are Revolving Credit Loans minus (b) 0.25%.
"Commercial Letter of Credit": as defined in subsection
3.6(b)(i).
"Committed Loan": any Term Loan or Revolving Credit Loan, as the
case may be.
"Committed Revolving Credit Extensions of Credit": as to any
Revolving Credit Lender at any time, an amount equal to the sum of (a)
the aggregate principal amount of all Revolving Credit Loans made by
such Revolving Credit Lender then outstanding and (b) such Revolving
Credit Lender's Revolving Credit Commitment Percentage of the L/C
Obligations then outstanding.
"Commitment": with respect to any Lender, such Lender's Term
Loan Commitment and/or Revolving Credit Commitment, as the case may be;
collectively, as to all the Lenders, the "Commitments".
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes
the Borrower and which is treated as a single employer under Section 414
of the Code.
"Confectionery Reserve": as of the last day of any fiscal month,
an amount equal to the amount, if any, by which the Inventory Value of
Inventory consisting of candy and other confectionery items exceeds an
amount equal to 2% of the Inventory Value of all Inventory as of such
day.
"Confidential Information": as defined in subsection 11.18.
"Consolidated": when used in connection with any defined term,
and not otherwise defined, means such term as it applies to any Person
and its Subsidiaries on a consolidated basis, after eliminating all
intercompany items.
"Continuing Directors": as defined in Section 9(j).
"Continuing Letter of Credit": each letter of credit that is
listed on Schedule 5.20 that is issued by a Lender or a Limited Purpose
Issuing Bank.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Convertible Debentures": the Convertible Junior Subordinated
Debentures issued by the Borrower to the Convertible Trust in connection
with the Convertible Preferred Securities Offering, including any
Convertible Junior Subordinated Debentures issued in connection with
<PAGE> 16
8
the exercise of the underwriters' over-allotment option, and any
debentures (with the same terms) issued in exchange therefor pursuant to
the Convertible Debenture Indenture as in effect on the Closing Date.
"Convertible Debenture Indenture": the Indenture pursuant to
which the Convertible Debentures will be issued on the Closing Date, as
the same may be amended, supplemented or otherwise modified from time to
time in accordance with this Agreement.
"Convertible Preferred Securities": the Trust Convertible
Preferred Securities issued by the Convertible Trust on the Closing Date
and any Trust Convertible Preferred Securities issued by the Convertible
Trust in connection with the exercise of the underwriters'
over-allotment option.
"Convertible Preferred Securities Documents": collectively, the
Convertible Preferred Securities Prospectus and the Convertible
Preferred Securities Underwriting Agreement.
"Convertible Preferred Securities Offering": as defined in
subsection 6.1(b).
"Convertible Preferred Securities Prospectus": the prospectus
pursuant to which the Convertible Preferred Securities are offered for
sale.
"Convertible Preferred Securities Underwriting Agreement": the
Underwriting Agreement entered into in connection with the Convertible
Preferred Securities Offering.
"Convertible Trust": Kmart Financing I, a Delaware statutory
business trust.
"Corporate Trustee": [ ], and its successors as
Corporate Trustee under the Trust Agreement, for the benefit of the
Secured Parties, unless express reference herein is made to, or the
context hereof requires that the reference be to, the Individual Trustee.
"Cost Complement": with respect to any fiscal month, the
percentage which the Inventory Value of all Inventory purchased by the
Borrower and the Subsidiary Guarantors from the beginning of the
relevant Fiscal Year through the end of such fiscal month represents of
total original selling price (exclusive of markdowns) of such Inventory.
For the purposes of the definition of "Markdown Reserve", the Cost
Complement shall be calculated separately for Builders Square, Inc. and
its Subsidiaries which are Subsidiary Guarantors, on the one hand, and
the Borrower and the other Subsidiary Guarantors, on the other hand.
"Debt": as to any Person at the date of any determination
thereof, the sum of the following to the extent such items should be
reflected on the consolidated balance sheet of such Person (excluding
any such items which appear only in the notes to such consolidated
balance sheet) at such date (without duplication): (a) all indebtedness
for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices),
(b) any other indebtedness which is evidenced by a note, bond, debenture
or similar instrument, (c) all obligations under Financing Leases, (d)
all obligations in respect of acceptances issued or created for the
account of such Person, and (e) all liabilities secured by any Lien on
any property owned by such Person even though such Person has not
assumed or
<PAGE> 17
9
otherwise become liable for the payment thereof, provided that the item
which in conformity with GAAP would reflect the amount of Convertible
Preferred Securities and/or the Convertible Debentures (and the
obligations of such Person with respect thereto) on the consolidated
balance sheet of such Person at such date of determination shall in no
event constitute Debt of such Person.
"Default": any of the events specified in Section 9, whether or
not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Designated Big Beaver Real Property": the collective reference
to the real property owned by the Big Beaver Joint Ventures as of the
Closing Date and designated as such on Schedule 5.19(c).
"Designated Lenders": as defined in subsection 6.1(a).
"Designated Value": with respect to any parcel of Eligible Big
Beaver Real Property at any time, the lesser of (a) the aggregate of the
aggregate then outstanding principal amount of Purchased Credit
Facilities and amounts advanced by the Borrower prior to and after the
Closing Date to complete construction of the related projects (i) owed
by the owner of such Eligible Big Beaver Real Property and (ii) with
respect to which the related promissory note or other evidence of
indebtedness is then subject to a perfected security interest in favor
of the Trustee subject to no prior Liens other than as permitted by
subsection 8.4(a) and (b) the value of such Eligible Big Beaver Real
Property set forth in the Final Appraisal or Preliminary Appraisal
delivered with respect thereto, provided that, (x) if a Final Appraisal
is not delivered with respect to any parcel of Eligible Big Beaver Real
Property as of the Closing Date, then upon delivery of such Final
Appraisal (i) the value of such parcel of Eligible Big Beaver Real
Property for purposes of this clause (b) shall be the value of such
parcel of Eligible Big Beaver Real Property set forth in such Final
Appraisal and (ii) the Borrowing Base shall (to the extent required) be
adjusted to reflect such value effective as of the delivery of the
Borrowing Base Certificate in respect of the fiscal month in which such
Final Appraisal is delivered to the Administrative Agent and (y) if, at
the time such Final Appraisal is delivered, the relevant parcel of
Eligible Big Beaver Real Property is still under construction, (i) the
Borrower may request that the Administrative Agent obtain another Final
Appraisal with respect to such parcel of Eligible Big Beaver Real
Property and (ii) if the Administrative Agent obtains any such Final
Appraisal, then, upon delivery of such Final Appraisal (A) the value of
such parcel of Eligible Big Beaver Real Property for purposes of this
clause (b) shall be the value of such parcel of Eligible Big Beaver Real
Property set forth in such Final Appraisal and (B) the Borrowing Base
shall be adjusted to reflect such value effective as of the last day of
the fiscal month in which such Final Appraisal is delivered.
"Discontinued Inventory Reserve": as of the last day of any
fiscal month, an amount equal to 75% of the Inventory Value of all
Inventory which has been designated as "discontinued" by the Borrower or
any Subsidiary Guarantor at least 18 months prior to such day on a basis
consistent with the Borrower's or the relevant Subsidiary Guarantor's
current and historical accounting practice.
"Dollar Equivalent": at any date of determination thereof with
respect to the face amount of any Letter of Credit issued in any
currency other than Dollars or any Reimbursement Obligations in respect
of any such Letter of Credit, an amount in Dollars
<PAGE> 18
10
equivalent to such face amount calculated at the rate of exchange quoted
by the Administrative Agent on such date of determination (at the hour
on such date of determination at which it customarily makes such
determination) to prime banks in the interbank market where its foreign
currency exchange operations in respect of the currency in which such
Letter of Credit is issued are then being conducted for the spot
purchase of such currency with Dollars.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Domestic Subsidiary": any Subsidiary of the Borrower organized
under the laws of any jurisdiction (including territories) within the
United States of America, excluding the Convertible Trust,
Securitization Entities, Inactive Subsidiaries, Special Purpose
Subsidiaries and Foreign Holding Companies.
"EBITDA": with respect to any period, EBITDAR for such period
minus, to the extent included in EBITDAR for such period, the
Consolidated Rental Expense of the Borrower for such period.
"EBITDAR": with respect to any period, Consolidated Net Income
of the Borrower for such period (a) plus, in each case to the extent
deducted in determining such Consolidated Net Income for such period,
the sum of the following: (i) Consolidated Interest Expense of the
Borrower, (ii) consolidated income tax expense of the Borrower and its
Consolidated Subsidiaries, (iii) consolidated depreciation and
amortization expense of the Borrower and its Consolidated Subsidiaries,
(iv) Consolidated Rental Expense of the Borrower, (v) other consolidated
non-recurring non-cash charges of the Borrower and its Consolidated
Subsidiaries and non-cash losses realized by the Borrower and its
Consolidated Subsidiaries upon the sale, disposition or refinancing of
Existing Real Properties and/or Repurchased Put Bonds and (vi) cash
payments received by the Borrower or any Consolidated Subsidiary during
such period in respect of non-recurring non- cash gains of the Borrower
taken subsequent to the first day of February 1996, and (b) minus the
sum of the following: (i) cash payments made by the Borrower or any
Consolidated Subsidiary during such period in respect of non-recurring
non-cash charges taken subsequent to the first day of February 1996 and
(ii) consolidated non-recurring non-cash gains of the Borrower and its
Consolidated Subsidiaries during such period.
"Eligible Big Beaver Real Property": at any time, any parcel of
Designated Big Beaver Real Property as to which each of the following
conditions shall have been satisfied at such time:
(a) the Administrative Agent shall have received a copy
of an as-built survey of such parcel of Designated Big Beaver
Real Property, if available;
(b) the Administrative Agent shall have received in
respect of such parcel of Designated Big Beaver Real Property a
title report, preliminary title certificate or commitment dated a
date reasonably satisfactory to the Administrative Agent to the
effect that title to such real property is vested in the owner
thereof free and clear of all mortgage liens and all defects and
encumbrances (other than those of a type that would constitute
Permitted Mortgage Liens), except such defects and encumbrances
as may be approved by the Administrative Agent;
<PAGE> 19
11
(c) the Administrative Agent shall have received a Final
Appraisal or Preliminary Appraisal with respect to such parcel of
Designated Big Beaver Real Property; and
(d) such parcel of Designated Big Beaver Real Property
shall be in compliance with all of the terms, covenants,
conditions, representations and warranties set forth in Schedule
1.1(b), provided that, (i) if any such term, covenant, condition,
representation or warranty shall reference any provision of this
Agreement, such reference shall be read without giving effect to
any qualification or limitation contained therein regarding a
Material Adverse Effect and (ii) if such parcel of Designated Big
Beaver Real Property ceases to be in compliance with any of the
terms, covenants, conditions, representations or warranties set
forth in Schedule 1.1(b), such parcel of Designated Big Beaver
Real Property shall cease (effective as of the delivery of the
next succeeding Borrowing Base Certificate) to be Eligible Big
Beaver Real Property during the continuation of such
non-compliance if such non-compliance could reasonably be
expected to have a material adverse effect on the value of such
parcel of Designated Big Beaver Real Property, but such
non-compliance shall not constitute, in and of itself, a Default
or Event of Default.
If a parcel of Designated Big Beaver Real Property becomes a parcel of
Eligible Big Beaver Real Property and is thereafter subsequently
developed or the development thereof is subsequently completed, the
Borrower may, at its option deliver a notice to the Administrative Agent
to the effect that the Borrower wishes to cause such parcel of
Designated Big Beaver Real Property to satisfy the requirements of this
definition as if (x) such parcel of Designated Big Beaver Real Property
became a parcel of Designated Big Beaver Real Property as of the date of
such notice and (y) such parcel of Designated Big Beaver Real Property
was not then a parcel of Eligible Big Beaver Real Property. Upon
delivery of any such notice, the Administrative Agent shall commission a
new final Appraisal with respect to such parcel of Designated Big Beaver
Real Property. Upon satisfaction of the conditions set forth in this
definition following such date with respect to such parcel of Designated
Big Beaver Real Property (other than the condition set forth in clause
(a) above and, in satisfaction of clause (b) above, the Borrower may
provide an updated title report, preliminary title certificate or
commitment dated from and after the date of the title report,
preliminary title certificate or commitment delivered as of the Closing
Date on the same conditions as such title report, preliminary title
certificate or commitment and otherwise satisfying the requirements of
such clause (b)), such parcel of Designated Big Beaver Real Property
shall, without duplication, be deemed to become a parcel of Eligible Big
Beaver Real Property as of the date such conditions are satisfied and
the Designated Value of such parcel of Eligible Big Beaver Real Property
shall be included in the Borrowing Base effective as of the delivery of
the Borrowing Base Certificate in respect of the fiscal month in which
such conditions are satisfied.
"Eligible California Real Property": at any time, any parcel of
Material Real Property of the Borrower located in the State of
California, Alaska, Nevada or Washington as to which each of the
following conditions has been satisfied at such time:
(a) (i) Such parcel of Material Real Property (A) is
comprised of a developed retail store, distribution center,
shopping center or office building with respect to which a
certificate of occupancy or temporary certificate of occupancy or
the local equivalent thereof (or any other similar proof of
completion) shall have been issued by the relevant Governmental
Authority or (B) is undeveloped and has a book value
<PAGE> 20
12
excluding soft costs) of at least $1,000,000, (ii) a Lien on such
parcel of Material Real Property shall have been granted by the
Borrower, in favor of a Subsidiary Guarantor pursuant to a
Subsidiary Mortgage securing California Mortgage Notes, (iii) such
Subsidiary Mortgage shall be in full force and effect in favor of
such Subsidiary Guarantor at such time, (iv) such Subsidiary
Mortgage shall have been recorded in the appropriate jurisdiction
or jurisdictions to perfect the Lien granted pursuant to such
Subsidiary Mortgage, (v) all applicable mortgage recording taxes
shall have been paid, provided that such Subsidiary Mortgage need
not have been so recorded (and any such mortgage recording taxes
need not have been so paid) if an effective title insurance policy
(naming such Subsidiary Guarantor as the insured thereunder) shall
have been issued that otherwise complies with the requirements of
clause (c) of this definition and that provides "gap" coverage
insuring against any exceptions that may arise prior to the actual
recording of such Subsidiary Mortgage (and the payment of any such
recording taxes), (vi) the California Mortgage Note or Notes
secured by the applicable Subsidiary Mortgage shall have been
pledged and delivered to the Trustee pursuant to the Pledge
Agreement at such time and (vii) a Mortgage Assignment, in
recordable form, and Assignment Financing Statements, in
recordable form, shall have been executed and delivered with
respect to such California Mortgage Note or Notes and shall be in
full force and effect in favor of the Trustee at such time;
(b) the Administrative Agent shall have received (i) and
the title insurance company issuing the policy referred to in
clause (c) of this definition shall have received, maps or plats
of an as-built survey of the sites of the Material Real Property
covered by such Subsidiary Mortgage certified to the
Administrative Agent and such title insurance company in a manner
reasonably satisfactory to them, dated a date reasonably
satisfactory to the Administrative Agent and such title insurance
company, by an independent professional licensed land surveyor
reasonably satisfactory to the Administrative Agent and such
title insurance company, which maps or plats and the surveys on
which they are based shall be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association
and the American Congress on Surveying and Mapping in 1992, and,
without limiting the generality of the foregoing, there shall be
surveyed and shown on such maps, plats or surveys the following:
(A) the locations on such sites of all the buildings, structures
and other improvements and the established building setback lines
(where setback information is readily obtainable); (B) the lines
of streets abutting such sites and the width thereof; (C) all
access and other easements appurtenant to such sites or necessary
to use such sites; (D) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar
encumbrances affecting such sites, whether recorded, apparent
from a physical inspection of such sites or otherwise known to
the surveyor; (E) any encroachments on any adjoining property by
the building structures and improvements on such sites; and (F)
if such sites are described as being on a filed map, a legend or
other information relating the survey to said map or (ii) in the
case of any such parcel of Material Real Property subject to a
Subsidiary Mortgage as of the Closing Date, a copy of an as-built
survey of such parcel of Material Real Property if such parcel of
Material Real Property has been developed as of the Closing Date
or a boundary survey of such parcel of Material Real Property if
such parcel of Material Real Property is undeveloped as of the
Closing Date, in each case prepared within five years prior to
the Closing Date;
<PAGE> 21
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(c) the Administrative Agent shall have received in
respect of such parcel of Material Real Property a mortgagee's
title policy (or policies) or marked up unconditional binder for
such insurance dated the Closing Date (in the case of any such
parcel of Material Real Property subject to a Subsidiary Mortgage
as of the Closing Date) or a date reasonably satisfactory to the
Administrative Agent otherwise. Each such policy shall (i) be in
an amount equal to the Mortgage Value (as of the date such parcel
of Material Real Property becomes a parcel of Eligible California
Real Property) of such parcel of Material Real Property; (ii) be
issued at ordinary rates; (iii) insure that the Subsidiary
Mortgage insured thereby creates a valid first Lien on such
parcel of Material Real Property free and clear of all defects
and encumbrances, except such as may be approved by the
Administrative Agent, Permitted Mortgage Liens and any Mortgage
Assignment; (iv) name the applicable Subsidiary Guarantor and the
Trustee as the insured as their interests may appear thereunder;
(v) be in the form of ALTA Loan Policy - 1992; (vi) contain a
comprehensive lender's endorsement and (vii) be issued by Chicago
Title Insurance Company, First American Title Insurance Company
or any other title company reasonably satisfactory to the
Administrative Agent (including any such title companies acting
as co- insurers or reinsurers, at the option of the
Administrative Agent). The Administrative Agent shall have
received (x) evidence satisfactory to it that all premiums in
respect of each such policy have been paid and (y) a copy of all
documents referred to, or listed as exceptions to title, in such
title policy (or policies);
(d) the Administrative Agent shall have received a Final
Appraisal with respect to such parcel of Material Real Property
or, in the case of any such parcel of Material Real Property
subject to a Subsidiary Mortgage as of the Closing Date, a
Preliminary Appraisal with respect to such parcel of Material
Real Property;
(e) with respect to any parcel of Material Real Property
(other than any parcel of Material Real Property subject to a
Subsidiary Mortgage as of the Closing Date), a Phase I
environmental report with respect to such parcel of Material Real
Property, dated a date not more than one year prior to the date
of delivery of the related Subsidiary Mortgage, showing no
material condition of environmental concern shall have been
delivered to the Administrative Agent and in form reasonably
satisfactory to the Administrative Agent;
(f) if such parcel of Material Real Property is subject to
a ground lease in favor of the Borrower as lessee, no consent
shall be required under such ground lease to mortgage or
foreclose upon such parcel of Material Real Property (or such
consent shall have been obtained); and
(g) such parcel of Material Real Property shall be in
compliance, or, as applicable, the owner or lessee thereof, shall
be in compliance, with all of the terms, covenants, conditions,
representations and warranties set forth in Schedule 1.1(b),
provided that, (i) if any such term, covenant, condition,
representation or warranty shall reference any provision of this
Agreement, such reference shall be read without giving effect to
any qualification or limitation contained therein regarding a
Material Adverse Effect, and (ii) if such parcel of Material Real
Property or, as applicable, the owner or lessee thereof ceases to
be in compliance with any of the terms, covenants, conditions,
representations or warranties set forth in Schedule 1.1(b), such
parcel of Material Real Property shall cease (effective as of the
delivery of the next succeeding
<PAGE> 22
14
Borrowing Base Certificate) to be Eligible California Real
Property during the continuation of such non-compliance if such
non- compliance could reasonably be expected to have a material
adverse effect on the value of such parcel of Material Real
Property, but such non-compliance shall not constitute, in and of
itself, a Default or Event of Default.
If a parcel of Material Real Property of the type described in clause
(a)(i)(B) of this definition becomes a parcel of Eligible California
Real Property and is thereafter subsequently developed such that such
parcel of Material Real Property satisfies the requirements of clause
(a)(i)(A) of this definition, the Borrower may, at its option, deliver a
notice to the Administrative Agent to the effect that the Borrower
wishes to cause such parcel of Material Real Property to satisfy the
requirements of this definition as if (x) such parcel of Material Real
Property became a parcel of Material Real Property as of the date of
such notice, (y) such parcel of Material Real Property was not then a
parcel of Eligible California Real Property and (z) if applicable, such
parcel of Material Real Property was not subject to a Subsidiary
Mortgage as of the Closing Date. Upon delivery of any such notice, the
Administrative Agent shall commission a new Final Appraisal with respect
to such parcel of Material Real Property. Upon satisfaction of the
conditions set forth in this definition following such date with respect
to such parcel of Material Real Property (other than the condition set
forth in clause (e) above and, in satisfaction of clause (c) above, the
Borrower may provide a date-down endorsement to the mortgagee's title
policy or binder delivered as of the Closing Date on the same conditions
as such policy or binder and otherwise satisfying the requirements of
such clause as to title insurance), such parcel of Material Real
Property shall, without duplication, be deemed to become a parcel of
Eligible California Real Property as of the date such conditions are
satisfied and the Mortgage Value of such parcel of Eligible California
Real Property shall be included in the Borrowing Base effective as of
the delivery of the Borrowing Base Certificate in respect of the fiscal
month in which such conditions are satisfied.
"Eligible Inventory Amount": as of the last day of any fiscal
month, (a) the Inventory Value of all Inventory of the Borrower and the
Subsidiary Guarantors that consists of finished goods as of such day
minus (b) the Ineligible Inventory Amount as of such day. For the
purposes of the definition of "Markdown Reserve", Builders Square, Inc.
and its Subsidiaries which are Subsidiary Guarantors shall be treated as
an entity separate from the Borrower and the other Subsidiary
Guarantors, and such amounts shall be calculated separately for Builders
Square, Inc. and its Subsidiaries which are Subsidiary Guarantors, on
the one hand, and the Borrower and the other Subsidiary Guarantors, on
the other hand.
"Eligible Inventory Borrowing Base Amount": as of the last day
of any fiscal month, an amount equal to (a) 55% of the Adjusted Eligible
Inventory Amount as of such day minus (b) the sum of (i) the Flow
Through Center Reserve for such fiscal month, (ii) the Special Order
Reserve for such fiscal month and (iii) the aggregate amount of gift
certificates then outstanding entitling the holder thereof to use all or
a portion thereof to pay all or a portion of the purchase price for any
Inventory as of such day which are not being held for escheatment or
which have not been escheated as of such day.
"Eligible Mortgaged Real Property": at any time, any parcel of
Material Real Property of the Borrower or any Subsidiary Guarantor
(other than parcels of Material Real Property of the Borrower located in
the State of California, Alaska, Nevada or Washington) as to which each
of the following conditions has been satisfied at such time:
<PAGE> 23
15
(a) (i) Such parcel of Material Real Property (A) is
comprised of a developed retail store, distribution center,
shopping center or office building with respect to which a
certificate of occupancy or temporary certificate of occupancy or
the local equivalent thereof (or any other similar proof of
completion) shall have been issued by the relevant Governmental
Authority or (B) is undeveloped and has a book value (excluding
soft costs) of at least $1,000,000, (ii) a Lien on such parcel of
Material Real Property shall have been granted by the Borrower or
such Subsidiary Guarantor, as the case may be, in favor of the
Trustee pursuant to a Mortgage, (iii) such Mortgage shall be in
full force and effect in favor of the Trustee at such time, (iv)
such Mortgage shall have been recorded in the appropriate
jurisdiction or jurisdictions to perfect the Lien granted
pursuant to such Mortgage and (v) all applicable mortgage
recording taxes shall have been paid, provided that such Mortgage
need not have been so recorded (and any such mortgage recording
taxes need not have been so paid) if an effective title insurance
policy (naming the Trustee for the benefit of the Secured Parties
as the insured thereunder) shall have been issued that otherwise
complies with the requirements of clause (c) of this definition
and that provides "gap" coverage insuring against any exceptions
that may arise prior to the actual recording of such Mortgage
(and the payment of any such recording taxes);
(b) the Administrative Agent shall have received (i) and
the title insurance company issuing the policy referred to in
clause (c) of this definition shall have received, maps or plats
of an as-built survey of the sites of the Material Real Property
covered by such Mortgage certified to the Administrative Agent
and such title insurance company in a manner reasonably
satisfactory to them, dated a date reasonably satisfactory to the
Administrative Agent and such title insurance company, by an
independent professional licensed land surveyor reasonably
satisfactory to the Administrative Agent and such title insurance
company, which maps or plats and the surveys on which they are
based shall be made in accordance with the Minimum Standard
Detail Requirements for Land Title Surveys jointly established
and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992, and, without
limiting the generality of the foregoing, there shall be surveyed
and shown on such maps, plats or surveys the following: (A) the
locations on such sites of all the buildings, structures and
other improvements and the established building setback lines
(where setback information is readily obtainable); (B) the lines
of streets abutting such sites and the width thereof; (C) all
access and other easements appurtenant to such sites or necessary
to use such sites; (D) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar
encumbrances affecting such sites, whether recorded, apparent
from a physical inspection of such sites or otherwise known to
the surveyor; (E) any encroachments on any adjoining property by
the building structures and improvements on such sites; and (F)
if such sites are described as being on a filed map, a legend or
other information relating the survey to said map or (ii) in the
case of any such parcel of Material Real Property subject to a
Mortgage as of the Closing Date, a copy of an as-built survey of
such parcel of Material Real Property if such parcel of Material
Real Property has been developed as of the Closing Date or a
boundary survey of such parcel of Material Real Property if such
parcel of Material Real Property is undeveloped as of the Closing
Date, in each case prepared within five years prior to the
Closing Date;
(c) the Administrative Agent shall have received in
respect of such parcel of Material Real Property a mortgagee's
title policy (or policies) or marked up
<PAGE> 24
16
unconditional binder for such insurance dated the Closing Date
(in the case of any such parcel of Material Real Property subject
to a Mortgage as of the Closing Date) or a date reasonably
satisfactory to the Administrative Agent otherwise. Each such
policy shall (i) be in an amount equal to the Mortgage Value (as
of the date such parcel of Material Real Property becomes a
parcel of Eligible Mortgaged Real Property) of such parcel of
Material Real Property, (ii) be issued at ordinary rates, (iii)
insure that the Mortgage insured thereby creates a valid first
Lien on such parcel of Material Real Property free and clear of
all defects and encumbrances, except such as may be approved by
the Administrative Agent and Permitted Mortgage Liens, (iv) name
the Trustee for the benefit of the Secured Parties as the insured
thereunder, (v) be in the form of ALTA Loan Policy - 1992, (vi)
contain a comprehensive lender's endorsement and (vii) be issued
by Chicago Title Insurance Company, First American Title
Insurance Company or any other title company reasonably
satisfactory to the Administrative Agent (including any such
title companies acting as co-insurers or reinsurers, at the
option of the Administrative Agent). The Administrative Agent
shall have received (x) evidence satisfactory to it that all
premiums in respect of each such policy have been paid and (y) a
copy of all documents referred to, or listed as exceptions to
title, in such title policy (or policies);
(d) the Administrative Agent shall have received a Final
Appraisal with respect to such parcel of Material Real Property
or, in the case of any such parcel of Material Real Property
subject to a Mortgage as of the Closing Date, a Preliminary
Appraisal with respect to such parcel of Material Real Property;
(e) with respect to any parcel of Material Real Property
(other than any parcel of Material Real Property subject to a
Mortgage as of the Closing Date), a Phase I environmental report
with respect to such parcel of Material Real Property, dated a
date not more than one year prior to the date of delivery of the
related Mortgage, showing no material condition of environmental
concern shall have been delivered to the Administrative Agent and
in form reasonably satisfactory to the Administrative Agent;
(f) if such parcel of Material Real Property is subject to
a ground lease in favor of the Borrower or any Subsidiary
Guarantor as lessee, no consent shall be required under such
ground lease to mortgage or foreclose upon such parcel of
Material Real Property (or such consent shall have been
obtained); and
(g) such parcel of Material Real Property shall be in
compliance, or, as applicable, the owner or lessee thereof, shall
be in compliance, with all of the terms, covenants, conditions,
representations and warranties set forth in Schedule 1.1(b),
provided that, (i) if any such term, covenant, condition,
representation or warranty shall reference any provision of this
Agreement, such reference shall be read without giving effect to
any qualification or limitation contained therein regarding a
Material Adverse Effect, and (ii) if such parcel of Material Real
Property or, as applicable, the owner or lessee thereof ceases to
be in compliance with any of the terms, covenants, conditions,
representations or warranties set forth in Schedule 1.1(b), such
parcel of Material Real Property shall cease (effective as of the
delivery of the next succeeding Borrowing Base Certificate) to be
Eligible Mortgaged Real Property during the continuation of such
non-compliance if such non-compliance could reasonably be
expected to have a material adverse effect on the value of such
parcel of Material Real
<PAGE> 25
17
Property, but such non-compliance shall not constitute, in and
of itself, a Default or Event of Default.
If a parcel of Material Real Property of the type described in clause
(a)(i)(B) of this definition becomes a parcel of Eligible Mortgaged Real
Property and is thereafter subsequently developed such that such parcel
of Material Real Property satisfies the requirements of clause (a)(i)(A)
of this definition, the Borrower may, at its option, deliver a notice to
the Administrative Agent to the effect that the Borrower wishes to cause
such parcel of Material Real Property to satisfy the requirements of
this definition as if (x) such parcel of Material Real Property became a
parcel of Material Real Property as of the date of such notice, (y) such
parcel of Material Real Property was not then a parcel of Eligible
Mortgaged Real Property and (z) if applicable, such parcel of Material
Real Property was not subject to a Mortgage as of the Closing Date.
Upon delivery of any such notice, the Administrative Agent shall
commission a new Final Appraisal with respect to such parcel of Material
Real Property. Upon satisfaction of the conditions set forth in this
definition following such date with respect to such parcel of Material
Real Property (other than the condition set forth in clause (e) above
and, in satisfaction of clause (c) above, the Borrower may provide a
date-down endorsement to the mortgagee's title policy or binder
delivered as of the Closing Date on the same conditions as such policy
or binder and otherwise satisfying the requirements of such clause as to
title insurance), such parcel of Material Real Property shall, without
duplication, be deemed to become a parcel of Eligible Mortgaged Real
Property as of the date such conditions are satisfied and the Mortgage
Value of such parcel of Eligible Mortgaged Real Property shall be
included in the Borrowing Base effective as of the delivery of the
Borrowing Base Certificate in respect of the fiscal month in which such
conditions are satisfied.
"Eligible Put Bond Real Property": at any time, any parcel of
Put Bond Real Property as to which each of the following conditions
shall have been satisfied at such time:
(a) (i) such parcel of Put Bond Real Property shall be
subject to a Lien granted under a Put Bond Mortgage or Mortgages
and such Lien shall be in full force and effect and shall not
have been released, (ii) the Repurchased Put Bonds secured by
such parcel of Put Bond Real Property shall have been pledged and
delivered to the Trustee pursuant to the Pledge Agreement at such
time and (iii) to the extent required to perfect the Lien in the
Repurchased Put Bonds created in favor of the Trustee pursuant to
the Pledge Agreement, a Mortgage Assignment and Assignment
Financing Statements, in recordable form, shall have been
executed and delivered with respect to such Put Bond Mortgages
and shall be in full force and effect in favor of the Trustee at
such time;
(b) the Administrative Agent shall have received a copy
of an as-built survey of such parcel of Put Bond Real Property,
if available;
(c) the Administrative Agent shall have received in
respect of such parcel of Put Bond Real Property a title report,
preliminary title certificate or commitment dated a date
reasonably satisfactory to the Administrative Agent to the effect
that the mortgage lien securing the relevant Repurchased Put
Bonds is a first priority mortgage Lien;
(d) the Administrative Agent shall have received a Final
Appraisal or Preliminary Appraisal with respect to such parcel of
Put Bond Real Property;
<PAGE> 26
18
(e) if such parcel of Put Bond Real Property is subject to
a ground lease in favor of the Borrower or any Subsidiary
Guarantor as lessee, no consent shall have been required under
such ground lease to mortgage or foreclose upon such parcel of
Put Bond Real Property (or such consent shall have been
obtained); and
(f) such parcel of Put Bond Real Property shall be in
compliance with all of the terms, covenants, conditions,
representations and warranties set forth in Schedule 1.1(b),
provided that, (i) if any such term, covenant, condition,
representation or warranty shall reference any provision of this
Agreement, such reference shall be read without giving effect to
any qualification or limitation contained therein regarding a
Material Adverse Effect, or (ii) if such parcel of Put Bond Real
Property ceases to be in compliance with any of the terms,
covenants, conditions, representations or warranties set forth in
Schedule 1.1(b), such parcel of Put Bond Real Property shall
cease (effective as of the delivery of the next succeeding
Borrowing Base Certificate) to be Eligible Put Bond Real Property
during the continuation of such non-compliance if such
non-compliance could reasonably be expected to have a material
adverse effect on the value of such parcel of Put Bond Real
Property, but such non-compliance shall not constitute, in and of
itself, a Default or Event of Default.
"Environmental Laws": any and all foreign, federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority or other
Requirements of Law (including common law) regulating, relating to or
imposing liability or standards of conduct concerning protection of
human health or the environment, as are now or may at any time hereafter
be in effect.
"Environmental Reserve Amount": at any time, an amount equal to
the product of (a) $150,000 and (b) the number of parcels of Eligible
Mortgaged Real Property, Eligible Big Beaver Real Property, Eligible Put
Bond Real Property and Eligible California Real Property which is
included in the Borrowing Base at such time.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors or
other Governmental Authority having jurisdiction with respect thereto)
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board of Governors)
maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate for deposits in Dollars for the period commencing on
the first day of such Interest Period and ending on the last day of such
Interest Period which appears on Telerate Page 3750 as of 10:00 A.M.,
New York City time, two Business Days prior to the beginning of such
Interest Period. If at least two rates appear on such Telerate Page for
such Interest Period, the "Eurodollar Base Rate" shall be the arithmetic
mean of such rates. If the "Eurodollar Base Rate" cannot be determined
in accordance with the immediately preceding sentences with respect to
any Interest Period, the
<PAGE> 27
19
"Eurodollar Base Rate" with respect to each day during such Interest
Period shall be the rate per annum equal to the average (rounded upward
to the nearest 1/16th of 1%) of the respective rates notified to the
Administrative Agent by each of the Reference Lenders as the rate at
which such Reference Lender is offered Dollar deposits at or about 10:00
A.M., New York City time, two Business Days prior to the beginning of
such Interest Period in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of
its Eurodollar Loans are then being conducted for delivery on the first
day of such Interest Period for the number of days comprised therein and
in an amount comparable to the amount of its Eurodollar Loan to be
outstanding during such Interest Period.
"Eurodollar Loans": Committed Loans the rate of interest
applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 9,
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Existing Credit Facilities": collectively, the Refinanced
Credit Facilities, the Purchased Credit Facilities and the Letter of
Credit Issuance Agreement.
"Existing Debt Related Transactions": as defined in subsection
6.1(c).
"Existing Real Property": the collective reference to all
parcels of Material Real Property as of the Closing Date other than any
parcel of Material Real Property which is undeveloped as of the Closing
Date.
"Existing Issuing Bank": each Person that has issued one or more
Continuing Letters of Credit.
"Existing Receivables Transactions": collectively, the
transactions contemplated under (i) the [ ] Program Agreement,
dated April 12, 1996, by and between [ ] and Builders Square,
Inc. and (ii) various store programs pursuant to which receivables
generated in connection with the sale of Inventory are sold to various
financing companies, in each case as such agreements and programs may
be amended, replaced, supplemented or otherwise modified from time to
time.
"Extension of Credit": with respect to any Lender, (a) the
making of a Loan by such Lender and (b) if such Lender is a Revolving
Credit Lender, the issuance or extension of a Letter of Credit;
collectively, as to all the Lenders, the "Extensions of Credit".
"FDIC": the Federal Deposit Insurance Corporation and any
Governmental Authority which succeeds to the powers and functions
thereof.
<PAGE> 28
20
"Federal Funds Effective Rate": as defined in the definition of
"ABR" contained in this subsection 1.1.
"Final Appraisal": with respect to any parcel of Material Real
Property, Put Bond Real Property or Designated Big Beaver Real Property,
a final complete appraisal of the value of such parcel of Material Real
Property, Put Bond Real Property or Designated Big Beaver Real Property,
as the case may be, commissioned in connection with this Agreement and
valued on an "alternative use" basis which in the reasonable judgment of
the Administrative Agent satisfies all applicable requirements of FIRREA
and the Uniform Standards of Professional Appraisal Practice.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of such lessee.
"FIRREA": the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended.
"Fiscal Year": each fiscal year of the Borrower. Fiscal Years
are referred to herein by reference to the calendar year in which the
first day of such Fiscal Year falls.
"Fixed Charge Coverage Ratio": as of the last day of any fiscal
quarter of the Borrower, the quotient of (A) EBITDAR for the period of
four fiscal quarters ending on the last day of such quarter divided by
(B) the sum of (i) Consolidated Cash Interest Expense of the Borrower
plus (ii) Consolidated Rental Expense of the Borrower, in each case for
such period.
"Fixed Rate CAF Advance": any CAF Advance made pursuant to a
Fixed Rate CAF Advance Request.
"Fixed Rate CAF Advance Request": any CAF Advance Request
requesting the Revolving Credit Lenders to offer to make CAF Advances at
an absolute rate which is not determined by reference to an external
source.
"Flow Through Center Reserve": with respect to any fiscal month,
the sum of (a) the average monthly amount paid by the Borrower and any
Subsidiary Guarantors in respect of fees charged by flow through centers
or distribution centers during the immediately preceding 12 fiscal month
period and (b) any such fees which are then overdue for less than 60
days.
"Foreign Holding Company": any Subsidiary organized under the
laws of any jurisdiction (including territories) within the United
States of America whose sole assets (exclusive of assets with an
aggregate book value not exceeding $1,000,000 and assets consisting of
advances or loans to the Borrower or any of its Subsidiaries) consist of
the Capital Stock of one or more Foreign Subsidiaries or other Foreign
Holding Companies.
"Foreign Subsidiary": any Subsidiary of the Borrower organized
under the laws of any jurisdiction outside the United States of America,
excluding Securitization Entities, Inactive Subsidiaries and Special
Purpose Subsidiaries, but including in any event Foreign Holding
Companies.
<PAGE> 29
21
"Foreign L/C Commitment Sublimit": at any time (a) prior to
January 1, 1997 $100,000,000, (b) on or after January 1, 1997 but prior
to January 1, 1998, $150,000,000 and (c) thereafter, $200,000,000.
"Funded Debt": as to any Person at the date of any determination
thereof, all Debt of such Person which by its terms or by the terms of
any instrument or agreement relating thereto matures more than one year
after the date of incurrence thereof, and any such Debt maturing within
one year from such date of incurrence which is directly or indirectly
renewable or extendible at the option of such Person to a date more than
one year from such date of determination (including an option of such
Person under a revolving credit or similar agreement obligating the
lender or lenders to extend credit over a period of more than one year
from such date of incurrence); provided, however, that for the purposes
of any determination of the Leverage Ratio hereunder the amount of
Funded Debt attributable to the Revolving Credit Loans and the CAF
Advances shall be the average daily outstanding amounts thereof for the
period of four fiscal quarters ending on or immediately preceding such
date of determination, except that in connection with any determination
of the Leverage Ratio prior to the end of the second fiscal quarter of
the 1997 Fiscal Year, the amount of Funded Debt attributable to the
Revolving Credit Loans and the CAF Advances shall be (a) $465,000,000
for each day during the third fiscal quarter of the 1995 Fiscal Year,
(b) $692,000,000 for each day during the fourth fiscal quarter of the
1995 Fiscal Year, (c) $322,000,000 for each day during the first fiscal
quarter of the 1996 Fiscal Year, and (d) $104,000,000 for each day
during the second fiscal quarter of the 1996 Fiscal Year.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time, provided that, solely for
purposes of determining compliance with subsection 8.1, "GAAP" shall
mean generally accepted accounting principles in the United States of
America as in effect on the date hereof.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Greeting Card Reserve": as of the last day of any fiscal month,
the excess of (a) the Inventory Value of all Inventory consisting of
greeting cards as of such day over (b) $37,500,000.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a guarantee, reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness (collectively, the "primary obligations") of any other
third Person (the "primary obligor"), in any manner, whether directly or
indirectly, or which guarantee, reimbursement, counterindemnity or
similar obligation should be reflected in a consolidated balance sheet
of the guaranteeing person (or in the notes thereto); provided, however,
that the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (b) the maximum amount for
which such guaranteeing
<PAGE> 30
22
person may be liable pursuant to the terms of the instrument embodying
such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee
Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower
in good faith.
"Inactive Subsidiary": any Subsidiary of the Borrower which (and
only for so long as such Subsidiary) (a) does not own assets with an
aggregate book value in excess of $1,000,000 and (b) is not then engaged
in any business.
"Indebtedness": of any Person at any date, (a) all indebtedness
of such Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities and current
accounts payable incurred in the ordinary course of business and payable
in accordance with customary practices), (b) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations (to the extent capitalized for
accounting purposes) of such Person under Financing Leases, (d) all
obligations of such Person in respect of acceptances issued or created
for the account of such Person, (e) all obligations of the types
described in the other clauses of this definition secured by any Lien on
any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof and (f) all
obligations of such Person in respect of interest rate and currency
hedging agreements. For purposes of this Agreement, the amount of any
Indebtedness referred to in clause (f) of the preceding sentence shall
be the net amounts, including any net termination payments, required to
be paid to a counterparty rather than any notional amount with regard to
which payments may be calculated.
"Indemnified Liabilities": as defined in subsection 11.5.
"Individual Trustee": [ ] and his successors as
Individual Trustee under the Trust Agreement, for the benefit of the
Secured Parties.
"Ineligible Inventory": as of the last day of any fiscal month,
all Inventory of the Borrower and the Subsidiary Guarantors that falls
in any one or more of the following categories as of such day:
(a) the Inventory (i) is not owned solely by the Borrower
or any such Subsidiary Guarantor, (ii) is leased by or on
consignment to the Borrower or any Subsidiary Guarantor or (iii)
is contained in a vending machine;
(b) the Inventory (including Inventory in transit from
vendors) that is not located at property that is owned or leased
by the Borrower or any Subsidiary Guarantor, other than with
respect to (i) Inventory which is located at flow through centers
or distribution centers (excluding timber reload centers) or (ii)
Inventory which is in transit from one property that is owned or
leased by the Borrower or any Subsidiary Guarantor (or a flow
through center or a distribution center) to another property that
is owned or leased by the Borrower or any Subsidiary Guarantor
(or a flow through center or a distribution center);
(c) the Inventory consists of packaged delicatessen
goods, dairy goods, meat products, produce or seafood;
<PAGE> 31
23
(d) the Inventory is intended for sale through the
restaurant, bakery or delicatessen operations of the Borrower or
any Subsidiary Guarantor;
(e) the Inventory consists of (i) books available for
sale in connection with the "Reader's Market" operations of the
Borrower or any Subsidiary Guarantor or (ii) magazines;
(f) the Inventory is subject to a layaway purchase by any
customer;
(g) the Inventory is located at any return center used by
the Borrower or any Subsidiary Guarantor;
(h) the Inventory (i) is not located in the United States
of America (excluding territories and possessions thereof) or
(ii) without limiting clause (i) above, is located in Puerto
Rico, the Virgin Islands or Guam; or
(i) the Inventory is not subject to a perfected security
interest in favor of the Trustee subject to only Permitted
Inventory Liens.
"Ineligible Inventory Amount": as of the last day of any fiscal
month, the sum of (a) the Inventory Value of all Ineligible Inventory of
the Borrower and the Subsidiary Guarantors as of such day plus (b) any
profit included in the Inventory Value of Inventory as a result of a
transfer of such Inventory from the Borrower to a Subsidiary or by any
Subsidiary to the Borrower or any other Subsidiary, plus (c) the
Confectionery Reserve at such time, plus (d) the Discontinued Inventory
Reserve at such time, plus (e) the Shrinkage Reserve at such time, plus
(f) the Return Reserve at such time plus (g) the Greeting Card Reserve
at such time plus (h) the Packaway Reserve plus (i) the Prescription
Drug Reserve at such time.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245
of ERISA.
"Intellectual Property": as defined in subsection 5.17.
"Interest Expense": of any Person for any period, (a) the amount
of interest expense, both expensed and capitalized, of such Person and
its Consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP for such period minus (b) the amount of interest
income of such Person and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with GAAP for such period, provided
that in no event shall Interest Expense include any distributions in
respect of the Convertible Preferred Securities or interest payments on
the Convertible Debenture or any fees or amortization of debt discount
associated with the transactions contemplated hereby or by the
Convertible Preferred Securities Offering, and the calculation of
Interest Expense shall not be impacted or affected by the sale or other
disposition of the Repurchased Put Bonds.
"Interest Payment Date": (a) as to any ABR Loan, the last day of
each March, June, September and December, (b) as to any Eurodollar Loan
having an Interest Period of three months or less, the last day of such
Interest Period, and (c) as to any Eurodollar Loan having an Interest
Period longer than three months, each day which is three months, or a
whole
<PAGE> 32
24
multiple thereof, after the first day of such Interest Period and the
last day of such Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(a) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such
Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of
borrowing or notice of conversion, as the case may be, given with
respect thereto; and
(b) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Eurodollar
Loan and ending one, two, three or six months thereafter, as
selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to
the last day of the then current Interest Period with respect
thereto;
provided that, all of the foregoing provisions relating to
Interest Periods are subject to the following:
(1) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall be
extended to the next succeeding 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 immediately preceding Business Day;
(2) any Interest Period that would otherwise extend
beyond, in the case of Eurodollar Loans which are Revolving
Credit Loans, the Revolving Credit Termination Date or, in the
case of Eurodollar Loans which are Term Loans, beyond the date
final payment is due on such Term Loans shall end on the
Revolving Credit Termination Date or such date of final payment,
as the case may be; and
(3) any Interest Period that begins on the last Business
Day of a calendar month (or 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 a
calendar month.
"Inventory Security Agreement": the Inventory Security Agreement
made by the Borrower and the Subsidiary Guarantors (other than the Big
Beaver Companies) in favor of the Trustee, substantially in the form of
Exhibit A-2 to the Trust Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Inventory Value": with respect to any Inventory of the Borrower
or any Subsidiary Guarantor, the value of such Inventory valued at cost
on a basis consistent with the Borrower's or such Subsidiary Guarantor's
current and historical accounting practice (without giving effect to
LIFO reserves, general ledger reserves for discontinued inventory,
markdowns, inter-company profit, rebates and discounts, any cut off
adjustments, revaluation adjustments, purchase price adjustments or
adjustments with respect to the capitalization of buying, occupancy,
distribution and other overhead costs reflected on the consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries in
respect of Inventory) plus freight charges incurred in connection
therewith. The value of the Inventory as set forth above will, without
<PAGE> 33
25
duplication, be calculated net of the reserve established by the
Borrower or any Subsidiary Guarantor on a basis consistent with the
Borrower's or such Subsidiary Guarantor's current and historical
accounting practice in respect of lost, misplaced or stolen Inventory at
such time.
"Investment": as defined in subsection 8.9.
"Issuing Banks": initially, (a) each Lender specified on
Schedule 1.1(a) as an Issuing Bank, (b) each Existing Issuing Bank
listed on Part I of Schedule 5.20 and (c) each Limited Purpose Issuing
Bank, in each case in its capacity as issuer of a Letter of Credit.
Additional Lenders may from time to time be designated as "Issuing
Banks" by the Borrower (with the consent of such Lender and with the
consent (which shall not be unreasonably withheld) of the Administrative
Agent) by written notice to such effect from the Borrower to the
Administrative Agent.
"Judgment Currency": as defined in subsection 11.19.
"L/C Commitment": at any time, the lesser of (a)(i) prior to
January 1, 1997, $750,000,000, (ii) on or after January 1, 1997 but
prior to January 1, 1998, $1,250,000,000 and (iii) thereafter,
$1,500,000,000, and (b) the Revolving Credit Commitments then in effect.
"L/C Fee Payment Date": the last day of each March, June,
September and December and the Revolving Credit Termination Date.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit issued in Dollars, (b) the Dollar
Equivalent of the aggregate then undrawn and unexpired amount of the
then outstanding Letters of Credit issued in currencies other than
Dollars (such Dollar Equivalent to be calculated as of the date of
issuance of such Letters of Credit), (c) the aggregate amount of
Reimbursement Obligations in respect of Letters of Credit issued in
Dollars which have not then been paid pursuant to subsection 3.10(a) and
(d) the Dollar Equivalent of the aggregate amount of Reimbursement
Obligations in respect of Letters of Credit issued in currencies other
than Dollars which have not then been paid pursuant to subsection
3.10(a) (such Dollar Equivalent to be calculated as of the date such
Reimbursement Obligation becomes due and payable).
"L/C Participants": the collective reference to all the
Revolving Credit Lenders.
"Lenders": as defined in the preamble to this Agreement.
"Letter of Credit Issuance Agreement": the Letter of Credit
Issuance Agreement, dated as of February 29, 1996, among the Borrower,
[ ], as agent, and the financial institutions parties thereto,
as amended.
"Letters of Credit": as defined in subsection 3.6(a).
"Leverage Ratio": as of any day of determination thereof, the
quotient of (a) Consolidated Funded Debt of the Borrower as of such day
divided by (b) Consolidated Capital Funds of the Borrower as of such
day.
<PAGE> 34
26
"LIBO Rate": in respect of any LIBO Rate CAF Advance, the London
interbank offered rate for deposits in Dollars for the period commencing
on the date of such CAF Advance and ending on the CAF Advance Maturity
Date with respect thereto which appears on Telerate Page 3750 as of
11:00 A.M., London time, two Business Days prior to the beginning of
such period.
"LIBO Rate CAF Advance": any CAF Advance made pursuant to a LIBO
Rate CAF Advance Request.
"LIBO Rate CAF Advance Request": any CAF Advance Request
requesting the Lenders to offer to make CAF Advances at an interest rate
equal to the LIBO Rate plus (or minus) a margin.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"Limited Purpose Issuing Bank": each Person that executes and
delivers a Limited Purpose Issuing Bank Addendum with respect to one or
more of the letters of credit issued by such Person that are listed on
Part II of Schedule 5.20.
"Limited Purpose Issuing Bank Addendum": an instrument,
substantially in the form of Exhibit N, with such changes thereto as may
be reasonably acceptable to the Administrative Agent and the Borrower.
"Loan": any Term Loan, Revolving Credit Loan or CAF Advance, as
the case may be.
"Loan Documents": this Agreement, any Notes, the Trust
Agreement, the Subsidiaries Guarantee, the Security Documents and any
Applications.
"Loan Parties": the collective reference to the Borrower, the
Subsidiary Guarantors and any other Subsidiary from time to time party
to any Loan Document.
"Majority Lenders": at any time, Lenders the Voting Percentages
of which aggregate more than 50%.
"Majority Revolving Credit Lenders": at any time, Revolving
Credit Lenders the Revolving Credit Commitment Percentages of which
aggregate more than 50%.
"Majority Term Loan Lenders": at any time, Term Loan Lenders the
Term Loan Commitment Percentages of which aggregate more than 50%.
"Margin Level Status": as to the Borrower, the existence of
Margin Level I Status, Margin Level II Status, Margin Level III Status,
Margin Level IV Status, Margin Level V Status, Margin Level VI Status or
Margin Level VII Status, as the case may be.
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27
"Margin Level I Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such
Adjustment Date is less than or equal to 1.75 to 1.00.
"Margin Level II Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such
Adjustment Date is greater than 1.75 to 1.00 but less than or equal to
2.00 to 1.00.
"Margin Level III Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such
Adjustment Date is greater than 2.00 to 1.00 but less than or equal to
2.25 to 1.00.
"Margin Level IV Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such
Adjustment Date is greater than 2.25 to 1.00 but less than or equal to
2.50 to 1.00.
"Margin Level V Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such
Adjustment Date is greater than 2.50 to 1.00 but less than or equal to
2.75 to 1.00.
"Margin Level VI Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such
Adjustment Date is greater than 2.75 to 1.00 but less than or equal to
3.00 to 1.00.
"Margin Level VII Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such
Adjustment Date is greater than 3.00 to 1.00.
"Markdown Percentage": with respect to any fiscal month, the
percentage which the aggregate amount of markdowns by the Borrower and
the Subsidiary Guarantors from the beginning of the relevant Fiscal Year
through the end of such fiscal month represents of total sales of the
Borrower and the Subsidiary Guarantors from the beginning of the
relevant Fiscal Year through the end of such fiscal month. The
"Markdown Percentage" shall be calculated separately for Builders
Square, Inc. and its Subsidiaries which are Subsidiary Guarantors, on
the one hand, and the Borrower and the other Subsidiary Guarantors, on
the other hand.
"Markdown Reserve": with respect to any fiscal month, an amount
equal to the product of (x) an amount equal to 50% of the Eligible
Inventory Amount as of the last day of such fiscal month times (y) the
product of (i) the Markdown Percentage for such fiscal month and (ii)
the Cost Complement for such fiscal month. The "Markdown Reserve" shall
be calculated separately for Builders Square, Inc. and its Subsidiaries
which are Subsidiary Guarantors, on the one hand, and the Borrower and
the other Subsidiary Guarantors, on the other hand, and then combined to
produce the "Markdown Reserve".
<PAGE> 36
28
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole or (b)
the validity or enforceability of this Agreement or any of the other
Loan Documents or the material rights or remedies of the Trustee, the
Administrative Agent or the Lenders hereunder or thereunder; it being
understood that any past or future reduction in the Borrower's or any
Subsidiary's credit rating or decline in the market price of the
Borrower's or any Subsidiary's equity securities shall not in and of
themselves be deemed to constitute a Material Adverse Effect.
"Material Real Property": real property not subject to a
mortgage, deed of trust or other similar instrument (other than pursuant
hereto) that (a) (i) is owned in fee by the Borrower or any Subsidiary
Guarantor and is not subject to a ground lease in favor of any other
Person as lessee, (ii) is located in the United States or Puerto Rico
and (iii) (A) has been developed with a retail store, distribution
center, shopping center or office building with respect to which a
certificate of occupancy or temporary certificate of occupancy shall
have been issued by the relevant Governmental Authority, (B) is being
developed with a retail store, distribution center, shopping center or
office building which is under construction as of the Closing Date or
(C) is undeveloped and has a book value (excluding soft costs) of at
least $1,000,000 or (b) (i) (A) consists of a developed retail store,
distribution center, shopping center or office building with respect to
which a certificate of occupancy or temporary certificate of occupancy
shall have been issued by the relevant Governmental Authority, or (B) is
being developed with a retail store, distribution center, shopping
center or office building which is under construction as of the Closing
Date, (ii) is located on property which is subject to a ground lease in
favor of the Borrower or any Subsidiary Guarantor as lessee and no
consent shall be required under such ground lease to mortgage or
foreclose upon such property (or such consent shall have been obtained),
(iii) is or, upon completion, will be classified as an owned retail
store, distribution center, shopping center or office building by the
Borrower or such Subsidiary Guarantor and (iv) is located in the United
States or Puerto Rico.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or
any hazardous or toxic substances, materials or wastes, defined or
regulated as such in or under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation.
"Meldisco": the collective reference to the Meldisco Shoe
Company subsidiaries which operate the footwear departments in the
Borrower's retail stores.
"Moody's": Moody's Investors Service, Inc.
"Mortgage Value": (a) with respect to any parcel of Eligible
Mortgaged Real Property or Eligible California Real Property, the lesser
of (i) the maximum amount secured by the Lien on such parcel of Eligible
Mortgaged Real Property or Eligible California Real Property, as the
case may be, granted in favor of the applicable secured mortgagee
pursuant to the relevant Mortgage or Subsidiary Mortgage, as the case
may be, and (ii) the value of such parcel of Eligible Mortgaged Real
Property or Eligible California Real Property, as the case may be, set
forth in the Final Appraisal delivered with respect thereto or, in the
case of any parcel of Eligible Mortgaged Real Property or Eligible
California Real Property as of the Closing Date, set forth in the
Preliminary Appraisal with respect thereto, provided that, if a Final
Appraisal is not delivered with respect to any parcel of Eligible
Mortgaged Real Property or Eligible
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29
California Real Property as of the Closing Date, then upon delivery of
such Final Appraisal (A) the value of such parcel of Eligible Mortgaged
Real Property or Eligible California Real Property, as the case may be,
for purposes of clause (ii) above shall be the value of such parcel of
Eligible Mortgaged Real Property or Eligible California Real Property,
as the case may be, set forth in such Final Appraisal and (B) the
Borrowing Base shall be adjusted to reflect such value effective as of
the delivery of the Borrowing Base Certificate in respect of the fiscal
month in which such Final Appraisal is delivered to the Administrative
Agent, provided, further, that in no event shall the Mortgage Value of
any parcel of Eligible California Real Property exceed the amount
secured by the Lien on such parcel of Eligible California Real Property
under the related California Mortgage Note or Notes and (b) with respect
to any parcel of Eligible Put Bond Real Property at any time, the least
of (i) the aggregate principal amount of Repurchased Put Bonds (not
including any principal which has not accreted on the date of valuation)
(A) which is secured by a Lien on such parcel of Eligible Put Bond Real
Property created pursuant to the applicable Put Bond Mortgages and (B)
with respect to which the related promissory note or other evidence of
indebtedness is then subject to a perfected security interest in favor
of the Trustee, (ii) the maximum amount secured by the Lien on such
parcel of Eligible Put Bond Real Property created pursuant to the
applicable Put Bond Mortgages and (iii) the value of such parcel of
Eligible Put Bond Real Property set forth in the Final Appraisal or
Preliminary Appraisal delivered with respect thereto, provided that, if
a Final Appraisal is not delivered with respect to any parcel of
Eligible Put Bond Real Property as of the Closing Date, then upon
delivery of such Final Appraisal (A) the value of such parcel of
Eligible Put Bond Real Property for purposes of this clause (iii) shall
be the value of such parcel of Eligible Put Bond Real Property set forth
in such Final Appraisal and (B) the Borrowing Base shall (to the extent
required) be adjusted to reflect such value effective as of the delivery
of the Borrowing Base Certificate in respect of the fiscal month in
which such Final Appraisal is delivered to the Administrative Agent.
"Mortgages": the collective reference to the fee and ground
leasehold mortgages, deeds of trust and other similar documents executed
and delivered from time to time by the Borrower and the Subsidiary
Guarantors in favor of the Trustee, pursuant to the Trust Agreement or
this Agreement, substantially in the form of Exhibit B to the Trust
Agreement or, if such Exhibit is not appropriate under applicable law in
the jurisdiction in which the relevant real property is located, in such
other form as shall be reasonably satisfactory to the Borrower and the
Administrative Agent, as each of the same may be amended, supplemented
or otherwise modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) with respect to any Asset Sale (other
than Asset Sales in connection with Securitization Transactions), the
cash proceeds (including Cash Equivalents and any cash payments received
by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or
otherwise, but only as and when received) of such Asset Sale received by
the Borrower or any of its Restricted Subsidiaries, net of all
attorneys' fees, accountants' fees, investment banking fees, survey
costs, title insurance premiums, and other customary fees actually
incurred by the Borrower or any of its Restricted Subsidiaries and
documented in connection therewith and net of taxes paid or reasonably
expected to be payable by the Borrower or any of its Restricted
Subsidiaries as a result thereof, net of purchase price adjustments
reasonably expected to be payable by the Borrower or any of its
Restricted Subsidiaries in connection therewith and
<PAGE> 38
30
repayments of the principal amount of Indebtedness (other than the
Loans) and any make-whole payments related thereto required to be
prepaid upon the sale of the assets so sold or otherwise disposed of,
(b) in connection with any issuance by Borrower or any of its Restricted
Subsidiaries of debt securities or instruments, or the incurrence of
Indebtedness, the cash proceeds (including Cash Equivalents) received by
the Borrower or any of its Restricted Subsidiaries from such issuance of
securities or incurrence of such Indebtedness net of all investment
banking fees, legal fees, accountants fees, underwriting discounts and
commissions and other customary fees and expenses, actually incurred by
the Borrower or any of its Restricted Subsidiaries and documented in
connection therewith and (c) with respect to Asset Sales in connection
with a Securitization Transaction, the cash proceeds (including Cash
Equivalents) received by the Borrower or any of its Restricted
Subsidiaries from the issuance of securities or incurrence of
Indebtedness in connection with such Securitization Transaction net of
all investment banking fees, legal fees, accountants fees, underwriting
discounts and commissions and other customary fees and expenses,
actually incurred by the Borrower or any of its Restricted Subsidiaries
and documented in connection therewith and repayments of the principal
amount of Indebtedness (other than the Loans) and any make-whole
payments related thereto required to be prepaid upon the sale of the
assets that are the subject of such Securitization Transaction.
"Net Income": of any Person for any period, net income of such
Person and its Consolidated Subsidiaries, determined on a consolidated
basis in accordance with GAAP for such period.
"Net Revenue": of any Person for any period, net revenue of such
Person and its Consolidated Subsidiaries, determined on a consolidated
basis in accordance with GAAP for such period.
"Net Worth": of any Person, as of the date of determination
thereof, the sum of (without duplication) (a) all items which in
conformity with GAAP would be included under shareholders' equity on a
consolidated balance sheet of such Person and its Consolidated
Subsidiaries at such date of determination, (b) the item which in
conformity with GAAP would reflect the amount of Convertible Preferred
Securities and/or the Convertible Debentures (and the obligations of
such Person with respect thereto) on the consolidated balance sheet of
such Person and its Consolidated Subsidiaries at such date of
determination and (c) the excess, if any, of (i) the aggregate amount of
net after-tax non-cash charges resulting from the write-down of assets
that have the effect of reducing the amount set forth in clause (a)
above, taken after the end of the 1995 Fiscal Year in connection with
the sale or other disposition of any asset the sale of which would
constitute a Scheduled Asset Sale over (ii) any reversal of any of the
foregoing charges.
"Non-Excluded Taxes": as defined in subsection 4.10.
"Non-Executing Persons": as defined in subsection 6.1(a).
"Notes": the collective reference to any Revolving Credit Notes,
any Term Notes and any CAF Advance Notes.
"Packaway Reserve": $10,000,000.
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31
"parcel": when used in connection with any parcel of real
property, means such parcel of real property, together with all of the
structures, buildings and other improvements located thereon and all
other property associated therewith and, when used in connection with
any parcel of real property subject to a ground lease in favor of the
Borrower or any Subsidiary Guarantor as lessee, means the leasehold
interest in such ground lease.
"Participant": as defined in subsection 11.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any Governmental
Authority which succeeds to the powers and functions thereof.
"Permitted Inventory Liens": the collective reference to Liens
permitted by subsections 8.4(a) and 8.4(b).
"Permitted Mortgage Liens": the collective reference to Liens
permitted by subsections 8.4(a), 8.4(b) and 8.4(e).
"Permitted Pari Passu Senior Debt": Indebtedness incurred
pursuant to subsection 8.2(j), no part of the principal of which is
scheduled to mature prior to the date which is three months after the
Term Loan Maturity Date.
"Permitted Sale-Leaseback": as defined in subsection 8.12.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, limited liability company, Governmental Authority or other
entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Pledge Agreement": the Securities Pledge Agreement made by the
Borrower and certain of the Subsidiary Guarantors in favor of the
Trustee, in substantially the form of Exhibit C to the Trust Agreement,
as the same may be amended, supplemented or otherwise modified from time
to time.
"Pledgors": the collective reference to the pledgors parties to
the Pledge Agreement.
"Preliminary Appraisal": with respect to any parcel of Material
Real Property, Put Bond Real Property or Designated Big Beaver Real
Property as of the Closing Date, a preliminary appraisal in summary form
of the value of such parcel of Material Real Property, Put Bond Real
Property or Designated Big Beaver Real Property, as the case may be,
commissioned in connection with this Agreement and valued on an
"alternative use" basis which in the reasonable judgment of the
Administrative Agent satisfies all applicable requirements of FIRREA and
the Uniform Standards of Professional Appraisal Practice.
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"Preliminary Prospectus": the Prospectus Supplement, issued May
24, 1996, with respect to the Convertible Preferred Securities.
"Prescription Drug Reserve": as of the last day of any fiscal
month, an amount equal to 50% of the Inventory Value of all Inventory
consisting of prescription drugs as of such day.
"Purchased Credit Facilities": collectively, the credit
facilities under the Big Beaver Loan Agreements.
"Put Bond Mortgages": as defined in subsection 5.19(b).
"Put Bond Real Property": any parcel of real property subject to
a Lien created pursuant to the Put Bond Mortgages to secure the
repayment of all or a portion of the Repurchased Put Bonds.
"Reference Lenders": Chemical, Bank of America National Trust
and Savings Association and The Bank of New York.
"Refinanced Credit Facilities": collectively, the credit
facilities described on Schedule 6.1(c) under the heading "Refinanced
Credit Facilities".
"Refinanced Three Year Facility": as defined in subsection
11.22.
"Refinancings": as defined in subsection 6.1(c).
"Register": as defined in subsection 11.6(d).
"Regulation U": Regulation U of the Board of Governors as in
effect from time to time.
"Reimbursement Obligation": the obligation of the Borrower
pursuant to subsection 3.10(a) to reimburse each Issuing Bank for
amounts drawn under any Letter of Credit issued by such Issuing Bank.
"Rental Expense": of any Person for any period, the aggregate
amount of fixed and contingent rentals payable by such Person for such
period in accordance with GAAP with respect to leases of real property
minus the aggregate amount of rental income (including licensee related
income from licensees operating on the store premises of the Borrower
and its Subsidiaries) payable to such Person for such period in
accordance with GAAP with respect to leases of real and personal
property.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .13, .14, .16, .18, .19 or .20
of PBGC Reg. Section 2615.
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33
"Repurchased Put Bonds": collectively, the bonds or notes or
certificates issued pursuant to the agreements described on Schedule
6.1(c) under the heading "Repurchased Put Bonds", as amended,
supplemented, substituted, replaced or otherwise modified from time to
time.
"Required Lenders": at any time, Lenders the Voting Percentages
of which aggregate more than 66-2/3%.
"Required Term Loan Lenders": at any time, Term Loan Lenders the
Term Loan Commitment Percentages of which aggregate more than 66-2/3%.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents
of such Person, and any law, statute, ordinance, code, decree, treaty,
rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject (including, without limitation, laws, ordinances and
regulations pertaining to the zoning, occupancy and subdivision of real
property).
"Responsible Officer": the chief executive officer, the
president, any executive vice president, the chief financial officer or
the treasurer of the Borrower or, with respect to financial matters, the
chief executive officer, the president, the executive vice
president-finance, the chief financial officer or treasurer of the
Borrower, provided that, for purposes of Section 9(d) only, a
"Responsible Officer" shall also include any other senior executive
officer of the Borrower, as well as the general counsel, vice president
- real estate finance, vice president - real estate and any assistant
treasurer of the Borrower.
"Restricted Payments": as defined in subsection 8.7.
"Restricted Subsidiaries": collectively, the Domestic
Subsidiaries and Significant Foreign Subsidiaries.
"Return Reserve": with respect to any fiscal month, the average
monthly amount of Inventory transferred by the Borrower and the
Subsidiary Guarantors to return centers during the immediately preceding
12 fiscal month period.
"Revolving Credit Commitment": as to any Lender, the obligation
of such Lender to make Revolving Credit Loans to and/or issue or
participate in Letters of Credit issued on behalf of the Borrower
hereunder in an aggregate principal and/or face amount at any one time
outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule 1.1(a) under the heading "Revolving Credit Commitment",
as such amount may be reduced from time to time pursuant to this
Agreement or as such amount may be adjusted from time to time pursuant
to subsection 11.6; collectively, as to all such Lenders, the "Revolving
Credit Commitments".
"Revolving Credit Commitment Percentage": as to any Revolving
Credit Lender (a) at any time prior to the termination of the Revolving
Credit Commitments, the percentage of the Revolving Credit Commitments
then constituted by such Revolving Credit Lender's Revolving Credit
Commitment and (b) at any time after the termination of the Revolving
Credit
<PAGE> 42
34
Commitments, the percentage which (i) the sum of (x) such Revolving
Credit Lender's Revolving Credit Loans then outstanding plus (y) the
product of such Revolving Credit Lender's Revolving Credit Commitment
Percentage immediately prior to the termination of the Revolving Credit
Commitments (after giving effect to any permitted assignment pursuant to
subsection 11.6) times the L/C Obligations then outstanding then
constitutes of (ii) the sum of (x) the aggregate principal amount of
Revolving Credit Loans of all the Revolving Credit Lenders then
outstanding plus (y) the aggregate L/C Obligations then outstanding.
"Revolving Credit Commitment Period": the period from and
including the Closing Date to but not including the Revolving Credit
Termination Date or such earlier date on which the Revolving Credit
Commitments shall terminate as provided herein.
"Revolving Credit Lender": any Lender with an unused Revolving
Credit Commitment hereunder and/or any Revolving Credit Loans
outstanding hereunder; collectively, the "Revolving Credit Lenders".
"Revolving Credit Loans": as defined in subsection 3.1.
"Revolving Credit Note": as defined in subsection 4.13(e).
"Revolving Credit Termination Date": the third anniversary of
the Closing Date.
"Rio Piedras Property": the real property located in Rio
Piedras, Puerto Rico that is owned by Big Beaver of Rio Piedras
Development Corporation, a Subsidiary of the Borrower.
"Sale-Leaseback": as defined in subsection 8.12.
"S&P": Standard & Poor's Ratings Group.
"Scheduled Asset Sales": as defined in subsection 8.6(f).
"SEC": the Securities and Exchange Commission and any
Governmental Authority which succeeds to the powers and functions
thereof.
"Securitization Entity": with respect to the Borrower or any
Subsidiary, a corporation, partnership, trust, limited liability company
or other entity that is formed by the Borrower or such Subsidiary for
the purpose of effecting or facilitating a Securitization Transaction
and which engages in no business and incurs no Indebtedness or other
liabilities other than those related to or incidental to a
Securitization Transaction.
"Securitization Transactions": a transaction or series of
related transactions pursuant to which a corporation, partnership,
trust, limited liability company or other entity incurs obligations or
issues interests, the proceeds of which are used to finance a discrete
pool (which may be fixed or revolving) of receivables, leases or other
financial assets, or a discrete portfolio of real property or equipment.
"Security Agreement": the Security Agreement made by the
Borrower and the Subsidiary Guarantors (other than the Big Beaver
Companies) in favor of the Trustee,
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35
substantially in the form of Exhibit A-1 to the Trust Agreement, as the
same may be amended, supplemented or otherwise modified from time to
time.
"Shrinkage Reserve": at any time, an amount equal to the excess,
if any, of (a) an amount equal to the product of (i) the average
percentage of Inventory which was identified as lost, misplaced or
stolen Inventory (expressed as a percentage of total sales of the
Borrower and the Subsidiary Guarantors for the relevant period) in
connection with the then two most recent year-end physical inventories
conducted by the Borrower and the Subsidiary Guarantors and (ii) the
product of (A) the total sales of the Borrower and the Subsidiary
Guarantors for the period commencing at the beginning of the Fiscal Year
in which such determination is made and ending at the end of the most
recently ended fiscal month and (B) the Cost Complement with respect to
the most recently ended fiscal month over (b) the reserve established by
the Borrower or any Subsidiary Guarantor on a basis consistent with the
Borrower's or such Subsidiary Guarantor's current and historical
accounting practice in respect of lost, misplaced or stolen Inventory at
such time.
"Significant Foreign Subsidiary": any Foreign Subsidiary which
is a Significant Subsidiary.
"Significant Subsidiary": any Subsidiary (a) the Total Assets of
which exceed 10% of the Total Assets of the Borrower and its
Consolidated Subsidiaries as of the end of the most recently completed
Fiscal Year or (b) the Net Revenue of which exceeds 10% of the Net
Revenue of the Borrower and its Consolidated Subsidiaries as of the end
of the most recently completed Fiscal Year.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as
of any date of determination, (a) the amount of the "present fair
saleable value" of the assets of such Person and its Subsidiaries, taken
as a whole, will, as of such date, exceed the amount that will be
required to pay all "liabilities of such Person and its Subsidiaries,
taken as a whole, contingent or otherwise", as of such date (as such
quoted terms are determined in accordance with applicable federal and
state laws governing determinations of the insolvency of debtors) as
such debts become absolute and matured, (b) such Person and its
Subsidiaries, taken as a whole, will not have, as of such date, an
unreasonably small amount of capital with which to conduct their
businesses, and (c) such Person and its Subsidiaries, taken as a whole,
will be able to pay their debts as they mature, taking into account the
timing of and amounts of cash to be received by such Person and its
Subsidiaries, taken as a whole, and the timing of and amounts of cash to
be payable on or in respect of indebtedness of such Person and its
Subsidiaries, taken as a whole; in each case after giving effect to (A)
as of the Closing Date the making of the extensions of credit to be made
on the Closing Date and to the application of the proceeds of such
extensions of credit and (B) on any date after the Closing Date, the
making of any extension of credit to be made on such date, and to the
application of the proceeds of such extension of credit. For purposes
of this definition, (i) "debt" means liability on a "claim", and (ii)
"claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal or equitable, secured or
unsecured or (y) right to an equitable remedy for breach of performance
if such breach gives rise to a right to payment, whether or not such
<PAGE> 44
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right to an equitable remedy is reduced to judgment, fixed, contingent,
matured or unmatured, disputed, undisputed, secured or unsecured. For
purposes of representations and warranties made pursuant to subsection
5.21 on any date after the Closing Date on which an Extension of Credit
is made hereunder, the Borrower may, in making such representation,
assume that the Aggregate Outstanding Extensions of Credit will be
refinanced at the maturity thereof.
"Special Order Reserve": with respect to any fiscal month, an
amount equal to 50% of the average monthly special order sales of the
Borrower and the Subsidiary Guarantors during the immediately preceding
12 fiscal month period.
"Special Purpose Subsidiary": any Subsidiary of the Borrower
organized solely for the purpose of (a) holding a license or permit
issued by any Governmental Authority and used in connection with the
business of the Borrower and/or its Subsidiaries or (b) providing
employee services for use in the foreign operations of the Borrower or
any of its Subsidiaries, provided that such Subsidiary shall only be a
"Special Purpose Subsidiary" for so long as such Subsidiary does not own
any assets (other than any such license or permit and other than other
assets with a book value not exceeding $1,000,000 in the aggregate) and
does not engage in any business (other than holding such license or
permit and activities directly related thereto).
"Standby L/C Fee Rate": at any time, the rate per annum equal to
the Applicable Margin then in effect for Eurodollar Loans which are
Revolving Credit Loans.
"Standby Letter of Credit": as defined in subsection 3.6(b)(i).
"Subsidiaries Guarantee": the Guarantee to be executed and
delivered by each Subsidiary Guarantor, substantially in the form of
Exhibit E, as the same may be amended, supplemented or otherwise
modified from time to time.
"Subsidiary": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by such
Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"Subsidiary Guarantor": each Subsidiary set forth on Schedule
5.13 under the heading "Initial Subsidiary Guarantors", together with
each other Subsidiary that becomes a party to the Subsidiaries Guarantee
pursuant to subsection 7.11(b).
"Subsidiary Mortgage": with respect to any parcel of Material
Real Property of the Borrower located in the State of California,
Alaska, Nevada or Washington, a Mortgage (otherwise satisfying the
requirements of the definition thereof, except that such Mortgage shall
be executed and delivered by the Borrower in favor of a Subsidiary
Guarantor and shall secure the applicable California Mortgage Note or
Notes instead of the Senior Secured Obligations) on such parcel of
Material Real Property.
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37
"Telerate Page 3750": the display page currently so designated
on the Dow Jones Telerate Service (or such other page as may replace
that service for the purpose of displaying comparable rates or prices).
"Temporary Cash Equivalent Investments": Cash Equivalents with a
maturity of less than 14 days.
"Term Loan": as defined in subsection 2.1.
"Term Loan Commitment": as to any Lender, its obligation to make
a Term Loan to the Borrower in an amount equal to the amount set forth
opposite such Lender's name in Schedule 1.1(a) under the heading "Term
Loan Commitment", as such amount may be reduced from time to time
pursuant to this Agreement or as such amount may be adjusted from time
to time pursuant to subsection 11.6; collectively, as to all such
Lenders, the "Term Loan Commitments".
"Term Loan Commitment Percentage": as to any Term Loan Lender at
any time, the percentage of the Term Loan Commitments then constituted
by such Term Loan Lender's Term Loan Commitment (or, after the Term
Loans are made, the percentage of the aggregate Term Loans then
constituted by such Term Loan Lender's Term Loan).
"Term Loan Lender": any Lender with an unused Term Loan
Commitment hereunder and/or any Term Loans outstanding hereunder;
collectively, the "Term Loan Lenders".
"Term Loan Maturity Date": the third anniversary of the Closing
Date.
"Term Note": as defined in subsection 4.13(d).
"[ ]": [ ], a Delaware corporation.
"[ ] Convertible Offering": the issuance by the
Borrower or any Restricted Subsidiary of any securities or interests
convertible into shares of Capital Stock of [ ].
"Total Assets": of any Person for any period, the total assets
of such Person and its Consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP for such period.
"Tranche": the collective reference to Eurodollar Loans the then
current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Eurodollar
Loans shall originally have been made on the same day).
"Transferee": as defined in subsection 11.6(f).
"Trust Agreement": the Trust Agreement made by the Borrower and
each other Obligor in favor of the Trustee, in substantially the form of
Exhibit F, as the same may be amended, supplemented or otherwise
modified from time to time.
"Trustee": collectively, the Corporate Trustee and the
Individual Trustee.
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"Type": as to any Committed Loan, its nature as an ABR Loan or a
Eurodollar Loan.
"UCC": the Uniform Commercial Code as in effect in the State of
New York from time to time.
"UCC Filing Collateral": Collateral (other than fixtures) as to
which filing financing statements under the uniform commercial code of
the applicable jurisdiction is an appropriate method of perfection of a
security interest in such Collateral.
"UCC Local Filing Collateral": with respect to any State, UCC
Filing Collateral located in such State as to which a security interest
may be perfected only by filing a uniform commercial code financing
statement in each county or other local filing office of such State in
which such Collateral is located.
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"Voting Percentage": as to any Lender (a) at any time prior to
the termination of the Revolving Credit Commitments, the percentage
which (i) the sum of (x) such Lender's Revolving Credit Commitment plus
(y) such Lender's Term Loan Commitment (or, after the Term Loans are
made, the outstanding principal amount of such Lender's Term Loan) then
constitutes of (ii) the sum of (x) the Revolving Credit Commitments of
all the Lenders plus (y) the Term Loan Commitments of all the Lenders
(or, after the Term Loans are made, the aggregate principal amount of
Term Loans of all the Lenders then outstanding), and (b) at any time
after the termination of the Revolving Credit Commitments, the
percentage which (i) the sum of (x) the principal amount of such
Lender's Committed Loans then outstanding plus (y) the product of such
Lender's Revolving Credit Commitment Percentage times the L/C
Obligations then outstanding then constitutes of (ii) the sum of (x) the
aggregate principal amount of Committed Loans of all the Lenders then
outstanding plus (y) the aggregate L/C Obligations of all the Lenders
then outstanding.
"VTA": VTA, Inc., a Delaware corporation.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in any Loan Document or any certificate or other document
made or delivered pursuant hereto or thereto.
(b) As used herein and in any other Loan Document, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
subsection 1.1 and accounting terms partly defined in subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under
GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
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(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(e) The definitions of "Debt" and "Indebtedness" in subsection
1.1 shall be independent in construction, interpretation and application.
(f) As used in this Agreement, the following terms defined in
the Trust Agreement shall have the meanings set forth therein: Cash
Equivalents, Collateral Account, Instruments, Inventory, Investment Securities,
Kmart Credit Agreement Obligations, Mortgage Assignment, Mortgaged Property,
Notice of Acceleration, Notice of Default, Obligor, Pledged Stock, Related
Patents and Trademarks, Restricted Jurisdictions, Secured Obligations, Secured
Parties, Securities Account, Security Documents, Trustee Fees and Trust Estate.
SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS
2.1 Term Loans. Subject to the terms and conditions hereof,
each Term Loan Lender severally agrees to make a term loan (a "Term Loan") to
the Borrower on the Closing Date in an amount equal to the Term Loan Commitment
of such Term Loan Lender. The Term Loans may from time to time be (a)
Eurodollar Loans, (b) ABR Loans or (c) a combination thereof, as determined by
the Borrower and notified to the Administrative Agent in accordance with
subsections 2.2 and 4.2.
2.2 Procedure for Term Loan Borrowing. The Borrower hereby
requests a Term Loan borrowing on the Closing Date in an amount equal to the
aggregate amount of the Term Loan Commitments of the Term Loan Lenders. The
Term Loans shall initially be ABR Loans. Each Term Loan Lender will make the
amount of its pro rata share of the Term Loans available to the Administrative
Agent for the account of the Borrower at the office of the Administrative Agent
specified in subsection 11.2 prior to 11:30 A.M., New York City time, on the
Closing Date in Dollars and in funds immediately available to the
Administrative Agent. The Administrative Agent shall credit the account of the
Borrower on the books of such office of the Administrative Agent by 12:15 P.M.,
New York City time, on the Closing Date, with the aggregate of the amounts made
available to the Administrative Agent by the Term Loan Lenders and in like
funds as received by the Administrative Agent.
2.3 Repayment of Term Loans. The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Term Loan Lender the unpaid principal amount of the Term Loan of such Term
Loan Lender on the Term Loan Maturity Date (or such earlier date on which the
Term Loans become due and payable pursuant to Section 9). The Borrower hereby
further agrees to pay interest on the unpaid principal amount of the Term Loans
from time to time outstanding from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in subsection 4.4.
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
3.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Revolving Credit
<PAGE> 48
40
Lender's Revolving Credit Commitment Percentage of the sum of the then
outstanding L/C Obligations and CAF Advances (after giving effect to the use of
proceeds of such Revolving Credit Loans), does not exceed the amount of such
Revolving Credit Lender's Revolving Credit Commitment, provided that no
Revolving Credit Lender shall be required to make a Revolving Credit Loan to
the extent that, after giving effect thereto, the Aggregate Outstanding
Extensions of Credit at such time would exceed the Borrowing Base at such time.
During the Revolving Credit Commitment Period the Borrower may use the
Revolving Credit Commitments by borrowing, prepaying and reborrowing the
Revolving Credit Loans in whole or in part, all in accordance with the terms
and conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrower and notified to the Administrative Agent in accordance with
subsections 3.2 and 4.2, provided that no Revolving Credit Loan shall be made
as a Eurodollar Loan after the day that is one month prior to the Revolving
Credit Termination Date.
3.2 Procedure for Revolving Credit Borrowing. The Borrower may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrower shall give
the Administrative Agent irrevocable notice (which notice must be received by
the Administrative Agent prior to 10:30 A.M., New York City time, (a) three
Business Days prior to the requested Borrowing Date, if all or any part of the
requested Revolving Credit Loans are to be initially Eurodollar Loans or (b) on
the requested Borrowing Date, otherwise), specifying (i) the amount to be
borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to
be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Periods therefor. Each borrowing under the Revolving Credit
Commitments shall be in an amount equal to (x) in the case of ABR Loans,
$5,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if the then
Available Revolving Credit Commitments are less than $5,000,000, such lesser
amount) and (y) in the case of Eurodollar Loans, $10,000,000 or a whole
multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from
the Borrower, the Administrative Agent shall promptly notify each Revolving
Credit Lender thereof. Each Revolving Credit Lender will make the amount of
its pro rata share of each borrowing available to the Administrative Agent for
the account of the Borrower at the office of the Administrative Agent specified
in subsection 11.2 prior to 12:00 Noon (or, in the case of such a borrowing on
the Closing Date, 11:30 A.M.), New York City time, on the Borrowing Date
requested by the Borrower in Dollars and in funds immediately available to the
Administrative Agent. Such borrowing will be made available to the Borrower on
or prior to 1:00 P.M. (or, in the case of such a borrowing on the Closing Date,
12:15 P.M.), New York City time, by the Administrative Agent crediting the
account of the Borrower on the books of such office of the Administrative Agent
with the aggregate of the amounts made available to the Administrative Agent by
the Revolving Credit Lenders and in like funds as received by the
Administrative Agent.
3.3 Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from and including the first day of the Revolving
Credit Commitment Period to but not including the Revolving Credit Termination
Date, computed at the rate of 1/2 of 1% per annum on the average daily amount
of the Available Revolving Credit Commitment of such Revolving Credit Lender
during the period for which payment is made, payable quarterly in arrears on
the last day of each March, June, September and December and on the Revolving
Credit Termination Date or such earlier date as the Revolving Credit
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41
Commitments shall terminate as provided herein, commencing on the first of such
dates to occur after the date hereof.
3.4 Termination or Reduction of Commitments. The Borrower shall
have the right, upon not less than three Business Days' notice to the
Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments,
provided that no such termination or reduction shall be permitted if, after
giving effect thereto and to any prepayments of the Revolving Credit Loans made
on the effective date thereof, the aggregate principal amount of the Revolving
Credit Loans then outstanding, when added to the then outstanding L/C
Obligations and CAF Advances, would exceed the Revolving Credit Commitments
then in effect. Any such reduction shall be in an amount equal to $10,000,000
or a whole multiple of $1,000,000 in excess thereof and shall reduce
permanently the Revolving Credit Commitments then in effect. Upon receipt of
any notice pursuant to this subsection 3.4, the Administrative Agent shall
promptly notify each Revolving Credit Lender thereof.
3.5 Repayment of Revolving Credit Loans. The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Revolving Credit Lender the then unpaid principal amount of each Revolving
Credit Loan of such Revolving Credit Lender on the Revolving Credit Termination
Date (or such earlier date on which the Revolving Credit Loans become due and
payable pursuant to Section 9). The Borrower hereby further agrees to pay
interest on the unpaid principal amount of the Revolving Credit Loans from time
to time outstanding from the date hereof until payment in full thereof at the
rates per annum, and on the dates, set forth in subsection 4.4.
3.6 L/C Commitment. (a) Subject to the terms and conditions
hereof, each Issuing Bank, in reliance on the agreements of the other Revolving
Credit Lenders set forth in subsection 3.9(a), agrees to issue letters of
credit ("Letters of Credit") for the account of the Borrower on any Business
Day during the Revolving Credit Commitment Period in such form as may be
approved from time to time by such Issuing Bank; provided that no Issuing Bank
shall have any obligation to issue any Letter of Credit if, after giving effect
to such issuance, (i) the L/C Obligations at such time would exceed the L/C
Commitment, (ii) the Aggregate Revolving Credit Outstandings at such time would
exceed the aggregate amount of the Revolving Credit Commitments at such time,
(iii) the Aggregate Outstanding Extensions of Credit at such time would exceed
the Borrowing Base at such time or (iv) in the case of Letters of Credit issued
in currencies other than Dollars only, the L/C Obligations in respect of
Letters of Credit issued in currencies other than Dollars would exceed the
Foreign L/C Commitment Sublimit at such time. Each Continuing Letter of Credit
shall be deemed to be issued under this Agreement on the Closing Date (to the
extent such Continuing Letter of Credit has not been fully drawn or has not
expired or been terminated as of the Closing Date) and shall be (x) a Letter of
Credit for all purposes hereof (other than subsection 3.7) and the other Loan
Documents and (y) a Commercial Letter of Credit or a Standby Letter of Credit,
as applicable, for purposes of subsections 3.8(b) and 3.8(c), respectively.
Each Lender acknowledges and agrees that each Limited Purpose Issuing Bank
shall have the rights set forth in the Limited Purpose Issuing Bank Addendum
executed by such Limited Purpose Issuing Bank.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars or such other currency that as of
the date of issuance thereof is in the reasonable judgment of the
relevant Issuing Bank (which shall be binding on the L/C Participants)
freely convertible or exchangeable into Dollars as the Borrower, the
relevant Issuing Bank and the Administrative Agent may from time to time
agree, and shall be
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either (A) a standby letter of credit issued to support obligations of
the Borrower or a Subsidiary, contingent or otherwise (a "Standby Letter
of Credit"), or (B) a commercial letter of credit issued in respect of
the purchase of inventory or other goods or services by the Borrower and
its Subsidiaries in the ordinary course of business (a "Commercial
Letter of Credit"), and
(ii) expire no later than the earlier of (A) five Business Days
prior to the Revolving Credit Termination Date and (B) one year after
the date of issuance thereof, provided that, subject to clause (A)
above, any Letter of Credit may, at the request of the Applicant as set
forth in the applicable Application, be automatically renewed on each
anniversary of the issuance thereof for an additional period of one year
unless the Issuing Bank which issued such Letter of Credit shall have
given prior written notice to the Borrower and the beneficiary of such
Letter of Credit that such Letter of Credit will not be renewed.
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(d) No Issuing Bank shall at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause such
Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.7 Procedure for Issuance of Letters of Credit. An Applicant
may from time to time request that an Issuing Bank issue a Letter of Credit by
delivering (a) to such Issuing Bank at its address for notices specified herein
in such manner as may be agreed by or be acceptable to such Issuing Bank
(including by electronic transmission) an Application therefor, completed to
the satisfaction of such Issuing Bank, and such other certificates, documents
and other papers and information as such Issuing Bank may request and (b) a
notice to the Administrative Agent that such Letter of Credit has been
requested. Upon receipt of any Application, each Issuing Bank agrees to
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall such Issuing Bank be required to issue any
Letter of Credit earlier than two Business Days after its receipt of the
Application therefor and all such other certificates, documents and other
papers and information relating thereto) by issuing the original of such Letter
of Credit to the beneficiary thereof or as otherwise may be agreed by such
Issuing Bank and the Borrower. Each Issuing Bank shall furnish a copy of each
Letter of Credit issued by such Issuing Bank to the Borrower and the
Administrative Agent promptly following the issuance thereof.
3.8 Letter of Credit Fees, Commissions and Other Charges. (a)
The Borrower shall pay to the relevant Issuing Bank with respect to each Letter
of Credit issued by such Issuing Bank under this Agreement, for the account of
such Issuing Bank, a fronting fee with respect to the period from the date of
issuance of such Letter of Credit to the expiration or termination date of such
Letter of Credit), computed at a rate per annum to be agreed upon by the
Borrower and such Issuing Bank on the average aggregate amount available to be
drawn under such Letter of Credit during the period for which such fee is
calculated. Such fronting fee shall be payable in arrears on each L/C Fee
Payment Date to occur after the issuance of such Letter of Credit and on the
Revolving Credit Termination Date (or on such earlier date as the Revolving
Credit Commitments shall terminate as provided herein) and shall be
nonrefundable.
(b) The Borrower shall pay to the Administrative Agent, for the
account of the L/C Participants, a letter of credit commission with respect to
each Commercial Letter of Credit issued
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under this Agreement with respect to the period from the date of issuance of
such Commercial Letter of Credit to the expiration or termination date of such
Letter of Credit, computed at a rate per annum equal to the Commercial L/C Fee
Rate on the average aggregate amount available to be drawn under such
Commercial Letter of Credit during the period for which such fee is calculated.
Such commission shall be shared ratably among the L/C Participants in
accordance with their respective Revolving Credit Commitment Percentages. Such
commission shall be payable in arrears on each L/C Fee Payment Date to occur
after the issuance of such Letter of Credit and on the Revolving Credit
Termination Date (or on such earlier date as the Revolving Credit Commitments
shall terminate as provided herein) and shall be nonrefundable.
(c) The Borrower shall pay to the Administrative Agent, for the
account of the L/C Participants, a letter of credit commission with respect to
each Standby Letter of Credit with respect to the period from the date of
issuance of such Standby Letter of Credit to the expiration or termination date
of such Letter of Credit, computed at a rate per annum equal to the Standby L/C
Fee Rate of the average aggregate amount available to be drawn under such
Standby Letter of Credit during the period for which such fee is calculated.
Such commission shall be shared ratably among the L/C Participants in
accordance with their respective Revolving Credit Commitment Percentages. Such
commission shall be payable in arrears on each L/C Fee Payment Date to occur
after the issuance of such Letter of Credit and on the Revolving Credit
Termination Date (or on such earlier date as the Revolving Credit Commitments
shall terminate as provided herein) and shall be nonrefundable.
(d) In addition to the foregoing fees and commissions, the
Borrower shall pay or reimburse each Issuing Bank for such normal and customary
costs and expenses as may be agreed upon by the Borrower and such Issuing Bank
in connection with issuing, effecting payment under, amending or otherwise
administering any Letter of Credit issued by such Issuing Bank.
(e) The Administrative Agent shall, promptly following its
receipt thereof, distribute to each Issuing Bank and the L/C Participants all
fees and commissions received by the Administrative Agent for their respective
accounts pursuant to this subsection.
3.9 L/C Participations. (a) Each Issuing Bank irrevocably
agrees to grant and hereby grants to each L/C Participant (other than such
Issuing Bank), and, to induce such Issuing Bank to issue Letters of Credit
hereunder, each such L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from such Issuing Bank, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and risk
an undivided interest equal to such L/C Participant's Revolving Credit
Commitment Percentage in such Issuing Bank's obligations and rights under each
Letter of Credit issued by such Issuing Bank hereunder and the amount of each
draft paid by such Issuing Bank thereunder. Each such L/C Participant
unconditionally and irrevocably agrees with each Issuing Bank that, if a draft
is paid under any Letter of Credit issued by such Issuing Bank for which such
Issuing Bank is not reimbursed in full by the Borrower in accordance with the
terms of this Agreement, such L/C Participant shall pay to the Administrative
Agent for the account of such Issuing Bank upon demand an amount equal to such
L/C Participant's Revolving Credit Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to
any Issuing Bank pursuant to subsection 3.9(a) in respect of any unreimbursed
portion of any payment made by such Issuing Bank under any Letter of Credit
issued by such Issuing Bank is paid to such Issuing Bank within three Business
Days after the date such payment is due, such L/C Participant shall pay to such
Issuing Bank on demand an amount equal to the product of (i) such amount, times
(ii) the daily average Federal Funds Effective Rate, during the period from and
including the date such payment is
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required to the date on which such payment is immediately available to such
Issuing Bank, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If
any such amount required to be paid by any L/C Participant pursuant to
subsection 3.9(a) is not in fact made available to any Issuing Bank by such L/C
Participant within three Business Days after the date such payment is due, such
Issuing Bank shall be entitled to recover from such L/C Participant, on demand,
such amount with interest thereon calculated from such due date at the rate per
annum applicable to ABR Loans hereunder. A certificate of any Issuing Bank
submitted to any L/C Participant with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after any Issuing Bank has made
payment under any Letter of Credit issued by such Issuing Bank and has received
from any L/C Participant its pro rata share of such payment in accordance with
subsection 3.9(a), such Issuing Bank receives any payment related to such
Letter of Credit (whether directly from the Borrower or otherwise, including
proceeds of collateral applied thereto by such Issuing Bank), or any payment of
interest on account thereof, such Issuing Bank will distribute to such L/C
Participant its pro rata share thereof.
(d) If any payment received by any Issuing Bank pursuant to
subsection 3.10 with respect to any Letter of Credit issued by it shall be
required to be returned by such Issuing Bank, each L/C Participant shall pay to
such Issuing Bank its pro rata share thereof.
3.10 Letter of Credit Reimbursement Obligations. (a) The
Borrower agrees to reimburse each Issuing Bank for the amount of (i) any draft
paid by such Issuing Bank under any Letter of Credit issued by such Issuing
Bank and (ii) any taxes, fees, charges or other costs or expenses incurred by
such Issuing Bank in connection with such payment. Each such payment shall be
made to the relevant Issuing Bank at its address for notices specified herein
in the currency in which the relevant Letter of Credit was issued and in
immediately available funds in such currency.
(b) If any draft shall be presented for payment under any Letter
of Credit issued by any Issuing Bank, such Issuing Bank shall promptly notify
the Borrower of the date and amount thereof. If an Issuing Bank notifies the
Borrower of any drawing under any Letter of Credit issued by it prior to 2:00
P.M., New York City time, on any Business Day, the Borrower shall reimburse
such Issuing Bank pursuant to subsection 3.10(a) with respect to such drawing
on such Business Day. If an Issuing Bank notifies the Borrower of any drawing
under any Letter of Credit issued by it after 2:00 P.M., New York City time, on
any Business Day, the Borrower shall reimburse such Issuing Bank pursuant to
subsection 3.10(a) with respect to such drawing on the next succeeding Business
Day and interest shall be payable on the amount of such drawing for such period
at the rate then applicable to ABR Loans hereunder. If any amount payable
under this subsection is not paid when due, interest shall be payable on such
amount from the date such amount becomes payable under this subsection until
payment in full thereof at the rate which would be payable on any outstanding
ABR Loans which were then overdue.
3.11 Obligations Absolute. (a) The Borrower's obligations
under this Section 3 in respect of Letters of Credit shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which the Borrower or any Applicant may have
or have had against any Issuing Bank or any beneficiary of any Letter of
Credit.
(b) The Borrower also agrees with each Issuing Bank that such
Issuing Bank shall not be responsible for, and the Borrower's Reimbursement
Obligations shall not be affected by, among other things, (i) the validity or
genuineness of documents or of any endorsements thereon, even though
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such documents shall in fact prove to be invalid, fraudulent or forged, or (ii)
any dispute between or among the Borrower, any Applicant and any beneficiary of
any Letter of Credit or any other party to which such Letter of Credit may be
transferred or (iii) any claims whatsoever of the Borrower or any Applicant
against any beneficiary of such Letter of Credit or any such transferee.
(c) No Issuing Bank shall be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit issued by
such Issuing Bank, except for errors or omissions caused by such Issuing Bank's
gross negligence or willful misconduct.
(d) The Borrower agrees that any action taken or omitted by any
Issuing Bank under or in connection with any Letter of Credit issued by such
Issuing Bank or the related drafts or documents, if done in the absence of
gross negligence or willful misconduct and in accordance with the standards of
care specified in the UCC, shall be binding on the Borrower and shall not
result in any liability of such Issuing Bank to the Borrower.
3.12 Letter of Credit Payments. The responsibility of each
Issuing Bank to the Borrower in connection with any draft presented for payment
under any Letter of Credit issued by such Issuing Bank shall, in addition to
any payment obligation expressly provided for in such Letter of Credit, be
limited to determining that the documents (including each draft) delivered
under such Letter of Credit in connection with such presentment are in
conformity with such Letter of Credit.
3.13 Letter of Credit Applications. To the extent that any
provision of any Application related to any Letter of Credit is inconsistent
with the provisions of this Section 3 or any other terms of this Agreement or
any other Loan Document, the provisions of this Section 3 shall apply.
3.14 CAF Advances. Subject to the terms and conditions of this
Agreement, the Borrower may request advances ("CAF Advances") from time to time
on any Business Day during the CAF Advance Availability Period. CAF Advances
may be requested in amounts such that (a) the Aggregate Revolving Credit
Outstandings at any time do not exceed the aggregate amount of the Revolving
Credit Commitments at such time and (b) the Aggregate Outstanding Extensions of
Credit at such time do not exceed the Borrowing Base at such time. Within the
limits and on the conditions hereinafter set forth with respect to CAF
Advances, the Borrower from time to time may borrow, repay and reborrow CAF
Advances.
3.15 Procedure for CAF Advance Borrowing. (a) The Borrower
shall request CAF Advances by delivering a CAF Advance Request to the
Administrative Agent, not later than 12:00 Noon (New York City time) four
Business Days prior to the proposed Borrowing Date (in the case of a LIBO Rate
CAF Advance Request), and not later than 10:00 A.M. (New York City time) one
Business Day prior to the proposed Borrowing Date (in the case of a Fixed Rate
CAF Advance Request). The Borrower shall pay to the Administrative Agent a fee
of $2,000 in connection with each CAF Advance Request delivered by the Borrower
to the Administrative Agent. Each CAF Advance Request in respect of any
Borrowing Date may solicit bids for CAF Advances on such Borrowing Date in an
aggregate principal amount of $10,000,000 or an integral multiple of $1,000,000
in excess thereof and having not more than three alternative CAF Advance
Maturity Dates. The CAF Advance Maturity Date for each CAF Advance shall be
the date set forth therefor in the relevant CAF Advance Request, which date
shall be (i) not less than 14 days nor more than 180 days after the Borrowing
Date therefor, in the case of a Fixed Rate CAF Advance, (ii) one, two, three or
six months after the Borrowing Date therefor, in the case of a LIBO Rate CAF
Advance and (iii) not later than
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the Revolving Credit Termination Date, in the case of any CAF Advance. The
Administrative Agent shall notify each Revolving Credit Lender promptly by
facsimile transmission of the contents of each CAF Advance Request received by
the Administrative Agent.
(b) In the case of a LIBO Rate CAF Advance Request, upon receipt
of notice from the Administrative Agent of the contents of such CAF Advance
Request, each Revolving Credit Lender may elect, in its sole discretion, to
offer irrevocably to make one or more CAF Advances at the applicable LIBO Rate
plus (or minus) a margin determined by such Revolving Credit Lender in its sole
discretion for each such CAF Advance. Any such irrevocable offer shall be made
by delivering a CAF Advance Offer to the Administrative Agent, before 10:30
A.M. (New York City time) on the day that is three Business Days before the
proposed Borrowing Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF Advance
Maturity Date and the aggregate maximum amount of CAF Advances for all
CAF Advance Maturity Dates which such Revolving Credit Lender would be
willing to make (which amounts may, subject to subsection 3.14, exceed
such Lender's Revolving Credit Commitments); and
(ii) the margin above or below the applicable LIBO Rate at
which such Lender is willing to make each such CAF Advance.
The Administrative Agent shall advise the Borrower before 11:00 A.M. (New York
City time) on the date which is three Business Days before the proposed
Borrowing Date of the contents of each such CAF Advance Offer received by it.
If the Administrative Agent, in its capacity as a Revolving Credit Lender,
shall elect, in its sole discretion, to make any such CAF Advance Offer, it
shall advise the Borrower of the contents of its CAF Advance Offer before 10:15
A.M. (New York City time) on the date which is three Business Days before the
proposed Borrowing Date.
(c) In the case of a Fixed Rate CAF Advance Request, upon
receipt of notice from the Administrative Agent of the contents of such CAF
Advance Request, each Revolving Credit Lender may elect, in its sole
discretion, to offer irrevocably to make one or more CAF Advances at a rate of
interest determined by such Revolving Credit Lender in its sole discretion for
each such CAF Advance. Any such irrevocable offer shall be made by delivering
a CAF Advance Offer to the Administrative Agent before 9:30 A.M. (New York City
time) on the proposed Borrowing Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF Advance
Maturity Date, and the aggregate maximum amount for all CAF Advance
Maturity Dates, which such Revolving Credit Lender would be willing to
make (which amounts may, subject to subsection 3.14, exceed such
Lender's Revolving Credit Commitments); and
(ii) the rate of interest at which such Revolving Credit
Lender is willing to make each such CAF Advance.
The Administrative Agent shall advise the Borrower before 10:00 A.M. (New York
City time) on the proposed Borrowing Date of the contents of each such CAF
Advance Offer received by it. If the Administrative Agent, in its capacity as
a Revolving Credit Lender, shall elect, in its sole discretion, to make any
such CAF Advance Offer, it shall advise the Borrower of the contents of its CAF
Advance Offer before 9:15 A.M. (New York City time) on the proposed Borrowing
Date.
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(d) Before 11:30 A.M. (New York City time) three Business Days
before the proposed Borrowing Date (in the case of CAF Advances requested by a
LIBO Rate CAF Advance Request) and before 10:30 A.M. (New York City time) on
the proposed Borrowing Date (in the case of CAF Advances requested by a Fixed
Rate CAF Advance Request), the Borrower, in its absolute discretion, shall:
(i) cancel the relevant CAF Advance Request by giving the
Administrative Agent telephonic notice to that effect, or
(ii) by giving telephonic notice to the Administrative Agent
(immediately confirmed by delivery to the Administrative Agent of a CAF
Advance Confirmation by facsimile transmission) (A) subject to the
provisions of subsection 3.15(e), accept one or more of the offers made
by any Revolving Credit Lender or Revolving Credit Lenders pursuant to
subsection 3.15(b) or subsection 3.15(c), as the case may be, and (B)
reject any remaining offers made by Revolving Credit Lenders pursuant to
subsection 3.15(b) or subsection 3.15(c), as the case may be.
(e) The Borrower's acceptance of CAF Advances in response to any
CAF Advance Offers shall be subject to the following limitations:
(i) the amount of CAF Advances accepted for each CAF Advance
Maturity Date specified by any Revolving Credit Lender in its CAF
Advance Offer shall not exceed the maximum amount for such CAF Advance
Maturity Date specified in such CAF Advance Offer;
(ii) the aggregate amount of CAF Advances accepted for all
CAF Advance Maturity Dates specified by any Revolving Credit Lender in
its CAF Advance Offer shall not exceed the aggregate maximum amount
specified in such CAF Advance Offer for all such CAF Advance Maturity
Dates;
(iii) the Borrower may not accept offers for CAF Advances for
any CAF Advance Maturity Date in an aggregate principal amount in excess
of the maximum principal amount of CAF Advances requested for such CAF
Advance Maturity Date in the related CAF Advance Request; and
(iv) if the Borrower accepts any of such CAF Advance Offers,
it must accept offers based solely upon pricing for each relevant CAF
Advance Maturity Date and upon no other criteria whatsoever, and if two
or more Revolving Credit Lenders submit CAF Advance Offers for any CAF
Advance Maturity Date at identical pricing and the Borrower accepts any
of such CAF Advance Offers but does not wish to (or, by reason of the
limitations set forth in subsection 3.14 or this subsection 3.15,
cannot) borrow the total amount offered by such Revolving Credit Lenders
with such identical pricing, the Borrower shall accept CAF Advance
Offers from all of such Revolving Credit Lenders in amounts allocated
among them pro rata according to the amounts offered by such Revolving
Credit Lenders (with appropriate rounding, in the sole discretion of the
Borrower, to assure that each accepted CAF Advance is an integral
multiple of $1,000,000); provided that if the number of Revolving Credit
Lenders that submit CAF Advance Offers for any CAF Advance Maturity Date
with identical pricing is such that, after the Borrower accepts such
offers pro rata in accordance with the foregoing provisions of this
paragraph, the CAF Advance to be made by any such Revolving Credit
Lender would be less than $5,000,000 principal amount, the number of
such Revolving Credit
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Lenders shall be reduced by the Administrative Agent by lot until the
CAF Advances to be made by each such remaining Revolving Credit Lender
would be in a principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof.
(f) If the Borrower notifies the Administrative Agent that a CAF
Advance Request is cancelled pursuant to subsection 3.15(d)(i), the
Administrative Agent shall give prompt telephonic notice thereof to the
Revolving Credit Lenders.
(g) If the Borrower accepts pursuant to subsection 3.15(d)(ii)
one or more of the CAF Advance Offers made by any Revolving Credit Lender or
Revolving Credit Lenders, the Administrative Agent promptly shall notify each
Revolving Credit Lender which has made such a CAF Advance Offer of (i) the
aggregate amount of such CAF Advances to be made on the relevant Borrowing Date
and the CAF Advance Maturity Date for each such CAF Advance and (ii) the
acceptance or rejection of any CAF Advance Offers to make such CAF Advances
made by such Revolving Credit Lender. Before 12:00 Noon (New York City time)
on the Borrowing Date specified in the applicable CAF Advance Request, each
Revolving Credit Lender whose CAF Advance Offer has been accepted shall make
available to the Administrative Agent at its office set forth in subsection
11.2 the amount of CAF Advances to be made by such Revolving Credit Lender, in
Dollars and in immediately available funds. The Administrative Agent will make
such funds available to the Borrower as soon as practicable on such date at
such office of the Administrative Agent in like funds. As soon as practicable
after each Borrowing Date, the Administrative Agent shall notify each Revolving
Credit Lender of the aggregate amount of CAF Advances advanced on such
Borrowing Date and the respective CAF Advance Maturity Dates thereof.
3.16 CAF Advance Payments. (a) The Borrower shall pay to the
Administrative Agent, for the account of each Revolving Credit Lender which has
made a CAF Advance, on the CAF Advance Maturity Date of such CAF Advance (or on
such earlier date on which such CAF Advance becomes due and payable pursuant to
Section 9) the principal amount of such CAF Advance. The Borrower shall not
have the right to prepay any principal amount of any CAF Advance without the
consent of the Revolving Credit Lender to which such CAF Advance is owed.
(b) The Borrower shall pay to the Administrative Agent for the
account of each Revolving Credit Lender which has made a CAF Advance interest
on the unpaid principal amount of such CAF Advance from the Borrowing Date with
respect thereto to the CAF Advance Maturity Date of such CAF Advance at the
rate of interest specified in the CAF Advance Offer accepted by the Borrower in
connection with such CAF Advance (calculated on the basis of a 360-day year for
actual days elapsed), payable on each applicable CAF Advance Interest Payment
Date.
(c) If any principal of, or interest on, any CAF Advance shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such CAF Advance shall, without limiting any rights of any
Revolving Credit Lender under this Agreement, bear interest from the date on
which such payment was due at a rate per annum which is 2% above the rate which
would otherwise be applicable to such CAF Advance until the stated CAF Advance
Maturity Date of such CAF Advance, and for each day after such stated CAF
Advance Maturity Date at a rate per annum which is 2% above the ABR, in each
case until paid in full (as well after as before judgment). Interest accruing
pursuant to this subsection 3.16(c) shall be payable from time to time on
demand.
3.17 Certain Restrictions With Respect to CAF Advances. A CAF
Advance Request may request CAF Advance Offers for CAF Advances to be made on
not more than one Borrowing Date and to mature on not more than three CAF
Advance Maturity Dates. No CAF Advance Request
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may be submitted earlier than five Business Days after submission of any other
CAF Advance Request.
3.18 Annual Revolving Credit Clean-Down. The Borrower agrees
that during each Fiscal Year there shall be a period of at least 30 consecutive
days during which the sum of the aggregate principal amount of all outstanding
Revolving Credit Loans plus the aggregate principal amount of all outstanding
CAF Advances shall not exceed $750,000,000.
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT
4.1 Optional and Mandatory Prepayments. (a) The Borrower may,
at any time and from time to time, prepay the Committed Loans, in whole or in
part, without premium or penalty (except, with respect to Eurodollar Loans that
are prepaid on a date other than the last day of the Interest Period with
respect thereto, as provided under subsection 4.11), upon (in the case of
prepayments of Eurodollar Loans) at least three Business Days' irrevocable
notice to the Administrative Agent and upon (in the case of prepayments of ABR
Loans) irrevocable notice to the Administrative Agent prior to 10:30 A.M., New
York City time, on the date of such prepayment, specifying the date and amount
of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to
each. Upon receipt of any such notice the Administrative Agent shall promptly
notify each affected Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified
therein, together with any amounts payable pursuant to subsection 4.11 in
connection therewith and, in the case of prepayments of the Term Loans only,
accrued interest to such date on the amount prepaid. Amounts prepaid on
account of the Term Loans may not be reborrowed. Partial prepayments under
this subsection 4.1(a) shall be in an aggregate principal amount of $10,000,000
or a whole multiple of $1,000,000 in excess thereof.
(b) If, at any time, the Aggregate Outstanding Extensions of
Credit at such time exceed the Borrowing Base at such time, the Borrower shall,
without notice or demand, immediately repay the Revolving Credit Loans in an
aggregate principal amount equal to the lesser of (i) the amount of such excess
and (ii) the aggregate principal amount of Revolving Credit Loans then
outstanding, together with interest accrued to the date of such payment or
prepayment on the principal so prepaid and any amounts payable under subsection
4.11 in connection therewith. To the extent that after giving effect to any
prepayment of the Revolving Credit Loans required by the preceding sentence,
the Aggregate Outstanding Extensions of Credit at such time exceed the
Borrowing Base at such time, the Borrower shall, without notice or demand,
immediately deposit in a Cash Collateral Account upon terms reasonably
satisfactory to the Administrative Agent an amount equal to the lesser of (i)
the aggregate then outstanding CAF Advances and L/C Obligations and (ii) the
amount of such remaining excess. The Administrative Agent shall apply any cash
deposited in the Cash Collateral Account (to the extent thereof) to repay on
each CAF Advance Maturity Date to occur thereafter the CAF Advances which
become due on such CAF Advance Maturity Dates and/or to pay any Reimbursement
Obligations which become due thereafter, provided that the Administrative Agent
shall release to the Borrower from time to time such portion of the amount on
deposit in the Cash Collateral Account which is equal to the amount by which
the Borrowing Base at such time plus the amount on deposit in the Cash
Collateral Account exceeds the Aggregate Outstanding Extensions of Credit at
such time. "Cash Collateral Account" means an account established by the
Borrower with the Administrative Agent and over which the Administrative Agent
shall have exclusive dominion and control, including the right of withdrawal
for application in accordance with this subsection 4.1(b). To the extent that
after giving effect to any prepayment of the Revolving Credit Loans and cash
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deposits required by the preceding sentences, the Aggregate Outstanding
Extensions of Credit at such time exceed the Borrowing Base at such time, the
Borrower shall, without notice or demand, immediately repay the Term Loans in
an aggregate principal amount equal to the lesser of (i) the amount of such
excess and (ii) the aggregate principal amount of Term Loans then outstanding,
together with interest accrued to the date of such payment or prepayment on the
principal so prepaid and any amounts payable under subsection 4.11 in
connection therewith. The Borrower shall also prepay the Revolving Credit
Loans to the extent required to comply with subsection 3.18.
(c) The Borrower shall prepay the Term Loans in an amount equal
to (i) 100% of the Net Cash Proceeds from the reissuance, resale (including,
without limitation, by way of a Securitization Transaction) or repayment of the
Repurchased Put Bonds, (ii) 50% of the Net Cash Proceeds of any Asset Sale
which is a Scheduled Asset Sale, (iii) 100% of the Net Cash Proceeds of any
Indebtedness permitted under subsection 8.2(j) incurred by the Borrower or any
of its Restricted Subsidiaries subsequent to the Closing Date, (iv) 100% of the
Net Cash Proceeds of any Asset Sale of Existing Real Properties (including,
without limitation, in connection with (A) a Permitted Sale-Leaseback or (B) a
Securitization Transaction), (v) 100% of the Net Cash Proceeds from any Asset
Sale of all or a portion of (or any interest in) the Purchased Credit
Facilities (any repayment or prepayment of the principal of the Purchased
Credit Facilities being deemed to be an Asset Sale of such Purchased Credit
Facilities), (vi) 100% of the Net Cash Proceeds of any Indebtedness which is
secured by a Lien on any Existing Real Property incurred subsequent to the
Closing Date, (vii) 50% of the Net Cash Proceeds of any Indebtedness in respect
of any [ ] Convertible Offering, and (viii) the amount required to
be applied to prepay such Term Loans pursuant to subsection 8.4(l), in each
case together with interest accrued to the date of such prepayment on the
principal so prepaid and any amounts payable under subsection 4.11 in
connection therewith. Each prepayment pursuant to this subsection 4.1(c) shall
be made (x) in the case of any prepayment with the Net Cash Proceeds of any
Permitted Pari Passu Senior Debt, on or before the fifth Business Day following
receipt of such Net Cash Proceeds and (y) in the case of all other prepayments,
on or before the sixtieth day (or, if a Default or Event of Default has then
occurred and is continuing, the fifth Business Day) following receipt of the
Net Cash Proceeds or other amounts requiring a prepayment pursuant to the
immediately preceding sentence, provided that to the extent that such Net Cash
Proceeds or other amounts, together with the Net Cash Proceeds or such other
amounts which have not previously been applied to prepay Term Loans in
accordance with this subsection 4.1(c), do not exceed $10,000,000, no
prepayment shall be required under this subsection 4.1(c) in respect thereof
unless and until the aggregate amount of all such Net Cash Proceeds and such
other amounts which have not then been applied to prepay Term Loans in
accordance with this subsection 4.1(c) shall exceed $10,000,000, at which time
the Borrower shall be required to make the prepayment required by this
subsection 4.1(c) in an amount equal to the aggregate amount of all such Net
Cash Proceeds and such other amounts which have not previously been so applied.
4.2 Conversion and Continuation Options. (a) The Borrower may,
subject to paragraph (b) below, elect from time to time to convert Eurodollar
Loans to ABR Loans by giving the Administrative Agent irrevocable notice of
such election prior to 10:30 A.M. on the date of conversion, provided that any
such conversion of Eurodollar Loans may only be made on the last day of an
Interest Period with respect thereto. The Borrower may elect from time to time
to convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at
least three Business Days' prior irrevocable notice of such election. Any such
notice of conversion to Eurodollar Loans shall specify the length of the
initial Interest Period or Interest Periods therefor. Upon receipt of any such
notice the Administrative Agent shall promptly notify each affected Lender
thereof. All or any part of outstanding Eurodollar Loans and ABR Loans may be
converted as provided herein, provided that (i) no ABR Loan may be converted
into a Eurodollar Loan when any Event of Default has occurred and
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is continuing and the Administrative Agent has determined that such a
conversion is not appropriate and (ii) no ABR Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Revolving Credit
Termination Date (in the case of conversions of Revolving Credit Loans) or
prior to the Term Loan Maturity Date (in the case of conversions of Term
Loans).
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection
1.1, of the length of the next Interest Period to be applicable to such
Eurodollar Loans, provided that no Eurodollar Loan may be continued as such (i)
when any Event of Default has occurred and is continuing and the Administrative
Agent has determined that such a continuation is not appropriate or (ii) after
the date that is one month prior to the Revolving Credit Termination Date (in
the case of continuations of Revolving Credit Loans) or prior to the Term Loan
Maturity Date (in the case of continuations of Term Loans), and provided,
further, that if the Borrower shall fail to give such notice or if such
continuation is not permitted such Eurodollar Loans shall be automatically
converted to ABR Loans on the last day of such then expiring Interest Period.
Upon receipt of any notice pursuant to this subsection 4.2(b), the
Administrative Agent shall notify each affected Lender thereof.
4.3 Minimum Amounts and Maximum Number of Tranches. All
borrowings, conversions and continuations of Committed Loans hereunder and all
selections of Interest Periods hereunder shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, the aggregate
principal amount of Eurodollar Loans comprising each Tranche shall be equal to
$10,000,000 or a whole multiple of $1,000,000 in excess thereof. In no event
shall there be more than 30 Tranches outstanding at any time.
4.4 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
day plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal
to the ABR plus the Applicable Margin.
(c) If all or a portion of (i) any principal of any Loan or (ii)
any interest payable thereon shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), the principal of all Loans shall bear
interest at a rate per annum which is the rate that would otherwise be
applicable thereto pursuant to this Agreement plus 2% from the date of such
non-payment until such overdue principal and/or interest is paid in full (as
well after as before judgment). If all or a portion of (i) any interest
payable on any Loan, (ii) any commitment fee or (iii) any other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), any such overdue interest, commitment fee or other
amount shall bear interest at a rate per annum which is the rate described in
paragraph (b) of this subsection plus 2%, in each case from the date of such
non-payment until such overdue interest, commitment fee or other amount is paid
in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that (i) interest accruing pursuant to subsection 4.4(c)
shall be payable from time to time on demand, (ii) interest on the Term Loans
shall also be payable on the Term Loan Maturity Date (or such earlier date on
which the Term Loans become due and payable pursuant to Section 9) and (iii)
interest on the Revolving Credit Loans shall also be due and payable on the
Revolving Credit Termination Date (or
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such earlier date on which the Revolving Credit Loans become due and payable
pursuant to Section 9).
4.5 Computation of Interest and Fees. (a) Whenever it is
calculated on the basis of the Prime Rate, interest shall be calculated on the
basis of a 365- (or 366-, as the case may be) day year for the actual days
elapsed; and, otherwise, interest, commitment fees and fees and commissions in
respect of Letters of Credit shall be calculated on the basis of a 360-day year
for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the affected Lenders of each determination
of a Eurodollar Rate. Any change in the interest rate on a Committed Loan
resulting from a change in the ABR or the Eurocurrency Reserve Requirements
shall become effective as of the opening of business on the day on which such
change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the affected Lenders of the effective date
and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the affected Lenders in the absence of manifest
error.
(c) If any Reference Lender shall for any reason no longer have
a Commitment or any Loans, such Reference Lender shall thereupon cease to be a
Reference Lender, and if, as a result, there shall only be one Reference Lender
remaining, the Administrative Agent (after consultation with the Lenders and
with the consent of the Borrower (which shall not be unreasonably withheld))
shall, by notice to the Borrower and the Lenders, designate another Lender that
is a commercial bank as a Reference Lender so that there shall at all times be
at least two Reference Lenders.
(d) Each Reference Lender shall use its best efforts to furnish
quotations of rates to the Administrative Agent as contemplated hereby. If any
of the Reference Lenders shall be unable or shall otherwise fail to supply such
rates to the Administrative Agent upon its request, the rate of interest shall,
subject to the provisions of this subsection 4.5, be determined on the basis of
the quotations of the remaining Reference Lenders or Reference Lender.
4.6 Inability to Determine Interest Rate. If prior to the first
day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Lenders that the Eurodollar Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the cost
to the Majority Lenders (as conclusively certified by such Lenders) of
making or maintaining their affected Committed Loans during such
Interest Period,
the Administrative Agent shall give facsimile or telephonic notice thereof to
the Borrower and the affected Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans requested to be made on the first
day of such Interest Period shall be made as ABR Loans, (y) any ABR Loans that
were to have been converted on the first day of such Interest Period to
Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding
Eurodollar Loans which the Borrower
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has requested to continue as such pursuant to subsection 4.2(b) shall be
converted, on the first day of such Interest Period, to ABR Loans. Until such
notice has been withdrawn by the Administrative Agent, no further Eurodollar
Loans shall be made or continued as such, nor shall the Borrower have the right
to convert ABR Loans to Eurodollar Loans.
4.7 Pro Rata Treatment and Payments. (a) Except as otherwise
provided in subsections 3.14 through 3.16, all payments (including prepayments)
to be made by the Borrower hereunder, whether on account of principal,
interest, fees or otherwise, shall be made without set off or counterclaim and
shall be made prior to 12:00 Noon, New York City time, on the due date thereof
to the Administrative Agent, for the account of the Revolving Credit Lenders or
the Term Loan Lenders, as the case may be, at the Administrative Agent's office
specified in subsection 11.2 (except as otherwise provided herein) in Dollars
and in immediately available funds. The Administrative Agent shall distribute
such payments to the Lenders entitled to receive the same promptly upon receipt
in like funds as received. If any payment hereunder (other than payments on
Eurodollar Loans or LIBO Rate CAF Advances) becomes due and payable on a day
other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a Eurodollar Loan or a LIBO Rate CAF Advance becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day (and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension) unless the result of such extension would be to extend such
payment into another calendar month, in which event such payment shall be made
on the immediately preceding Business Day.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its portion of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to
the Administrative Agent by the required time on the Borrowing Date therefor,
such Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available
to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error. If such Lender's portion
of such borrowing is not made available to the Administrative Agent by such
Lender within three Business Days of such Borrowing Date, the Administrative
Agent shall also be entitled to recover such amount with interest thereon at
the rate per annum applicable to ABR Loans hereunder, on demand, from the
Borrower.
(c) Each borrowing by the Borrower of Term Loans and Revolving
Credit Loans shall be made ratably from the Term Loan Lenders and Revolving
Credit Lenders, respectively, in accordance with their respective Term Loan
Commitment Percentages and Revolving Credit Commitment Percentages. Any
reduction of the Revolving Credit Commitments shall be made ratably among the
Revolving Credit Lenders, in accordance with their respective Revolving Credit
Commitment Percentages. Each payment (including each prepayment) by the
Borrower on account of principal of and interest on the Term Loans shall be
made pro rata according to the respective outstanding principal amounts of the
Term Loans then held by the Term Loan Lenders. Each payment (including each
prepayment) by the Borrower on account of principal of and interest on the
Revolving
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Credit Loans shall be made pro rata according to the respective outstanding
principal amounts of the Revolving Credit Loans then held by the Revolving
Credit Lenders.
4.8 Illegality. Notwithstanding any other provision herein, if
the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans or LIBO Rate CAF Advances as contemplated by
this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar
Loans shall forthwith be suspended during the period of illegality, (b) such
Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law and (c) the Borrower shall, with respect to any LIBO Rate CAF
Advance of such Lender, take such action as such Lender may reasonably request.
If any such conversion of a Eurodollar Loan occurs on a day which is not the
last day of the then current Interest Period with respect thereto, the Borrower
shall pay to such Lender such amounts, if any, as may be required pursuant to
subsection 4.11.
4.9 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof (or, in the case of LIBO Rate CAF Advances, made
subsequent to acceptance by the Borrower of the CAF Advance Offer relating to
such LIBO Rate CAF Advance):
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Eurodollar Loan
or any LIBO Rate CAF Advance made by it, any Letter of Credit issued or
participated in by it or any Application, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Non-Excluded Taxes covered by subsection 4.10 and changes in the rate of
tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting
into, continuing or maintaining Eurodollar Loans or LIBO Rate CAF Advances or
issuing or participating in Letters of Credit or to reduce any amount
receivable hereunder in respect thereof, then, in any such case, within 15 days
after demand therefor (accompanied by the certificate contemplated by
subsection 4.9(c) with respect thereto) the Borrower shall pay such Lender such
additional amount or amounts as will compensate such Lender for such increased
cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or
any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority
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made subsequent to the date hereof shall have the effect of reducing the rate
of return on such Lender's or such corporation's capital as a consequence of
its obligations hereunder or under or in respect of any Letter of Credit to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, within 15
days after demand therefor (accompanied by the certificate contemplated by
subsection 4.9(c) with respect thereto), the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender for such
reduction.
(c) If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection 4.9, it shall promptly notify the Borrower
(with a copy to the Administrative Agent) of the event by reason of which it
has become so entitled. A certificate as to any additional amounts payable
pursuant to this subsection 4.9 submitted by such Lender to the Borrower (with
a copy to the Administrative Agent) setting forth in reasonable detail the
calculation of such amounts and the basis therefor shall be conclusive in the
absence of manifest error. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
4.10 Indemnification for Taxes. (a) All payments made by the
Borrower under this Agreement and any Notes shall be made free and clear of,
and without deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding net income taxes
and franchise and excise taxes (imposed in lieu of net income taxes) imposed on
the Administrative Agent or any Lender as a result of a present or former
connection between the Administrative Agent or such Lender and the jurisdiction
of the Governmental Authority imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such connection arising
solely from the Administrative Agent or such Lender having executed, delivered
or performed its obligations or received a payment under, or enforced, this
Agreement or any Note). If any such non-excluded taxes, levies, imposts,
duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are
required to be withheld from any amounts payable to the Administrative Agent or
any Lender hereunder or under any Note, the amounts so payable to the
Administrative Agent or such Lender shall be increased to the extent necessary
to yield to the Administrative Agent or such Lender (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement, provided, however, that
the Borrower shall not be required to increase any such amounts payable to any
Lender that is not organized under the laws of the United States of America or
a state thereof if such Lender fails to comply with the requirements of
paragraph (b) of this subsection 4.10. Whenever any Non-Excluded Taxes are
payable by the Borrower, as promptly as possible thereafter the Borrower shall
send to the Administrative Agent for its own account or for the account of such
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower fails to pay
any Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Administrative Agent and
the Lenders for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Lender as a result of any such
failure. The agreements in this subsection shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
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(i) in the case of a Lender or a Transferee that is a
"bank" under Section 881(c)(3)(A) of the Code:
(A) on or before the date it becomes a party to this
Agreement (or, in the case of a Participant, on or before the
date such Participant becomes a Participant hereunder), deliver
to the Borrower and the Administrative Agent (I) two duly
completed copies of United States Internal Revenue Service Form
1001 or 4224, or successor applicable form, as the case may be,
and (II) an Internal Revenue Service Form W-8 or W-9, or
successor applicable form, as the case may be;
(B) deliver to the Borrower and the Administrative
Agent two further copies of any such form or certification on or
before the date that any such form or certification expires or
becomes obsolete and after the occurrence of any event requiring
a change in the most recent form previously delivered by it to
the Borrower; and
(C) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Borrower or the Administrative Agent; and
(ii) in the case of a Lender or a Transferee that is not a
"bank" under Section 881(c)(3)(A) of the Code:
(A) on or before the date it becomes a party to this
Agreement (or, in the case of a Participant, on or before the
date such Participant becomes a Participant hereunder), deliver
to the Borrower and the Administrative Agent (I) a statement
under penalties of perjury that such Lender or Transferee (x) is
not a "bank" under Section 881(c)(3)(A) of the Code, is not
subject to regulatory or other legal requirements as a bank in
any jurisdiction, and has not been treated as a bank for purposes
of any tax, securities law or other filing or submission made to
any Governmental Authority, any application made to a rating
agency or qualification for any exemption from tax, securities
law or other legal requirements, (y) is not a 10-percent
shareholder within the meaning of Section 881(c)(3)(B) of the
Code and (z) is not a controlled foreign corporation receiving
interest from a related person within the meaning of Section
881(c)(3)(C) of the Code and (II) a properly completed and duly
executed Internal Revenue Service Form W-8 or applicable
successor form;
(B) deliver to the Borrower and the Administrative Agent
two further properly completed and duly executed copies of such
Form W-8, or any successor applicable form, on or before the date
that any such Form W-8 expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrower or upon the
request of the Borrower; and
(C) obtain such extensions of time for filing and
completing such forms or certifications as may be reasonably
requested by the Borrower or the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering
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any such form with respect to it and such Lender so advises the Borrower and
the Administrative Agent. Each Lender that is not incorporated under the laws
of the United States of America or a state thereof shall certify (i) in the
case of a Form 1001 or 4224, that it is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes and (ii) in the case of a Form W-8 or W-9 provided pursuant to subsection
4.10(b)(i)(A)(II), that it is entitled to an exemption from United States
backup withholding tax. Each Person that shall become a Lender or a
Participant pursuant to subsection 11.6 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and statements
required pursuant to this subsection, provided that in the case of a
Participant such Participant shall furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased.
4.11 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or reasonable expense which such
Lender may sustain or incur as a consequence of (a) default by the Borrower in
making a borrowing of, conversion into or continuation of Eurodollar Loans or
CAF Advances after the Borrower has given a notice requesting the same in
accordance with the provisions of this Agreement, (b) default by the Borrower
in making any prepayment of a Eurodollar Loan or CAF Advance after the Borrower
has given a notice thereof in accordance with the provisions of this Agreement
or (c) the making of a prepayment or conversion of Eurodollar Loans or CAF
Advances on a day which is not the last day of an Interest Period or the
applicable CAF Advance Maturity Date, as the case may be, with respect thereto,
which loss shall be equal to the excess, if any, of (i) the amount of interest
which would have accrued on the amount so prepaid or converted, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or conversion or of such failure to borrow, convert or continue to
the last day of such Interest Period (or proposed Interest Period) or, in the
case of CAF Advances, the applicable CAF Advance Maturity Date (or proposed CAF
Advance Maturity Date), in each case at the applicable rate of interest for
such Eurodollar Loans or CAF Advance provided for herein (excluding, however,
the Applicable Margin or any positive margin applicable to CAF Advances
included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurodollar market. A certificate as to any amounts
payable pursuant to this subsection 4.11 submitted by any Lender to the
Borrower (with a copy to the Administrative Agent) shall be conclusive in the
absence of manifest error. This covenant shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
4.12 Change of Lending Office. Each Lender agrees that if it
makes any demand for payment under subsection 4.9 or 4.10(a), or if any
adoption or change of the type described in subsection 4.8 shall occur with
respect to it, it will use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions and so long as such efforts would
not be disadvantageous to it, as determined in its sole discretion) to
designate a different lending office if the making of such a designation would
reduce or obviate the need for the Borrower to make payments under subsection
4.9 or 4.10(a), or would eliminate or reduce the effect of any adoption or
change described in subsection 4.8.
4.13 Evidence of Debt. (a) Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing
indebtedness of the Borrower to such Lender resulting from the Loans of such
Lender, including the amounts of principal and interest payable and paid to
such Lender from time to time under this Agreement.
(b) The Administrative Agent shall maintain the Register
pursuant to subsection 11.6(d), and a subaccount therein for each Lender, in
which shall be recorded (i) in the case of
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Committed Loans, the amount of each Committed Loan made hereunder, the Type
thereof and each Interest Period (if any) applicable thereto, (ii) in the case
of CAF Advances, the amount of each CAF Advance made hereunder, the CAF Advance
Maturity Date thereof, the interest rate applicable thereto and each CAF
Advance Interest Payment Date applicable thereto, (iii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iv) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(c) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 4.13(a) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans in
accordance with the terms of this Agreement.
(d) The Borrower agrees that, upon the request to the
Administrative Agent by any Term Loan Lender, the Borrower will execute and
deliver to such Term Loan Lender a promissory note of the Borrower evidencing
the Term Loan of such Term Loan Lender, substantially in the form of Exhibit G
(a "Term Note"), payable to the order of such Term Loan Lender and in a
principal amount equal to, in the case of Term Notes issued on the Closing
Date, the Term Loan Commitment of such Term Loan Lender and, in the case of
Term Notes issued after the Closing Date, the unpaid principal amount of the
Term Loan of such Term Loan Lender on the date of issuance thereof. Each Term
Loan Lender is hereby authorized to record the date, Type and amount of the
Term Loan of such Term Loan Lender, the date and amount of each payment or
prepayment of principal thereof, each continuation of all or a portion thereof
as the same Type, each conversion of all or a portion thereof to another Type
and, in the case of Eurodollar Loans, the length of each Interest Period and
Eurodollar Rate with respect thereto, on the schedule (or any continuation of
the schedule) annexed to and constituting a part of its Term Note, as the case
may be, and any such recordation shall, to the extent permitted by applicable
law, constitute prima facie evidence of the accuracy of the information so
recorded, provided that the failure to make any such recordation (or any error
therein) shall not affect the obligation of the Borrower to repay (with
applicable interest) the Term Loans in accordance with the terms of this
Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Revolving Credit Lender, the Borrower will execute
and deliver to such Lender a promissory note of the Borrower evidencing the
Revolving Credit Loans of such Lender, substantially in the form of Exhibit H
(a "Revolving Credit Note"), payable to the order of such Revolving Credit
Lender and in a principal amount equal to the Revolving Credit Commitment of
such Revolving Credit Lender on the date of issuance of such Revolving Credit
Note. Each Revolving Credit Lender is hereby authorized to record the date,
Type and amount of each Revolving Credit Loan of such Revolving Credit Lender,
the date and amount of each payment or prepayment of principal thereof, each
continuation of all or a portion thereof as the same Type, each conversion of
all or a portion thereof to another Type and, in the case of Eurodollar Loans,
the length of each Interest Period and Eurodollar Rate with respect thereto, on
the schedule (or any continuation of the schedule) annexed to and constituting
a part of its Revolving Credit Note, as the case may be, and any such
recordation shall, to the extent permitted by applicable law, constitute prima
facie evidence of the accuracy of the information so recorded, provided that
the failure to make any such recordation (or any error therein) shall not
affect the obligation of the Borrower to repay (with applicable interest) the
Revolving Credit Loans in accordance with the terms of this Agreement.
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(f) The Borrower agrees that, upon the request to the
Administrative Agent by any Revolving Credit Lender, the Borrower will execute
and deliver to such Revolving Credit Lender a promissory note of the Borrower
evidencing the CAF Advances of such Revolving Credit Lender, substantially in
the form of Exhibit I (a "CAF Advance Note"), payable to the order of such
Revolving Credit Lender and representing the obligation of the Borrower to pay
the lesser of (a) the aggregate amount of the Revolving Credit Commitments and
(b) the unpaid principal amount of all CAF Advances made by such Revolving
Credit Lender, with interest on the unpaid principal amount from time to time
outstanding of each CAF Advance evidenced thereby as prescribed in subsection
3.16(b). Each Revolving Credit Lender is hereby authorized to record the date
and amount of each CAF Advance made by such Revolving Credit Lender, the CAF
Advance Maturity Date thereof, the date and amount of each payment of principal
thereof and the interest rate with respect thereto on the schedule (or any
continuation of the schedule) annexed to and constituting a part of its CAF
Advance Note and any such recordation shall, to the extent permitted by
applicable law, constitute prima facie evidence of the accuracy of the
information so recorded, provided that the failure to make any such recordation
(or any error therein) shall not affect the obligation of the Borrower to repay
(with applicable interest) the CAF Advances in accordance with the terms of
this Agreement. Each CAF Advance Note shall be dated the Closing Date, and
each CAF Advance evidenced thereby shall bear interest for the period from and
including the Borrowing Date of such CAF Advance on the unpaid principal amount
thereof from time to time outstanding at the applicable rate per annum
determined as provided in, and such interest shall be payable as specified in,
subsection 3.16(b).
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Extensions of Credit, the Borrower hereby
represents and warrants to the Administrative Agent and each Lender that:
5.1 Financial Condition. The consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at January 31, 1996 and the
related consolidated statements of income and of cash flows for the Fiscal Year
ended on such date, reported on by Price Waterhouse LLP, copies of which have
heretofore been furnished to each Lender, are complete and correct in all
material respects and present fairly the consolidated financial condition of
the Borrower and its Consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows for
the Fiscal Year then ended. The unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at May 1, 1996 and the related
unaudited consolidated statements of income and of cash flows for the
three-month period ended on such date, certified by a Responsible Officer,
copies of which have heretofore been furnished to each Lender, are complete and
correct in all material respects and present fairly the consolidated financial
condition of the Borrower and its Consolidated Subsidiaries as at such date,
and the consolidated results of their operations and their consolidated cash
flows for the three-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules
and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein). Except as set forth on Schedule 5.1, neither the Borrower nor any of
its Consolidated Subsidiaries had, at the date of the most recent balance sheet
referred to above, any material Guarantee Obligation, material contingent
liability or liability for taxes, or any material long-term lease or unusual
forward or long-term commitment, including, without limitation, any interest
rate or foreign currency swap or exchange transaction, which is not reflected
in the foregoing statements or in the notes thereto. Except as set forth on
Schedule 5.1, during the period from January
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31, 1996 to and including the date hereof there has been no sale, transfer or
other disposition by the Borrower or any of its Consolidated Subsidiaries of
any material part of its business or property and no purchase or other
acquisition of any business or property (including any capital stock of any
other Person) material in relation to the consolidated financial condition of
the Borrower and its Consolidated Subsidiaries at January 31, 1996.
5.2 No Change. Since January 31, 1996, there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect.
5.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Restricted Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right,
to own and operate its property, to lease the property it operates as lessee
and to conduct the business in which it is currently engaged, (c) is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification and (d) is in compliance with all
Requirements of Law except, in each case, where the failure to be so organized,
existing, in good standing or qualified, or the failure to have such power or
authority or to so comply, could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
5.4 Corporate Power; Authorization; Enforceable Obligations.
Each of the Borrower and its Restricted Subsidiaries has the corporate power
and authority, and the legal right, to make, deliver and perform the Loan
Documents to which it is a party and (in the case of the Borrower) to borrow
and obtain the other Extensions of Credit hereunder and has taken all necessary
corporate action to authorize the Extensions of Credit on the terms and
conditions of this Agreement and any Notes and to authorize the execution,
delivery and performance of the Loan Documents to which it is a party. No
consent or authorization of, filing with, notice to, or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Extensions of Credit hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents to
which the Borrower or any of its Restricted Subsidiaries is a party except as
may be necessary to perfect the Liens created pursuant to the Security
Documents and the Trust Agreement and except those described on Schedule 5.4,
all of which have been obtained, made or waived. This Agreement has been, and
each other Loan Document will be, duly executed and delivered on behalf of the
Borrower and each of its Restricted Subsidiaries that is a party thereto. This
Agreement constitutes, and each other Loan Document when executed and delivered
will constitute, a legal, valid and binding obligation of the Borrower and each
of its Restricted Subsidiaries that is a party thereto enforceable against the
Borrower and each such Restricted Subsidiary in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered
in a proceeding in equity or at law) and an implied covenant of good faith and
fair dealing.
5.5 No Legal Bar. Except as set forth on Schedule 5.7, the
execution, delivery and performance of the Loan Documents to which the Borrower
or any of its Restricted Subsidiaries is a party, the Extensions of Credit
hereunder and the use of the proceeds thereof will not violate any Requirement
of Law or Contractual Obligation of the Borrower or of any of its Restricted
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien on any of its or their respective properties or revenues pursuant to
any such Requirement of Law or Contractual Obligation (other than pursuant to
the Loan Documents), except to the extent that any such violations
(individually or in the aggregate) could not reasonably be expected to have a
Material Adverse Effect.
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5.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
of its Restricted Subsidiaries or against any of its or their respective
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby or (b) which could reasonably
be expected to have a Material Adverse Effect.
5.7 No Default. Except as set forth on Schedule 5.7, neither
the Borrower nor any of its Restricted Subsidiaries is in default under or with
respect to any of its Contractual Obligations in any respect which could
reasonably be expected to have a Material Adverse Effect. After giving effect
to the initial Extensions of Credit and the application of the proceeds
thereof, no Default or Event of Default has occurred and is continuing.
5.8 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of the Borrower or any of its Restricted Subsidiaries
could reasonably be expected to have a Material Adverse Effect.
5.9 Taxes. Each of the Borrower and its Restricted Subsidiaries
has filed or caused to be filed all tax returns which, to the knowledge of the
Borrower, are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property (including, without limitation, any Material Real Property) and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any such taxes, fees or other charges (i)
the amount or validity of which are then being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Borrower or its Subsidiaries, as
the case may be, or (ii) which, if not paid, could reasonably be expected to
have a Material Adverse Effect); no tax Lien has been filed, and, to the
knowledge of the Borrower, no claim is being asserted, with respect to any such
tax, fee or other charge (other than with respect to any such tax, fee or other
charge the amount or validity of which is then being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Borrower or its Subsidiaries, as
the case may be) which could reasonably be expected to have a Material Adverse
Effect.
5.10 Federal Regulations. No part of the proceeds of any
Extension of Credit will be used for "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation G or Regulation U of the Board of Governors as now and from time to
time hereafter in effect. If requested by any Lender or the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR
Form G-1 or FR Form U-1 referred to in said Regulation G or Regulation U, as
the case may be.
5.11 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan.
Each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect. No termination of a
Single Employer Plan has occurred, except where such a termination could not
reasonably be expected to have a Material Adverse Effect, and no Lien in favor
of the PBGC or a Plan has arisen, during such five-year period. The present
value of all accrued benefits under each Single Employer Plan (based on those
assumptions used to fund such Plan) did
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not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits, except to the extent any such excess
(individually or in the aggregate) could not reasonably be expected to have a
Material Adverse Effect. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan,
except where such withdrawal could not reasonably be expected to have a
Material Adverse Effect, and neither the Borrower nor any Commonly Controlled
Entity would become subject to any liability under ERISA if the Borrower or any
such Commonly Controlled Entity were to withdraw completely from all
Multiemployer Plans as of the valuation date most closely preceding the date on
which this representation is made or deemed made, except where such liability
could not reasonably be expected to have a Material Adverse Effect. No such
Multiemployer Plan is in Reorganization or Insolvency.
5.12 Investment Company Act; Other Regulations. The Borrower is
not an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
To the best knowledge of the Borrower, the Borrower is not subject to
regulation under any federal or state statute or regulation (other than
Regulation X of the Board of Governors) which limits its ability to incur
Indebtedness.
5.13 Subsidiaries. Schedule 5.13 sets forth all the
Subsidiaries of the Borrower at the date hereof.
5.14 Environmental Matters. To the best knowledge of the
Borrower:
(a) The Mortgaged Properties do not contain, and have not
previously contained, any Materials of Environmental Concern in amounts
or concentrations or under such conditions which (i) constitute or
constituted a violation of, or (ii) could reasonably be expected to give
rise to liability under, any Environmental Law, except in either case
insofar as such violation or liability, or any aggregation thereof,
could not reasonably be expected to have a Material Adverse Effect.
(b) The Mortgaged Properties and all operations at the Mortgaged
Properties are in compliance, and have within the periods covered by the
applicable statute of limitations been in compliance, in all material
respects with all applicable Environmental Laws, and there is no
contamination at, under or about the Mortgaged Properties or violation
of any Environmental Law with respect to the Mortgaged Properties or the
business operated by the Borrower or any of its Restricted Subsidiaries
(the "Business") which could reasonably be expected to have a Material
Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries has
received any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Mortgaged
Properties or the Business, nor does the Borrower have knowledge or
reason to believe that any such notice will be received or is being
threatened, except insofar as such notice or threatened notice, or any
aggregation thereof, does not involve a matter or matters that could
reasonably be expected to have a Material Adverse Effect.
(d) Materials of Environmental Concern have not been transported
or disposed of from the Mortgaged Properties in violation of, or in a
manner or to a location which could reasonably be expected to give rise
to liability under, any Environmental Law, nor have any Materials of
Environmental Concern been generated, treated, stored or disposed of at,
on or
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under any of the Mortgaged Properties in violation of, or in a manner
that could reasonably be expected to give rise to liability under, any
applicable Environmental Law except insofar as any such violation or
liability referred to in this paragraph, or any aggregation thereof,
could not reasonably be expected to have a Material Adverse Effect.
(e) No judicial proceeding or governmental or administrative
action is pending or threatened under any Environmental Law to which the
Borrower or any Restricted Subsidiary is or will be named as a party
with respect to the Mortgaged Properties or the Business, nor are there
any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Mortgaged
Properties or the Business except insofar as such proceeding, action,
decree, order or other requirement, or any aggregation thereof, could
not reasonably be expected to have a Material Adverse Effect.
(f) There has been no release or threat of release of Materials
of Environmental Concern at or from the Mortgaged Properties, or arising
from or related to the operations of the Borrower or any Restricted
Subsidiary in connection with the Mortgaged Properties or otherwise in
connection with the Business, in violation of or in amounts or in a
manner that could reasonably give rise to liability under Environmental
Laws except insofar as any such violation or liability referred to in
this paragraph, or any aggregation thereof, could not reasonably be
expected to have a Material Adverse Effect.
(g) Each of the representations and warranties set forth in
subsections 5.14(a) through (f) is true and correct with respect to each
parcel of real property owned or operated by the Borrower or any of its
Restricted Subsidiaries (other than the Mortgaged Properties) except to
the extent that the facts and circumstances giving rise to any such
failure to be so true and correct could not reasonably be expected to
have a Material Adverse Effect.
5.15 The Security Documents. (a) When executed and delivered,
the provisions of the Security Agreement will be effective to create in favor
of the Trustee a legal and valid security interest in all right, title and
interest of the Borrower or any Subsidiary Guarantor party thereto in the
collateral described therein (subject to Section 11 thereof), and when the
financing statements referred to on Schedule 5.15 and subsection 7.11(a)(ii)
have been filed as specified in Schedule 5.15 and subsection 7.11(a)(ii), as
the case may be, the Trustee shall have a fully perfected security interest in
all right, title and interest of the Borrower or such Subsidiary Guarantor, as
the case may be, in all "accounts", "chattel paper", "inventory" or "general
intangibles" (other than "uncertificated securities") (each as defined in the
applicable uniform commercial code) described in such financing statements, all
other UCC Filing Collateral (other than UCC Local Filing Collateral) described
in such financing statements and, to the best knowledge of the Borrower, all
UCC Local Filing Collateral described in such financing statements, in each
case superior (to the extent that priority can be obtained by filing uniform
commercial code financing statements) in right to any Liens of any third person
against such collateral or interests therein, subject only to Liens permitted
under subsection 8.4 (other than subsection 8.4(k));
(b) When executed and delivered, the provisions of the Pledge
Agreement, together with possession by the Trustee (or any agent acting on its
behalf) of the Pledged Securities described therein (or, in the case of Pledged
Securities constituting "securities" (as defined in the applicable uniform
commercial code), together with the "transfer" to the Trustee (or any agent
acting on its behalf) of such Pledged Securities in accordance with the
applicable uniform commercial code), will be effective to create in favor of
the Trustee a legal and valid security interest in all right, title and
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interest of the Borrower or any Subsidiary Guarantor party thereto, as the case
may be, in the Pledged Securities (subject to Section 14 of the Pledge
Agreement). Thereafter, the Trustee will have a fully perfected security
interest in the Pledged Stock and all other Pledged Securities described in the
Pledge Agreement which are then in the possession of the Trustee (or any agent
acting on its behalf) (or, in the case of Pledged Securities constituting
"securities" (as defined in the applicable uniform commercial code), which have
been "transferred" to the Trustee (or any agent acting on its behalf) in
accordance with the applicable uniform commercial code), which security
interest will be (i) in the case of Pledged Stock, superior in right to any
Liens of any third person against such collateral or interests therein, subject
to Section 14 of the Pledge Agreement and to Liens permitted under subsection
8.4(a) and (ii) in the case of all other Pledged Securities, superior (to the
extent that priority can be obtained by possession or "transfer" of such other
Pledged Securities) in right to any Liens of any third person against such
collateral or interests therein, subject to Section 14 of the Pledge Agreement
and to Liens permitted by subsection 8.4(a);
(c) When executed and delivered, each Mortgage will be effective
to create in favor of the Trustee, a legal, valid and enforceable Lien on all
right, title and interest of the Borrower or any Subsidiary Guarantor party
thereto, as the case may be, in the Mortgaged Property thereunder. When each
Mortgage and the related fixture filings are duly recorded in the appropriate
office or offices and the mortgage recording fees and taxes in respect thereof
are paid and compliance is otherwise had with the formal requirements of state
law applicable to the recording of real estate mortgages generally, such
Mortgage shall constitute a fully perfected Lien on and security interest in
such Mortgaged Property (prior to all mortgages on the Mortgaged Property other
than those which have been assigned to the Trustee), subject only to the
encumbrances and exceptions to title expressly set forth or referred to in such
Mortgage, and to Liens permitted by subsection 8.4 (other than subsection
8.4(k));
subject, in the case of clauses (a) through (c) above, to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and to principles of equity whether
considered in a proceeding in equity or at law.
5.16 Ownership of Property; Liens. Each of the Borrower and
each Restricted Subsidiary has good title in fee simple to, or valid ground
leasehold interests in, their respective Material Real Properties and has good
title in fee simple to their other owned real property that is material to the
operation of their respective businesses, subject to defects in title and
leasehold and other interests which are not material to the business,
operations and financial condition of the Borrower and its Restricted
Subsidiaries taken as a whole and other than those items referred to in the
applicable Mortgages or in the schedules to the applicable Mortgages, and none
of such property is subject to any Lien other than Liens permitted under
subsection 8.4 (other than subsection 8.4(k)).
5.17 Intellectual Property. The Borrower and each of its
Restricted Subsidiaries owns, or is licensed to use, all trademarks,
tradenames, copyrights, technology, know-how and processes necessary for the
conduct of its business as currently conducted except for those the failure to
own or license which could not reasonably be expected to have a Material
Adverse Effect (the "Intellectual Property"). Except as set forth on Schedule
5.17, no claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect, nor
does the Borrower know of any valid basis for any such claim. Except as set
forth on Schedule 5.17, the use of such Intellectual Property by the Borrower
and its Restricted Subsidiaries does not infringe on the rights of any Person,
except for such claims and infringements that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
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5.18 Pledged Stock. On the Closing Date, the shares of Capital
Stock listed on Schedule A to the Pledge Agreement will constitute all the
issued and outstanding shares of Capital Stock of the issuers thereof listed on
said Schedule owned by the Borrower or the Subsidiary Guarantors party to the
Pledge Agreement; all such shares have been duly and validly issued and are
fully paid and nonassessable; the relevant Pledgor of said shares is the record
and beneficial owner of said shares; and said shares are free of any Liens or
options in favor of, or claims of, any other Person, except the Lien of the
Pledge Agreement (subject to Section 14 thereof) and Liens permitted under
subsection 8.4(a).
5.19 Real Estate Matters. (a) The real property described on
Schedule 5.19(a) constitutes all of the Material Real Property of the Borrower
or any Subsidiary Guarantor on the date hereof. The Borrower shall have the
right to supplement Schedule 5.19(a) at any time prior to the Closing Date to
add additional parcels of real property by written notice thereof to the
Administrative Agent on or prior to the Closing Date.
(b) Schedule 5.19(b) sets forth a true and complete list as of
the date hereof of all mortgages and deeds of trust (collectively, as amended,
supplemented, substituted, replaced or otherwise modified from time to time,
the "Put Bond Mortgages") pursuant to which a Lien has been granted on real
property to secure the Repurchased Put Bonds.
(c) Schedule 5.19(c) sets forth a true and complete list of all
real property owned by the Big Beaver Joint Ventures as of the date hereof.
5.20 Continuing Letters of Credit. Part I of Schedule 5.20 is a
true and complete list, by reference to the aggregate face amounts of letters
of credit issued by the Persons listed thereon that are also Lenders, of
letters of credit issued by such Persons that are outstanding as of the dates
set forth in such Schedule. Part II of Schedule 5.20 is a true and complete
list, by reference to the aggregate face amount of the letters of credit issued
by the Persons listed thereon that are not Lenders, of letters of credit issued
by such Persons that are outstanding as of the dates set forth in such
Schedule. The list delivered pursuant to subsection 6.1(s) shall be deemed to
supplement Schedule 5.20.
5.21 Solvency. As of the Closing Date and each date on which an
Extension of Credit is made hereunder, after giving effect to the transactions
contemplated to occur on the Closing Date or on such other date, the Borrower
is Solvent.
5.22 Certain Proceeds. As of the date hereof, the Borrower has
received at least $250,000,000 of Net Cash Proceeds from the sources described
on Schedule 5.22.
5.23 Purpose of Loans. The proceeds of the Term Loans shall be
used to finance a portion of the Existing Debt Related Transactions and the
proceeds of the Revolving Credit Loans and CAF Advances, if any, shall be used
to finance a portion of the Existing Debt Related Transactions and for general
corporate purposes.
5.24 Accuracy of Information. All statements and other
information (other than statements and information constituting projections)
contained in any written documents or other materials provided to the
Administrative Agent and the Lenders by the Borrower, including all such
statements and other information contained in the Preliminary Confidential
Information Memorandum dated April 1996 (as supplemented through the date
hereof, the "Information Memorandum") and the Preliminary Prospectus, are, when
taken as a whole, correct in all material respects and do not contain
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any untrue statements of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements were made.
All statements and other information constituting projections which are
contained in any written documents or other materials provided to the
Administrative Agent and the Lenders by the Borrower, including the Information
Memorandum and the Preliminary Prospectus, were prepared based on good faith
estimates and assumptions of the Borrower believed to be reasonable at the time
such projections were prepared.
SECTION 6. CONDITIONS
6.1 Conditions of Initial Extensions of Credit. The agreement
of each Lender to make the initial Extension of Credit requested to be made by
it is subject to the satisfaction or waiver, immediately prior to or
concurrently with the making of such Extension of Credit on the Closing Date,
of the following conditions:
(a) Execution of Loan Documents and Addenda. The Administrative
Agent shall have received (i) this Agreement, executed and delivered by
a duly authorized officer of the Borrower, with a counterpart for the
Administrative Agent and each Lender, (ii) an executed Addendum (or a
copy thereof by facsimile transmission) from each Person listed on
Schedule 1.1(a), provided, that, notwithstanding the foregoing, in the
event that an Addendum has not been duly executed and delivered by each
Person listed on Schedule 1.1(a) on the date (which shall be no earlier
than the date hereof) on which this Agreement shall have been executed
and delivered by each of the Borrower and the Administrative Agent, the
condition set forth in this subsection 6.1(a)(ii) shall, subject to
satisfaction of the other conditions precedent set forth in this
subsection 6.1, nevertheless be satisfied on such date with respect to
those Persons which have executed and delivered an Addendum on or before
such date if on such date the Borrower and the Administrative Agent
shall have designated one or more banks, financial institutions or other
entities ("Designated Lenders") to assume, in the aggregate, all of the
Commitments which would have been held by the Persons listed on Schedule
1.1(a) (the "Non-Executing Persons") which have not so executed an
Addendum (subject to each such Designated Lender's prior written consent
in its sole discretion and its execution of an Addendum) (Schedule
1.1(a) shall automatically be deemed to be amended to reflect the
respective Commitments of the Designated Lenders and the omission of the
Non-Executing Persons as Lenders hereunder), (iii) each of the Security
Documents, each executed and delivered by a duly authorized officer of
each Loan Party thereto, with a copy for each Lender and (iv) the
Subsidiaries Guarantee, executed and delivered by a duly authorized
officer of each Loan Party thereto, with a copy for each Lender.
(b) Proceeds from Convertible Preferred Securities Offering. The
Administrative Agent shall have received evidence in form and substance
satisfactory to it that the Borrower shall have received the net cash
proceeds from the issuance of Convertible Debentures in connection with
an offering of Convertible Preferred Securities with an aggregate
liquidation preference of at least $750,000,000 by the Convertible Trust
(the "Convertible Preferred Securities Offering") concurrently with the
initial Extensions of Credit hereunder, which Convertible Debentures and
Convertible Preferred Securities shall be, in all material respects,
issued on the terms set forth in the Preliminary Prospectus.
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(c) Existing Debt Related Transactions. The Administrative
Agent shall have received evidence satisfactory to it that (i) the
outstanding principal of and interest accrued through the Closing Date
on the loans made on or prior to the Closing Date under the Refinanced
Credit Facilities shall be repaid in full concurrently with the initial
Extension of Credit hereunder and that the commitments under the
Refinanced Credit Facilities shall have been terminated, (ii) the
Indebtedness under the Purchased Credit Facilities shall have been
purchased by the Borrower or a Subsidiary Guarantor on terms and
conditions satisfactory to the Administrative Agent (the transactions
described in the preceding clauses (i) and (ii) collectively, the
"Refinancing") and (iii) immediately after the consummation of the
Refinancings, either (A) the Repurchased Put Bonds shall have been
purchased by the Borrower or a Subsidiary Guarantor on terms and
conditions satisfactory to the Administrative Agent or (B) to the extent
not so purchased, the Borrower or a Subsidiary Guarantor shall have
tendered to the holders of the Repurchased Put Bonds not so purchased
(or a Person acting on their behalf) an amount that is at least equal to
the outstanding principal of and interest accrued through the Closing
Date on such Repurchased Put Bonds and shall, to the extent such tender
shall not have been accepted, have placed such amount in escrow, for the
benefit of such holders on terms and conditions satisfactory to the
Administrative Agent (together with the Refinancings, the "Existing Debt
Related Transactions").
(d) Trust Agreement. The Administrative Agent shall have
received the Trust Agreement, executed and delivered by a duly
authorized officer of each Person that is a party thereto, with a copy
for each Lender, and the Trust Agreement shall have become effective in
accordance with its terms.
(e) Related Agreements. The Administrative Agent shall have
received, with a copy for each Lender, true and correct copies,
certified as to authenticity by the Borrower, of the Convertible
Debenture Indenture, the Convertible Preferred Securities Prospectus and
the Convertible Preferred Securities Underwriting Agreement and such
other documents or instruments delivered in connection therewith as may
be reasonably requested by the Administrative Agent.
(f) Closing Certificate. The Administrative Agent shall have
received, with a copy for each Lender, a certificate of the Borrower,
dated the Closing Date, substantially in the form of Exhibit J, with
appropriate insertions and attachments, satisfactory in form and
substance to the Administrative Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of the
Borrower.
(g) Corporate Proceedings of the Borrower. The Administrative
Agent shall have received, with a copy for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of the Borrower authorizing (i) the
execution, delivery and performance of this Agreement and the other Loan
Documents to which it is a party, (ii) the Extensions of Credit
contemplated hereunder and (iii) the granting by it of the Liens created
pursuant to the Security Documents, certified by the Secretary or an
Assistant Secretary of the Borrower as of the Closing Date, which
certificate shall be in form and substance satisfactory to the
Administrative Agent and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(h) Borrower Incumbency Certificate. The Administrative Agent
shall have received, with a copy for each Lender, a certificate of the
Borrower, dated the Closing Date, as to the incumbency and signature of
the officers of the Borrower executing any Loan Document
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satisfactory in form and substance to the Administrative Agent, executed
by the President or any Vice President and the Secretary or any
Assistant Secretary of the Borrower.
(i) Corporate Proceedings of Subsidiaries. The Administrative
Agent shall have received, with a copy for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors or sole shareholder of each Restricted
Subsidiary which is a party to a Loan Document authorizing (i) the
execution, delivery and performance of the Loan Documents to which it is
a party and (ii) the granting by it of the Liens created pursuant to the
Security Documents to which it is a party, certified by the Secretary or
an Assistant Secretary of each such Subsidiary as of the Closing Date,
which certificate shall be in form and substance satisfactory to the
Administrative Agent and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(j) Subsidiary Incumbency Certificates. The Administrative
Agent shall have received, with a copy for each Lender, a certificate of
each Restricted Subsidiary of the Borrower which is a party to a Loan
Document, dated the Closing Date, as to the incumbency and signature of
the officers of such Subsidiary executing any such Loan Document,
satisfactory in form and substance to the Administrative Agent, executed
by the President or any Vice President and the Secretary or any
Assistant Secretary of such Subsidiary.
(k) Fees. The Administrative Agent shall have (i) received the
fees to be received on the Closing Date pursuant to the Fee Letter,
dated May 17, 1996, from Chemical and Chase Securities Inc. to the
Borrower and (ii) shall have received evidence, satisfactory to it, that
each of the Co-Arrangers have received the fees to be paid to each of
them under their respective fee letters in respect of the transactions
contemplated hereby.
(l) Legal Opinions. The Administrative Agent shall have
received, with a copy for each Lender, the following executed legal
opinions:
(i) the executed legal opinion of Skadden, Arps,
Slate, Meagher & Flom, counsel to the Borrower and the other Loan
Parties, substantially in the form of Exhibit K-1;
(ii) the executed legal opinion of Anthony N. Palizzi,
general counsel of the Borrower, substantially in the form of
Exhibit K-2;
(iii) the executed legal opinion of Simpson Thacher &
Bartlett, counsel to the Administrative Agent and the Lenders,
substantially in the form of Exhibit K-3; and
(iv) the executed legal opinion of counsel in each of
the jurisdictions listed on Schedule 6.1(l), which
opinions shall be substantially to the effect set forth in
Exhibit K-4 (with such modifications thereto as are
reasonably acceptable to the Administrative Agent) and
otherwise be satisfactory in form and substance to the
Administrative Agent (it being understood that certain
matters of New York, Illinois and California law required
to be covered pursuant to this clause (iv) shall be
covered by the opinion delivered pursuant to clause (i)
above).
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Each such legal opinion shall cover such matters incident to the
transactions contemplated by this Agreement as the Administrative Agent
may reasonably require.
(m) UCC Filings. The Administrative Agent shall have received
evidence in form and substance satisfactory to it that all the filings
described in Schedule 6.1(m) shall have been completed (or arrangements,
satisfactory to the Administrative Agent, for the completion thereof
shall have been made).
(n) Eligible Mortgaged Real Property, Eligible Put Bond Real
Property and Eligible Big Beaver Real Property. The Borrowing Base
Certificate delivered pursuant to subsection 6.1(q) shall reflect that
the sum of (i) the aggregate Mortgage Value of Eligible Mortgaged Real
Property as of the Closing Date, (ii) the aggregate Mortgage Value of
Eligible Put Bond Real Property as of the Closing Date, (iii) the
aggregate Designated Value of Eligible Big Beaver Real Property as of
the Closing Date and (iv) the aggregate Mortgage Value of Eligible
California Real Property as of the Closing Date, shall not be less than
$300,000,000 in the aggregate.
(o) Mortgages. The Administrative Agent shall have received
Mortgages or Subsidiary Mortgages, as the case may be, each executed and
delivered by a duly authorized officer of the party thereto, with
respect to each parcel of Material Real Property listed on Schedule
5.19(a) other than the Rio Piedras Property and other than with respect
to any parcel of Material Real Property located in a Restricted
Jurisdiction.
(p) Lien Searches. The Administrative Agent shall have received
the results of a recent search in the jurisdictions listed on Schedule
6.1(p) of the Uniform Commercial Code, of judgment and tax lien filings
(as indicated on such Schedule) which may have been filed with respect
to personal property of the Borrower and the Subsidiary Guarantors, and
the results of such search shall be satisfactory to the Administrative
Agent.
(q) Borrowing Base Certificate. The Administrative Agent shall
have received a Borrowing Base Certificate, executed and delivered by a
duly authorized officer of the Borrower.
(r) Flood Insurance. To the extent required by applicable law,
the Administrative Agent shall have received (i) a policy of flood
insurance which (A) covers any parcel of Material Real Property located
in an area identified as an area having special flood hazards by the
Secretary of Housing and Urban Development or other applicable agency,
and (B) otherwise complies with such applicable law and (ii)
confirmation that the Borrower has received the notice required pursuant
to Section 208(e)(3) of Regulation H of the Board of Governors.
(s) Letters of Credit. The Administrative Agent shall have
received a list, setting forth as of a date not earlier than June 7,
1996, of all letters of credit of the Borrower or any Restricted
Subsidiary outstanding as of such date, together with the face amounts
and expiration dates thereof.
(t) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection
with the transactions contemplated by this Agreement and the other Loan
Documents shall be reasonably satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received
such
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other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it
shall reasonably request.
6.2 Conditions to Each Extension of Credit. The agreement of
each Lender to make any Extension of Credit requested to be made by it on any
date (including, without limitation, its initial Extension of Credit) is
subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations
and warranties made by the Loan Parties in or pursuant to the Loan
Documents (excluding those set forth on Schedule 1.1(b)) shall be true
and correct in all material respects on and as of such date as if made
on and as of such date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
Extension of Credit requested to be made on such date.
(c) Borrowing Base. After giving effect to the Extensions of
Credit requested to be made on such date, the Aggregate Outstanding
Extensions of Credit at such time shall not exceed the Borrowing Base at
such time.
Each Extension of Credit to the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date thereof that the
conditions contained in this subsection have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect or any Letter of Credit remains outstanding or any amount is
owing to any Lender or the Administrative Agent hereunder or under any other
Loan Document, the Borrower shall and (except in the case of delivery of
financial information, reports and notices) shall cause each of its Restricted
Subsidiaries to:
7.1 Financial Statements. Furnish to the Administrative Agent
with a copy for each Lender:
(a) as soon as available, but in any event within 95 days after
the end of each Fiscal Year of the Borrower, a copy of the consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at
the end of such year and the related consolidated statements of income
and retained earnings and of cash flows for such year, setting forth in
each case in comparative form the figures as of the end of and for the
previous Fiscal Year, reported on without a qualification arising out of
the scope of the audit, by Price Waterhouse LLP or other independent
certified public accountants of nationally recognized standing, together
with a copy of the Borrower's Form 10-K filed with the SEC for such
Fiscal Year; and
(b) as soon as available, but in any event not later than 50
days after the end of each of the first three quarterly periods of each
Fiscal Year of the Borrower, the unaudited consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as at the end of such
quarter and the related unaudited consolidated statements of income and
retained earnings and of cash flows of the Borrower and its Consolidated
Subsidiaries for such quarter and the portion of the Fiscal Year through
the end of such quarter, setting forth in each case in comparative form
the figures for the previous Fiscal Year as set forth in the Borrower's
Form
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10-Q filed with the SEC for such quarterly period, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments).
All such financial statements shall be complete and correct in all material
respects (subject to, in the case of the financial statements referred to in
paragraph (b) above, normal year-end adjustments) and shall be prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein and with prior periods (except as approved by
such accountants or officer, as the case may be, and disclosed therein).
7.2 Certificates; Other Information. Furnish to the
Administrative Agent with a copy for each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as specified in
such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of a
Responsible Officer (i) stating that, to the best of such Officer's
knowledge, the Borrower has observed or performed all of its covenants
and other agreements, and satisfied every condition, contained in this
Agreement and the other Loan Documents to be observed, performed or
satisfied by it during the period covered by such financial statements,
and that such Officer has obtained no knowledge of any Default or Event
of Default except as specified in such certificate and (ii) setting
forth, in reasonable detail, a calculation of the financial covenants
set forth in subsection 8.1 for the period corresponding to such
financial statements;
(c) on or prior to the twentieth day (or if such day is not a
Business Day, the next succeeding Business Day) following the end of
each fiscal month, an officer's certificate substantially in the form of
Exhibit L (a "Borrowing Base Certificate"), certified by a Responsible
Officer as true and correct, provided that for purposes of the
certificate delivered pursuant to subsection 6.1(q), such certificate
shall be as of the last day of the most recently ended fiscal month that
ended at least twenty days prior to the date of delivery of such
certificate (adjusted to include the Mortgage Value of all parcels of
Eligible Mortgaged Real Property, Eligible California Real Property and
Eligible Put Bond Real Property and the Designated Value of all parcels
of Eligible Big Beaver Property, in each case as of the Closing Date);
(d) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of a
Responsible Officer setting forth a list of all stores and distribution
centers owned or leased and classified as owned by the Borrower or any
of its Restricted Subsidiaries for which a certificate of occupancy or a
temporary certificate of occupancy has been issued during the period
covered by such financial statements (or, in the case of the first such
certificate, since the Closing Date);
(e) not later than 90 days after the beginning of each Fiscal
Year of the Borrower, a copy of the projections by the Borrower of the
operating budget and cash flow budget of the Borrower and its
Subsidiaries for such Fiscal Year, such projections to be accompanied by
a certificate of a Responsible Officer to the effect that such
projections have been prepared on the basis of assumptions believed to
have been reasonable when made;
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(f) promptly after the same are sent, copies of all financial
statements and reports which the Borrower sends to its stockholders, and
promptly after the same are filed, copies of all reports on Form 8-K
which the Borrower may make to, or file with, the SEC; and
(g) promptly, such additional financial and other information as
the Administrative Agent (on behalf of itself or any Lender) may from
time to time reasonably request.
7.3 Payment of Obligations. Pay, discharge or otherwise satisfy
at or before maturity or before they become delinquent, as the case may be, all
its obligations of whatever nature, except where the amount or validity thereof
is currently being contested in good faith by appropriate proceedings and
reserves in conformity with GAAP with respect thereto have been provided on the
books of the Borrower or its Subsidiaries, as the case may be, and except where
the failure to so pay, discharge or otherwise satisfy such obligation could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
7.4 Conduct of Business and Maintenance of Existence. Continue
to engage in business of the same general type as now conducted by the Borrower
and its Restricted Subsidiaries and preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct
of its business except as otherwise permitted pursuant to subsection 8.5 and
except where the failure to maintain such rights, privileges and franchises
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect.
7.5 Maintenance of Property; Insurance. Keep its property
necessary in its business in good working order and condition, ordinary wear
and tear excepted, if the failure to do so could reasonably be expected to have
a Material Adverse Effect; maintain with financially sound and reputable
insurance companies insurance on all its property in at least such amounts and
against at least such risks as are usually insured against in the same general
area by similar companies of comparable size engaged in the same or a similar
business and owning or operating similar properties in localities where the
Borrower and its Restricted Subsidiaries operate and furnish upon the written
request of the Administrative Agent information as to the insurance carried.
7.6 Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of
all dealings and transactions in relation to its business and activities; and
permit representatives of the Administrative Agent, at the request of any
Lender, to visit and inspect any of its properties and examine and make
abstracts from any of its books and records at any reasonable time and as often
as may reasonably be desired and to discuss the business, operations,
properties and financial and other condition of the Borrower and its Restricted
Subsidiaries with officers and employees of the Borrower and its Restricted
Subsidiaries and with its independent certified public accountants.
7.7 Notices. Promptly give notice to the Administrative Agent
(which shall promptly give notice thereof to each Lender) of:
(a) the occurrence of any Default or Event of Default;
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(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Restricted Subsidiaries which
could reasonably be expected to have a Material Adverse Effect or (ii)
litigation, investigation or proceeding which may exist at any time
between the Borrower or any of its Subsidiaries and any Governmental
Authority, which (A) in the case of any such litigation, investigation
or proceeding in the ordinary course of business, could reasonably be
expected to have a Material Adverse Effect and (B) in the case of any
other litigation, investigation or proceeding, if adversely determined,
could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any
of its Subsidiaries in which the amount involved is $50,000,000 or more
to the extent not covered by insurance or in which injunctive or similar
relief is sought which (A) in the case of any such litigation, or
proceeding in the ordinary course of business, could reasonably be
expected to have a Material Adverse Effect and (B) in the case of any
other litigation or proceeding, if adversely determined, could
reasonably be expected to have a Material Adverse Effect; and
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a
Plan, the creation of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of,
any Multiemployer Plan which, in any case, could reasonably be expected
to have a Material Adverse Effect or (ii) the institution of proceedings
or the taking of any other action by the PBGC or the Borrower or any
Commonly Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the termination, Reorganization or Insolvency of,
any Plan which, in any case, could reasonably be expected to have a
Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.
7.8 Environmental Laws. (a) Comply with all applicable
Environmental Laws and obtain and comply in all material respects with and
maintain any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except in any such case to
the extent that failure to do so could not be reasonably expected to have a
Material Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect, and promptly comply in all material
respects with all lawful orders and directives of all Governmental Authorities
regarding Environmental Laws except to the extent that the same are being
contested in good faith by appropriate proceedings and the pendency of such
proceedings could not be reasonably expected to have a Material Adverse Effect.
7.9 Further Assurances. Upon the request of the Administrative
Agent, promptly perform or cause to be performed any and all acts and execute
or cause to be executed any and all documents (including, without limitation,
financing statements and continuation statements) for filing under the
provisions of the Uniform Commercial Code or any other Requirement of Law which
are necessary or, in the reasonable opinion of the Administrative Agent,
advisable to maintain in favor of
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the Trustee Liens on the Collateral that are duly perfected (to the extent that
the same are contemplated to be so perfected under the terms of the Loan
Documents) in accordance with all applicable Requirements of Law.
7.10 Mortgages; Etc. (a) (i) With respect to any parcel
of property that qualifies as a parcel of Material Real Property during any
fiscal quarter (other than any parcel of Material Real Property of the Borrower
located in the State of California, Alaska, Nevada or Washington), on or before
the last day of the succeeding fiscal quarter, execute and deliver to the
Administrative Agent a Mortgage with respect to such parcel of Material Real
Property unless (A) a Lien is granted in favor of third parties on such parcel
of Material Real Property pursuant to subsection 8.4(g), (i), (j) or (k) or (B)
the recordation of such Mortgage would result in the payment of a material
mortgage recording tax and (ii) with respect to any parcel of property that
qualifies as a parcel of Material Real Property of the Borrower during any
fiscal quarter which is located in the State of California, Alaska, Nevada or
Washington, on or before the last day of the succeeding fiscal quarter, execute
and deliver a Subsidiary Mortgage to a Subsidiary Guarantor securing all
California Mortgage Notes issued by the Borrower to such Subsidiary Guarantor
then outstanding, together with an additional California Mortgage Note in an
aggregate principal amount, or an increase in the aggregate principle amount of
such outstanding California Mortgage Notes in an amount, at least equal to the
fair market value, as determined by the Borrower, of such parcel of Material
Real Property unless (A) a Lien is granted in favor of third parties on such
parcel of Material Real Property pursuant to subsection 8.4(g), (i), (j) or (k)
or (B) the recordation of such Subsidiary Mortgage would result in the payment
of a material mortgage recording tax.
(b) Within 30 days following the Closing Date, use its best
efforts to deliver to the Trustee (or a custodian acting on its behalf) all
Instruments evidencing amounts payable in excess of $1,000,000 owned by it
(other than checks and other drafts received in the ordinary course of business
for deposit).
(c) Within 180 days following the Closing Date, cause a Mortgage
to be executed and delivered with respect to the Rio Piedras Property and cause
such Mortgage to be recorded in the appropriate jurisdiction or jurisdictions
unless, on or prior to such date, such Rio Piedras Property is sold and 100% of
the Net Cash Proceeds of such sale are applied to repay the Term Loans in
accordance with subsection 4.1(c).
(d) On the Closing Date, cause VTA to deliver the promissory
notes evidencing the loans and advances made by VTA to the Borrower to the
Corporate Trustee or its agent or custodian, to be held by the Corporate
Trustee (or its agent or custodian) as Pledged Securities, subject to the terms
of the Pledge Agreement, as collateral security for the Secured Obligations.
(e) Cause to be delivered to the Corporate Trustee all
Repurchased Put Bonds acquired after the Closing Date to be held by the
Corporate Trustee (or its agent or custodian) as Pledged Securities, subject to
the terms of the Pledge Agreement, as collateral security for the Secured
Obligations.
(f) Cause to be delivered to the Corporate Trustee all
California Mortgage Notes issued on or after the Closing Date to be held by the
Corporate Trustee (or its agent or custodian) as Pledged Securities, subject to
the terms of the Pledge Agreement, as collateral security for the Secured
Obligations.
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(g) Cause to be delivered to the Corporate Trustee a certificate
or certificates evidencing 65% of the Capital Stock of Kmart Taiwan Limited
owned by Kmart Overseas Corporation promptly upon the receipt thereof by the
Borrower or Kmart Overseas Corporation.
7.11 Additional Collateral. (a) With respect to any assets
acquired after the Closing Date by the Borrower or any Subsidiary Guarantor
that are intended to be subject to the Lien created by any of the Security
Documents but which are not so subject (other than any assets described in
subsection 7.10 or paragraph (b), (c) or (d) of this subsection), promptly (and
in any event within 30 days after the acquisition thereof): (i) execute and
deliver to the Administrative Agent such amendments to the relevant Security
Documents or such other documents as the Administrative Agent shall deem
necessary or advisable to grant to the Trustee a Lien on such assets, (ii) take
all actions reasonably deemed necessary or advisable by the Administrative
Agent to cause such Lien to be duly perfected (to the extent contemplated
therein and in the other Loan Documents) in accordance with all applicable
Requirements of Law, including, without limitation, the filing of financing
statements in such jurisdictions as may be requested by the Administrative
Agent (it being agreed that no action shall be required pursuant to this clause
(ii) to perfect a Lien (1) in assets that would not constitute UCC Filing
Collateral or (2) in assets constituting UCC Filing Collateral if such
perfection relates to assets with an aggregate book value of less than
$1,000,000), and (iii) with respect to assets constituting UCC Filing
Collateral with a book value in excess of $1,000,000 that are perfected under
the laws of any jurisdiction, if requested by the Administrative Agent, deliver
to the Administrative Agent legal opinions relating to the matters described in
clauses (i) and (ii) immediately preceding, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(b) With respect to any Person that, subsequent to the Closing
Date, becomes a Domestic Subsidiary, promptly upon the request of the
Administrative Agent: (i) execute and deliver to the Trustee a new pledge
agreement or such amendments to the relevant Pledge Agreement as the
Administrative Agent shall deem necessary or advisable to grant to the Trustee
a Lien on the Capital Stock of such Domestic Subsidiary which is owned by the
Borrower or any of its Subsidiaries, (ii) deliver to the Trustee the
certificates representing such Capital Stock, together with undated stock
powers executed and delivered in blank by a duly authorized officer of the
Borrower or such Domestic Subsidiary, as the case may be, (iii) cause such new
Domestic Subsidiary (A) to become a party to the Subsidiaries Guarantee and the
Subsidiaries Security Agreement, in each case pursuant to documentation which
is in form and substance satisfactory to the Administrative Agent, and (B) to
take all actions reasonably deemed necessary or advisable by the Administrative
Agent to cause the Lien created by the Subsidiaries Security Agreement to be
duly perfected (to the extent contemplated therein and in the other Loan
Documents) in accordance with all applicable Requirements of Law, including,
without limitation, the filing of financing statements in such jurisdictions as
may be requested by the Administrative Agent (it being agreed that no action
shall be required pursuant to this clause (iii) to perfect a Lien in assets
that would not constitute UCC Filing Collateral or in assets constituting UCC
Filing Collateral if such perfection relates to assets with an aggregate book
value of less than $1,000,000) and (iv) with respect to assets of any such
Domestic Subsidiary with a book value in excess of $1,000,000 that are
perfected under the laws of any jurisdiction, if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in clauses (i), (ii) and (iii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
(c) With respect to any Person that, subsequent to the Closing
Date, becomes a Foreign Subsidiary with a net worth in excess of $1,000,000,
promptly upon the request of the Administrative Agent: (i) execute and deliver
to the Trustee a new pledge agreement or such
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amendments to the relevant Pledge Agreement as the Administrative Agent shall
deem necessary or advisable to grant to the Trustee a Lien on the Capital Stock
of such Subsidiary which is owned by the Borrower or any of its Subsidiaries
(provided that in no event shall more than 65% of the Capital Stock of any such
Subsidiary be required to be so pledged) and (ii) deliver to the Trustee any
certificates representing such Capital Stock, together with undated stock
powers executed and delivered in blank by a duly authorized officer of the
Borrower or such Subsidiary, as the case may be, and take or cause to be taken
all such other actions under the law of the jurisdiction of organization of
such Foreign Subsidiary as may be necessary or advisable to perfect such Lien
on such Capital Stock.
(d) If the Borrower or any Subsidiary Guarantor shall acquire
any Investment Securities (other than Investment Securities of any issuer
aggregating less than $1,000,000), such Loan Party shall deliver certificates
representing such Investment Securities to the Corporate Trustee or its agent
or custodian (or otherwise "transfer" such Investment Security (within the
meaning of the applicable uniform commercial code) to the Corporate Trustee or
its agent or custodian), together with, when necessary or appropriate, undated
powers as provided in Section 2(b) of the Pledge Agreement, to be held by the
Corporate Trustee (or its agent or custodian) as Pledged Securities, subject to
the terms of the Pledge Agreement, as collateral security for the Secured
Obligations.
7.12 Cash Equivalents. Except as otherwise permitted by clause
(c), (d), (f), (i) (to the extent applicable), (j) or (k) of subsection 8.4,
the Borrower and each Subsidiary Guarantor will maintain all its Cash
Equivalents in accounts established with a custodian which shall have agreed to
hold such property in the name of the Trustee subject to the provisions of the
Pledge Agreement, provided that the Borrower and the Subsidiary Guarantors
shall not be required to maintain Temporary Cash Equivalent Investments in such
accounts to the extent such investments in such Temporary Cash Equivalent
Investments are reasonably necessary for the operation of the business of the
Borrower and the Subsidiary Guarantors consistent with past practices.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect or any Letter of Credit remains outstanding or any amount is
owing to any Lender or the Administrative Agent hereunder or under any other
Loan Document, the Borrower shall not, and (except in the case of subsection
8.1) shall not permit any of its Restricted Subsidiaries to, directly or
indirectly:
8.1 Financial Condition Covenants.
(a) Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio as of the last day of any fiscal quarter to be less than
1.25 to 1.00.
(b) Leverage Ratio. Permit at any time the Leverage Ratio to
exceed 0.50 to 1.00.
8.2 Limitation on Indebtedness. Create, incur, assume or suffer
to exist any Indebtedness, except:
(a) Indebtedness of the Borrower (i) under this Agreement and
(ii) under the Convertible Debentures;
(b) (i) Indebtedness of the Borrower to any Subsidiary and of
any Subsidiary Guarantor to the Borrower or any other Subsidiary and
(ii) Indebtedness of the Borrower in
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respect of cash advances from Meldisco in anticipation of dividends,
income distributions and royalties due from Meldisco to the Borrower;
(c) Indebtedness of the Borrower and any of its Restricted
Subsidiaries incurred after the Closing Date to finance the acquisition,
construction or completion of fixed or capital assets (whether pursuant
to a loan, a Financing Lease or otherwise), provided that the principal
amount of such Indebtedness shall at no time exceed 100% of the original
acquisition, construction or completion cost, as the case may be, of
such assets;
(d) Indebtedness of Significant Foreign Subsidiaries incurred
for working capital or other operating purposes;
(e) Indebtedness outstanding on the date hereof;
(f) Indebtedness of a corporation which becomes a Restricted
Subsidiary after the date hereof, provided that (i) such Indebtedness
existed at the time such corporation became a Restricted Subsidiary and
was not created in anticipation thereof and (ii) immediately after
giving effect to the acquisition of such corporation by the Borrower or
any other Restricted Subsidiary no Default or Event of Default shall
have occurred and be continuing;
(g) Indebtedness in respect of interest rate and currency
hedging transactions entered into in the ordinary course of business and
not for speculative purposes;
(h) (i) until the Closing Date, Indebtedness under the
Refinanced Credit Facilities and (ii) Indebtedness under the Purchased
Credit Facilities and the Repurchased Put Bonds;
(i) subject to subsection 8.9(g), Indebtedness of any Foreign
Subsidiary to the Borrower or any Subsidiary;
(j) Indebtedness not otherwise permitted by this subsection 8.2,
100% of the Net Cash Proceeds of which is applied to prepay Term Loans
in accordance with subsection 4.1(c), provided that the principal amount
of any such Indebtedness shall not exceed the amount required to prepay
the outstanding Term Loans in full on the date such Indebtedness is
incurred;
(k) Indebtedness in respect of any [ ] Convertible
Offering, provided that such Indebtedness is limited in recourse solely
to the Capital Stock of [ ];
(l) Indebtedness not otherwise permitted by this subsection 8.2
not exceeding (as to the Borrower and all its Restricted Subsidiaries)
$250,000,000 in aggregate principal amount at any one time outstanding;
and
(m) any refinancings, refundings, renewals or extensions of
Indebtedness permitted hereunder, provided that if the principal amount
of such Indebtedness is increased, such increased amount is permitted to
be incurred under subsection 8.2(j) or (l).
8.3 Limitation on Guarantee Obligations. Create, incur, assume
or suffer to exist any Guarantee Obligation except:
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(a) the Subsidiaries Guarantee and any Guarantee Obligations
arising under any of the other Loan Documents;
(b) (i) until the Closing Date, Guarantee Obligations in respect
of the Refinanced Credit Facilities and (ii) Guarantee Obligations in
respect of the Purchased Credit Facilities;
(c) Guarantee Obligations in existence on the date hereof;
(d) Guarantee Obligations of the Borrower or any Restricted
Subsidiary of obligations of any Restricted Subsidiary or the Borrower
which obligations are otherwise permitted under this Agreement;
(e) Guarantee Obligations of the Borrower under its guaranty of
the obligations of the Convertible Trust under, or as contemplated by,
the Convertible Preferred Securities Documents as in effect on the
Closing Date;
(f) Guarantee Obligations entered into in connection with
surety, appeal, payment and performance bonds (and other obligations of
a like nature) incurred in the ordinary course of business;
(g) Guarantee Obligations of the Borrower or any Restricted
Subsidiary of Indebtedness or other obligations of Securitization
Entities incurred in connection with Securitization Transactions;
(h) subject to subsection 8.9(g), Guarantee Obligations of the
Borrower or any Restricted Subsidiary of Indebtedness or other
obligations incurred in the ordinary course of business of Foreign
Subsidiaries;
(i) Guarantee Obligations in respect of obligations of vendors to
the Borrower and its Restricted Subsidiaries created in the ordinary
course of business;
(j) Guarantee Obligations (not otherwise permitted pursuant to
this subsection 8.3) incurred after the Closing Date in an aggregate
amount for the Borrower and its Restricted Subsidiaries not to exceed
$200,000,000 at any one time outstanding; and
(k) Guarantee Obligations of the Borrower and the Subsidiary
Guarantors in respect of Permitted Pari Passu Senior Debt.
8.4 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings, provided that adequate reserves
with respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP (or, in the
case of Significant Foreign Subsidiaries, generally accepted accounting
principles in effect from time to time in their respective jurisdictions
of incorporation);
(b) carriers', warehousemen's, mechanics', landlord's,
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business securing amounts which are not
<PAGE> 87
79
overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings;
(c) (i) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements and (ii) Liens granted to banks
in the ordinary course of business in connection with deposit,
disbursement or concentration accounts (other than in connection with
borrowed money) maintained with such banks on funds and other items in
such accounts;
(d) Liens granted and deposits made to secure the performance of
bids, trade contracts and real estate related contracts entered into in
the ordinary course of business (in each case, other than for borrowed
money), utilities, leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(e) easements, rights-of-way, restrictions, subdivisions,
parcelizations and other similar encumbrances incurred in the ordinary
course of business which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the Borrower or such Restricted
Subsidiary;
(f) Liens in existence on the date hereof (or arising at any
time during the period from the date hereof through the Closing Date)
and (i) listed on Schedule 8.4(f) securing Indebtedness or other
obligations described on such Schedule or (ii) otherwise securing
Indebtedness or other obligations not exceeding $10,000,000 in the
aggregate;
(g) Liens securing Indebtedness of the Borrower and its
Restricted Subsidiaries permitted by subsection 8.2(c), provided that
(i) such Liens do not at any time encumber any property other than the
property financed by such Indebtedness and (ii) the amount of
Indebtedness secured thereby is not increased;
(h) Liens on assets of any Significant Foreign Subsidiary
securing Indebtedness of such Significant Foreign Subsidiary permitted
by subsection 8.2(d) and other obligations incurred in the ordinary
course of business;
(i) Liens on the property or assets of a corporation which
becomes a Restricted Subsidiary after the date hereof and Liens existing
on assets acquired by the Borrower or a Restricted Subsidiary after the
date hereof, in either case securing Indebtedness permitted by
subsection 8.2(c) or 8.2(f), provided that (i) such Liens existed at the
time such corporation became a Restricted Subsidiary or such asset was
acquired and were not created in anticipation thereof, (ii) any such
Lien is not spread to cover any property or assets of such corporation
after the time such corporation becomes a Restricted Subsidiary or such
asset is acquired, and (iii) the amount of Indebtedness secured thereby
is not increased;
(j) Liens securing Indebtedness permitted under subsection
8.2(m) to the extent such Indebtedness was originally permitted to be
secured pursuant to this subsection; provided that the principal amount
of such Indebtedness is not increased (other than by an amount equal to
any costs and expenses incurred in connection with such refunding or
refinancing) and that no such Lien is spread to cover additional
property;
<PAGE> 88
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(k) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to the Borrower and all its Restricted
Subsidiaries) $50,000,000 in aggregate principal or face amount at any
time outstanding;
(l) Liens granted in accordance with the terms of the Put Bond
Mortgages or the Repurchased Put Bonds as in effect on the date hereof
on property or assets in substitution for or replacement of property or
assets subject to the Liens granted pursuant to the Put Bond Mortgages
to the extent such substitution or replacement is required thereunder in
accordance with the provisions thereof, provided that if any such
replacement Lien covers any parcel of real property constituting
Eligible Mortgaged Real Property that if sold or financed would have
required a prepayment of the Term Loans pursuant to the other provisions
hereof, an amount equal to the appraised value of such parcel of real
property included for purposes of the Borrowing Base shall be applied to
prepay the Term Loans in accordance with subsection 4.1(c);
(m) Liens created pursuant to the Security Documents to secure,
among other things, Permitted Pari Passu Senior Debt and the Kmart
Credit Agreement Obligations and Liens created pursuant to any
Subsidiary Mortgages; and
(n) Liens on the Capital Stock of Thrifty Payless created in
connection with any Thrifty Payless Convertible Offering;
provided that, notwithstanding the foregoing, no Lien created, incurred,
assumed or suffered to exist pursuant to this subsection 8.4 (other than
subsections 8.4(a), (b) or (m)) shall be a Lien on Inventory of the Borrower or
any of its Restricted Subsidiaries.
8.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets except:
(a) any Restricted Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that the Borrower shall
be the continuing or surviving corporation) or with or into any one or
more wholly owned Restricted Subsidiaries of the Borrower (provided that
the wholly owned Restricted Subsidiary or Restricted Subsidiaries shall
be the continuing or surviving corporation and provided that if one of
the parties to such transaction is a Subsidiary Guarantor then the
continuing or surviving corporation shall be a Subsidiary Guarantor);
(b) any Restricted Subsidiary may convey, sell, lease, transfer,
assign or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any other wholly owned
Restricted Subsidiary of the Borrower (provided that if such selling
Restricted Subsidiary is a Subsidiary Guarantor then the acquiring
Restricted Subsidiary shall be a Subsidiary Guarantor); and
(c) any Restricted Subsidiary may be merged or consolidated with
or into, or convey, sell, lease, transfer, assign or otherwise dispose
of any or all of its assets to, any Person to the extent that the sale
or other disposition of the assets of such Restricted Subsidiary would
be permitted under subsection 8.6.
<PAGE> 89
81
8.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Restricted Subsidiary,
issue or sell any shares of such Restricted Subsidiary's Capital Stock to any
Person (other than the Borrower or any wholly owned Subsidiary Guarantor or, if
such Restricted Subsidiary is not a wholly-owned Restricted Subsidiary,
pro-rata to the owners of the equity securities of such Restricted Subsidiary),
except:
(a) the sale or other disposition of obsolete, surplus or worn
out property in the ordinary course of business or in connection with
real estate development activities;
(b) the sale of inventory in the ordinary course of business
(including sales of inventory in connection with closed stores and sales
of discontinued inventory) and transfers of inventory and equipment
among the Borrower and the Subsidiary Guarantors pursuant to reasonable
business requirements;
(c) (i) the sale or discount of accounts receivable arising in
the ordinary course of business in connection with the compromise or
collection thereof or pursuant to the Existing Receivables Transactions
and (ii) sales or other dispositions of Cash Equivalents or Temporary
Cash Equivalent Investments in the ordinary course of business;
(d) as permitted by subsection 8.5(b);
(e) sales and dispositions of real property and related assets
in connection with (i) Permitted Sale-Leasebacks or (ii) Securitization
Transactions; provided that, in the opinion of a Responsible Officer,
the purchase price with respect to each such sale or disposition
represents the fair value of the assets so sold;
(f) the transactions described on Schedule 8.6(f) (the
"Scheduled Asset Sales"), provided that, in the opinion of a Responsible
Officer the purchase price with respect to each such sale represents the
fair value of the assets so sold;
(g) the sale by the Borrower or any Restricted Subsidiary of all
or a portion of (or any interest in) the Purchased Credit Facilities and
the Repurchased Put Bonds;
(h) the sale or other disposition of any property (other than
any sale or other disposition which is otherwise permitted under this
subsection 8.6), provided that (i) the aggregate book value of all
assets so sold or disposed of in any Fiscal Year shall not exceed
$200,000,000 and (ii) in the opinion of a Responsible Officer the
purchase price with respect to each such sale or other disposition
represents the fair value of the assets so sold or disposed of;
(i) subject to the other terms and provisions hereof, leases or
subleases (or assignment of leases) of real property in the ordinary
course of business; and
(j) the sale or other disposition of the Investments described
as items 1 and 2 in Schedule 8.9(i)(A) under the heading "Kmart
Corporation Other Investments".
8.7 Limitation on Dividends. Declare or pay any dividend (other than
dividends payable solely in common stock of the Borrower) on, or make any
payment on account of, or set apart
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82
assets for a sinking or other analogous fund for, the purchase, redemption,
defeasance, retirement or other acquisition of, any shares of any class of
Capital Stock of the Borrower or any warrants or options to purchase any such
Stock, whether now or hereafter outstanding, or make any other distribution in
respect thereof, either directly or indirectly, whether in cash or property or
in obligations of the Borrower or any Restricted Subsidiary (such declarations,
payments, setting apart, purchases, redemptions, defeasances, retirements,
acquisitions and distributions being herein called "Restricted Payments"),
except that:
(a) the Borrower may purchase or exchange then-existing employee
stock options for consideration consisting solely of new employee stock
options and may purchase Capital Stock or options to acquire the same
from directors, officers and employees of the Borrower and its
Restricted Subsidiaries in connection with employment and severance
arrangements; and
(b) so long as after giving effect thereto no Default or Event
of Default has occurred and is continuing the Borrower may make
Restricted Payments with respect to its Common Stock commencing in the
1997 Fiscal Year, provided that no Restricted Payment may be made
pursuant to this paragraph if, after giving effect thereto, the
aggregate amount of all Restricted Payments made pursuant to this
paragraph would exceed 50% of the Consolidated Net Income of the
Borrower for the period (taken as one accounting period) from the
beginning of the 1997 Fiscal Year through the last day of the most
recent fiscal quarter ended prior to the date such Restricted Payment is
made.
8.8 Limitation on Capital Expenditures. (a) Make (by way of the
acquisition of securities of a Person or otherwise) any expenditure in respect
of the purchase or other acquisition of fixed or capital assets (excluding (x)
any such asset acquired in connection with normal replacement and maintenance
programs properly charged to current operations and (y) expenditures made in
connection with the self-development of real properties by the Borrower and
its Restricted Subsidiaries to the extent such expenditures would not
constitute capital expenditures under GAAP) except for expenditures not
exceeding, in the aggregate for the Borrower and its Restricted Subsidiaries
during any of the Fiscal Years of the Borrower set forth below, the amount set
forth opposite such Fiscal Year below:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1996 $400,000,000
1997 $500,000,000
1998 $500,000,000
1999 $500,000,000
</TABLE>
provided that, (a) with respect to any Fiscal Year (other than the 1996 Fiscal
Year), the Borrower and its Restricted Subsidiaries shall be permitted to make
additional capital expenditures (i) which are financed with indebtedness
permitted under subsection 8.2(c) or 8.2(l) in an aggregate amount not
exceeding $200,000,000 as to any such Fiscal Year and (ii) in an amount not to
exceed the Additional Permitted Capital Expenditure Amount for such Fiscal
Year, (b) the amount set forth above for the 1999 Fiscal Year shall be pro
rated for the period from the beginning of such Fiscal Year to the Revolving
Credit Termination Date and (c) up to 50% of any amount permitted to be
expended in any Fiscal Year (without giving effect to this clause (c)) if not
so expended in the Fiscal Year for which it is permitted above, may be carried
over for expenditure in the next following Fiscal Year.
<PAGE> 91
83
(b) Make any expenditures in respect of the construction or
development of "property held for resale," except for expenditures not
exceeding, in the aggregate for the Borrower and its Restricted Subsidiaries,
$300,000,000 during any Fiscal Year, or, with respect to the period from the
beginning of the 1996 Fiscal Year through the Term Loan Maturity Date,
$800,000,000, provided that up to 100% of any amount permitted to be expended
in any Fiscal Year (without giving effect to this proviso) if not so expended
in the Fiscal Year for which it is permitted, may be carried over for
expenditure in the next following Fiscal Year.
8.9 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of any Person (an "Investment"), except for:
(a) extensions of trade credit and prepaid expenses made in
the ordinary course of business;
(b) Investments in Cash Equivalents and Temporary Cash
Equivalent Investments;
(c) (i) Investments resulting from the acquisition by the
Borrower or a Restricted Subsidiary of the Indebtedness under the
Purchased Credit Facilities and the Repurchased Put Bonds and (ii)
subject to subsection 8.8(b), loans made by the Borrower or a
Restricted Subsidiary to the Big Beaver Joint Ventures to finance
construction of the related projects prior and subsequent to the date
hereof;
(d) loans to officers of the Borrower or any Subsidiary;
(e) loans and advances to employees of the Borrower or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business;
(f) Investments by the Borrower in Subsidiary Guarantors and
Investments by Restricted Subsidiaries in the Borrower and in
Subsidiary Guarantors;
(g) Investments by the Borrower and Restricted Subsidiaries
in Foreign Subsidiaries, provided that the aggregate amount of all
such Investments (including Investments in the nature of sales and
transfers of assets (including, pursuant to a transaction permitted
under subsection 8.5) for less than fair market value and Guarantee
Obligations pursuant to subsection 8.4(h)) subsequent to the Closing
Date in Foreign Subsidiaries shall not exceed $150,000,000, provided,
further, that the conversion of any Indebtedness owed to the Borrower
or any Restricted Subsidiary by any Foreign Subsidiary into equity of
such Foreign Subsidiary shall not constitute an additional Investment
in such Foreign Subsidiary by the Borrower or such Restricted
Subsidiary for purposes of the limitation contained in the immediately
preceding proviso;
(h) loans by the Borrower to its employees (other than to
officers of the Borrower or any Subsidiary) in connection with
management incentive plans in an aggregate amount not to exceed
$20,000,000 at any one time outstanding;
(i) Investments (A) existing on the date hereof and listed on
Schedule 8.9(i)(A), (B) in the Convertible Trust contemplated by the
Declaration of Trust for the Convertible Trust or the Convertible
Debenture Indenture as in effect on the Closing Date and (C) in
Securitization Entities formed or established in connection with
Securitization Transactions;
<PAGE> 92
84
(j) Investments received in connection with the collection of
accounts receivable in the ordinary course of business;
(k) Investments received in connection with any Asset Sale or
other disposition permitted hereunder;
(l) loans and advances to suppliers in the ordinary course of
business consistent with past practice; and
(m) Acquisitions and other Investments made by the Borrower
or any of its Restricted Subsidiaries, provided that the aggregate
consideration (including assumed Indebtedness) for all such
Acquisitions and such other Investments after the Closing Date shall
not exceed $125,000,000.
8.10 Limitation on Optional Payments and Modifications of Debt
Instruments. (a) Make any optional payment or prepayment on or optionally
redeem or purchase any Indebtedness (other than the Loans and the Convertible
Debentures) of the Borrower or any Subsidiary, (b) make any payment or
prepayment on account of the principal of or interest on, or redeem or
purchase, any Convertible Debentures, provided that (i) so long as after giving
effect thereto no Event of Default shall have then occurred and be continuing,
the Borrower may pay interest on the Convertible Debentures pursuant to the
terms of the Convertible Debenture Indenture and (ii) the conversion of the
Convertible Debentures into common stock of the Borrower (and any related cash
payments made in lieu of fractional shares) shall not be deemed to be a payment
or prepayment on account of or a redemption or purchase of the Convertible
Debentures or (c) amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms relating to the payment
or prepayment of principal of or interest on, any such Indebtedness or the
Convertible Debenture or the Convertible Debenture Indenture (other than any
such amendment, modification or change which would extend the maturity or
reduce the amount of any payment of principal thereof or which would reduce the
rate or extend the date for payment of interest thereon); provided, that the
Borrower and its Restricted Subsidiaries may prepay Indebtedness (other than
the Convertible Debenture) (i) from the proceeds of new Indebtedness incurred
to refinance such Indebtedness pursuant to subsection 8.2(m), (ii) under
Financing Leases for stores and other property no longer occupied or used by
the Borrower or such Restricted Subsidiary in connection with the settlement,
termination or assignment of such Financing Lease, (iii) secured by assets in
connection with any sale or other disposition of such assets permitted under
subsection 8.6, (iv) in respect of the [ ] Convertible Offering,
(v) under the Refinanced Credit Facilities on the Closing Date, (vi) after the
Term Loans shall have been repaid in full, incurred after the date hereof
pursuant to subsection 8.2(l), and (vii) after the Term Loans shall have been
repaid in full, in an aggregate amount, in addition to payments otherwise
permitted under this subsection 8.10, not to exceed $100,000,000.
8.11 Limitation on Transactions with Affiliates. Except as
set forth on Schedule 8.11, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate unless such transaction is (a) otherwise
permitted under this Agreement and (b) upon fair and reasonable terms no less
favorable to the Borrower or such Restricted Subsidiary, as the case may be,
than it would obtain in a comparable arm's length transaction with a Person
which is not an Affiliate.
8.12 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Restricted
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Borrower or such Restricted Subsidiary
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85
to such Person or to any other Person to whom funds have been or are to be
advanced by such Person on the security of such property or rental obligations
of the Borrower or such Restricted Subsidiary (such arrangement, a
"Sale-Leaseback") except for Sale-Leasebacks in the ordinary course of the
Borrower's or such Restricted Subsidiary's business, consistent with past
practice and at market rates and subject to compliance with subsection 8.6(e)
("Permitted Sale-Leasebacks"). For the avoidance of doubt, Sale-Leasebacks
that result in a Financing Lease shall be treated as Indebtedness for all
purposes of this Agreement.
8.13 Fiscal Year. Change the manner in which it determines its Fiscal
Years.
8.14 Joint Ventures. Consent to or approve the incurrence or
assumption of any Indebtedness (other than Indebtedness under the Purchased
Credit Facilities and any amounts advanced by the Borrower or any Subsidiary
Guarantor to complete construction of the related projects) by any of the Big
Beaver Joint Ventures or consent to or approve the creation, assumption or
incurrence of any Lien (other than any Lien in favor of the Borrower or any
Subsidiary Guarantor) by any of the Big Beaver Joint Ventures, except in a
transaction which results in the repayment in full of the related Indebtedness
of such Big Beaver Joint Venture under the Purchased Credit Facilities or any
amounts advanced by the Borrower or any Subsidiary Guarantor to such Big Beaver
Joint Venture to complete construction of the related projects.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan
when due in accordance with the terms hereof; or the Borrower shall
fail to pay any Reimbursement Obligation within two Business Days
after such Reimbursement Obligation becomes due in accordance with the
terms hereof; or the Borrower shall fail to pay any interest on any
Loan, or any other amount payable hereunder, within five days after
any such interest or other amount becomes due in accordance with the
terms hereof; or
(b) Any representation or warranty made or deemed made by the
Borrower or any other Loan Party herein or in any other Loan Document
or which is contained in any certificate, document or financial or
other statement furnished by it at any time under or in connection
with this Agreement or any such other Loan Document shall prove to
have been incorrect in any material respect on or as of the date made
or deemed made; or
(c) The Borrower shall default in the observance or
performance of any agreement contained in Section 8 or the Borrower
shall fail to deliver a Borrowing Base Certificate pursuant to
subsection 7.2(c) within 10 days after such Borrowing Base Certificate
was due pursuant to such subsection; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this Section), and such default shall
continue unremedied for a period of 30 days after the earlier of (i)
the date upon which written notice thereof is given to the Borrower by
the Administrative Agent or the Majority Lenders or (ii) the date upon
which a Responsible Officer becomes aware of such default; or
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86
(e) The Borrower or any of its Restricted Subsidiaries shall
(i) default in any payment of principal of or interest on any
Indebtedness (other than the Loans and other than (so long as the
condition set forth in subsection 6.1(c)(iii) is then satisfied) the
Repurchased Put Bonds) or in the payment of any Guarantee Obligation,
beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness or Guarantee Obligation was
created; or (ii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or Guarantee
Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice
if required (but after the expiration of all grace periods applicable
thereto), such Indebtedness to become due prior to its stated maturity
or such Guarantee Obligation to become payable; provided, however,
that no Default or Event of Default shall exist under this paragraph
unless the aggregate amount of Indebtedness and/or Guarantee
Obligations in respect of which any default or other event or
condition referred to in this paragraph shall have occurred shall be
equal to at least $100,000,000; or
(f) (i) The Borrower or any of its Restricted Subsidiaries
shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any of its
Restricted Subsidiaries shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against the
Borrower or any of its Restricted Subsidiaries any case, proceeding or
other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged or unbonded
for a period of 60 days; or (iii) there shall be commenced against the
Borrower or any of its Restricted Subsidiaries any case, proceeding or
other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief
which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) the
Borrower or any of its Restricted Subsidiaries shall take any action
in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) the Borrower or any of its Restricted Subsidiaries
shall generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan or any Lien in favor of
the PBGC or a Plan shall arise on the assets of the Borrower or any
Commonly Controlled Entity, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee appointed,
or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion
of the Majority Lenders, likely to result in the termination of such
Plan for purposes of Title IV of
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87
ERISA, (iv) any Single Employer Plan shall terminate for purposes of
Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity
shall, or in the reasonable opinion of the Majority Lenders is likely
to, incur any liability in connection with a withdrawal from, or the
Insolvency or Reorganization of, a Multiemployer Plan or (vi) any
other event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any,
could reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Borrower or any of its Restricted Subsidiaries involving in the
aggregate a liability (to the extent not paid or covered by insurance)
of $100,000,000 or more, and such judgments or decrees shall not have
been vacated, discharged, stayed or bonded pending appeal within 60
days from the entry thereof; or
(i) (i) For any reason (other than any act on the part of the
Administrative Agent, the Trustee or any Lender) the Trust Agreement,
the Subsidiaries Guarantee or any Security Document ceases to be or is
not in full force and effect (except in accordance with its terms) in
any material respect and such default shall continue unremedied for 30
days after the earlier of receipt by the Borrower of notice of such
default from the Administrative Agent or actual knowledge of such
default by a Responsible Officer, (ii) the Borrower or any of its
Restricted Subsidiaries shall assert in writing that the Trust
Agreement, the Subsidiaries Guarantee or any Security Document has
ceased to be or is not in full force and effect (except in accordance
with its terms) or (iii) the Lien created by any of the Security
Documents shall cease to be enforceable and of the same effect and
priority purported to be created thereby except to the extent
contemplated hereunder and under the other Loan Documents; or
(j) (i) Any Person or "group" (within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) (A)
shall have acquired beneficial ownership of 33% or more of any
outstanding class of Capital Stock having ordinary voting power in the
election of directors of the Borrower or (B) shall obtain the power
(whether or not exercised) to elect a majority of the Borrower's
directors or (ii) the Board of Directors of the Borrower shall not
consist of a majority of Continuing Directors; "Continuing Directors"
shall mean the directors of the Borrower on the Closing Date and each
other director, if such other director's nomination for election to
the Board of Directors of the Borrower is recommended by a majority of
the then Continuing Directors;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to the
Borrower, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters
of Credit shall have presented the documents required thereunder) shall
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with the
consent of the Majority Lenders, the Administrative Agent may, or upon the
request of the Majority Lenders, the Administrative Agent shall, by notice to
the Borrower declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the consent of the
Majority Lenders, the Administrative Agent may, or upon the request of the
Majority Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement (including, without limitation, all amounts
of L/C Obligations, whether or not the beneficiaries of the then outstanding
Letters of Credit
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88
shall have presented the documents required thereunder) to be due and payable
forthwith, whereupon the same shall immediately become due and payable. Except
as expressly provided above in this Section, presentment, demand, protest and
all other notices of any kind are hereby expressly waived.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit in
a cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of each
Issuing Bank and the L/C Participants, a security interest in such cash
collateral to secure all obligations of the Borrower under this Agreement and
the other Loan Documents. Amounts held in such cash collateral account shall
be applied by the Administrative Agent to the payment of drafts drawn under
such Letters of Credit, and the unused portion thereof after all such Letters
of Credit shall have expired or been fully drawn upon, if any, shall be applied
to repay other obligations of the Borrower hereunder and under the Notes.
After all such Letters of Credit shall have expired or been fully drawn upon,
all Reimbursement Obligations shall have been satisfied and all other
obligations of the Borrower hereunder and under the Notes shall have been paid
in full, the balance, if any, in such cash collateral account shall be returned
to the Borrower. The Borrower shall execute and deliver to the Administrative
Agent, for the account of each Issuing Bank and the L/C Participants, such
further documents and instruments as the Administrative Agent may reasonably
request to evidence the creation and perfection of the security interest in
such cash collateral account.
Whenever the Loans hereunder (with accrued interest thereon)
and all other amounts owing under this Agreement and any Notes shall have
become immediately due and payable in accordance with clause (A) or clause (B)
of the second preceding paragraph, the Administrative Agent shall forthwith
deliver a Notice of Acceleration to the Corporate Trustee, provided that, by
written notice to the Borrower and the Administrative Agent, the Majority
Lenders may, for such periods and/or subject to such conditions as may be
specified in such notice, withdraw any declaration of acceleration effected in
accordance with clause (B) above. If a declaration of acceleration in
accordance with clause (B) immediately preceding shall have been withdrawn in
accordance with the proviso to the immediately preceding sentence, the
Administrative Agent shall forthwith deliver to the Corporate Trustee a notice
of cancellation of the respective Notice of Acceleration theretofore delivered
to the Corporate Trustee. In addition, if the Administrative Agent shall have
previously delivered a Notice of Default to the Corporate Trustee relating to a
particular Event of Default which Notice of Default is then in effect, the
Administrative Agent shall deliver a cancellation of such Notice of Default
upon the waiver or cure of such Event of Default, provided that no other Event
of Default shall have occurred and be continuing at such time.
SECTION 10. THE ADMINISTRATIVE AGENT
10.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each Lender irrevocably authorizes
the Administrative Agent, in such capacity, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental
thereto, including, without limitation, all powers, rights and remedies
provided in the Trust Agreement. Notwithstanding any provision to the
contrary elsewhere in this Agreement, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth
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89
herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent.
10.2 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and the other Loan 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 Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions. Neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or any
officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Borrower.
10.4 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter,
facsimile, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative 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 Lenders entitled to so act in
accordance with the terms of this Agreement as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of Lenders
entitled to so act in accordance with the terms of this Agreement, and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans.
10.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall promptly give notice thereof to the Lenders. The Administrative
Agent shall take such action with respect to
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such Default or Event of Default as shall be reasonably directed by Lenders
entitled to so act in accordance with the terms of this Agreement; provided
that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable in the best interests of the
Lenders.
10.6 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent 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
Administrative Agent hereafter taken, including any review of the affairs of
the Borrower, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrower. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, the Administrative Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Borrower which
may come into the possession of the Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
10.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Voting Percentages in effect on the date
on which indemnification is sought, 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 Loans)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan 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 Administrative Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
Administrative Agent's gross negligence or willful misconduct. The agreements
in this subsection shall survive the payment of the Loans and all other amounts
payable hereunder.
10.8 Administrative Agent in Its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though the
Administrative Agent were not the Administrative Agent hereunder and under the
other Loan Documents. With respect to the Loans made by it or any Letter of
Credit issued or participated in by it, the Administrative Agent shall have the
same rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it
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were not the Administrative Agent, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
10.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Borrower and the
Lenders. If the Administrative Agent shall resign as Administrative Agent
under this Agreement and the other Loan Documents, then the Majority Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent (provided that it shall have been approved by the Borrower),
shall succeed to the rights, powers and duties of the Administrative Agent
hereunder. Effective upon such appointment and approval, the term
"Administrative Agent" shall mean such successor agent, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 10 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
10.10 Upfront Fees. On the Closing Date, the Administrative Agent
shall pay to each Lender (other than the Co-Arrangers) the upfront fees offered
by the Administrative Agent to such Lender in respect of such Lender's
Commitments.
SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement nor any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Majority Lenders may, or, with the written consent of the Majority Lenders, the
Administrative Agent may, from time to time, (a) enter into with the applicable
Loan Party or Parties written amendments, supplements or modifications hereto
and to the other Loan Documents for the purpose of adding, deleting or revising
any provisions to this Agreement or the other Loan Documents or changing in any
manner the rights of the Lenders or of the Borrower hereunder or thereunder or
(b) waive, on such terms and conditions as the Majority Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any
of the requirements of this Agreement or the other Loan Documents or any
Default or Event of Default and its consequences; provided, however, that no
such waiver and no such amendment, supplement or modification shall (i) reduce
the amount or extend the scheduled date of maturity of any Loan or of any
installment thereof, or reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof or increase the
amount or extend the expiration date of any Lender's Commitments, in each case
without the consent of each Lender adversely affected thereby, (ii) (A) amend,
modify or waive any provision of this subsection or of subsection 11.13, or
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement and the other Loan Documents or, except as
provided in subsection 11.13, release or subordinate the interest of the
Trustee in all or substantially all of the Collateral, in each case without the
written consent of all the Lenders and the Limited Purpose Issuing Banks, or
(B) reduce the percentage specified in the definition of Majority Lenders or
Required Lenders without the written consent of all the Lenders, (iii) increase
any percentage set forth in the definition of Borrowing Base or Eligible
Inventory Borrowing Base Amount without the consent of the Required Lenders,
(iv) amend, modify or waive any provision of Section 2 without the written
consent of the Majority Term Loan Lenders, or any provision of subsection
4.1(c) without the written consent of the Required Term Loan Lenders or reduce
the percentage specified in the definition of Majority Term Loan Lenders or
Required Term
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Loan Lenders without the consent of all the Term Loan Lenders, (v) amend,
modify or waive any provision of Section 3 or of subsection 6.2 without the
prior written consent of the Majority Revolving Credit Lenders or reduce the
percentage specified in the definition of Majority Revolving Credit Lenders
without the consent of all the Revolving Credit Lenders, (vi) amend, modify or
waive any provision of subsection 4.7(c) or of Section 3.4(b) or 3.4(c) of the
Trust Agreement without the written consent of the Majority Term Loan Lenders
and the Majority Revolving Credit Lenders, (vii) amend, modify or waive any
provision of subsections 3.6 through 3.13 without the consent of each Issuing
Bank adversely affected in any material respect thereby or (viii) amend, modify
or waive any provision of Section 10 without the written consent of the then
Administrative Agent. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and the Limited Purpose
Issuing Banks and shall be binding upon the Borrower, the Lenders, the Limited
Purpose Issuing Banks, the Administrative Agent and all future holders of the
Loans. In the case of any waiver, the Borrower, the Lenders, the Limited
Purpose Issuing Banks, and the Administrative Agent shall be restored to their
former positions and rights hereunder and under the other Loan Documents, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; no such waiver shall extend to any subsequent or other Default or
Event of Default or impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand
(including by overnight courier), when delivered, (b) in the case of delivery
by mail, three days after being deposited in the mails, postage prepaid, or (c)
in the case of delivery by facsimile transmission, when sent and receipt has
been confirmed, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in Schedule 11.2 in the case of the
other parties hereto, or to such other address as may be hereafter notified by
the respective parties hereto:
The Borrower: Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
(a) For all notices:
Attention: Treasurer
Fax: (810) 643-5398
(b) For notices other than pursuant to Sections 2, 3 and 4
Attention: Chief Financial Officer
Fax: (810) 643-5787
and
Attention: General Counsel
Fax: (810) 643-1054
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The Administrative
Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: [ ]
Fax: [ ]
With a copy to:
Chemical Bank Agent Bank Services
140 East 45th Street, 29th Floor
New York, New York 10017
Attention: [ ]
Fax: [ ]
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 3.2, 3.4, 3.6, 3.15, 4.1, 4.2 or 4.7
shall not be effective until received. Whenever the Administrative Agent sends
a notice by mail, the Administrative Agent will use reasonable efforts to also
send such notice by one of the other means of notice permitted hereunder,
provided that the failure to do so shall not affect in any way the validity of
any delivery by mail pursuant to this subsection or otherwise result in any
liability to the Administrative Agent or the Lenders.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
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. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
11.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of
the Loans hereunder.
11.5 Payment of Expenses and Taxes; Indemnity. The Borrower agrees
(a) to pay or reimburse the Administrative Agent for all its reasonable
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
this Agreement and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation and administration of
the transactions contemplated hereby and thereby, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent, (b) (i) to pay or reimburse the Administrative Agent for
all its reasonable out-of-pocket costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the other
Loan Documents and any such other documents, including, without limitation, the
fees and disbursements of counsel (including the allocated fees and expenses of
in-house counsel) to the Administrative Agent, and (ii) to pay or reimburse
each Lender for all its reasonable out-of-pocket costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents following the
occurrence and during the continuation of a Default or an
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Event of Default, including, without limitation, the fees and disbursements of
counsel (including the allocated fees and expenses of in-house counsel) to each
Lender, (c) to pay, indemnify, and hold each Lender and the Administrative
Agent (and their respective directors, officers, employees and agents) harmless
from, any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise (other than
excise taxes imposed in lieu of net income taxes) and other similar taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold
each Lender and the Administrative Agent (and their respective directors,
officers, employees and agents) harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits
and reasonable out-of-pocket costs, expenses or disbursements of any kind or
nature whatsoever with respect to any claim, litigation, investigation or
proceeding relating to the execution, delivery, enforcement, performance and
administration of this Agreement and the other Loan Documents and any such
other documents or any use of any of the Extensions of Credit, including,
without limitation, any of the foregoing relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the Borrower, any of its Subsidiaries or any of the Properties
(all the foregoing in this clause (d), collectively, the "Indemnified
Liabilities"), provided that the Borrower shall have no obligation hereunder to
the Administrative Agent or any Lender (or their respective directors,
officers, employees or agents) with respect to Indemnified Liabilities arising
from the gross negligence or willful misconduct of the Administrative Agent or
any such Lender (or their respective directors, officers, employees or agents,
as the case may be). The agreements in this subsection shall survive the
termination of this Agreement and the repayment of the Loans and all other
amounts payable hereunder.
11.6 Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Administrative Agent and their respective successors and assigns,
except that the Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("Participants") participating interests in any
Loan owing to such Lender, any interest of such Lender in any Letter of Credit,
any Commitment of such Lender or any other interest of such Lender hereunder
and under the other Loan Documents. In the event of any such sale by a Lender
of a participating interest to a Participant, such Lender's obligations under
this Agreement to the other parties to this Agreement shall remain unchanged,
such Lender shall remain solely responsible for the performance thereof, such
Lender shall remain the holder of any such Loan for all purposes under this
Agreement and the other Loan Documents, and the Borrower and the Administrative
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and the other
Loan Documents. No Lender shall be entitled to create in favor of any
Participant, in the participation agreement pursuant to which such
Participant's participating interest shall be created or otherwise, any right
to vote on, consent to or approve any matter relating to this Agreement or any
other Loan Document except for those specified in clauses (i) and (ii) of the
proviso to subsection 11.1. The Borrower agrees that if amounts outstanding
under this Agreement are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of setoff 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
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owing directly to it as a Lender under this Agreement, provided that, in
purchasing such participating interest, such Participant shall be deemed to
have agreed to share with the Lenders the proceeds thereof as provided in
subsection 11.8(a) as fully as if it were a Lender hereunder. The Borrower
also agrees that each Participant shall be entitled to the benefits of
subsections 4.9, 4.10 and 4.11 with respect to its participation in the
Commitments and the Loans outstanding from time to time as if it were a Lender;
provided that, in the case of subsection 4.10, such Participant shall have
complied with the requirements of said subsection and provided, further, that
no Participant shall be entitled to receive any greater amount pursuant to any
such subsection than the transferor Lender would have been entitled to receive
in respect of the amount of the participation transferred by such transferor
Lender to such Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its business of making
or investing in loans and in accordance with applicable law, at any time
and from time to time assign to any Lender or any affiliate thereof or, with
the consent of the Borrower and the Administrative Agent (which in each case
shall not be unreasonably withheld), to an additional bank, financial
institution or other entity that is then engaged in the business of lending
money (an "Assignee") all or any part of its rights and obligations under this
Agreement and the other Loan Documents pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit M, executed by such Assignee
and such assigning Lender (and, in the case of an Assignee that is not then a
Lender or an affiliate thereof, by the Borrower and the Administrative Agent)
and delivered to the Administrative Agent for its acceptance and recording in
the Register, with a copy thereof to the Borrower, provided that (a) in the
case of any such assignment to an additional bank or financial institution, the
sum of the aggregate principal amount of the Committed Loans, the aggregate
amount of the L/C Obligations and the aggregate amount of the unused
Commitments being assigned and, if such assignment is of less than all of the
rights and obligations of the assigning Lender, the sum of the aggregate
principal amount of the Committed Loans, the aggregate amount of the L/C
Obligations and the aggregate amount of the unused Commitments remaining with
the assigning Lender are each not less than $5,000,000 (or such lesser amount
as may be agreed to by the Borrower and the Administrative Agent) and (b)
assignments shall not be required to be made on a ratable basis between the
Commitments and/or Committed Loans held by any Lender. Upon such execution,
delivery, acceptance and recording, from and after the effective date
determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment as set forth therein, and (y) the assigning Lender
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto). Notwithstanding any provision of this
paragraph (c) and paragraph (e) of this subsection, the consent of the Borrower
shall not be required, and, unless requested by the Assignee and/or the
assigning Lender, new Notes shall not be required to be executed and delivered
by the Borrower, for any assignment which occurs at any time when any of the
events described in Section 9(f) shall have occurred and be continuing.
(d) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in
subsection 11.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of the names and addresses of the
Lenders and the Commitments of, and principal amounts of the Loans owing to,
each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders may (and, in the case of any Loan or other
obligation hereunder not evidenced by a Note, shall) treat each Person whose
name is recorded in the Register as the owner of a Loan or other obligation
hereunder as the owner thereof for
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all purposes of this Agreement and the other Loan Documents, notwithstanding
any notice to the contrary. Any assignment of any Loan or other obligation
hereunder shall be effective only upon appropriate entries with respect thereto
being made in the Register. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender or an affiliate thereof, by the Borrower and the
Administrative Agent) together with payment to the Administrative Agent of a
registration and processing fee of $3,000, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrower.
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
subject to the provisions of subsection 11.18, any and all financial
information in such Lender's possession concerning the Borrower and its
Affiliates which has been delivered to such Lender by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrower in connection with such Lender's credit
evaluation of the Borrower and its Affiliates prior to becoming a party to this
Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
11.7 Replacement of Lenders under Certain Circumstances. The Borrower
shall be permitted to replace any Lender which (a) requests reimbursement for
amounts owing pursuant to subsection 4.9 or 4.10 (other than with respect to
LIBO Rate CAF Advances) or (b) is affected in the manner described in
subsection 4.8 (other than with respect to LIBO Rate CAF Advances) and as a
result thereof any of the actions described in said subsection are required to
be taken; provided that (i) such replacement does not conflict with any
Requirement of Law, (ii) no Event of Default shall have occurred and be
continuing at the time of such replacement, (iii) the Borrower shall repay (or
the replacement bank or institution shall purchase, at par) all Loans and other
amounts owing to such replaced Lender prior to the date of replacement, (iv)
the Borrower shall be liable to such replaced Lender under subsection 4.11 if
any Eurodollar Loan owing to such replaced Lender shall be prepaid (or
purchased) other than on the last day of the Interest Period relating thereto
or any CAF Advance owing to such replaced Lender shall be paid other than on
the relevant CAF Advance Maturity Date, (v) the replacement bank or
institution, if not already a Lender, and the terms and conditions of such
replacement, shall be reasonably satisfactory to the Administrative Agent, (vi)
the replaced Lender shall be obligated to make such replacement in accordance
with the provisions of subsection 11.6 (provided that the Borrower shall be
obligated to pay the registration and processing fee referred to therein),
(vii) until such time as such replacement shall be consummated, the Borrower
shall pay all additional amounts (if any) required pursuant to subsection 4.9
or 4.10, as the case may be, and (viii) any such replacement shall not be
deemed to be a waiver of any rights which the Borrower, the Administrative
Agent or any other Lender shall have against the replaced Lender.
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11.8 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
shall at any time receive any payment of all or part of its Loans or the
Reimbursement Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in Section
9(f), or otherwise), and, after giving effect to any such payment or the
receipt of any such collateral, such benefitted Lender shall have received a
greater proportionate payment (determined in accordance with subsection 4.7) or
interest in collateral than that received by any other Lender, if any, in
respect of such other Lender's Loans or the Reimbursement Obligations owing to
it, or interest thereon, such benefitted Lender shall purchase for cash from
the other Lenders a participating or other similar interest in such portion of
each such other Lender's Loans or the Reimbursement Obligations owing to it, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders entitled to the same under this subsection; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower,
any such notice being expressly waived by the Borrower to the extent permitted
by applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) which
is not paid when due to set-off and appropriate and apply against such amount
any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of the Borrower. Each
Lender agrees promptly to notify the Borrower and the Administrative 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.
(c) The Borrower hereby irrevocably waives and agrees not to assert,
for the benefit of the applicable Secured Parties, all rights of set-off,
counterclaim or defense to payment, whether now existing or hereafter arising,
that the Borrower may have in respect of any Repurchased Put Bonds or
California Mortgage Notes now or hereafter held by any Subsidiary Guarantor.
11.9 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of
the copies of this Agreement signed by all the parties shall be lodged with the
Borrower and the Administrative Agent.
11.10 Severability. Any provision of this Agreement which 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.
11.11 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof and thereof, and there
are no promises, undertakings, representations or warranties by the
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98
Administrative Agent or any Lender relative to subject matter hereof or thereof
not expressly set forth or referred to herein or in the other Loan Documents.
11.12 Termination. This Agreement shall terminate and be of no
further force and effect if the condition set forth in subsection 6.1(a)(ii)
shall not have been satisfied on or prior to June 17, 1996 or, unless extended
by the Majority Lenders, if the initial Extension of Credit hereunder has not
occurred on or prior to July 15, 1996. Otherwise, this Agreement shall
terminate when the Commitments have terminated or expired, no Letter of Credit
is outstanding and the other Kmart Credit Obligations have been paid in full.
11.13 Collateral Release. So long as no Default or Event of Default
shall have occurred and be continuing at such time, the Collateral shall be
released automatically upon the occurrence of either of the following:
(a) if the senior long-term unsecured debt of the Borrower is rated at least
Baa3 by Moody's and the corporate credit rating of the Borrower is at least
BBB- by S&P; or (b) if, as of the last day of any fiscal quarter of the
Borrower: (i) the Term Loans shall have been paid in full, (ii) the Fixed
Charge Coverage Ratio as of such day and as of the last day of the immediately
preceding fiscal quarter is greater than or equal to 2.0 to 1.0 and (iii) the
Leverage Ratio as of such day is less than or equal to 0.375 to 1.0. Within
one Business Day following the satisfaction of the foregoing conditions and the
receipt by the Administrative Agent of a certificate of a Responsible Officer
certifying that such conditions have been satisfied, the Administrative Agent
shall deliver to the Trustee the notice required pursuant to Section 7.10(a) of
the Trust Agreement.
11.14 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.15 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action
or proceeding relating to this Agreement and the other Loan Documents
to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate
courts from any thereof;
(b) to the extent permitted by applicable law, consents that
any such action or proceeding may be brought in such courts and waives
any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in subsection 11.2
or at such other address of which the Administrative Agent shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
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99
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special, exemplary,
punitive or consequential damages.
11.16 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or fiduciary duty to the Borrower arising
out of or in connection with this Agreement or any of the other Loan
Documents, and the relationship between the Administrative Agent and
the Lenders, on the one hand, and the Borrower, on the other hand, in
connection herewith or therewith is solely that of debtor and
creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders or among the Borrower and the Administrative Agent.
11.17 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.18 Confidentiality. Each Lender agrees to keep confidential all
information provided to it by the Borrower or the Administrative Agent pursuant
to or in connection with this Agreement that is designated by the Borrower in
writing as confidential (the "Confidential Information"); provided that nothing
herein shall prevent any Lender from disclosing any such Confidential
Information (i) to the Administrative Agent or any other Lender, (ii) to any
Transferee or prospective Transferee which receives such Confidential
Information having been made aware of the confidential nature thereof and which
has agreed in writing to be bound by the terms of this subsection 11.18, (iii)
to its directors, officers, employees, employees of affiliates, examiners and
professional advisers who have a need to know such Confidential Information in
accordance with customary banking practices and who receive such Confidential
Information having been made aware of the restrictions of this subsection and,
in the case of professional advisers, having agreed to be bound thereby, (iv)
upon the request or demand of any Governmental Authority having jurisdiction
over such Lender, (v) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (vi) in connection with the exercise of any remedy
hereunder, (vii) which is now or hereafter becomes generally available to the
public other than as a result of a disclosure by such Lender or a disclosure
known to such Lender to have been made by any person or entity to which such
Lender has delivered such Confidential Information, (viii) which was available
to such Lender prior to its disclosure to such Lender by the Borrower, or (ix)
which becomes available to such Lender from a source other than the Borrower,
provided that such source is not (1) known to such Lender to be bound by a
confidentiality agreement with the Borrower or (2) known to such Lender to be
otherwise prohibited from transmitting the information to such Lender by a
contractual, legal or fiduciary obligation.
11.19 Judgment Currency. The obligation of the Borrower under this
Agreement to make payments in respect of each Reimbursement Obligation in the
currency in which it is outstanding
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100
(the "Agreement Currency") shall not be discharged or satisfied by any tender
or recovery pursuant to any judgment expressed in or converted into any other
currency (the "Judgment Currency") except to the extent that such tender or
recovery of the Judgment Currency results in the effective receipt by the
Lenders or the relevant Issuing Banks, as the case may be, of the full amount
of the Agreement Currency payable under this Agreement and the Borrower agrees
to indemnify the Lenders or the relevant Issuing Banks, as the case may be (and
the Lenders or the relevant Issuing Banks, as the case may be, shall have an
additional legal claim) for any difference between such full amount and the
amount effectively received by such Lenders or such Issuing Banks, as the case
may be, pursuant to any such tender or recovery. Each Lender's or Issuing
Bank's determination of amounts effectively received by such Lender or Issuing
Bank shall be conclusive absent manifest error. If a judgment in respect of
the obligations of the Borrower hereunder is rendered in a currency other than
the Agreement Currency and if, upon receipt of the full amount of such judgment
in such currency and the conversion into, and receipt of such amount in the
Agreement Currency, such amount of the Agreement Currency exceeds the
obligations of the Borrower hereunder, such excess amount shall be remitted to
the Borrower by the Lenders or the relevant Issuing Banks, as the case may be.
The obligations of the Borrower under this subsection shall survive the
termination of this Agreement and the repayment of the Loans and all other
amounts payable hereunder.
11.20 Section Headings. The Section and subsection headings in this
Agreement are for convenience in reference only and shall not deemed to alter
or affect the interpretation of any provisions hereof.
11.21 Waivers of Prepayment and Commitment Termination Notices in
connection with Existing Credit Facilities. Each Lender and Limited Purpose
Issuing Bank, to the extent that it is a lender or issuer of letters of credit
under the Existing Credit Facilities, hereby waives any notice of prepayment
or commitment termination which may be required in connection with the
prepayment of the Indebtedness or the termination of such Lender's or such
Limited Purpose Issuing Bank's commitment under such Existing Credit Facilities
on the Closing Date.
11.22 Waivers of Certain Requirements Under the Existing Credit
Facilities. (a) Each Lender, to the extent that it is an issuer of a
Continuing Letter of Credit, and each Limited Purpose Issuing Bank, hereby
permanently waives and releases, effective as of the Closing Date, for the
intended benefit of the Borrower and each lender and agent under the Existing
Credit Facilities in their capacity as such, (i) any requirement under the
Existing Credit Facilities and related documents and agreements for
collateralization of any such Continuing Letter of Credit as a condition to the
termination of such Existing Credit Facility or otherwise, (ii) any requirement
for sharing or the purchase of risk participations in letters of credit by any
other lender under the Existing Credit Facilities and (iii) any other
responsibilities or duties of any agent or lender under the Existing Credit
Facilities in their capacities as such in connection with any Continuing Letter
of Credit, including, without limitation, the provisions of Section 4.01 of the
Letter of Credit Issuance Agreement and Section 2.16(d) of the Three Year
Credit Agreement dated as of October 7, 1994 (as amended from time to time, the
"Refinanced Three Year Facility"), the cash collateral requirements set forth
in Section 15 of the Kmart Pledge Agreement dated as of December 22, 1995 (as
amended from time to time) and Section 10.18 of the Refinanced Three Year
Facility and the procedures and agent duties set forth in the Facing Agreement
(as defined in the Refinanced Three Year Facility).
(b) Each Lender that is a party to any Existing Credit
Facility hereby permanently waives and releases, effective as of the Closing
Date, (i) the compliance and observance by the Borrower and its Subsidiaries
from and after the Closing Date of the covenants and agreements set forth in
the respective sections of the Existing Credit Facilities and any guaranty by
the Borrower
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thereof titled "Affirmative Covenants" and "Negative Covenants" to the extent,
if any, that such covenants and agreements are not terminated on the Closing
Date as a result of the Refinancings, (ii) the failure of any of the
representations and warranties set forth in any of the Existing Credit
Facilities or any guaranty by the Borrower thereof to be true and correct as of
any time and (iii) any default or event of default now or hereafter arising
under any Existing Credit Facility.
(c) As of the Closing Date, the Borrower, in its capacity as
a holder of any indebtedness under the Purchased Credit Facilities and the
Repurchased Put Bonds, and each Lender and Limited Purpose Issuing Bank that is
a party to any Existing Credit Facility hereby permanently waives, releases and
terminates, for the intended benefit of each agent and lender under the
Existing Credit Facilities, all obligations of any of the lenders or issuers of
letters of credit under the Existing Credit Facilities to purchase
participations and/or assignments in indebtedness pursuant to the Letter of
Credit Issuance Agreement, the Bank Set-off Sharing Agreement (as defined in
the Refinanced Three Year Facility) and the Set-off Sharing Agreement (as
defined in the Refinanced Three Year Facility).
11.23 Continuing Letters of Credit. As of the Closing Date,
each Continuing Letter of Credit shall cease to be a letter of credit under
the Existing Credit Facilities. For purposes of subsection 3.8(e), fronting
fees accrued in respect of Continuing Letters of Credit through the Closing
Date under the Existing Credit Facilities will be payable on the first L/C Fee
Payment Date to occur after the Closing Date.
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.
KMART CORPORATION
By:___________________________________
Name:
Title:
CHEMICAL BANK, as Administrative Agent
By:___________________________________
Name:
Title:
<PAGE> 110
EXECUTION COPY
TRUST AGREEMENT
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TRUST AGREEMENT
among
KMART CORPORATION,
THE SUBSIDIARIES OF KMART CORPORATION PARTIES HERETO
and
[ ] and [ ]
Trustees
Dated as of June 17, 1996
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TABLE OF CONTENTS
<TABLE>
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DECLARATION OF TRUST............................................................ 1
SECTION 1. DEFINITIONS......................................................... 2
1.1 Defined Terms................................................... 2
1.2 Other Definitional Provisions................................... 11
SECTION 2. REMEDIAL PROVISIONS................................................. 12
2.1 Notices of Acceleration and Default............................. 12
2.2 General Authority of the Trustees over the Collateral........... 12
2.3 Right to Initiate Judicial Proceedings.......................... 13
2.4 Right to Appoint a Receiver..................................... 13
2.5 Exercise of Powers; Instructions of Required Secured Parties.... 13
2.6 Remedies Not Exclusive.......................................... 14
2.7 Waiver and Estoppel............................................. 14
2.8 Limitation on Trustees' Duty in Respect of Collateral........... 15
2.9 Limitation by Law; Limitation by Contract....................... 15
2.10 Rights of Secured Parties under Secured Instruments............. 16
SECTION 3. COLLATERAL ACCOUNT; DISTRIBUTIONS................................... 16
3.1 The Collateral Account.......................................... 16
3.2 Control of Collateral Account................................... 16
3.3 Investment of Funds Deposited in Collateral Account............. 16
3.4 Application of Moneys........................................... 17
3.5 Amounts Held for Contingent Secured Obligations................. 19
3.6 Trustee's Calculations.......................................... 20
3.7 Pro Rata Sharing................................................ 20
SECTION 4. AGREEMENTS WITH TRUSTEES............................................ 21
4.1 Delivery of Secured Instruments; Designation of
Approved Trade Creditors and Excluded Trade Creditors;
Termination of Rights of Subordinated Creditors................. 21
4.2 Information as to Secured Parties and Administrative Agent...... 21
4.3 Compensation and Expenses....................................... 21
4.4 Stamp and Other Similar Taxes................................... 22
4.5 Filing Fees, Excise Taxes, Etc.................................. 22
4.6 Indemnification................................................. 22
4.7 Further Assurances.............................................. 23
4.8 Inspection of Properties and Books.............................. 23
SECTION 5. POSSESSION AND USE OF COLLATERAL; PARTIAL RELEASES.................. 23
5.1 Use Prior to Acceleration....................................... 23
5.2 Releases........................................................ 24
5.3 Insurance and Condemnation Proceeds; Liquidating Dividends 25
SECTION 6. THE TRUSTEES........................................................ 25
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6.1 Acceptance of Trust............................................................... 25
6.2 Exculpatory Provisions............................................................ 25
6.3 Delegation of Duties.............................................................. 26
6.4 Reliance by Trustees.............................................................. 27
6.5 Limitations on Duties of Trustees................................................. 28
6.6 Moneys to be Held in Trust........................................................ 29
6.7 Resignation and Removal of the Trustees........................................... 29
6.8 Status of Successor Corporate Trustee............................................. 30
6.9 Merger of the Corporate Trustee................................................... 30
6.10 Co-Trustee; Separate Trustees..................................................... 30
6.11 Treatment of Payee or Indorsee by Trustees; Representatives of Secured Parties.... 32
SECTION 7. MISCELLANEOUS......................................................................... 32
7.1 Notices........................................................................... 32
7.2 No Waivers........................................................................ 33
7.3 Amendments, Supplements and Waivers............................................... 33
7.4 Headings.......................................................................... 33
7.5 Severability...................................................................... 33
7.6 Successors and Assigns............................................................ 33
7.7 Currency Conversions.............................................................. 34
7.8 Governing Law..................................................................... 34
7.9 Counterparts...................................................................... 34
7.10 Termination....................................................................... 34
7.11 New Obligors...................................................................... 35
7.12 Inspection by Regulatory Agencies................................................. 35
7.13 Confidentiality................................................................... 35
7.14 Submission to Jurisdiction; Waivers............................................... 35
7.15 WAIVERS OF JURY TRIAL............................................................. 36
SECTION 8. SUBORDINATION OF RIGHTS OF SUBORDINATED CREDITORS..................................... 36
8.1 Priority of Interests of Holders of Secured Obligations........................... 36
8.2 Enforcement Against Collateral.................................................... 36
8.3 Application of Proceeds........................................................... 37
8.4 Acknowledgment.................................................................... 37
Exhibits
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TRUST AGREEMENT, dated as of June 17, 1996, among KMART CORPORATION, a
Michigan corporation ("Kmart"), the subsidiaries of Kmart which are listed on
the signature pages hereto under the heading "Initial Obligors" (together with
Kmart, the "Initial Obligors"), the other subsidiaries of Kmart from time to
time parties hereto (the "New Obligors"), [ ] as corporate trustee (the
"Corporate Trustee"), and [ ], as individual trustee (the
"Individual Trustee"; together with the Corporate Trustee, the "Trustees").
W I T N E S S E T H:
WHEREAS, in order to induce the lending institutions parties thereto
to enter into the Kmart Credit Agreement (as defined below), the Initial
Obligors and the New Obligors (collectively, the "Obligors") each desire to
secure the payment of the loans and all other amounts from time to time owing by
Kmart thereunder; and
WHEREAS, the Obligors may desire to secure the payment of amounts
owing by the Obligors to certain trade creditors on a subordinated basis to the
Senior Secured Obligations (as defined below); and
WHEREAS, the Obligors may desire to secure the payment of certain
Permitted Pari Passu Senior Debt (as defined in the Kmart Credit Agreement).
DECLARATION OF TRUST:
NOW, THEREFORE, in order to secure the due and punctual payment of the
Senior Secured Obligations and the Subordinated Secured Obligations and in
consideration of the premises and the mutual agreements set forth herein, the
Trustees do hereby declare that they hold and will hold as trustees in trust
under this Trust Agreement for the benefit of the applicable Secured Parties all
of their right, title and interest in, to and under all the following, whether
now existing or hereafter arising (and the Obligors do hereby consent thereto):
(A) the Security Agreement and the collateral granted to the Trustees
thereunder;
(B) the Inventory Security Agreement and the collateral granted to
the Trustees thereunder;
(C) each Mortgage and the collateral granted to the Trustees
thereunder;
(D) the Securities Pledge Agreement and the collateral granted to the
Trustees thereunder;
(E) each Mortgage Assignment and the collateral granted to the
Trustees thereunder; and
(F) each agreement entered into pursuant to clause (ii) of subsection
7.3(b) and the collateral granted to the Trustees thereunder.
TO HAVE AND TO HOLD the foregoing Security Documents and the entire
Collateral (the right, title and interest of the Trustees in the Security
Documents and the Collateral
<PAGE> 114
2
being hereinafter referred to as the "Trust Estate") unto the Trustees and their
respective successors in trust under this Trust Agreement and their respective
assigns forever;
IN TRUST NEVERTHELESS, under and subject to the conditions herein set
forth and for the benefit of the Secured Parties, and for the enforcement of the
payment of all Senior Secured Obligations and Subordinated Secured Obligations,
and as security for the performance of and compliance with the covenants and
conditions of this Trust Agreement, each of the Secured Instruments and each of
the Security Documents.
PROVIDED, that the portions of the Trust Estate securing the
Subordinated Secured Obligations is limited to the Inventory and the
Post-petition Inventory Proceeds.
PROVIDED, HOWEVER, that these presents are upon the condition that if
Kmart, its successors or assigns, shall satisfy the conditions set forth in
subsection 7.10(a), then this Trust Agreement and the Security Documents, and
the estates and rights hereby and thereby assigned, shall cease, terminate and
be void; otherwise they shall remain and be in full force and effect.
IT IS HEREBY FURTHER COVENANTED AND DECLARED, that the Trust Estate is
to be held and applied by the Trustees, subject to the further covenants,
conditions and trusts hereinafter set forth.
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms defined in
the captions to this Agreement shall have the meanings set forth therein, and
the following terms have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounts" shall mean all accounts (as such term is defined in the
Code) now owned or hereafter acquired by the Obligors and all instruments
and chattel paper (as defined in the Code) now owned or hereafter acquired
by the Obligors which evidence a right to payment for goods sold or leased
or for services rendered, whether or not such right has been earned by
performance.
"Affiliate" shall mean, 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. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to
(a) vote 10% or more of the securities having ordinary voting power for the
election of directors of such Person or (b) direct or cause the direction
of the management and policies of such Person, whether by contract or
otherwise. For the purposes of this Trust Agreement, Kmart and its
Restricted Subsidiaries (as defined in the Kmart Credit Agreement) shall
not be deemed to be Affiliates of each other.
"Administrative Agent" shall mean Chemical Bank, in its capacity as
Administrative Agent under the Kmart Credit Agreement and any successor
Administrative Agent appointed thereunder.
"Approved Trade Creditor" shall mean a Trade Creditor that (i) may
from time to time be designated as an "Approved Trade Creditor" pursuant to
the terms of any Trade Agreement
<PAGE> 115
3
from time to time entered into between an Obligor and such Person and (ii)
is not an Excluded Trade Creditor at such time.
"Bankruptcy Code" shall mean Title 11 of the United States Code, as
the same may from time to time be amended, modified or supplemented.
"Bankruptcy Event" with respect to any Person shall mean the
commencement of any case, proceeding or other action (A) under any existing
or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or the making of a
general assignment for the benefit of its creditors.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York City or in the city in which the
principal corporate trust office of the Corporate Trustee is located are
authorized or required by law to close.
"Capital Stock" shall mean any and all shares, interests,
participations or other equivalents (however designated) of capital stock
of a corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to purchase
any of the foregoing.
"Cash Equivalents" shall mean (i) direct obligations of, or
obligations guaranteed by, the United States of America or any agency
thereof, (ii) commercial paper issued in the United States of America and
rated at least A-1 or P-1 by at least one nationally recognized rating
organization, (iii) certificates of deposit issued by or eurodollar
deposits made with [ ] or any bank or trust company which has (or
the parent of which has) capital, surplus and undivided profits
aggregating at least $125,000,000 (or the equivalent amount in another
currency), (iv) loan participations in respect of loans made in the United
States by any bank or trust company referred to in clause (iii) above to
borrowers which have short-term ratings of at least A-1 or P-1 by at least
one nationally recognized rating organization, (v) drafts accepted by any
bank or trust company referred to in clause (iii) above or any other
negotiable instrument guaranteed or endorsed with full recourse by any
such bank or trust company and (vi) repurchase agreements with respect to
any of the foregoing types of securities; provided that (a) all such
obligations, commercial paper, certificates of deposit, eurodollar
deposits, loan participations, drafts, instruments and repurchase
agreements are denominated in Dollars, (b) each such obligation,
commercial paper, certificate of deposit, draft and instrument (including
those subject to repurchase agreements) is evidenced by an instrument or a
security (each as defined in the Code) of which (and of any confirmations
related thereto) the Corporate Trustee or its agents promptly take
possession unless such items are Permitted Book-Entry Securities, or, in
the case of eurodollar deposits or loan participations, are held in the
name of the Corporate Trustee or any agent therefor and in the case of
loan participations, are evidenced by facsimile or other written
confirmation, (c) each such obligation, certificate of deposit, draft and
instrument (including those subject to repurchase agreements) matures
within six months after it is acquired by any Obligor, and
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(d) each item of such commercial paper (including those subject to
repurchase agreements) matures within three months after it is acquired by
any Obligor.
"Chattel Paper" shall have the meaning defined in the Code.
"Code" shall mean the Uniform Commercial Code as in effect in the
State of New York from time to time.
"Collateral" shall mean the Security, the Pledged Securities, the
Mortgaged Property, all Proceeds of the foregoing and all other property in
which the Trustees are granted a lien or security interest from time to
time hereunder or under any Security Document, subject to the limitations
set forth in subsection 2.9 hereof.
"Collateral Account" shall have the meaning assigned in subsection 3.1
of the Trust Agreement.
"Corporate Trustee" shall mean [ ] in its capacity as
corporate trustee hereunder, and any successor corporate trustee
appointed hereunder, in each case acting on behalf of the Secured Parties
and not in its individual capacity.
"Derivative Agreements" shall mean any foreign exchange contracts,
interest rate and currency swap agreements, floors, caps, collars,
swaptions and similar derivative contracts, in each case, between any
Obligor and any Lender, in each case, entered into after the Effective
Date.
"Distribution Date" shall mean each date fixed by the Corporate
Trustee for a distribution to the Secured Parties of funds held in the
Collateral Account, the first of which shall be within 120 days after the
Corporate Trustee receives a Notice of Acceleration and the remainder of
which shall be monthly thereafter on the day of the month corresponding
to the first Distribution Date (or, if there be no such corresponding
day, the last day of such month) provided that if any such day is not a
Business Day, such Distribution Date shall be the next Business Day,
provided, that no day shall be a Distribution Date unless a Notice of
Acceleration is then in effect.
"Documents" shall have the meaning defined in the Code.
"Dollars" and "$" shall mean dollars in lawful currency of the
United States of America.
"Effective Date" shall mean the date on which the initial Extensions
of Credit (as defined in the Kmart Credit Agreement) are made thereunder.
"Equipment" shall mean all equipment, machinery, chattels, tools,
dies, jigs, molds, parts, machine tools, furniture, furnishings, fixtures
and supplies, of every nature, now owned or hereafter acquired or
created, wherever located, additions, accessories and improvements
thereto and substitutions therefor and all parts and equipment which may
be attached to or which are necessary for the operation and use of such
personal property or fixtures, whether or
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not the same shall be deemed to be affixed to real property and including,
without limitation, equipment (as such term is defined in the Code) but
excluding Inventory.
"Excluded Trade Creditor" shall mean a Trade Creditor designated an
"Approved Trade Creditor" by an Obligor pursuant to the terms of a Trade
Agreement and that subsequently has failed to provide such Obligor with
the requisite trade terms contained in the Trade Agreement (unless such
Trade Creditor has been redesignated as, and at such time is, an Approved
Trade Creditor pursuant to subsection 4.1(b) hereof).
"General Intangibles" shall mean all general intangibles of every
nature, whether presently existing or hereafter acquired or created,
including, without limitation, all Records, claims, choses in action,
judgments, United States patents, United States patent applications,
United States trademarks, interests in mortgages, deeds of trust and
other instruments encumbering real property, licensing agreements,
royalty payments, United States copyrights, United States trade names,
United States service marks, logos, insurance policies, tax refunds and
goodwill, and shall include, in any event, all general intangibles within
the meaning of the Code and all rights to receive payment of money which
rights are not Accounts and do not arise under Chattel Paper and are not
Instruments.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
"Individual Trustee" shall mean [ ], in his capacity as
individual trustee under this Trust Agreement, and any successor
individual trustee appointed hereunder.
"Initial Obligors" shall have the meaning assigned in the recitals
to this Trust Agreement.
"Instruments" shall have the meaning defined in the Code.
"Insurance Policies" shall mean all rights of the Obligors in, to
and under insurance policies of every kind, now existing or hereafter
acquired, under which any Collateral is insured; provided that (i) any
such rights which constitute Proceeds shall be included in the meaning of
the term "Proceeds" and excluded from the meaning of the term "Insurance
Policies", and (ii) proceeds of such policies, whether or not "Proceeds",
shall be governed by and applied pursuant to subsection 5.3 of the Trust
Agreement.
"Inventory" shall mean goods held for sale or lease or to be
furnished under contracts of service or so leased or furnished, and all
raw materials, work in process or materials used or consumed in a
business, and in any event including all "inventory" as defined in the
Code.
"Inventory Security Agreement" shall mean the Inventory Security
Agreement among the Obligors and the Trustees, substantially in the form
of Exhibit A-2 to the Trust Agreement, as the same shall be amended,
modified, supplemented, extended or renewed from time to time.
"Investment Securities" shall mean all Instruments or securities (as
defined in the Code) other than (i) Pledged Stock, (ii) Capital Stock of
any Subsidiary that is not expressly
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required to be pledged pursuant the Kmart Credit Agreement or the
Securities Pledge Agreement and (iii) Cash Equivalents.
"Kmart" shall mean Kmart Corporation, a Michigan corporation.
"Kmart Credit Agreement" shall mean the Credit Agreement, dated as
of June 6, 1996, among Kmart, the several lending institutions from time
to time parties thereto and the Administrative Agent, as the same may be
amended, modified, supplemented, extended, renewed or refinanced from
time to time.
"Kmart Credit Agreement Obligations" shall mean, at any time, (i)
the principal of and interest on the Loans, (ii) L/C Obligations and
(iii) all other amounts payable at any time or from time to time by Kmart
under the Kmart Credit Agreement and the promissory notes, if any, issued
thereunder (including, without limitation, interest accruing at the then
applicable rate provided in the Kmart Credit Agreement after the maturity
of the Loans and interest accruing at the then applicable rate provided
in the Kmart Credit Agreement after the occurrence of any Bankruptcy
Event (as defined in the Kmart Credit Agreement) with respect to Kmart,
whether or not a claim for post-filing or post-petition interest is
allowed in any related bankruptcy proceeding).
"L/C Obligations" shall have the meaning assigned in the Kmart
Credit Agreement.
"Lenders" shall have the meaning assigned in the Kmart Credit
Agreement.
"Loan" shall have the meaning assigned in the Kmart Credit
Agreement.
"Mortgage" shall mean each mortgage or deed of trust of real
property or similar document executed and delivered from time to time to
the Trustees pursuant to the Trust Agreement or the Kmart Credit
Agreement, substantially in the form of Exhibit B to the Trust Agreement,
as appropriate, or, if such Exhibit is not appropriate under applicable
law in the jurisdiction in which such real property is located, in such
other form as shall be reasonably satisfactory to the Administrative
Agent and Kmart, as any of the same may be amended, modified,
supplemented, extended or renewed from time to time.
"Mortgage Assignment" shall mean each assignment of mortgage
(including without limitation, any mortgage held by an Obligor as an
assignee of any other person) executed and delivered from time to time to
the Trustees pursuant to the Trust Agreement or the Kmart Credit
Agreement, in a form reasonably satisfactory to the Administrative Agent
and Kmart and as appropriate under applicable law in the jurisdiction in
which such real property is located, as any of the same may be amended,
modified, supplemented, extended or renewed from time to time.
"Mortgaged Property" shall mean all property in which the Trustees
are granted a lien or security interest pursuant to the Mortgages.
"New Obligors" shall have the meaning assigned in the recitals to
this Trust Agreement.
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"Notice of Acceleration" shall mean a notice delivered to the
Corporate Trustee by the Administrative Agent with respect to Kmart Credit
Agreement Obligations or by the Permitted Senior Debt Trustee with respect
to the Permitted Senior Debt Obligations, in either case, upon which the
Trustees may conclusively rely, stating that (a) the Loans have, or such
indebtedness or other obligations under the Permitted Senior Debt Indenture
have, as the case may be, not been paid in full at the stated final
maturity or, in the case of an outstanding, non-cash collateralized
Reimbursement Obligation, on the Revolving Credit Termination Date (as
defined in the Kmart Credit Agreement), and any applicable grace period has
expired or (b) a default has occurred under the provisions of the Kmart
Credit Agreement or the Permitted Senior Debt Indenture, as the case may
be, and, as a result thereof, the Kmart Credit Agreement Obligations or all
such indebtedness or other obligations under the Permitted Senior Debt
Indenture, as the case may be, have become due and payable prior to the
stated maturity thereof or, in the case of any Reimbursement Obligation, a
requirement for immediate cash collateralization has occurred and has not
been satisfied.
"Notice of Default" shall mean a notice delivered to the Corporate
Trustee by the Administrative Agent, upon which the Trustees may
conclusively rely, stating that an Event of Default (as defined in the
Kmart Credit Agreement) has occurred and is continuing and stating that
such notice is a "Notice of Default" for the purposes of the Trust
Agreement.
"Obligors" shall have the meaning assigned in the recitals to this
Trust Agreement.
"Opinion of Counsel" shall mean an opinion in writing signed by
legal counsel satisfactory to the Corporate Trustee, who may be an
employee of any of the Obligors or counsel regularly retained by Kmart or
the Corporate Trustee.
"Other Collateral" shall mean Collateral other than the Shared
Collateral.
"Other Collateral Sub-Account" shall have the meaning assigned in
subsection 3.1 of the Trust Agreement.
"Overdraft" means, at any time, the amount by which the aggregate
amount debited from any deposit, concentration, operating or disbursement
account maintained by Kmart or any other Obligor with any Lender or any
Affiliate of any Lender, as a result of processing of payment orders
issued by Kmart or such Obligor or otherwise, exceeds the aggregate funds
on deposit in such account.
"Permitted Book-Entry Securities" shall mean securities which
conform in all respects to the requirements set forth in the definition
of Cash Equivalents except that the Corporate Trustee or its agent does
not have possession thereof; provided that with respect to any security
which the Corporate Trustee or its agent does not have physical
possession of, such security shall be "transferred" to the Corporate
Trustee in accordance with the provisions of Section 8-313(1) of the Code
such that the Trustees shall have a perfected security interest therein
(or in the event of any amendments or revisions to Article 8 of the Code,
such other actions as may be necessary to perfect the security interest
of the Trustees in such security (or the related security entitlement)
under the Code as amended or revised).
"Permitted Pari Passu Senior Debt" shall have the meaning assigned
in the Kmart Credit Agreement.
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"Permitted Senior Debt Indenture" shall mean, collectively, the
indenture or indentures pursuant to which any Permitted Pari Passu Senior
Debt is issued, as the same may be amended, modified, supplemented,
extended or renewed from time to time.
"Permitted Senior Debt Obligations" shall mean, at the date of
determination thereof, principal and interest and premiums, if any, owing
at such date under or in respect of Permitted Pari Passu Senior Debt.
"Permitted Senior Debt Trustee" shall mean, collectively, the
trustees under the Permitted Senior Debt Indentures, or their respective
successors thereto.
"Person" shall mean an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association,
limited liability company, joint venture, Governmental Authority or any
other entity of whatever nature.
"Pledged Securities" shall have the meaning assigned in Section 2(a)
of the Securities Pledge Agreement.
"Pledged Stock" shall have the meaning assigned in clause (i) of
Section 2(a) of the Securities Pledge Agreement.
"Post-petition Inventory Proceeds" shall mean with respect to any
Obligor, Proceeds with respect to Inventory of such Obligor arising after
the commencement of a case or proceeding under the Bankruptcy Code by
such Obligor.
"Proceeds" shall mean all proceeds within the meaning of the Code.
"Records" shall mean all books, correspondence, credit files,
records and other documents of an Obligor, whether presently existing or
hereafter acquired or created, including, without limitation, all
computer programs, computer tapes, cards, and other papers and documents
in its possession or control or in the possession or control of any
affiliate or computer service bureau.
"Reimbursement Obligation" shall mean the obligation of Kmart
pursuant to the Kmart Credit Agreement to reimburse each Issuing Bank (as
defined in the Kmart Credit Agreement) for amounts drawn under any Letter
of Credit (as defined in the Kmart Credit Agreement) issued by such
Issuing Bank.
"Related General Intangibles" shall mean all Related Patents and
Trademarks and all inventions, processes, production methods, proprietary
information, know-how, trade secrets and copyrights owned by any Obligor.
"Related Patents and Trademarks" shall mean (i) all United States
trademarks and service marks and all applications and registrations in
respect thereof (and any renewals thereof) listed on Schedule A to the
Security Agreement and any and all future United States trademarks and
service marks hereafter acquired by the Obligors, together with the
goodwill of the business connected with the use of, and symbolized by,
such trademarks and service marks; (ii) all United States patents and
applications for United States letters patent, owned by the Obligors,
including, without limitation, those listed on Schedule B to the Security
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Agreement; (iii) all re-issues, divisions, continuations, extensions and
continuations-in-part of the items referred to in clause (ii) above; and
(iv) the right to sue for past, present and future infringements of the
foregoing.
"Required Secured Parties" shall mean, as of a particular date prior
to payment in full of all Senior Secured Obligations, Lenders the Voting
Percentages of which aggregate more than 50% under the Kmart Credit
Agreement on such date. For the purpose of this definition (prior to
payment in full of all Senior Secured Obligations), the Administrative
Agent shall be deemed to hold or represent, and shall be entitled to vote
and give notices and directions with respect to, the Required Secured
Parties. After the payment in full of all Senior Secured Obligations,
Required Secured Parties shall mean, as of a particular date, Subordinated
Creditors holding in the aggregate more than 50% of the Subordinated
Secured Obligations.
"Responsible Officer" shall mean, with respect to any Obligor, the
chief executive officer, the president, any executive vice president, the
chief financial officer and the treasurer of such Obligor or, with
respect to financial matters, the chief executive officer, president,
executive vice president-finance, chief financial officer or treasurer of
such Obligor.
"Restricted Jurisdiction" shall mean with respect to any Mortgage or
Mortgage Assignment, any jurisdiction in which the recordation of such
Mortgage or Mortgage Assignment would result in the payment of a material
mortgage recording tax.
"Secured Instruments" shall mean the collective reference to the
Senior Secured Instruments and the Subordinated Secured Instruments.
"Secured Obligations" shall mean the collective reference to the
Senior Secured Obligations and the Subordinated Secured Obligations.
"Secured Parties" shall mean at any time the holders of the Senior
Secured Obligations and the Subordinated Secured Obligations.
"Securities Account" shall have the meaning assigned in Section 9 of
the Securities Pledge Agreement.
"Securities Pledge Agreement" shall mean the Securities Pledge
Agreement, among certain of the Obligors and the Trustees, substantially
in the form of Exhibit C to the Trust Agreement, as the same shall be
amended, modified, supplemented, extended or renewed from time to time.
"Security" shall have the meaning assigned collectively in Section 2
of the Security Agreement and Section 2 of the Inventory Security
Agreement.
"Security Agreement" shall mean the Security Agreement and
Collateral Assignment, among the Obligors (other than the Big Beaver
Companies (as defined in the Kmart Credit Agreement)) and the Trustees,
substantially in the form of Exhibit A-1 to the Trust Agreement, as the
same shall be amended, modified, supplemented, extended or renewed from
time to time.
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"Security Documents": the collective reference to the Security
Agreement, the Inventory Security Agreement, the Securities Pledge
Agreement, the Mortgages, the Mortgage Assignments and each agreement
entered into pursuant to clause (ii) of subsection 7.3(b) of the Trust
Agreement.
"Senior Creditors" shall mean at any time the holders of the Senior
Secured Obligations.
"Senior Secured Instruments" shall mean at any time the Kmart Credit
Agreement, the Permitted Senior Debt Indenture and any other agreements
or instruments evidencing Senior Secured Obligations.
"Senior Secured Obligations" shall mean all of the following, in
each case whether now existing or hereafter incurred or created, except
to the extent otherwise expressly provided in the agreements or
instruments relating thereto:
(i) the Kmart Credit Agreement Obligations;
(ii) the Permitted Senior Debt Obligations;
(iii) all sums payable by the Obligors under the
Trust Agreement or any Security Document (including,
without limitation, Trustee Fees);
(iv) all sums payable by Obligors which are
Subsidiary Guarantors (as defined in the Kmart Credit
Agreement) under the Subsidiaries Guarantee (as defined
in the Kmart Credit Agreement);
(v) liabilities of any Obligor for Overdrafts; and
(vi) liabilities and obligations of any Obligor under
Derivative Agreements.
When used in this Trust Agreement with respect to any of the Secured
Obligations that constitute the obligations of any Obligor under a bond or
guarantee or under a reimbursement agreement or counter-indemnity
agreement executed and delivered in respect of a bond, acceptance,
guarantee or letter of credit issued on behalf of any Obligor or under an
insurance, reimbursement and indemnity agreement or under any Derivative
Agreement or any similar obligation, the term "outstanding" shall include,
at any time, without duplication, the aggregate of the principal, interest
and other amounts then outstanding that are the subject of such bond,
acceptance, guarantee, insurance, reimbursement and indemnity agreement,
letter of credit or similar obligation, as the case may be, that have not
then been reimbursed by the relevant Obligor and the amount then available
to be drawn or demanded under such bond, acceptance, guarantee, insurance,
reimbursement and indemnity agreement, letter of credit or similar
obligation (assuming compliance with all conditions to drawing) or the
termination liabilities, if any, of the Obligor under such Derivative
Agreement.
"Shared Collateral" shall mean Inventory and Post-petition Inventory
Proceeds.
"Shared Collateral Sub-Account" shall have the meaning assigned in
subsection 3.1 of the Trust Agreement.
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"Subordinated Creditors" shall mean at any time the holders of the
Subordinated Secured Obligations.
"Subordinated Secured Instruments" shall mean at any time any
agreements or instruments evidencing Subordinated Secured Obligations.
"Subordinated Secured Obligations" shall mean the Trade Payables of
any Obligor to an Approved Trade Creditor.
"Subsidiary" means as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of Kmart.
"Trade Agreement" shall mean an arrangement entered into between an
Obligor and a Trade Creditor that designates such Trade Creditor as an
"Approved Trade Creditor", which designation may be subject to a
continuing agreement to provide such Obligor with certain trade terms.
"Trade Creditor" shall mean a Person that supplies goods to an
Obligor, and such Person's successors and assigns.
"Trade Payables" shall mean all amounts owing to a Trade Creditor in
respect of the purchase by an Obligor of goods.
"Trust Agreement" shall mean this Trust Agreement, dated as of June
__, 1996, among the Obligors and the Trustees, as the same may from time
to time be amended, supplemented or otherwise modified.
"Trust Estate" shall have the meaning assigned in the Declaration of
Trust in the Trust Agreement.
"Trustee Fees" shall mean all fees, costs and expenses of the
Trustees of the types described in subsections 4.3, 4.4, 4.5 and 4.6 of
the Trust Agreement.
"Voting Percentage" shall have the meaning assigned in the Kmart
Credit Agreement.
1.2 Other Definitional Provisions. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Trust Agreement shall
refer to this Trust Agreement as a whole and not to any particular provision of
this Trust Agreement, and section and subsection references are to this Trust
Agreement unless otherwise specified. The meanings given to terms defined
herein shall be equally applicable to both the singular and plural forms of such
terms.
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SECTION 2. REMEDIAL PROVISIONS
2.1 Notices of Acceleration and Default. (a) Upon receipt by the
Corporate Trustee of a Notice of Acceleration, the Corporate Trustee shall
immediately notify Kmart, the Administrative Agent and the Permitted Senior Debt
Trustee of the receipt and contents thereof. So long as such Notice of
Acceleration is in effect, the Trustees shall exercise the rights and remedies
provided in this Trust Agreement and in the Security Documents subject to
Section 6 hereof and such instructions as they may receive from time to time
from the Required Secured Parties as provided herein. The Trustees are not
empowered to exercise any remedy hereunder or thereunder unless a Notice of
Acceleration is in effect (other than, if a Notice of Default is in effect, as
specified in subsection 2.3(b)).
(b) A Notice of Acceleration delivered by the Administrative Agent
or the Permitted Senior Debt Trustee shall become effective upon receipt thereof
by the Corporate Trustee. A Notice of Acceleration, once effective, shall
remain in effect unless and until it is cancelled as provided in subsection
2.l(c).
(c) The Administrative Agent or the Permitted Senior Debt Trustee
giving a Notice of Acceleration shall be entitled to cancel its own Notice of
Acceleration by delivering a written notice of cancellation to the Corporate
Trustee at any time. The Corporate Trustee shall immediately notify Kmart, the
Administrative Agent and the Permitted Senior Debt Trustee as to the receipt and
contents of any such notice of cancellation.
(d) A Notice of Default delivered by the Administrative Agent shall
become effective upon receipt thereof by the Corporate Trustee. Upon receipt by
the Corporate Trustee of a Notice of Default, the Corporate Trustee shall
immediately notify Kmart as to its receipt of such notice and the contents
thereof. So long as such Notice of Default is in effect, the Trustees shall
exercise the rights and remedies specified in subsection 2.3(b) at the direction
of the Administrative Agent. A Notice of Default, once effective, shall remain
in effect unless and until it is cancelled by the Administrative Agent by
delivering a written notice of cancellation to the Corporate Trustee at any
time. The Corporate Trustee shall immediately notify Kmart as to the receipt
and contents of any such notice of cancellation.
2.2 General Authority of the Trustees over the Collateral. Each
Obligor hereby irrevocably constitutes and appoints the Trustees and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full power and authority in the name of such Obligor or in
its or his own name, from time to time in the Trustees' discretion, subject to
subsection 2.1, so long as any Notice of Acceleration is in effect, to take any
and all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to carry out the terms of this Trust
Agreement and the Security Documents and accomplish the purposes hereof and
thereof and, without limiting the generality of the foregoing, each Obligor
hereby gives the Trustees, subject to subsection 2.1, the power and right on
behalf of such Obligor, without notice to or further assent by such Obligor, so
long as any Notice of Acceleration is in effect, to do the following:
(i) to ask for, demand, sue for, collect, receive and give
acquittance for any and all moneys due or to become due upon, or in
connection with, the Collateral;
(ii) to receive, take, endorse, assign and deliver any and all
checks, notes, drafts, acceptances, documents and other negotiable and
non-negotiable instruments taken or received by the Trustees as, or in
connection with, the Collateral;
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(iii) to commence, prosecute, defend, settle, compromise or
adjust any claim, suit, action or proceeding with respect to, or in
connection with, the Collateral;
(iv) to sell, transfer, assign or otherwise deal in or with the
Collateral or any part thereof as fully and effectively as if the Trustees
were the absolute owner thereof; and
(v) to do, at their option and at the expense and for the
account of the Obligors, at any time or from time to time, all acts and
things which the Trustees deem necessary to protect or preserve the
Collateral and to realize upon the Collateral.
2.3 Right to Initiate Judicial Proceedings. (a) If a Notice of
Acceleration is in effect, the Trustees, subject to the provisions of subsection
2.5(b) and Section 6, (i) shall have the right and power to institute and
maintain such suits and proceedings as they may deem appropriate to protect and
enforce the rights vested in them by this Trust Agreement and each Security
Document and (ii) may either after entry, or without entry, proceed by suit or
suits at law or in equity to enforce such rights and to foreclose upon the
Collateral and to sell all or, from time to time, any of the Collateral under
the judgment or decree of a court of competent jurisdiction.
(b) If a Notice of Default is in effect, the Trustees, subject to
the provisions of subsection 2.5(b), shall have the right and power, subject to
prior receipt of instructions from the Administrative Agent, to institute and
maintain such suits and proceedings and take such other actions as may be
requested by the Administrative Agent to enforce those obligations of the
Obligors set forth in subsection 5.1(b).
2.4 Right to Appoint a Receiver. If a Notice of Acceleration is in
effect, upon the filing of a bill in equity or other commencement of judicial
proceedings to enforce the rights of the Trustees under this Trust Agreement or
any Security Document, the Trustees shall, to the extent permitted by law, with
notice to Kmart but without notice to any party claiming through the Obligors,
without regard to the solvency or insolvency at the time of any Person then
liable for the payment of any of the Secured Obligations, without regard to the
then value of the Trust Estate, and without requiring any bond from any
complainant in such proceedings, be entitled as a matter of right to the
appointment of a receiver or receivers (who may be a Trustee) of the Trust
Estate, or any part thereof, and of the rents, issues, tolls, profits,
royalties, revenues and other income thereof, pending such proceedings, with
such powers as the court making such appointment shall confer, and to the entry
of an order directing that the rents, issues, tolls, profits, royalties,
revenues and other income of the property constituting the whole or any part of
the Trust Estate be segregated, sequestered and impounded for the benefit of the
Trustees and the Secured Parties, and each Obligor irrevocably consents to the
appointments of such receiver or receivers and to the entry of such order;
provided that, notwithstanding the appointment of any receiver, the Corporate
Trustee shall be entitled to retain possession and control of all cash and Cash
Equivalents held by or deposited with it pursuant to this Trust Agreement or any
Security Document.
2.5 Exercise of Powers; Instructions of Required Secured Parties.
(a) All of the powers, remedies and rights of the Trustees as set forth in this
Trust Agreement may be exercised by the Trustees in respect of any Security
Document as though set forth in full herein and all of the powers, remedies and
rights of the Trustees, the Administrative Agent and the other Secured Parties
as set forth in any Security Document may be exercised from time to time as
herein and therein provided.
(b) The Required Secured Parties shall have the right, by one or
more instruments in writing executed and delivered to the Corporate Trustee, to
direct the time, method and place of
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conducting any proceeding for any right or remedy available to the Trustees, or
of exercising any trust or power conferred on the Trustees, or for the
appointment of a receiver, or to direct the taking or the refraining from taking
of any action authorized by this Trust Agreement or any Security Document;
provided that (i) such direction shall not conflict with the provisions of law
or of this Trust Agreement or of any Security Document and (ii) the Trustees
shall be adequately secured and indemnified as provided in subsection 6.4(d).
Nothing in this subsection 2.5(b) shall impair the right of the Trustees in
their discretion to take any action which they deem proper and which is not
inconsistent with such direction by the Required Secured Parties. In the
absence of such direction, the Trustees shall have no duty to take or refrain
from taking any action unless explicitly required herein.
2.6 Remedies Not Exclusive. (a) No remedy conferred upon or
reserved to the Trustees herein or in the Security Documents is intended to be
exclusive of any other remedy or remedies, but every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or in
any Security Document or now or hereafter existing at law or in equity or by
statute.
(b) No delay or omission by the Trustees to exercise any right,
remedy or power hereunder or under any Security Document shall impair any such
right, remedy or power or shall be construed to be a waiver thereof, and every
right, power and remedy given by this Trust Agreement or any Security Document
to the Trustees may be exercised from time to time and as often as may be deemed
expedient by the Trustees.
(c) If the Trustees shall have proceeded to enforce any right,
remedy or power under this Trust Agreement or any Security Document and the
proceeding for the enforcement thereof shall have been discontinued or abandoned
for any reason or shall have been determined adversely to the Trustees, then the
Obligors, the Trustees and the Secured Parties shall, subject to any
determination in such proceeding, severally and respectively be restored to
their former positions and rights hereunder or thereunder with respect to the
Trust Estate and in all other respects, and thereafter all rights, remedies and
powers of the Trustees shall continue as though no such proceeding had been
taken.
(d) All rights of action and of asserting claims upon or under this
Trust Agreement and the Security Documents may be enforced by the Trustees
without the possession of any Secured Instrument or instrument evidencing any
Secured Obligation or the production thereof at any trial or other proceeding
relative thereto, and any suit or proceeding instituted by the Trustees shall
be, subject to subsections 6.5(c), 6.5(d) and 6.10(b)(ii), brought in their name
as Trustees and any recovery of judgment shall be held as part of the Trust
Estate.
2.7 Waiver and Estoppel. (a) Each Obligor agrees, to the extent it
may lawfully do so, that it will not at any time in any manner whatsoever claim
or take the benefit or advantage of any appraisement, valuation, stay of
execution, extension, moratorium, turnover or redemption law, or any law
permitting it to direct the order in which the Collateral shall be sold, now or
at any time hereafter in force, which may delay, prevent or otherwise affect the
performance or enforcement of this Trust Agreement or any Security Document and
hereby waives all benefit or advantage of all such laws and covenants that it
will not hinder, delay or impede the execution of any power granted to the
Trustees in this Trust Agreement or any Security Document but will suffer and
permit the execution of every such power as though no such law were in force.
(b) Each Obligor, to the extent it may lawfully do so, on behalf of
itself and all who may claim through or under it, waives and releases all rights
to demand or to have any
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marshalling of the Collateral upon any sale, whether made under any power of
sale granted herein or in any Security Document or pursuant to judicial
proceedings or upon any foreclosure or any enforcement of this Trust Agreement
or any Security Document and consents and agrees that all the Collateral may at
any such sale be offered and sold as an entirety.
(c) Each Obligor waives, to the extent permitted by applicable law,
presentment, demand, protest and any notice of any kind (except notices
explicitly required hereunder or under the Kmart Credit Agreement or any
Security Document) in connection with this Trust Agreement and the Security
Documents and any action taken by the Trustees with respect to the Collateral.
2.8 Limitation on Trustees' Duty in Respect of Collateral. Beyond
their duties as to the custody thereof expressly provided herein or in any
Security Document and to account to the Secured Parties and the Obligors for
moneys and other property received by them hereunder or under any Security
Document, the Trustees shall not have any duty to the Obligors or to the Secured
Parties as to any Collateral in their possession or control or in the possession
or control of any of their agents or nominees, or any income thereon or as to
the preservation of rights against prior parties or any other rights pertaining
thereto except to treat such Collateral in their possession and control with the
same degree of care as they accord their own property.
2.9 Limitation by Law; Limitation by Contract. (a) All rights,
remedies and powers provided in this Trust Agreement or any Security Document
may be exercised only to the extent that the exercise thereof does not violate
any applicable provision of law, and all the provisions hereof are intended to
be subject to all applicable mandatory provisions of law which may be
controlling and (subject to subsection 7.5) to be limited to the extent
necessary so that they will not render this Trust Agreement invalid,
unenforceable in whole or in part or not entitled to be recorded, registered or
filed under the provisions of any applicable law. In addition, and without
limiting the generality of the foregoing, (x) if any applicable law restricts
the granting of a security interest in any property or asset of an Obligor
(which would otherwise be Collateral under any Security Document) unless one or
more consents have been obtained or one or more conditions have been satisfied,
then such property or asset shall not be subject to a security interest under
the Security Documents and shall not constitute Collateral unless such consents
have been obtained and such conditions have been satisfied, and (y) if any
applicable law restricts the sale, assignment or other transfer of any interest
of an Obligor in any Collateral unless one or more consents have been obtained
or one or more conditions have been satisfied, then no such sale, assignment or
other transfer of such interest shall be made hereunder or under any Security
Document unless such consents have been obtained and such conditions have been
satisfied.
(b) The security interest granted under the Security Documents shall
not extend to any property or asset of any Obligor to the extent, and only for
so long as, such property is subject to another lien or security interest which
restricts the granting of additional liens or security interests on such
property and such property shall not constitute Collateral; provided that (i)
such lien or security interest is permitted pursuant to subsection 8.4(f), (g),
(i), (j) or (l) of the Kmart Credit Agreement and (ii) the restriction on the
granting of additional liens or security interests extends only to the property
subject to such lien or security interest and the proceeds thereof.
(c) If any contract expressly prohibits the granting of a security
interest in such contract without consent, then unless such consent has been
obtained, such contract shall not be subject to a security interest under the
Security Documents and shall not constitute Collateral.
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2.10 Rights of Secured Parties under Secured Instruments.
Notwithstanding any other provision of this Trust Agreement or any Security
Document, the right of each Secured Party to receive payment of the Secured
Obligations held by such Secured Party when due (whether at the stated maturity
thereof, by acceleration or otherwise) as expressed in the related Secured
Instrument or other instrument evidencing or agreement governing a Secured
Obligation or to institute suit for the enforcement of such payment on or after
such due date, and the obligation of the relevant Obligor to pay such Secured
Obligation when due, shall not be impaired or affected without the consent of
such Secured Party.
SECTION 3. COLLATERAL ACCOUNT; DISTRIBUTIONS
3.1 The Collateral Account. On the Effective Date there shall be
established and, at all times thereafter until the trusts created by this Trust
Agreement shall have terminated, there shall be maintained with the Corporate
Trustee at the office of the Corporate Trustee's corporate trust division an
account which shall be entitled the "Kmart Collateral Account" (the "Collateral
Account") and which shall be comprised of two sub-accounts entitled the "Kmart
Shared Collateral Sub-Account" (the "Shared Collateral Sub-Account") and the
"Kmart Other Collateral Sub-Account (the "Other Collateral Sub-Account"),
respectively. All moneys which are required by this Trust Agreement or any
Security Document to be delivered to the Trustees while a Notice of Acceleration
or Notice of Default is in effect or which are received by the Trustees or any
agent or nominee of the Trustees in respect of the Collateral, whether in
connection with the exercise of the remedies provided in this Trust Agreement or
any Security Document or otherwise, while a Notice of Acceleration or Notice of
Default is in effect shall be deposited (i) in the Shared Collateral Sub-Account
if such moneys are in respect of Shared Collateral or (ii) in the Other
Collateral Sub-Account if such moneys are in respect of Other Collateral and, in
each case, held by the Corporate Trustee as part of the Trust Estate and applied
in accordance with the terms of this Trust Agreement. Upon the cancellation of
all outstanding Notices of Acceleration and Notices of Default pursuant to
subsections 2.1(c) and (d), respectively, the Trustee shall (subject to the
first sentence of subsection 3.4(a)) cause all funds on deposit in the
Collateral Account to be forthwith paid over to Kmart.
3.2 Control of Collateral Account. All right, title and interest
in and to the Collateral Account shall vest in the Corporate Trustee, and funds
on deposit in the Collateral Account shall constitute part of the Trust Estate.
3.3 Investment of Funds Deposited in Collateral Account. The
Corporate Trustee shall invest and reinvest moneys on deposit in the Collateral
Account at any time in any of the following:
(i) marketable obligations of the United States having a
maturity of not more than three months from the date of acquisition;
(ii) marketable obligations directly and fully guaranteed by
the United States having a maturity of not more than three months from the
date of acquisition;
(iii) bankers' acceptances and certificates of deposit and
other interest-bearing obligations issued by [ ] or any bank organized
under the laws of the United States or any state thereof with capital,
surplus and undivided profits aggregating at least $125,000,000, in each
case having a maturity of not more than three months from the date of
acquisition;
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(iv) repurchase obligations with a term of not more than one day
for underlying securities of the types described in clauses (i), (ii) and
(iii) above entered into with [ ] or any bank meeting the
qualifications specified in clause (iii) above; and
(v) commercial paper (except commercial paper issued by Kmart
or its affiliates) rated at least A-1 or the equivalent thereof by Standard
& Poor's Ratings Group or P-1 or the equivalent thereof by Moody's
Investors Service, Inc. and maturing within three months after the date of
acquisition;
provided that the aggregate amount invested in obligations of the types
described in clauses (iii), (iv) and (v) above of any one issuer shall not
exceed $50,000,000 at any time, and provided, further, that, unless a Notice of
Acceleration is in effect, the Corporate Trustee shall not make any such
investment except at the direction of Kmart. All such investments and the
interest and income received thereon and the net proceeds realized on the sale
or redemption thereof shall be held in the Collateral Account as part of the
Trust Estate.
3.4 Application of Moneys. (a) The Corporate Trustee shall have
the right (pursuant to subsection 4.7) at any time to apply moneys held by it in
either the Shared Collateral Sub-Account or the Other Collateral Sub-Account to
the payment of due and unpaid Trustee Fees without any requirement that such
applications be made ratably from such accounts. Furthermore, notwithstanding
any other provision of this Trust Agreement or the Security Documents, when
taking actions with respect to the Collateral, the Trustees shall not be
obligated to maximize the realization by the Senior Creditors from the Other
Collateral before the Senior Creditors realize benefits from the Shared
Collateral.
(b) All remaining moneys held by the Corporate Trustee in the Shared
Collateral Sub-Account or received by the Trustees while a Notice of
Acceleration is in effect shall, to the extent available for distribution (it
being understood that the Corporate Trustee may liquidate investments prior to
maturity in order to make a distribution pursuant to this subsection 3.4), be
distributed (subject to the provisions of subsections 3.5 and 3.6) by the
Corporate Trustee on each Distribution Date in the following order of priority:
First: to the Trustees for any unpaid Trustee Fees and then to any
Secured Party which has theretofore advanced or paid any Trustee Fees, an
amount equal to the amount thereof so advanced or paid by such Secured
Party and for which such Secured Party has not been reimbursed prior to
such Distribution Date, and, if such moneys shall be insufficient to pay
such amounts in full, then ratably (without priority of any one over any
other) to such Secured Parties in proportion to the unpaid amounts thereof
on such Distribution Date;
Second: to the Senior Creditors in an amount equal to the unpaid
principal or face amount of, and unpaid interest on, and premium or fees,
if any, in respect of, the Senior Secured Obligations then outstanding
whether or not then due and payable, including, without limitation, the
aggregate undrawn amounts available to be drawn (assuming compliance with
all conditions to drawing) under all bonds, guarantees, letters of credit,
acceptances, insurance, reimbursement and indemnity agreements or similar
obligations with respect to which Kmart or any other Obligor is obligated
to reimburse the issuer thereof for any drawings thereunder, the aggregate
estimated amount of payment liabilities of Kmart and each other Obligor
under Derivative Agreements assuming immediate termination of all such
agreements, the outstanding amount of any Overdrafts, and, if such moneys
shall be insufficient to pay such
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amounts in full, then ratably (without priority of any one over any other)
to the Senior Creditors in proportion to the unpaid amounts thereof on such
Distribution Date;
Third: to the Senior Creditors, amounts equal to all other sums
which constitute Senior Secured Obligations, including without limitation
the costs and expenses of the Senior Creditors and their representatives
which are due and payable under the relevant Secured Instruments and
which constitute Senior Secured Obligations as of such Distribution Date,
and, if such moneys shall be insufficient to pay such sums in full, then
ratably to the Senior Creditors in proportion to such sums;
Fourth: to the Subordinated Creditors in an amount equal to the
unpaid principal or face amount of, and unpaid interest on, and premium
or fees, if any, in respect of, the Subordinated Secured Obligations then
outstanding whether or not then due and payable, and, if such moneys
shall be insufficient to pay such amounts in full, then ratably (without
priority of any one over any other) to the Subordinated Creditors in
proportion to the unpaid amounts thereof on such Distribution Date;
Fifth: to the Subordinated Creditors, amounts equal to all other
sums which constitute Subordinated Secured Obligations, including without
limitation the costs and expenses of the Subordinated Creditors and their
representatives which are due and payable under the relevant Secured
Instruments and which constitute Subordinated Secured Obligations as of
such Distribution Date, and, if such moneys shall be insufficient to pay
such sums in full, then ratably to the Subordinated Creditors in
proportion to such sums; and
Sixth: any surplus then remaining shall be paid to the Obligors or
their successors or assigns or to whomsoever may be lawfully entitled to
receive the same or as a court of competent jurisdiction may direct.
(c) All remaining moneys held by the Corporate Trustee in the Other
Collateral Sub-Account or received by the Trustees while a Notice of
Acceleration is in effect shall, to the extent available for distribution (it
being understood that the Corporate Trustee may liquidate investments prior to
maturity in order to make a distribution pursuant to this subsection 3.4), be
distributed (subject to the provisions of subsections 3.5 and 3.6) by the
Corporate Trustee on each Distribution Date in the following order of priority:
First: to the Trustees for any unpaid Trustee Fees and then to any
Senior Creditor which has theretofore advanced or paid any Trustee Fees,
an amount equal to the amount thereof so advanced or paid by such Senior
Creditor and for which such Senior Creditor has not been reimbursed prior
to such Distribution Date, and, if such moneys shall be insufficient to
pay such amounts in full, then ratably (without priority of any one over
any other) to such Senior Creditors in proportion to the unpaid amounts
thereof on such Distribution Date;
Second: to the Senior Creditors in an amount equal to the unpaid
principal or face amount of, and unpaid interest on, and premium or fees,
if any, in respect of, the Senior Secured Obligations then outstanding
whether or not then due and payable, including, without limitation, the
aggregate undrawn amounts available to be drawn (assuming compliance with
all conditions to drawing) under all bonds, guarantees, letters of
credit, acceptances, insurance, reimbursement and indemnity agreements or
similar obligations with respect to which Kmart or any other Obligor is
obligated to reimburse the issuer thereof for any drawings thereunder,
the aggregate estimated amount of payment liabilities of Kmart and each
other Obligor under
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Derivative Agreements assuming immediate termination of all such
agreements, the outstanding amount of any Overdrafts, and, if such moneys
shall be insufficient to pay such amounts in full, then ratably (without
priority of any one over any other) to the Senior Creditors in proportion
to the unpaid amounts thereof on such Distribution Date;
Third: to the Senior Creditors, amounts equal to all other sums
which constitute Senior Secured Obligations, including without limitation
the costs and expenses of the Senior Creditors and their representatives
which are due and payable under the relevant Secured Instruments and
which constitute Senior Secured Obligations as of such Distribution Date,
and, if such moneys shall be insufficient to pay such sums in full, then
ratably to the Senior Creditors in proportion to such sums; and
Fourth: any surplus then remaining shall be paid to the Obligors or
their successors or assigns or to whomsoever may be lawfully entitled to
receive the same or as a court of competent jurisdiction may direct.
(d) The term "unpaid" as used in clauses Second and Fourth of
subsection 3.4(b) and clause Second of subsection 3.4(c) refers:
(i) in the absence of a bankruptcy proceeding with respect to
the relevant Obligor(s), to all amounts of Senior Secured Obligations or
Subordinated Secured Obligations, as the case may be, outstanding as of a
Distribution Date, whether or not such amounts are fixed or contingent, and
(ii) during the pendency of a bankruptcy proceeding with respect
to the relevant Obligor(s), to all amounts allowed by the bankruptcy court
in respect of Senior Secured Obligations or Subordinated Secured
Obligations, as the case may be, as a basis for distribution (including
estimated amounts, if any, allowed in respect of contingent claims),
to the extent that prior distributions (whether actually distributed or set
aside pursuant to subsection 3.5) have not been made in respect thereof.
(e) The Corporate Trustee shall make all payments and distributions
under this subsection 3.4: (i) on account of Kmart Credit Agreement Obligations
to the Administrative Agent for re-distribution in accordance with the
provisions of the Kmart Credit Agreement, (ii) on account of Permitted Senior
Debt Obligations to the Permitted Senior Debt Trustee for re-distribution in
accordance with the provisions of the Permitted Senior Debt Indenture, (iii) on
account of any other Senior Secured Obligation (other than Overdrafts), to the
relevant Senior Creditor based on the information supplied to the Corporate
Trustee by Kmart pursuant to subsection 4.2, (iv) on account of Overdrafts, to
the relevant Lender based on information supplied to the Corporate Trustee by
such Lender and (v) on account of any Subordinated Secured Obligation, to the
relevant Subordinated Creditor based on the information supplied to the
Corporate Trustee by Kmart pursuant to subsection 4.2.
(f) Nothing in this subsection 3.4 shall affect the subordinated
status of any subordinated Secured Obligation or affect the rights or
obligations of any Secured Party under any applicable subordination provisions.
3.5 Amounts Held for Contingent Secured Obligations. In the event
any Secured Party shall be entitled to receive any moneys pursuant to clauses
Second or Fourth of subsection
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3.4(b) or clause Second of subsection 3.4(c) in respect of the unliquidated,
unmatured or contingent portion of the outstanding Secured Obligations
(including, without limitation, obligations under then outstanding letters of
credit, guarantees and termination liabilities with respect to Derivative
Agreements and obligations which are not determinable or are unmatured), then
the Corporate Trustee shall invest such moneys in obligations of the kinds
referred to in clauses (i) and (ii) of subsection 3.3 maturing within three
months after they are acquired by the Corporate Trustee and shall hold all such
amounts so distributable, and all such investments and the net proceeds thereof,
in trust solely for such Secured Party and for no other purpose until (i) such
Secured Party shall have notified the Corporate Trustee that all or part of such
unliquidated, unmatured or contingent claim shall have become matured or fixed,
in which case the Corporate Trustee shall distribute from such investments and
the proceeds thereof an amount equal to such matured or fixed claim to such
Secured Party for application to the payment of such matured or fixed claim, and
shall promptly give notice thereof to Kmart or (ii) all or part of such
unliquidated, unmatured or contingent claim shall have been extinguished,
whether as the result of an expiration without drawing of any letter of credit,
payment of amounts secured or covered by any letter of credit other than by
drawing thereunder, payment of amounts covered by any guarantee or otherwise, in
which case (x) such Secured Party shall, as soon as practicable thereafter,
notify Kmart and the Corporate Trustee and (y) such investments, and the
proceeds thereof, shall be held in the Shared Collateral Sub-Account or the
Other Collateral Sub-Account, as the case may be, in trust for all Secured
Parties pending application in accordance with the provisions of subsection 3.4.
3.6 Trustee's Calculations. In making the determinations and
allocations required by subsection 3.4, the Corporate Trustee may conclusively
rely upon information supplied by the Administrative Agent as to the amounts
payable with respect to Kmart Credit Agreement Obligations, upon information
supplied by the Permitted Senior Debt Trustee as to the amounts payable with
respect to Permitted Senior Debt Obligations or upon information supplied by the
holder of any other Secured Obligation or Kmart as to the amounts payable with
respect to any other Secured Obligation, and the Trustees shall have no
liability to any of the Secured Parties for actions taken in reliance on any
such information, provided, that nothing in this sentence shall prevent any
Obligor from contesting any amounts claimed by any Secured Party in any
information so supplied. All distributions made by the Corporate Trustee
pursuant to subsection 3.4 shall be (subject to any decree of any court of
competent jurisdiction) final (absent manifest error), and the Trustees shall
have no duty to inquire as to the application by the Administrative Agent or the
Permitted Senior Debt Trustee or any other Person of any amounts distributed to
them.
3.7 Pro Rata Sharing. If, through the operation of any bankruptcy,
reorganization, insolvency or other laws or otherwise, the Trustees' security
interest hereunder and under the Security Documents is enforced with respect to
some, but not all, of the Secured Obligations then outstanding, the Corporate
Trustee shall nonetheless apply the proceeds of the Collateral for the benefit
of the holders of all Secured Obligations in the proportions and subject to the
priorities specified herein. To the extent that the Corporate Trustee
distributes Proceeds collected with respect to Secured Obligations held by one
holder to or on behalf of Secured Obligations held by a second holder, the first
holder shall be deemed to have purchased a participation in the Secured
Obligations held by the second holder, or shall be subrogated to the rights of
the second holder to receive any subsequent payments and distributions made with
respect to the portion thereof paid or to be paid by the application of such
Proceeds.
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SECTION 4. AGREEMENTS WITH TRUSTEES
4.1 Delivery of Secured Instruments; Designation of Approved Trade
Creditors and Excluded Trade Creditors; Termination of Rights of Subordinated
Creditors. (a) Within 30 days after the issuance of Permitted Pari Passu
Senior Debt, Kmart shall deliver to the Corporate Trustee true and complete
copies of the related Permitted Senior Debt Indenture.
(b) An Obligor may from time to time, in the exercise of its sole
discretion, designate certain Trade Creditors as "Approved Trade Creditors".
From time to time, Kmart will give the Corporate Trustee written notice of such
designation and such Trade Creditors shall thereafter be deemed to be Approved
Trade Creditors for all purposes hereunder until such time as the Corporate
Trustee shall have received written notice from Kmart that such Trade Creditor
is an "Excluded Trade Creditor", at which time such Trade Creditor shall be
deemed not to be a Secured Party for all purposes hereunder and all right, title
and interest of such Trade Creditor in the Trust Estate, the Trust Agreement and
the Security Documents shall terminate; provided that, Kmart may in its sole and
absolute discretion, redesignate an Excluded Trade Creditor as an Approved Trade
Creditor with respect to Trade Payables of such Trade Creditor created after the
effective date of such redesignation and, if Kmart so elects, in its sole and
absolute discretion, with respect to Trade Payables of such Trade Creditor
outstanding as of the effective date of such redesignation. The Trustees shall
have no obligation to notify any Trade Creditor of its designation as an
Excluded Trade Creditor.
(c) Kmart may at any time, in the exercise of its sole discretion,
terminate all right, title and interest of the Subordinated Creditors in the
Trust Estate, the Trust Agreement and the Security Documents by giving the
Corporate Trustee prior written notice of such termination and thereafter (i)
the Subordinated Creditors shall be deemed not to be Secured Parties for all
purposes hereunder, (ii) the Subordinated Secured Obligations shall be deemed
not to be Secured Obligations for all purposes hereunder, (iii) the Subordinated
Secured Instruments shall be deemed not to be Secured Instruments for all
purposes hereunder and (iv) this Trust Agreement and each of the Security
Documents shall be deemed to have been amended to give effect to such
termination; provided that such termination and the provisions of this paragraph
(c) shall be effective only with respect to Subordinated Secured Obligations
created after the effective date of such termination. The Trustees shall have
no obligation to notify the Subordinated Creditors of such termination.
(d) Nothing in this subsection 4.1 shall affect the status of any
Senior Secured Obligation or affect the rights of any Senior Creditor hereunder
or under the Security Documents.
4.2 Information as to Secured Parties and Administrative Agent.
Kmart shall deliver to the Corporate Trustee from time to time when a Notice of
Acceleration shall be in effect upon request of the Corporate Trustee, a list
setting forth as of a date not more than 30 days prior to the date of such
delivery (i) the aggregate unpaid principal or face amount of Kmart Credit
Agreement Obligations and the name and address of the Administrative Agent, (ii)
the aggregate unpaid principal or face amount of any Permitted Senior Debt
Obligations and the name and address of any Permitted Senior Debt Trustee and
(iii) the aggregate unpaid or notional amount of each other Secured Obligation
(other than Overdrafts) and the name and address of each Secured Party
thereunder. In addition, Kmart will promptly notify the Corporate Trustee of
each change in the identity of the Administrative Agent or a Permitted Senior
Debt Trustee.
4.3 Compensation and Expenses. Kmart agrees to pay to the
Trustees, from time to time upon demand, (i) reasonable compensation as agreed
in writing from time to time between Kmart and the Trustees (which shall not be
limited by any provision of law in regard to compensation
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of fiduciaries or of a trustee of an express trust) for their services hereunder
and under the Security Documents and for administering the Trust Estate and (ii)
all of the reasonable out-of-pocket costs and expenses of the Trustees
(including, without limitation, the reasonable fees and disbursements of counsel
and other professional advisors) (A) arising in connection with the preparation,
execution, delivery, modification, and termination of this Trust Agreement and
each Security Document or the enforcement of any of the provisions hereof or
thereof, (B) incurred or advanced in connection with the administration of the
Trust Estate (including, without limitation, any advance made by the Trustees on
behalf of the Obligors under any Mortgage), the sale or other disposition of
Collateral pursuant to any Security Document and the preservation, protection or
defense of the Trustees' rights under this Trust Agreement and the Security
Documents and in and to the Collateral and the Trust Estate or (C) incurred by
the Trustees in connection with the removal of either or both of the Trustees
pursuant to subsection 6.7(a). The obligations of Kmart under this subsection
4.3 shall survive the termination of the other provisions of this Trust
Agreement.
4.4 Stamp and Other Similar Taxes. Kmart agrees to indemnify and
hold harmless the Trustees, the Administrative Agent, the Permitted Senior Debt
Trustee and each Secured Party from any present or future claim for liability
for any stamp or any other similar tax and any penalties or interest with
respect thereto, which may be assessed, levied or collected by any jurisdiction
in connection with this Trust Agreement, any Security Document, the Trust Estate
or any Collateral. The obligations of Kmart under this subsection 4.4 shall
survive the termination of the other provisions of this Trust Agreement.
4.5 Filing Fees, Excise Taxes, Etc. Kmart agrees to pay or to
reimburse the Trustees for any and all payments made by the Trustees in respect
of all filing, recording and registration fees, excise taxes and other similar
imposts which may be payable or determined to be payable by the Trustees in
respect of the execution and delivery of this Trust Agreement and each Security
Document. The obligations of Kmart under this subsection 4.5 shall survive the
termination of the other provisions of this Trust Agreement.
4.6 Indemnification. Kmart agrees to pay, indemnify, and hold the
Trustees harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits and reasonable out-of-pocket
costs, expenses (including, without limitation, the reasonable fees of counsel)
or disbursements of any kind or nature whatsoever with respect to the
enforcement of this Trust Agreement and the Security Documents, unless arising
from the gross negligence or willful misconduct of any indemnified party
(including, without limitation, indemnification of the respective Trustees for
liabilities of the respective Trustees for the net amount of taxes (after taking
account of any deduction, credit or other tax reduction or benefit available by
reason of the imposition of any such tax) in any jurisdiction in which the
respective Trustees would not otherwise be subject to tax except by reason of
their acting hereunder or under any Security Document (directly or through
agents, separate trustees or co-trustees), provided that such indemnification
for taxes (a) shall apply only (i) in respect of taxes solely attributable to
the performance of the respective Trustees' obligations as Trustee hereunder or
under any Security Document and (ii) to the extent that the respective Trustees,
using reasonable efforts, shall have been unable to avoid or minimize the same
as contemplated by subsection 6.10 and (b) shall in no event cover any federal,
New York State or New York City taxes imposed upon the respective Trustees with
respect to or measured by their net income or profits). Kmart shall pay,
indemnify, and hold the Trustees harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits
and reasonable out-of-pocket costs, expenses (including, without limitation, the
reasonable fees of counsel and other professional advisors) or disbursements of
any kind or nature whatsoever with respect to the violation by any Obligor of,
noncompliance with or remediation
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obligations under any laws, rules or regulations regulating, relating to or
imposing liabilities or standards of conduct concerning environmental protection
matters directly relating to Kmart or its real property (except to the extent
that the same results from the conduct or actions of either Trustee or their
employees, officers or agents). The agreements in this subsection 4.6 shall
survive the termination of the other provisions of this Trust Agreement.
4.7 Further Assurances. At any time and from time to time, upon
the written request of the Administrative Agent, and at the expense of Kmart,
each Obligor will promptly execute and deliver any and all such further
instruments and documents and take such further action as is necessary or
reasonably requested further to perfect, or to protect the perfection of, the
liens and security interests granted under the Security Documents intended to be
perfected under the terms of the Kmart Credit Agreement, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any applicable jurisdiction. In addition
to the foregoing, at any time and from time to time, upon the written request of
the Corporate Trustee (which shall be made only upon the written direction of
the Administrative Agent), and at the expense of Kmart, each Obligor will
promptly execute and deliver any and all such further instruments and documents
and take such further action as the Corporate Trustee has been so directed is
necessary or reasonably requested to obtain the full benefits of this Trust
Agreement and the Security Documents and of the rights and powers herein and
therein granted (consistent with any exclusions or time periods provided for
granting or perfection of liens and security interests contemplated by the Kmart
Credit Agreement or the Security Documents), including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code in effect in any jurisdiction with respect to the liens and security
interests granted by the Security Documents (consistent with any exclusions or
time periods provided for granting or perfection of liens and security interests
contemplated by the Kmart Credit Agreement or the Security Documents). Each
Obligor also hereby authorizes the Trustees to sign and to file any such
financing statements (if such Obligor fails to sign such financing statements
within ten Business Days after being requested to do so) and continuation
statements without the signature of such Obligor, in each case to the extent
permitted by applicable law. In the event that the Trustees file any such
financing or continuation statements, the Trustees shall promptly provide copies
thereof to Kmart and the Administrative Agent, provided, that the failure to
provide such copies shall not affect the validity of such filings.
Notwithstanding the foregoing, no financing statements with respect to fixtures
shall be filed in any jurisdiction which is a Restricted Jurisdiction.
4.8 Inspection of Properties and Books. So long as a Notice of
Acceleration shall be in effect, Kmart and its Restricted Subsidiaries (as
defined in the Kmart Credit Agreement) shall give the Trustee access, at its
request, to all Mortgaged Property and other Collateral and to all books,
records, documents and information in the possession of Kmart or any Restricted
Subsidiary relating thereto.
SECTION 5. POSSESSION AND USE OF COLLATERAL; PARTIAL RELEASES
5.1 Use Prior to Acceleration. (a) So long as no Notice of
Acceleration is in effect, the Obligors shall have the right: (i) to remain in
possession and retain exclusive control of the Collateral (except the Pledged
Securities and the Collateral Account) with power freely and without let or
hindrance on the part of the Trustees or the Secured Parties to operate, manage,
develop, use and enjoy the Collateral and to receive the rents, issues, tolls,
profits, royalties, revenues and other income thereof, (ii) to sell or otherwise
dispose of, free and clear of the lien and security interest created by the
Security Documents, any Collateral if such sale or other disposition is not
prohibited by the Kmart Credit Agreement or has been expressly approved in
accordance with the terms of the Kmart Credit
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Agreement or if any Person is legally empowered to take any Collateral under the
power of condemnation or eminent domain and (iii) to cause the release of the
lien and security interest created by the Security Documents in any item of
Collateral in connection with any secured financing in respect thereof permitted
by the Kmart Credit Agreement. The Trustees consent and thereby subordinate
each Mortgage to those matters permitted by subsection 8.4(e) of the Kmart
Credit Agreement with respect to the related parcel of real property. The
Trustees shall have no duty to monitor the exercise by the Obligors of their
rights under this subsection 5.1.
(b) When a Notice of Acceleration or Notice of Default is in
effect, cash Proceeds (other than, in the case of a Notice of Default, Proceeds
subject to the provisions of subsection 5.3(b)) received by the Trustees or any
Obligor in connection with the sale or other disposition of Collateral shall be
deposited in the Shared Collateral Sub-Account or the Other Collateral
Sub-Account, as the case may be. Any such Proceeds received by any Obligor
shall be held by such Obligor in trust for the Trustees, shall be segregated
from other funds of such Obligor and shall, forthwith upon receipt by such
Obligor, be turned over to the Corporate Trustee, in the same form as received
by such Obligor (duly indorsed to the Corporate Trustee, if required) for
deposit in the Shared Collateral Sub-Account or the Other Collateral
Sub-Account, as the case may be. Notwithstanding anything to the contrary in
this Trust Agreement, unless a Notice of Acceleration is in effect, each Obligor
may upon written or oral request (confirmed in writing) to the Corporate Trustee
obtain the prompt release to it or its order of funds in the Shared Collateral
Sub-Account or the Other Collateral Sub-Account, provided that the failure to
confirm an oral request in writing shall not effect the validity of such request
and the Corporate Trustee's obligation to promptly release such funds. Any
written or oral request or instructions by any Obligor pursuant to the preceding
sentence shall be full authority for and direction to the Corporate Trustee to
make the requested release, and the Corporate Trustee shall promptly do so. The
Corporate Trustee in so doing shall have no liability to any Person.
5.2 Releases. (a) Sales or other dispositions of Collateral which
are permitted by subsection 5.1, releases of funds pursuant to subsection 5.1
hereof and Section 9(c) of the Securities Pledge Agreement and releases,
consents and subordinations pursuant to subsection 5.1 hereof shall be automatic
and shall not require any affirmative action on the part of the Trustees. In
addition, in the case of any sale or other disposition of any Material Real
Property (as defined in the Kmart Credit Agreement) located in the State of
Alaska, California, Nevada or Washington or of any Put Bond Real Property (as
defined in the Kmart Credit Agreement), the release of the pledge of the
applicable California Mortgage Notes (as defined in the Kmart Credit Agreement)
or Repurchased Put Bonds (as defined in the Kmart Credit Agreement), as the case
may be, and the applicable Mortgage Assignment shall be automatic and not
require any affirmative action on the part of the Trustees. Nevertheless, any
Obligor may request that the Trustees execute and deliver to it or any
purchaser, transferee or assignee of Collateral or any such real property, or
other affected party, a written consent, release, discharge, disclaimer,
quitclaim or subordination, as applicable, in recordable form if necessary, of
the Trustees' interest in any Collateral under the Security Documents, and such
purchaser, transferee, assignee or other affected party shall be entitled to
rely conclusively on such consent, release, discharge, disclaimer, quitclaim or
subordination. Such request shall be in writing, shall describe the subject
property in reasonable detail, and, except in the case of releases of funds
pursuant to Section 9(c) of the Securities Pledge Agreement, shall state that
such action is or will be in accordance with the Kmart Credit Agreement.
(b) If any Collateral which is being sold or otherwise disposed of
pursuant to this Section 5 is in the possession of the Trustees or any agent or
nominee thereof, the Trustees or such agent or nominee shall promptly (and in
any event within two Business Days after the request therefor) release such
Collateral to the Obligor in connection with such sale or disposition.
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(c) The notices, statements, directions and certificates requested
under or required by this subsection 5.2 (together with any required certificate
of a Responsible Officer under subsection 6.4(e)) shall be full authority for
and direction to the Trustees to execute and deliver the releases, disclaimers,
quitclaims and other instruments referred to in this subsection 5.2, and the
Trustees shall promptly (and in any event within two Business Days) do so. The
Trustees in so doing shall have no liability to any Person.
5.3 Insurance and Condemnation Proceeds; Liquidating Dividends.
Any insurance proceeds in respect of any Collateral, any Proceeds from the
exercise of rights of eminent domain or condemnation in respect of any
Collateral and any liquidating dividends paid in respect of Pledged Stock
received by any of the Obligors or the Trustees shall be paid over to Kmart
unless (a) a Notice of Acceleration is in effect (and, in the case of insurance
proceeds, notice thereof shall have been given by the Trustees to the applicable
insurer in accordance with its loss payable clause), in which case such
insurance proceeds, condemnation proceeds or liquidating dividends shall be
deposited in the Shared Collateral Sub-Account or the Other Collateral
Sub-Account, as the case may be, to be held therein and applied in accordance
with Section 3, or (b) the Corporate Trustee shall have received from the
Administrative Agent a Notice of Default that shall not have been withdrawn
(and, in the case of insurance proceeds, notice thereof shall have been given by
the Trustees to the applicable insurer in accordance with its loss payable
clause), in which case such insurance proceeds, condemnation proceeds or
liquidating dividends shall, if they arise out of a single loss or a series of
related losses, a single condemnation proceeding or a series of related
condemnation proceedings, or a single liquidating dividend, respectively, and
the amount thereof exceeds $50,000,000, be held (so long as such Notice of
Default shall not be withdrawn) by the Trustees as part of the Trust Estate,
invested from time to time in instruments of a type described by subsection 3.3
and released to Kmart only with the prior written consent of the Administrative
Agent. If any such insurance proceeds, condemnation proceeds or liquidating
dividends shall be held by the Trustees pursuant to clause (b) of the
immediately preceding sentence at a time when a Notice of Acceleration is
received by the Corporate Trustee, the full amount thereof shall be deposited in
the Shared Collateral Sub-Account or the Other Collateral Sub-Account, as the
case may be, to be held therein and applied in accordance with Section 3. If
for any reason any Obligor shall receive or hold any insurance proceeds,
condemnation proceeds or liquidating dividends that are required to be held by
the Trustees pursuant to clause (a) or (b) of the first sentence of this
subsection, such Obligor shall hold such proceeds or dividends in trust for the
Trustees and the Secured Parties and shall, as promptly as practicable, deliver
such proceeds or dividends to the Corporate Trustee to be held in accordance
with the provisions of this subsection.
SECTION 6. THE TRUSTEES
6.1 Acceptance of Trust. The Trustees, for themselves and their
respective successors, hereby accept the trusts created by this Trust Agreement
upon the terms and conditions hereof. Each Trustee acknowledges that the
Corporate Trustee shall hold the Pledged Stock, Instruments and any other type
of "possessory" Collateral for the benefit of itself and the Individual Trustee,
for the benefit of the Secured Parties.
6.2 Exculpatory Provisions. (a) The Trustees shall not be
responsible in any manner whatsoever for the correctness of any recitals,
statements, representations or warranties herein, all of which are made solely
by the Obligors. The Trustees make no representations as to the value or
condition of the Trust Estate or any part thereof, or as to the title of the
Obligors thereto or as to the security or perfection afforded by this Trust
Agreement or any Security Document, or as to the
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validity, execution (except its own execution), enforceability, legality or
sufficiency of this Trust Agreement, the Security Documents or the Secured
Obligations, and the Trustees shall incur no liability or responsibility in
respect of any such matters. The Trustees shall not be responsible for insuring
the Collateral or for the payment of taxes, charges or assessments or
discharging of liens upon the Collateral or otherwise as to the maintenance of
the Collateral, except that if the Trustees take possession of any Collateral,
the Trustees shall use the care accorded its own assets in the preservation of
the Collateral in their possession.
(b) The Trustees shall not be required to ascertain or inquire as
to the performance by the Obligors of any of the covenants or agreements
contained herein or in any Security Document or Secured Instrument. Whenever it
is necessary, or in the opinion of the Trustees advisable, for the Trustees to
ascertain the amount of Secured Obligations then held by the Secured Parties,
the Trustees may conclusively rely on a certificate of (i) the Administrative
Agent, in the case of Kmart Credit Agreement Obligations, (ii) the Permitted
Senior Debt Trustee, in the case of Permitted Senior Debt Obligations or (iii)
any other Secured Party, in the case of any other Secured Obligations and, if
the Administrative Agent, the Permitted Senior Debt Trustee or any other Secured
Party shall not give such information to the Trustees, such Person shall not be
entitled to receive distributions hereunder (in which case distributions to
those Persons who have supplied such information to the Trustees shall be
calculated by the Trustees using, for those Persons who have not supplied such
information, the list then most recently delivered by Kmart pursuant to
subsection 4.2), and the amount so calculated to be distributed to the Person
who fails to give such information shall be held in trust for such Person until
such Person does supply such information to the Trustees, whereupon on the next
Distribution Date the amount distributable to such Person shall be recalculated
using such information and distributed to it. Nothing in the preceding sentence
shall prevent any Obligor from contesting amounts claimed by any Secured Party
in any certificate so supplied.
(c) The Trustees shall be under no obligation or duty to take any
action under this Trust Agreement or any Security Document if taking such action
(i) would subject the Trustees to a tax in any jurisdiction where they are not
then subject to a tax or (ii) would require the Trustees to qualify to do
business in any jurisdiction where they are not then so qualified, unless the
Trustees receive security or indemnity satisfactory to them against such tax (or
equivalent liability), or any liability resulting from such qualification, in
each case as results solely from the taking of such action under this Trust
Agreement or any Security Document.
(d) Notwithstanding any other provision of this Trust Agreement
(other than those relating to the care of the Collateral in its possession), the
Trustees shall not be personally liable for any action taken or omitted to be
taken by them in accordance with this Trust Agreement or the Security Documents
except for its or his/her own gross negligence or willful misconduct.
(e) The Corporate Trustee shall have the same rights with respect
to any Secured Obligation held by it as any other Secured Party and may exercise
such rights as though it were not the Corporate Trustee hereunder, and may
accept deposits from, lend money to, and generally engage in any kind of banking
or trust business with, any of the Obligors as if it were not the Corporate
Trustee.
6.3 Delegation of Duties. The Trustees may execute any of the
trusts or powers hereof and perform any duty hereunder either directly or by or
through agents or attorneys-in-fact, who, subject to Sections 8 and 9(e) of the
Securities Pledge Agreement, may include officers and employees of any of the
Obligors. The Trustees shall be entitled to advice of counsel concerning all
matters pertaining to such trusts, powers and duties. The Trustees shall not be
responsible for the
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negligence or misconduct of any agents or attorneys-in-fact selected by them
with reasonable care. The Trustees may enter into agreements with such agents
or attorneys-in-fact in such form as they may deem necessary or advisable, and
shall be entitled to amend, modify, or waive the provisions of such agreements
from time to time; provided that no amendment, modification or waiver to any
bailment, custodial or similar agreement executed in connection herewith
affecting Kmart or any Obligor shall be effective unless consented to in writing
by Kmart, which consent shall not be unreasonably withheld.
6.4 Reliance by Trustees. (a) Whenever in the administration of
this Trust Agreement or the Security Documents the Trustees shall deem it
necessary or desirable that a factual matter be proved or established in
connection with the Trustees taking, suffering or omitting any action hereunder
or thereunder, such matter (unless other evidence in respect thereof is herein
specifically prescribed) may be deemed to be conclusively proved or established
by a certificate of a Responsible Officer delivered to the Corporate Trustee,
and such certificate shall be full warrant to the Trustees for any action taken,
suffered or omitted in reliance thereon, subject, however, to the provisions of
subsection 6.5.
(b) The Trustees may consult with counsel, and any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken or suffered by them hereunder or under any Security Document in
accordance therewith. The Trustees shall have the right at any time to seek
instructions concerning the administration of this Trust Agreement and the
Security Documents from any court of competent jurisdiction.
(c) The Trustees may rely, and shall be fully protected in acting,
upon any resolution, statement, certificate, instrument, opinion, report,
notice, request, consent, order, bond or other paper or document which they have
no reason to believe to be other than genuine and to have been signed or
presented by the proper party or parties or, in the case of cables, facsimiles
and telexes, to have been sent by the proper party or parties. In the absence
of their gross negligence or willful misconduct, the Trustees may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the Trustees
and conforming to the requirements of this Trust Agreement.
(d) The Trustees shall not be under any obligation to exercise any
of the rights or powers vested in the Trustees by this Trust Agreement and the
Security Documents, at the request or direction of the Required Secured Parties
pursuant to this Trust Agreement or otherwise, unless the Trustees shall have
been provided adequate security and indemnity against the costs, expenses and
liabilities which may be incurred by them in compliance with such request or
direction, including such reasonable advances as may be requested by the
Trustees.
(e) Upon any application or demand by any of the Obligors (except
any such application or demand which is expressly permitted to be made orally)
to the Trustees to take or permit any action under any of the provisions of this
Trust Agreement or any Security Document, Kmart shall furnish to the Trustees a
certificate of a Responsible Officer stating that all conditions precedent, if
any, provided for in this Trust Agreement, in any relevant Security Document or
in the Kmart Credit Agreement relating to the proposed action have been or will
be (in the case of application of proceeds from sales of assets) complied with,
and in the case of any such application or demand as to which the furnishing of
any document is specifically required by any provision of this Trust Agreement
or a Security Document relating to such particular application or demand, such
additional document shall also be furnished.
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(f) Any Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate of a Responsible Officer or representations
made by a Responsible Officer in a writing filed with the Corporate Trustee.
6.5 Limitations on Duties of Trustees. (a) Unless a Notice of
Acceleration is in effect, the Trustees shall be obligated to perform such
duties and only such duties as are specifically set forth in this Trust
Agreement and the Security Documents, and no implied covenants or obligations
shall be read into this Trust Agreement or any Security Document against the
Trustees. If and so long as a Notice of Acceleration is in effect, the Trustees
shall, subject to the provisions of subsection 2.5(b), exercise the rights and
powers vested in them by this Trust Agreement and the Security Documents, and
shall not be liable with respect to any action taken by them, or omitted to be
taken by them, in accordance with the direction of the Required Secured Parties.
If and so long as a Notice of Default is in effect, the Trustees shall exercise
the rights and powers vested in them by subsection 2.3(b) only to the extent
requested to do so by the Administrative Agent, and shall not be liable with
respect to any action taken by them, or omitted to be taken by them, in
accordance with the direction of the Administrative Agent.
(b) Except as herein otherwise expressly provided, the Trustees
shall not be under any obligation to take any action which is discretionary with
the Trustees under the provisions hereof or of any Security Document except upon
the written request of the Required Secured Parties. The Corporate Trustee
shall make available for inspection and copying by the Administrative Agent, the
Permitted Senior Debt Trustee and each other Secured Party each certificate or
other paper furnished to the Corporate Trustee by any of the Obligors under or
in respect of this Trust Agreement or any Security Document or any of the
Collateral.
(c) The Individual Trustee has been joined as such, so that if, by
any present or future law in any jurisdiction in which it may be necessary to
perform any act in the execution of the trust hereby created, the Corporate
Trustee, or its successor or successors, may be incompetent or unqualified to
act as such Trustee, or would be subject to a tax that would not otherwise be
imposed except for such act, then all the acts required to be performed in such
jurisdiction in the execution of the trusts hereby created, shall and will be
performed by the Individual Trustee, or his/her successor or successors acting
alone. Except as it may be deemed necessary for the Individual Trustee solely
or jointly with the Corporate Trustee, notwithstanding any other provision
hereof or of any Security Document to the contrary, the Corporate Trustee shall
solely have and exercise the powers, and shall be solely charged with the
performance of the duties of the Trustees provided for herein or in any Security
Document.
(d) No provision of this Trust Agreement or of any Security
Document shall be deemed to impose any duty or obligation on the Corporate
Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it, in any jurisdiction in which it shall be
illegal, or in which the Corporate Trustee shall be unqualified or incompetent,
to perform any such act or acts or to exercise any such right, power, duty or
obligation or if such performance or exercise would constitute doing business by
the Corporate Trustee in such jurisdiction or imposes a tax on the Corporate
Trustee by reason thereof. The Individual Trustee, to the extent that he/she
may lawfully so delegate and that the Corporate Trustee is permitted by law to
exercise the power so delegated, and to the extent that such delegation is not
inconsistent with the preceding sentence and does not impair the right, title
and interest of the Individual Trustee under, or the validity of the lien of,
this Trust Agreement and the Security Documents, (i) may delegate to the
Corporate Trustee the exercise of any power, discretionary or otherwise,
conferred by the provisions of this Trust Agreement or any Security Document,
and (ii) hereby makes, constitutes and appoints the Corporate Trustee,
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his/her true and lawful attorney for him/her and in his/her name, or in the name
of the Corporate Trustee, to do and perform all acts necessary or proper in the
execution and prosecution of the duties of the Trustees hereunder in as full and
ample a manner as he or she might do personally.
6.6 Moneys to be Held in Trust. All moneys received by the
Trustees under or pursuant to any provision of this Trust Agreement or any
Security Document (except Trustee Fees) shall be held in trust for the purposes
for which they were paid or are held.
6.7 Resignation and Removal of the Trustees. (a) The Trustees or
either of them may at any time, by giving written notice to Kmart, the
Administrative Agent and the other Trustee, resign and be discharged of the
responsibilities hereby created, such resignation to become effective upon (i)
the appointment of a successor Corporate Trustee and/or Individual Trustee, as
the case may be, (ii) the acceptance of such appointment by such successor
Trustee, (iii) the approval of such successor Trustee evidenced by one or more
instruments signed by the Administrative Agent (which approval shall not be
unreasonably withheld) and (iv) in the case of the appointment of a successor
Individual Trustee, the approval of such successor by the Corporate Trustee. If
no successor Trustee shall be appointed and shall have accepted such appointment
within 90 days after the Corporate Trustee or the Individual Trustee gives the
aforesaid notice of resignation, the Corporate Trustee or the resigning
Individual Trustee, as the case may be, or Kmart, the Administrative Agent or
any Secured Party may apply to any court of competent jurisdiction to appoint a
successor Corporate Trustee or Individual Trustee, as the case may be, to act
until such time, if any, as a successor Corporate Trustee or Individual Trustee,
as the case may be, shall have been appointed as provided in this subsection
6.7. Any successor so appointed by such court shall immediately and without
further act be superseded by any successor Corporate Trustee or Individual
Trustee, as the case may be, appointed by the Administrative Agent or the
Corporate Trustee, as the case may be, as provided in this subsection 6.7. The
Administrative Agent may, at any time with the prior approval of Kmart, which
approval shall not be unreasonably withheld and provided that such approval
shall not be required while a Notice of Default or a Notice of Acceleration is
in effect, remove the Trustees or either of them and appoint a successor
Corporate Trustee or Individual Trustee, as the case may be, such removal to be
effective upon the acceptance of such appointment by the successor and, in the
case of the removal of the Individual Trustee, upon receipt by the
Administrative Agent of the written approval of the appointment of the successor
Individual Trustee by the Corporate Trustee. The Corporate Trustee may, at any
time by giving written notice to Kmart, the Administrative Agent and the
Individual Trustee, remove the Individual Trustee and appoint a successor
Individual Trustee, such removal to be effective upon the acceptance of such
appointment by the successor Individual Trustee and the receipt by the Corporate
Trustee of the written approval of such appointment by the Administrative Agent.
Any Trustee shall be entitled to Trustee Fees and any rights of indemnification
provided for herein to the extent incurred or arising, or relating to events
occurring, before such resignation or removal becomes effective.
(b) If at any time the Corporate Trustee or the Individual Trustee
shall resign or be removed or otherwise become incapable of acting, or if at any
time a vacancy shall occur in the office of the Corporate Trustee or the
Individual Trustee for any other cause, a successor Corporate Trustee or
Individual Trustee, as the case may be, may be appointed by the Administrative
Agent, and unless there is a Notice of Default or Notice of Acceleration in
effect, with the written consent of Kmart (which consent shall not be
unreasonably withheld) provided that the appointment of an Individual Trustee
shall not be effective until receipt by the Administrative Agent of written
approval of such appointment by the Corporate Trustee. If at any time the
Individual Trustee shall resign or be removed or otherwise become incapable of
acting or if at any time a vacancy shall occur in the office of the Individual
Trustee for any other cause, a successor Individual Trustee may be appointed by
the
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Corporate Trustee, provided that such appointment shall not be effective until
receipt by the Corporate Trustee of written approval of such appointment by the
Administrative Agent, and unless there is a Notice of Default or Notice of
Acceleration in effect, with the written consent of Kmart (which consent shall
not be unreasonably withheld). In either case, the powers, duties, authority
and title of the predecessor Corporate Trustee or Individual Trustee, as the
case may be, shall be terminated and canceled without procuring the resignation
of such predecessor and without any other formality (except as may be required
by applicable law) than appointment and designation of a successor in writing
duly acknowledged and delivered to the predecessor and Kmart. Such appointment
and designation shall be full evidence of the right and authority to make the
same and of all the facts therein recited, and this Trust Agreement and the
Security Documents shall vest in such successor, without any further act, deed
or conveyance, all the estates, properties, rights, powers, trusts, duties,
authority and title of its predecessor; but such predecessor shall,
nevertheless, on the written request of the Administrative Agent, Kmart, or the
successor, execute and deliver an instrument transferring to such successor all
the estates, properties, rights, powers, trusts, duties, authority and title of
such predecessor hereunder and under the Security Documents and shall deliver
all Collateral held by it or him/her or its or his/her agents to such successor.
Should any deed, conveyance or other instrument in writing from any Obligor be
required by any successor Corporate Trustee or Individual Trustee solely for the
purpose of more fully and certainly vesting in such successor the estates,
properties, rights, powers, trusts, duties, authority and title vested or
intended to be vested in the predecessor Corporate Trustee or Individual
Trustee, as the case may be, any and all such deeds, conveyances and other
instruments in writing shall, on request of such successor, be executed,
acknowledged and delivered by such Obligor. If such Obligor shall not have
executed and delivered any such deed, conveyance or other instrument within 10
Business Days after it received a written request from the successor Corporate
Trustee or Individual Trustee, as the case may be, to do so, or if a Notice of
Acceleration is in effect, the predecessor Corporate Trustee or Individual
Trustee, as the case may be, may execute the same on behalf of such Obligor.
Such Obligor hereby appoints any predecessor Corporate Trustee or Individual
Trustee, as the case may be, as its agent and attorney to act for it as provided
in the next preceding sentence.
6.8 Status of Successor Corporate Trustee. Every successor
Corporate Trustee appointed pursuant to subsection 6.7 shall be a bank or trust
company in good standing and having power to act as Corporate Trustee hereunder,
incorporated under the laws of the United States of America or any State thereof
or the District of Columbia and having its principal corporate trust office
within the 48 contiguous States and shall also have capital, surplus and
undivided profits of not less than $100,000,000, if there be such an institution
with such capital, surplus and undivided profits willing, qualified and able to
accept the trust hereunder upon reasonable or customary terms.
6.9 Merger of the Corporate Trustee. Any corporation into which
the Corporate Trustee may be merged, or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the
Corporate Trustee shall be a party, shall be Corporate Trustee under this Trust
Agreement and the Security Documents without the execution or filing of any
paper or any further act on the part of the parties hereto.
6.10 Co-Trustee; Separate Trustees. (a) If at any time or times it
shall be necessary or prudent in order to conform to any law of any jurisdiction
in which any of the Collateral shall be located, or to avoid any violation of
law or imposition on the Trustees of taxes by such jurisdiction not otherwise
imposed on the Trustees, or the Corporate Trustee shall be advised by counsel,
satisfactory to it, that it is necessary or prudent in the interest of the
Secured Parties, or the Administrative Agent shall in writing so request the
Corporate Trustee and the Obligors, or the Corporate Trustee shall reasonably
deem it desirable for its own protection in the performance of its duties
hereunder or under any Security Document, the Corporate Trustee and each of the
Obligors
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shall execute and deliver all instruments and agreements necessary or proper to
constitute another bank or trust company, or one or more persons approved by the
Corporate Trustee and the Obligors, either to act as co-trustee or co-trustees
of all or any of the Collateral under this Trust Agreement or under any of the
Security Documents, jointly with the Trustees originally named herein or therein
or any successor Trustees, or to act as separate trustee or trustees of any of
the Collateral. If any of the Obligors shall not have joined in the execution
of such instruments and agreements within 10 Business Days after it receives a
written request from the Corporate Trustee to do so, or if a Notice of
Acceleration is in effect, the Corporate Trustee may act under the foregoing
provisions of this subsection 6.10(a) without the concurrence of such Obligors
and execute and deliver such instruments and agreements on behalf of such
Obligors. Each of the Obligors hereby appoints the Trustee as its agent and
attorney to act for it under the foregoing provisions of this subsection 6.10(a)
in either of such contingencies.
(b) Every separate trustee and every co-trustee, other than any
successor Trustee appointed pursuant to subsection 6.7, shall, to the extent
permitted by law, be appointed and act and be such, subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred upon
the Corporate Trustee in respect of the custody, control and management of
moneys, papers or securities shall be exercised solely by the Corporate
Trustee or any agent appointed by the Corporate Trustee;
(ii) all rights, powers, duties and obligations conferred or
imposed upon the Corporate Trustee hereunder and under the relevant
Security Document or Documents shall be conferred or imposed and exercised
or performed by the Corporate Trustee and such separate trustee or separate
trustees or co-trustee or co-trustees, jointly, as shall be provided in the
instrument appointing such separate trustee or separate trustees or
co-trustee or co-trustees, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed the
Corporate Trustee shall be incompetent or unqualified to perform such act
or acts, or unless the performance of such act or acts would result in the
imposition of any tax on the Trustees which would not be imposed absent
such joint act or acts, in which event such rights, powers, duties and
obligations shall be exercised and performed by such separate trustee or
separate trustees or co-trustee or co-trustees;
(iii) no power given hereby or by the relevant Security Documents
to, or which it is provided herein or therein may be exercised by, any such
co-trustee or co-trustees or separate trustee or separate trustees, shall
be exercised hereunder or thereunder by such co-trustee or co-trustees or
separate trustee or separate trustees except jointly with, or with the
consent in writing of, the Corporate Trustee anything contained herein to
the contrary notwithstanding;
(iv) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(v) Kmart and the Corporate Trustee, at any time by an
instrument in writing executed by them jointly, may accept the resignation
of or remove any such separate trustee or co-trustee and, in that case by
an instrument in writing executed by them jointly, may appoint a successor
to such separate trustee or co-trustee, as the case may be, anything
contained herein to the contrary notwithstanding. If Kmart shall not have
joined in the execution of any such instrument within 10 Business Days
after it receives a written request from the Corporate Trustee to do so, or
if a Notice of Acceleration is in effect, the Corporate Trustee shall have
<PAGE> 144
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the power to accept the resignation of or remove any such separate trustee
or co-trustee and to appoint a successor without the concurrence of Kmart,
Kmart hereby appointing the Corporate Trustee its agent and attorney to act
for it in such connection in such contingency. If the Corporate Trustee
shall have appointed a separate trustee or separate trustees or co-trustee
or co-trustees as above provided, the Corporate Trustee may at any time, by
an instrument in writing, accept the resignation of or remove any such
separate trustee or co-trustee and the successor to any such separate
trustee or co-trustee shall be appointed by Kmart and the Corporate
Trustee, or by the Corporate Trustee alone pursuant to this subsection
6.10(b).
6.11 Treatment of Payee or Indorsee by Trustees; Representatives of
Secured Parties. (a) The Trustees may treat the registered holder or, if none,
the payee or indorsee of any promissory note or debenture evidencing a Secured
Obligation as the absolute owner thereof for all purposes and shall not be
affected by any notice to the contrary, whether such promissory note or
debenture shall be past due or not.
(b) Any Person (other than the Administrative Agent or the
Permitted Senior Debt Trustee), which shall be designated as the duly authorized
representative of one or more Secured Parties to act as such in connection with
any matters pertaining to this Trust Agreement or the Collateral shall present
to the Corporate Trustee such documents, including, without limitation, Opinions
of Counsel, as the Corporate Trustee may reasonably require, in order to
demonstrate to the Corporate Trustee the authority of such Person to act as the
representative of such Secured Parties (it being understood that the holders of
Kmart Credit Agreement Obligations are represented hereunder by the
Administrative Agent and shall have no other rights pursuant to this subsection
6.11(b)). The authority of the Administrative Agent and the Permitted Senior
Debt Trustee shall be demonstrated by their inclusion as such in the lists from
time to time delivered pursuant to subsection 4.2.
SECTION 7. MISCELLANEOUS
7.1 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand
(including by overnight courier), when delivered, (b) in the case of delivery by
mail, three days after being deposited in the mails, postage prepaid, or (c) in
the case of delivery by facsimile transmission, when sent and receipt has been
confirmed, addressed as follows, or to such other address as may be hereafter
notified by the respective parties hereto:
(a) if to any Obligor or the Trustees, to such party at its address
specified on the signature pages hereof; or
(b) if to the Administrative Agent, a Permitted Senior Debt Trustee
or any other Secured Party, to it at its address specified in the list
provided by Kmart to the Trustee pursuant to subsection 4.2;
provided that any notice, request or demand to the Trustees shall not be
effective until received by the Corporate Trustee. Whenever any party hereto
sends a notice by mail, such party will use reasonable efforts to also send such
notice by one of the other means of notice permitted hereunder, provided that
the failure to do so shall not affect in any way the validity of any delivery by
mail or otherwise result in any liability to such party.
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33
7.2 No Waivers. No failure on the part of the Trustees, any
co-trustee, any separate trustee, the Administrative Agent, the Permitted Senior
Debt Trustee or any Secured Party to exercise, no course of dealing with respect
to, and no delay in exercising, any right, power or privilege under this Trust
Agreement or any Security Document shall operate as a waiver thereof nor shall
any single or partial exercise of any such right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege.
7.3 Amendments, Supplements and Waivers. (a) With the written
consent of the Administrative Agent, the Trustees and each of the Obligors may,
from time to time, enter into written agreements supplemental hereto or to any
Security Document for the purpose of adding to, or waiving any provisions of,
this Trust Agreement or any Security Document or changing in any manner the
rights or obligations of the Trustees, the Secured Parties or the Obligors
hereunder or thereunder; provided that no such supplemental agreement shall (i)
amend, modify or waive any provision of this subsection 7.3 without the written
consent of the Administrative Agent, (ii) reduce the percentages or change the
numbers specified in the definition of Required Secured Parties or, except as
contemplated by subsection 4.1, amend, modify or waive any provision of
subsection 3.4 or the definition of Secured Obligations without the written
consent of each Secured Party whose rights would be adversely affected thereby
or (iii) amend, modify or waive any provision of Section 4 or 6 or alter the
duties, rights or obligations of the Trustees hereunder or under the Security
Documents without the written consent of the Trustees. Any such supplemental
agreement shall be binding upon the Obligors, the Administrative Agent, the
Permitted Senior Debt Trustee, the Secured Parties and the Trustees and their
respective successors and assigns.
(b) Without the consent of the Administrative Agent or any Secured
Party, the Trustee and any of the Obligors, at any time and from time to time,
may enter into one or more agreements supplemental hereto or to any Security
Document, in form satisfactory to the Corporate Trustee, (i) to add to the
covenants of such Obligor for the benefit of the Secured Parties or to surrender
any right or power herein conferred upon such Obligor or (ii) to mortgage or
pledge to the Trustees, or grant a security interest in favor of the Trustees
in, any property or assets as additional security for the Secured Obligations.
(c) Notwithstanding anything to the contrary herein, if at any time
Kmart is advised by counsel in connection with the issuance of the Permitted
Senior Debt Obligations that this Trust Agreement must be qualified under the
Trust Indenture Act of 1939, as amended, the Trustees shall, from time to time
without the consent of or notice to any Secured Party (other than notice to the
Administrative Agent), promptly upon request of Kmart make such amendments to
this Trust Agreement as are specified in Exhibit E or are otherwise satisfactory
to the Administrative Agent and Kmart.
7.4 Headings. The table of contents and the headings of Sections
and subsections have been included herein and in the Security Documents for
convenience only and should not be considered in interpreting this Trust
Agreement or the Security Documents.
7.5 Severability. Any provision of this Trust Agreement which is
prohibited or unenforceable in any jurisdiction shall not invalidate 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.
7.6 Successors and Assigns. This Trust Agreement shall be binding
upon and inure to the benefit of each of the parties hereto and shall inure to
the benefit of each of the Secured
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34
Parties and their respective successors and assigns, and nothing herein is
intended or shall be construed to give any other Person any right, remedy or
claim under, to or in respect of this Trust Agreement or any Collateral.
7.7 Currency Conversions. In calculating the amount of Secured
Obligations for any purpose hereunder, including, without limitation, voting or
distribution purposes, the amount of any Secured Obligation which is denominated
in a currency other than Dollars shall be converted into Dollars at the spot
rate for purchasing Dollars with such currency determined by the Corporate
Trustee (which determination shall be conclusive absent manifest error) to be in
effect in the New York foreign exchange market at the close of business on the
Business Day prior to the date on which such calculation is to be made.
7.8 Governing Law. This Trust Agreement and the rights and
obligations of the parties hereunder shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.
7.9 Counterparts. This Trust Agreement may be signed in any number
of counterparts with the same effect as if the signatures thereto and hereto
were upon the same instrument.
7.10 Termination. (a) Upon receipt by the Corporate Trustee from
the Administrative Agent of (A) a written direction pursuant to subsection 11.13
of the Kmart Credit Agreement to cause the liens created by the Security
Documents to be released and discharged or (B) a written notice stating that the
Kmart Credit Agreement has terminated in accordance with the terms thereof, the
security interests created by the Security Documents shall terminate forthwith
and all right, title and interest of the Trustees in and to the Collateral shall
revert to the Obligors, their respective successors and assigns.
(b) Upon the termination of the Trustees' security interest and the
release of the Collateral in accordance with subsection 7.10(a), the Trustees
will promptly, at Kmart's written request and expense, (i) execute and deliver
to the Obligors such documents as Kmart shall reasonably request to evidence the
termination of such security interest or the release of the Collateral and (ii)
deliver or cause to be delivered to the Obligors all property of the Obligors
then held by the Trustees or any agent thereof.
(c) Upon receipt by the Corporate Trustee from Kmart of a
certificate of Kmart that all the Capital Stock of an Obligor has been sold to a
third party (which certificate shall state that such sale is or will be in
accordance with the Kmart Credit Agreement), (i) such Obligor and each
Subsidiary of such Obligor which is included in such sale (such Obligor and each
such Subsidiary being referred to herein as "Included Obligors") shall cease to
be an Obligor hereunder or a party to any Security Document and shall be
released from its obligations pursuant hereto and thereto, (ii) the security
interests created by the Security Documents entered into by such Included
Obligors in all right, title and interest of such Included Obligors in the
Collateral shall terminate, in each case only with respect to such Included
Obligors, (iii) all right, title and interest of the Trustees in and to the
Collateral subject to such security interests shall revert to such Included
Obligors, their successors and assigns and (iv) any obligations of such Included
Obligors shall, unless otherwise expressly notified by Kmart to the Corporate
Trustee and the Administrative Agent in writing, cease to be Secured
Obligations. Upon any such termination, the Trustees will promptly, at Kmart's
written request, (x) execute and deliver to such Included Obligors such
documents as Kmart shall reasonably request to evidence the termination of such
security interest or the release of such Collateral and (y) deliver or
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35
cause to be delivered to such Included Obligors all property of such Included
Obligors then held by the Trustees or any agent thereof.
(d) This Trust Agreement shall terminate when the security interest
granted under the Security Documents has terminated and the Collateral has been
released as provided in subsection 7.10(a); provided that the provisions of
subsections 4.3, 4.4, 4.5 and 4.6 shall not be affected by any such termination.
7.11 New Obligors. During the term of this Trust Agreement, one or
more additional Subsidiaries may become a party to this Trust Agreement by
executing an assumption agreement, substantially in the form of Exhibit D,
whereupon such Subsidiary shall become an Obligor for all purposes and to the
same extent as if originally a party hereto and shall be bound by and entitled
to the benefits of this Trust Agreement.
7.12 Inspection by Regulatory Agencies. Each Trustee shall make
available, and shall cause each custodian and agent acting on its behalf in
connection with this Trust Agreement to make available, all Collateral in such
Person's possession at all times for inspection by any regulatory agency having
jurisdiction over an Obligor to the extent required by such regulatory agency in
its discretion.
7.13 Confidentiality. Each Trustee agrees to keep confidential all
information provided to it by any Obligor pursuant to or in connection with this
Trust Agreement that is designated by such Obligor in writing as confidential
(the "Confidential Information"); provided that nothing herein shall prevent
either Trustee from disclosing any such Confidential Information (i) to any
Lender, (ii) to its directors, officers, employees, examiners and professional
advisers who have a need to know such Confidential Information in accordance
with customary practices and who receive such Confidential Information having
been made aware of the restrictions of this subsection and, in the case of
professional advisers, having agreed to be bound thereby, (iii) upon the request
or demand of any Governmental Authority having jurisdiction over such Trustee,
(iv) in response to any order of any court or other Governmental Authority or as
may otherwise be required pursuant to any Requirement of Law (as defined in the
Kmart Credit Agreement), (v) in connection with the exercise of any remedy
hereunder, (vi) which is now or hereafter becomes generally available to the
public other than as a result of a disclosure by such Trustee or a disclosure
known to such Trustee to have been made by any person or entity to which such
Trustee has delivered such Confidential Information, (vii) which was available
to such Trustee prior to its disclosure to such Trustee by such Obligor, or
(viii) which becomes available to such Trustee from a source other than such
Obligor, provided that such source is not (1) known to such Trustee to be bound
by a confidentiality agreement with such Obligor or (2) known to such Trustee to
be otherwise prohibited from transmitting the information to such Trustee by a
contractual, legal or fiduciary obligation.
7.14 Submission to Jurisdiction; Waivers. Each Obligor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Trust Agreement and the other Security
Documents to which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction of
the Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
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36
(b) to the extent permitted by applicable law, consents that any
such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action
or proceeding in any such court or that such action or proceeding was
brought in an inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Obligor at its address set forth in subsection 7.1 or at such other address
of which the Trustees shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this subsection any special, exemplary, punitive or consequential
damages.
7.15 WAIVERS OF JURY TRIAL. EACH OF THE OBLIGORS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS TRUST AGREEMENT OR ANY OTHER SECURITY DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.
SECTION 8. SUBORDINATION OF RIGHTS OF SUBORDINATED CREDITORS
8.1 Priority of Interests of Holders of Secured Obligations.
Notwithstanding anything to the contrary contained herein, in any Security
Document or any Secured Instrument and irrespective of:
(i) the time, order or method of attachment or perfection of
the security interests created by the Trust Agreement or any Security
Document,
(ii) the time or order of filing or recording of financing
statements or other documents filed or recorded to perfect security
interests in any Collateral,
(iii) anything contained in any filing or agreement to which the
Trustees, the Administrative Agent, any Lender or any Subordinated Creditor
now or hereafter may be a party and
(iv) the rules for determining priority under the Code or any
other law governing the relative priorities of secured creditors,
any rights in the Shared Collateral in favor of the Senior Creditors pursuant
to this Trust Agreement and the Security Documents has and shall have priority,
to the extent of any unpaid Senior Secured Obligations, over any rights in the
Shared Collateral in favor of the Subordinated Creditors.
8.2 Enforcement Against Collateral. So long as this Trust
Agreement remains in effect, whether or not any Bankruptcy Event has been
commenced by or against Kmart or any other Obligor:
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37
(a) no Subordinated Creditor will (i) exercise or seek to
exercise any rights or exercise any remedies with respect to any Shared
Collateral or (ii) institute any action or proceeding with respect to such
rights or remedies, including without limitation, any action of foreclosure
or (iii) contest, protest or object to any foreclosure proceeding or action
brought by the Trustees or any other exercise by the Trustees of any rights
and remedies hereunder or under any Security Document; and
(b) the Trustees shall have the exclusive right to enforce
rights and exercise remedies with respect to the Shared Collateral in
accordance with the terms hereof;
in each case, to the extent such rights are derived pursuant to this Trust
Agreement.
8.3 Application of Proceeds. Any money, property or securities
realized upon the sale, disposition or other realization by the Trustees upon
all or any part of the Collateral, shall be applied by the Trustees as set forth
in subsection 3.4.
8.4 Acknowledgment. Each Subordinated Creditor, by accepting the
benefits hereof, acknowledges that it derives no interest in the Other
Collateral pursuant to this Trust Agreement.
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38
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed (by their respective authorized officers in the
case of corporate parties) as of the day and year first written above.
KMART CORPORATION
By: ___________________________
Name:
Title:
INITIAL OBLIGORS
BUILDERS SQUARE, INC.
By: ____________________________
Name: Calvin B. Massmann
Title: Senior Vice President and
Chief Financial Officer
KMART APPAREL SERVICE OF ATLANTA CORP.
By: ____________________________
Name:
Title:
KMART APPAREL SERVICE OF DES PLAINES CORP.
By: ____________________________
Name:
Title:
K-MART APPAREL OF PUERTO RICO CORP.
By: ____________________________
Name:
Title:
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39
KMART HOLDINGS, INC.
By: ____________________________
Name:
Title:
KMART PROPERTIES, INC.
By: ____________________________
Name: Gerald T. Tschura
Title: Vice President
PMB, INC.
By: ____________________________
Name:
Title:
SOURCING AND TECHNICAL SERVICES, INC.
By: ____________________________
Name:
Title:
KMART OVERSEAS CORPORATION
By: ____________________________
Name:
Title:
JAF, INC.
By: ____________________________
Name:
Title:
<PAGE> 152
40
VTA, INC.
By: ____________________________
Name:
Title:
Address for Notices for Obligors:
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Attention: Chief Financial Officer
Fax: (810) 643-5787
General Counsel
Fax: (810) 643-1054
Treasurer
Fax: (810) 643-5398
[Collateral Trustee]
By: ____________________________
Name:
Title:
_______________________________
[INDIVIDUAL TRUSTEE]
Address for Notices for Trustees:
Attention:
